Restrictions on the state purchase of foreign-made medicines now apply in Russia due to the entry into force of the long-awaited Government Decree № 1289 dated 30 November 2015. Locally-made medicines have been given a new preference in the form of the so-called “third odd one out” rule.
State and municipal customers are now obliged, if certain criteria are met, to reject any bids from manufacturers to supply medicines on the Essential Drugs List (the “EDL List”) that do not originate from the Eurasian European Union (the “EEU”). This is provided that at least two bids have been received in respect of medicines that (i) dooriginate from the EEU and (ii) have the same international non-proprietary name or, in the absence of such name, the same chemical or grouped name. At the time of writing, the EEU comprises Russia, Kazakhstan, Belarus, Kyrgyzstan and Armenia.
The country of origin of a medicine is to be defined in accordance with the Rules on determining the country of origin of goods in the CIS dated 20 November 2009 (the “Rules”) and confirmed by a country of origin certificate issued under the Rules.
The new requirement’s impact will only fully hit drug manufacturers in 2017. Until 31 December 2016, the restrictions will not apply to medicines in respect of which manufacturing is partially localised in the EEU at the stage of primary or secondary packaging and quality control release, notwithstanding the fact that both primary and secondary packaging fail to meet the criteria of a locally-produced medicine in accordance with the Rules.
Bidders offering medicines of foreign origin should bear in mind that even when there is a single or no “local” bid offering an EDL List medicine for tender (meaning “foreign” bidders are able to participate), then other legal preferences to local drug manufacturers will nevertheless apply. The most noticeable preference is the 15% price rebate enjoyed by local medical products – currently, if a foreign medicine wins a public tender, the customer is entitled to demand an additional 15% discount from the bidder.
The new preference for local drug manufacturers will come as no surprise as it follows the introduction by the Russian Government earlier this year of the same “third odd one out” rule for medical devices (as we previously reported). This latest development is undoubtedly a new step in the context of the localisation trend of the Russian healthcare industry, which has been pressing international manufacturers of medicines and medical devices to localise production in Russia. However, as promised, the Russian Government gave such manufacturers a one-year transitional period during which medicines localised only at the stage of primary or secondary packaging will still be able to participate in tenders on equal terms with local producers. This should give manufacturers some time to decide whether to take the important decision to proceed with a deeper localisation in Russia.