Guest Feature: Ireland

Irish Minister for Health proposes consultation paper on biosimilars

In July 2016, the Irish Government and the Health Service Executive (the “HSE”) agreed a new Framework Agreement with the Irish Pharmaceutical Healthcare Association (“IPHA”) in relation to the supply of medicines to the public. IPHA is an industry group which represents the international research-based pharmaceutical industry in Ireland. The Framework Agreement will last for four years and governs the supply and pricing of medicines which are reimbursed by the HSE.

One of the new provisions introduced by the 2016 Framework Agreement was the inclusion of a pricing mechanism for patent-expired biologic medicines. The Framework Agreement provides for a reduction of 80% in the price of a biologic medicine, which comes off patent after August 2016. A 12.5% rebate will also be payable to the HSE following the price reduction. The reduction only applies once a biosimilar medicine becomes available for sale and supply in Ireland.

The 2016 Framework Agreement has recently come under criticism for failing to deliver the anticipated EUR 785 million in savings to the Irish health budget. One of the reported reasons for this has been the lack of biosimilars entering the Irish market. Stakeholders claim that there is little incentive for biosimilars to enter the market as the price reductions on branded biologics equate to the general entry point for a biosimilar and prescribers are generally unaware of the pricing implications. The Irish Minister for Health, Simon Harris, has indicated that a consultation paper on biosimilars will be published in the coming weeks. It is not yet clear what issues will be included in the consultation, though it is speculated that one possibility that could be explored is the introduction of obligatory substitution in respect of biologic medicines. The Health (Pricing and Supply of Medical Goods) Act 2013 introduced, among other measures, a system of generic substitution designed to tackle the perceived high cost of branded medicines. Biologics are exempt from substitution under the Act. The consultation will be central to understanding the government’s policy objectives in respect of biosimilars, and is being closely watched by all industry players. We will publish further information once the consultation paper is released.

European Union

Teva/Allergan Generics ‒ Portfolio power theory of harm

In 2016, the European Commission cleared the acquisition of the generics business of Allergan by Teva, subject to conditions.  The decision remains confidential but an EU merger brief explains the EU's reasoning.

Ordinarily a generic-to-generic merger is not so newsworthy.  They tend to be relatively predictable.  The agencies review competition at a molecular level and divestments of individual drugs may be required if concentration is unacceptably high. 

What sets Teva/Allergan Generics apart is that the EU took a "portfolio" theory of harm in the case.  That is to say, the breadth of the parties' range of products made the deal unacceptable in certain countries, regardless of any overlap in individual products.  That lead to divestment not just of individual drugs, but of almost the entire business in the UK, Iceland and Ireland.

In the UK, Teva and Allergan were said to be the only two generics manufacturers with a portfolio of generics broad enough to be able to sell directly to pharmacies (without going through a wholesaler). They offered attractive discounts and service to pharmacies.  Wholesalers could not replicate the unique competitive constraint represented by Allergan.

In Iceland, it was alleged Teva was the only serious challenger to Allergan's incumbency.  Teva's broad offering and aggressive pricing via its local wholesaler was the key competitive constraint on Allergan. 

In Ireland, Teva and Allergan were recent entrants, but their breadth of portfolio and aggressive pricing to pharmacies made them market leaders in generic products.  Teva and Allergan were allegedly each other's closest competitors.

Outside these three territories, the analysis proceeded in the more traditional manner.  There were other broad range generics suppliers.  Or portfolio power was considered unlikely due to price regulation and high volume tender practices.  For those territories, the EU considered only molecule-to-molecule competition.

The key takeaway from the case is even in what looks like straightforward generic-to-generic deals, the risk of a portfolio power allegation should also be considered.  Though very rare in recent times, portfolio power is certainly a theory of harm in the agencies' toolkit and can be alleged in EU merger cases.

