Kazakhstan is Changing the Rules in the Pharmaceutical Market Regulation System

At the initiative of ‘SK Pharmaciya’ and the Ministry of Health of the Republic of Kazakhstan, in early February 2013, amendments were introduced to the Decree № 1729 ‘On approval of the organisation and conduct of procurement of medicines, preventive (immunobiological, diagnostic, antiseptic) medicines, medical devices and medical equipment, as well as pharmaceutical services pertaining to the provision of a guaranteed volume of free-of-charge medical care’. According to the document, the state distributor ‘SK Pharmaciya’ shall unilaterally revise the previous agreements with suppliers. According to the document, the national distributor of medicaments ‘SK Pharmaciya’ will expect from pharmaceutical companies to start deliveries of medical means not within 7, but a maximum of 2 years (!) from the date of signing the contract. Should this period be extended by a supplier, ‘SK Pharmaciya’ has the right to terminate the contract.

This decision predominantly affects the interests of foreign investors, who are coming to the pharmaceutical market in Kazakhstan. According to the new wording of the Decree, long-term supply contracts, concluded previously with such companies as ‘Abdi Ibrahim’ (Turkey), ‘Favea Europe’ (Check Republic), ‘Polpharma’ (Poland), ‘Pharmstandard’ (Russia) and ‘Nobel Ilac’ (Turkey), may also be revised.

Conclusions:

• New amendments to the legislation of Kazakhstan violate the international principle of guaranteed full protection and security of investment. In order to maintain the investment attractiveness of Kazakhstan, authorities are required to comply with the previously signed agreements with investors, as well as introduce changes only upon consent of both parties or by a court order.
• Violation of the rights of investors in the pharmaceutical industry is a conspicuous example of the systemic problems and double-standards on the part of the Kazakh government. It is difficult for European investors to conduct their business activity under such conditions. This policy discredits Kazakhstan and may lead to high-profile lawsuits in international courts. In light of a lack of true institutional mechanisms for the protection of foreign investors inside the country, international arbitration remains their only hope. 

Source: Open Dialog Foundation