Inna Demidova, regulatory affairs manager, Russia and CIS, looks at the Russian market in 2015 and the impact of sanctions on prices of medicines.
On 12 September 2014 the second package of EU sanctions was adopted, affecting the Russian economy in particular. Another major world event of 2014 was the sharp fall in oil prices – one of the main financial sources for the Russian economy. The combination of these factors eventually led to the collapse of the RUR on 16-17 December 2014.
As a result, the prices of medicines in Russian pharmacies grew by 12.7% in 2014 and growth reached 20% in the last 1.5 months of the year, according to analysis by DSM Group.
The Russian pharmaceutical market is divided into two large segments: medicines with prices regulated by the Ministry of Health (MoH) i.e the drugs included in the Essential Drugs List (EDL) and drugs with an unregulated price.
Under the influence of sanctions the RU government initiated a number of restrictions for the state purchasing of medical drugs and devices, if analogues or similar goods are produced in Russia.
On 5 February 2015, prime minister Dmitry Medvedev signed a decree #102 on the restriction of procurement of foreign medical devices, excluding devices manufactured by Belarus, Kazakhstan and Armenia – members of the EurоAsian Economic Union (EAEU) Additionally, the Ministry of Industry and Trade developed a draft decree on the restriction of admission of foreign drugs to state procurement if there are two or more applications on their supply from manufacturers from country members of the EAEU, applying to all medicines purchased for state needs, including EDL drugs.
Since 1 September 2010, the maximum manufacturers’ selling price for EDL drugs must be registered. Moreover, this price must not exceed the maximum price for comparable drugs already marketed in Russia. Cost calculation for such drugs is also regulated by government decree #865 of 29 October 2010, with different methods of calculation for local and foreign manufacturers.
At the end of 2014, the prices of EDL drugs had risen minimally; retail prices increased by 0.35%, and in the hospital segment, by slightly more than 4% (source: http://www.rosminzdrav.ru/news). However, in January 2015, the growth of the hospital segment was 15%, and growth of EDL drugs was 6%. In October 2014, seeing the worsening economic situation, the RU MoH held additional auctions and managed to provide our patients with all the required expensive drugs up to September 2015. Moreover, the RU MoH does not intend to reduce state purchasing of foreign EDL drugs, which have no analogues in the Russian Federation.
Now, about 20,000 International Nonproprietary Names (INNs) are marketed in Russia. However, the share of budget funds on the Russian pharmaceutical market is only 35%. Most drugs are purchased by patients whose income is limited. So, since the retail pharmaceutical market in Russia is actually a market of generics, patients still have a choice – there are often 10-20 analogues with a huge price difference in the different pharmacies.
Going forward, the Russian pharmaceutical market will be more focused on the Russian manufacturer and, Russian manufacturers also will receive significant support from the government, eg the decree of the RU government No. 98-R (approved 27 January 2015) includes a numerous of measures to support import substitution.
In 2009 the Ministry of Industry and Trade successfully implemented a Federal Program of development of the pharmaceutical industry (Pharma-2020) and in Russia there are now effective local generics which, in tenders and auctions, receive a 15% price preference. However, there is one nuance: two years ago Russia joined the WTO. Since then it has been prohibited to produce local generics of foreign drugs, as these drugs do not stay in the RU market for six years. But it should be noted that big pharma companies – including Astellas, AstraZeneca, Gedeon Richter, Novo Nordisk, Novartis, Servier, Stada, Takeda, and Teva – have built manufacturing sites in Russia, and more than 2.5 billion US dollars was invested in localisation in recent years (source: II International Forum “Drug Manufacturing Russia and CIS” conference).
These measures should mean rising drug prices will not have a dramatic impact on the socio-economic situation in the country. In the extreme case there is a procedure of ‘compulsory licensing’ – when patent owners have to transfer the license to use their rights in exchange for some compensation.
Sanctions will not force the MoH to reduce the purchase of foreign EDL drugs, which have no analogues in the Russian Federation. It is equally obvious that the support of government and private investments are actively developing RU pharmaceutical companies. It is further obvious that the market abhors a vacuum, and if European and American pharmaceutical companies will leave a RU market, others will come from Asia, India, China.