VAT exemption applicable on e-Health

On December 5, 2016, the Swedish Supreme Administrative Court published a ruling in relation to an Indirect Tax case regarding the application of the VAT exemption for medical care on online consultancy and diagnosis.

The Swedish Supreme Administrative Court ruled that the underlying services, i.e., online consultations and diagnostics provided by medical practitioners were essentially the same as similar consultations offered in a traditional way, i.e., a visit to a doctor, and should therefore be VAT exempt.

Facts

The Swedish private company, which was for regulatory purposes registered as a so-called caregiver company, provides online healthcare services directly to patients or to insurance companies. As a registered caregiver, the company may carry out diagnosis and treatment of diseases as well as prescribe recipes and sampling for the treatment of common diseases. These medical services are carried out by licensed medical practitioners.

The medical practitioner is presented with the patient's name and picture on the platform. The patient has the opportunity to choose the medical practitioner on duty. The platform is therefore, in a way, comparable with a digital waiting room. The patient and the medical practitioner can connect via text, audio and video conferencing during the consultation.

The only difference from traditional healthcare in the underlying case is the fact that the medical practitioner will not have any physical contact with the patient.

VAT exemption: point of attention

As mentioned, the Swedish Supreme Administrative Court ruled that the online supplies of underlying medical services are VAT exempt. The fact that these were rendered online and not in the traditional way did not influence the VAT exempt qualification of the services.

Given the scope of the medical exemptions for EU VAT purposes, the outcome of this case may not be surprising. Other EU jurisdictions have a similar approach, e.g., the Netherlands, where the format of a medical consultation (i.e., online or in real life) is, in principle, also irrelevant for the VAT qualification.

Nevertheless, the outcome of this Swedish case does confirm that companies that offer online medical assistance may be confronted with a VAT exemption. This is specifically relevant for MedTech and Medical Device companies. Such companies in principle carry out VAT taxable supplies. If they, however, add VAT exempt services, such as online medical consultations or medical assistance to their service offerings, this will likely have a negative effect on their overall VAT position. As a result of the VAT exemption they will, in principle, no longer be fully entitled to deduct the input VAT they incurred on their own costs, resulting in additional costs and thus a negative impact on the profit margin.

We therefore recommend carefully reviewing the EU VAT consequences of any form of online medical assistance to prevent such additional VAT costs.

Consolidated - and probably final - texts of EU medical device and in-vitro diagnostic regulations published - adoption expected in March

On February 22, 2017, the Council of the European Union published the consolidated and likely to be final texts of the EU Medical Device Regulation (MDR) and the In Vitro Diagnostics Regulation (IVDR). The new versions of the draft texts are available here and here.

The Council is scheduled to vote on the adoption of the MDR and the IVDR on March 7, 2017 followed by the European Parliament on  March 20,2017. In which case, the Regulations are expected to be published by May 2017 and enter into force before the European summer.

The MDR and the IVDR will replace Directive 93/42/EEC on Medical Devices, Directive 90/385/EEC on Active Implantable Medical Devices and Directive 98/79/EC on In Vitro Diagnostic Medical Devices, representing a major overhaul of the regulatory framework for medical devices in the EU. The Regulations provide for a general transitional period of 3 years for medical devices (despite ongoing pleas for a longer transitional period) and a 5 year transitional period for IVDs. However, many different timelines are provided for specific obligations under the new Regulations. Given the significant impact of the Regulations on new and existing devices (including increased clinical evidence requirements and post marketing obligations as well as the need to certify products under the new system and requirements), it is important to start preparing for implementation now if you have not already done so.

By the end of the transitional period the UK is likely to have left the European Union. It remains unclear what Brexit will exactly mean for the medical devices industry in the UK and how it will affect the regulations. However, companies in the UK are encouraged to implement the new regulations given the influence that the MHRA, the UK's regulator, and UK industry experts have had in developing them and considering that the UK will be translating EU laws into UK law -at least  initially- with a view to depart from such laws only where necessary or deemed opportune.

