russian pharmaceuticals and tax exemptions

Tax exemptions for Solagran being worked on. There are exemptions for domestic drugs made in Russia.

"In April 1996, the government adopted the resolution "On a list of essential and life-saving drugs", which are recommended for supply and use in public health facilities. This was also intended to boost domestic production, as companies producing these drugs receive tax exemptions. In practice the list also included a large number of domestically produced drugs not always in line with criteria for essential drugs.

"Regulation of the pharmaceutical sector has changed with decentralization and while this has brought some positive results, it is also less coherent than that of the 1980s. Responsibilities are divided between the Federal and regional levels. The Ministry of Health makes an overview of federal regulatory issues and monitors controlled drugs and imports of federal licensees, while local authorities oversee the local distribution network including pharmacies. Pharmaceutical manufacturers are subject to inspection by the Ministry of Health and Ministry of Technologies, Science and Industry for manufacturing standards, and by the san-epid network for sanitary conditions.

Drug prices are regulated by several mechanisms. At the federal level the Ministry of Health registers manufacturers' products and prices. After this, mark-up limitations are introduced, intended to hold down retail prices of pharmaceuticals. These limitations specify the allowable percentage of markup for both wholesalers and retailers. According to federal legislation, the maximum mark-up over the manufacturer's price is 25%, and retail prices should not exceed wholesale prices by more than 30% for drugs included in the list of essential drugs (the limit is slightly higher for other drugs). In practice, the mark-ups within these limits are the responsibility of regional authorities and therefore vary from region to region. In principle, mark-ups apply to the first importer, however, in practice there are various mechanisms by which mark-ups can be avoided for distributors further down the chain, resulting in mark-ups varying from 120 to 200%.

Whereas the Russian Federation generally lacks a coherent legislative basis for regulating the health care system, it does have a legislative framework and system of state control of medical goods imports, including a drug law, registration and certification, and quality control systems. According to Russian legislation, all drugs and biological products must be registered with the Ministry of Health at the federal level. Registration is undertaken by the ministry's Bureau of Registration of New Pharmaceuticals and Medical Equipment on the basis of assessments by the ministry's certifying agency, the State Inspection of Quality Control on Drugs and Medical Equipment. Gosstandart-authorized77 laboratories may also certify pharmaceuticals. Thus there is no lack of regulation at the federal level; in fact the system is heavily regulated. There are, however, problems with enforcement, irregular updating, etc.

The federal and many regional governments have taken steps to compile lists of essential drugs in an effort to promote access, especially for vulnerable groups, and cost-effective consumption of pharmaceuticals. In April 1996, the government adopted the resolution "On a list of essential and life-saving drugs", which are recommended for supply and use in public health facilities. This was also intended to boost domestic production, as companies producing these drugs receive tax exemptions. In practice the list also included a large number of domestically produced drugs not always in line with criteria for essential drugs. Hospitals and polyclinics are encouraged to restrict themselves to the administration of drugs listed as essential, but compliance is incomplete.

Various lists of essential drugs are developed and used for different purposes: in addition to the federal government, regional governments develop their own lists, usually an expanded version of the federal one and often used for supplying the public sector and for drug reimbursement purposes. The various ministries and enterprises running their own facilities (i.e. the parallel system) develop their versions, as do the larger insurance companies. The key criteria for selections are efficacy, safety and price. However, as getting a drug on a list implies guaranteed drug sales, bribery and backdoor deals are additional factors determining which drugs get included, as is the case in many other countries.

The federal government in recent years has attempted to take measures to support the pharmaceutical industry, and in 1998 the programme "Development of Medicinal Industry in 1998-2000 and up to 2005" was adopted. It proposed the organization of domestic facilities for the production of new substances that would allow 70% of pharmaceutical needs to be covered by domestic production. However, the programme has remained unfunded by the state budget. Increasingly, individual manufacturers are raising funds for their own development, with the longer-term goal of achieving good manufacturing practice (GMP) standards. The Russian GMP standard was approved in 1998 with a provision that implementation by manufacturers must be within five years. Although after this period non-compliant producers should in principle be closed down, there are very few manufacturers that have taken substantial steps toward implementation.

There are also attempts to encourage prescription of generic drugs. However, this is problematic for several reasons such as unreliable supply, extensive advertising and promotion of brand name drugs targeted at both patients and prescribes, as well as inadequate drug reimbursement and insurance schemes. Nonetheless, because of strong price sensitivity, the local markets are generally more receptive to generics than brand-names. There is no negative list as such.

Promotion of rational drug prescription and use has become an issue in several regions, as well as at the federal level. Tools such as national and local essential drug lists, drug formularies, and treatment guidelines have been developed and implemented in various regions. Competitive bidding has become a common tool for procurement of drugs for public sector needs and is supported by the legislative framework.

A federal centre for monitoring adverse reactions was set up in 1997 and is now a member of WHO's adverse drug reaction monitoring programme. The centre has good links with a number of regional drug information centres, however efforts are still required to establish countrywide activities.

Professional organizations such as associations of pharmacists, distributors and manufacturers are playing increasingly important roles in the regulation of the pharmaceutical sector. Substantial changes can also be observed in activities of various basic and continuing pharmaceutical education and training institutions, both public and private.

While efforts are being made to introduce the evidence-based medicine concept in the Russian Federation, there is a long way to go in this regard. The concept of pharmaco-economic evaluation of pharmaceuticals is also gradually being developed.

In early stages of decentralization several regions compensated for the lack of federal legislation by passing their own pharmaceutical legislation. This practice has gradually diminished and there is now a clear division of responsibilities between federal and regional authorities. Federal responsibilities are clearly defined by the federal drug law that covers the entire Russian Federation, while a large number of federal level regulations and decrees have been proposed as guidelines and recommendations for further adjustments by the regions themselves.

The regulation of new technology is largely in abeyance. However, this is less of an issue at the moment, if only because very little capital expenditure is being undertaken anywhere in the Russian Federation.

In theory, case payments are expected to include a component to cover the cost of routine acquisitions and equipment maintenance. Where providers want to invest in high technology or expensive equipment they are meant to apply to the insurance company or companies with which they have contracts for a grant to cover the costs. It is assumed that insurers will exercise control and only support purchases that correspond to health care needs in the area, with emphasis on primary and preventive medicine. In practice, insurance companies have neither been able to exert control nor to support capital programmes. In those areas where purchases have been made, they have been funded by local government out of tax revenues.

In those few areas that have had funding, there is no apparent control of purchasing policy. Imports are largely at the discretion of local funding bodies, licenses do not need to be issued either for the acquisition or use of new equipment, and the training of staff is left to the discretion of the suppliers.

Experience indicates that when funds are available local authorities respond to the demands of secondary and tertiary physicians in highly specialized niches and invest inappropriately and without regard to long-term strategy or the stated health needs of the population."