Governmental regulation of vital and essential medicines (hereinafter Essential Drugs) in the Russian Federation in the form in which it exists today has been functioning since 2010. The list of Essential Drugs (“EDL List”) has already been updated several times but the essence of regulation remains the same.

Subject to restriction is the maximum price for EDL Drugs. This price must be calculated by determining (and registering) the manufacturer's sales price and applying wholesale and retail markups that are set by the Russian Federation constituent entities. Dealing in EDL durgs imposes additional obligations on all participants in the distribution chain from the manufacturer to the retail seller, starting with compliance with the pricing procedure and ending with the need to prepare additional documentation such as, for example, a price negotiation protocol.

The local divisions of a number of state authorities may audit a retail seller's compliance with pricing rules for EDL drugs:

  • the Federal Healthcare Supervisory Service ("Roszdravnadzor");
  • the Prosecutor's Office;
  • the Federal Antimonopoly Service ("FAS") (if the audit is of a dominant entity or otherwise related to the antimonopoly legislation);
  • other competent authorities of the RF constituent entity, such as various tariff and pricing policy committees, consumer social protection departments, etc.

Liability for overcharging for EDL drugs arises under Article 14.6 (Violation of Pricing Procedure) of the Russian Federation Code on Administrative Offenses (for legal entities the penalty is double the extra proceeds from the sale of an EDL drug over the registered  prices for such EDL drug for the entire period during which the offense was committed, but not more than one year).

Since its introduction, regional regulation of EDL drugs has led to differences in the degree and measures for exercising control in various constituent entities of the Russian Federation. Audits may be conducted both during general audits of compliance with the law and licensing requirements, as well as in response to consumer complaints. Individual audits at a specific entity or at a specific pharmacy are interspersed with mass audits. For example, recently the Prosecutor's Office initiated mass audits of retail prices for EDL drugs in Moscow.[1]

Prices for many pharmaceuticals (including EDL drugs) started to actively go up at the end of 2014 with the fall of the ruble exchange rate. This led to a growing number of complaints both from end consumers and from wholesale distributors. The number of audits also increased. For example, as early as February 26, 2015 the FAS sent an order calling to tighten control over pricing of dominant entities at the regional retail markets for pharmaceuticals, medical devices and associated goods. According to the comments of their representatives, many FAS departments [2] renewed monitoring of prices for EDL drugs. In April 2015 the General Prosecutor's Office and the FAS received an appeal from the Audit Chamber calling on them to check into the rise in medicine prices.

The numerous audits yielded results. As at the end of April 2015 the Prosecutor's Office had opened 779 administrative offense cases in 2015 for exceeding the permitted markups on EDL drugs [3].  On May 18, 2015 the FAS published information [4] that, according to the results of audits, 14 administrative investigations were initiated in a number of constituent entities based upon the evidence of overstated prices of EDL drugs. Regional regulation is also getting tighter. For example, Moscow Government Resolution No. 134-PP of March 24, 2015 gave the Moscow Department of Health the right to initiate and resolve administrative offense cases related to pricing of EDL drugs (prior to that time the Health Department had the authority to conduct audits and issue directives, but was not entitled to initiate the relevant cases on its own).

RF Government Decree No. 434 "On Regional State Control over the Application of Prices for Medicines on the List of Crucial Medicines" (the Decree) was enacted on May 6, 2015. According to the Decree, the relevant competent executive authorities of Russian Federation constituent entities (primarily the Roszdravnadzor authorities) monitor prices of EDL drugs by:

  • organizing and conducting audits of the monitored entity's compliance with mandatory requirements;
  • systematically observing the performance of mandatory requirements by a monitored entity; taking steps, according to the procedure of Russian Federation law, to stop discovered violations of
  • mandatory requirements and/or remedy the consequences of such violations, issue directives to remedy discovered violations of mandatory requirements and take steps to prosecute the offenders.

Comments of experts and representatives of Roszdravnadzor on the Decree differ. For example, adviser to the head of Roszdravnadzor Olga Maleeva asserts that [5] the Decree merely specifies powers that already belonged to the regional authorities. Other specialists and representatives of Roszdravnadzor assert that the Resolution formally establishes the right to conduct audits that are specifically oriented toward pricing of EDL drugs.

Amendments are already being made to regional acts to reflect in them the principles stipulated in the Decree. For example, the Administrative Regulations for the Moscow Department of Health to perform the state function of regional state control over the application of prices of medicines on the EDL list (approved by the Moscow Government Resolution of November 18, 2014) have amended the previous Moscow City Government Resolution No. 320-PP of June 4, 2015. For one thing, a new method of controlling prices for EDL Drugs has been set up: systematic observation that does not require interaction with the entities being monitored. Observation is by "visual review" of information on the pharmaceutical entity's website. This is done at least once a month and the results are taken into consideration when the audit plans are being drawn up.  The authorities are not permitted to request any documents or information from pharmaceutical entities when performing such systematic observation.

Active audits of prices for EDL drugs—primarily retail prices—are expected to continue.