Belgium

Recently published Belgian Sunshine Act establishes legal basis for transparency obligations

On December 27, 2016, the Belgian Act of December 18, 2016 containing various provisions on health was published in the Belgian Official Gazette. Chapter I of Title 3 of the Act, entitled “Sunshine Act”, establishes the legal basis for the current transparency obligations. The self-regulatory initiative from Pharma.be, Mdeon, beMedTech, FeBelGen, BACHI and betransparent.be will thus receive a legal basis. However, this legislation has not yet entered into force. First, a Royal Decree needs to be enacted and published which will determine the categories of transfers of value to be made public as well as the date of entry into force of the legislation.

It is expected that the Royal Decree will most likely be published in the coming months and that this legislation is therefore expected to enter into force vis-à-vis transfers of value made as from April 2017 (with public disclosure in June 2018).

As a consequence of the incorporation of the disclosure obligations in mandatory legislation (as opposed to the current “merely” self-regulatory initiatives), the following will most likely change:

  • all (Belgian and foreign) pharma and medical devices companies will be obliged to disclose transfers of value made to HCPs/HCOs established in Belgium (not only pharma and medical devices companies that are members of Pharma.be, FeBelGen or beMedTech);
  • the informed consent of HCPs to publish the transfers of value on an individual basis will no longer be necessary;
  • transfers of value to patient associations will also have to be disclosed;
  • companies will have to retain the relevant proof that they have respected their disclosure obligations correctly and in full for a minimum of 10 years (instead of five years) after the end of the relevant reporting period; and
  • violations of the transparency rules will be subject to fines of between EUR 1,600 and EUR 120,000.

As long as the legislation has not entered into force, the current (self-regulatory) rules remain in place. Vis-à-vis transfers of value made in 2016 (of which the disclosure will take place in June 2017), the current (self-regulatory) transparency rules will thus apply.

Italy

The Decree on the new essential levels of care has been approved

On January 12, 2016, the President of the Council of Ministers signed a Decree that establishes the new essential levels of care identifying the services and the products that the National Health Service ("NHS") provides to all citizens free of charge or on payment of a ticket ("Decree"). Among the various changes introduced by the Decree are the following:

  • update of the list of chronic diseases through the introduction of six new illnesses and the inclusion of some illnesses already exempted as rare diseases, such as celiac disease and Down syndrome;
  • update of the list of rare diseases through the introduction of 110 new illnesses listed in Annex 3 to the Decree;
  • extension of the list of medical devices provided to citizens by the NHS through the inclusion of several technologically advanced devices considered to be of primary importance to guarantee the autonomy of disabled people (e.g.,  IT support for people with very low communication abilities) and single-use medical devices for patients suffering from serious chronic diseases and forced to stay in bed;
  • introduction of new vaccines among those provided by the NHS, such as the anti-human papilloma virus, the anti-pneumococcal and the anti-meningococcal.

The Decree will enter into force after the approval of the Court of Auditors and its publication in the Official Gazette of the Italian Republic.

The Italian Medicine Agency and the Ministry of Health sign the "Fast track" Memorandum of Understanding  

On December 19, 2016, the Italian Medicine Agency (“AIFA”) and the Ministry of Health signed the “Fast track” Memorandum of Understanding ("Memorandum") in order to establish a fast procedure for the assessment of clinical trials on drugs and medical devices. The Memorandum – which the operators of the healthcare sector may join on a voluntary basis – defines the duties of those involved in the trials and identifies the terms for their fulfillment.

Regarding clinical trials on drugs, the Memorandum provides the obligation for promoters to submit the request for authorization to the AIFA and the request for opinion to the Ethics Committees. The term for the issuance of the authorization/rejection by the AIFA and for the opinion by the National Institute of Health is 60 days for Phase I, II and IV clinical trials, and 90 days for trials on advanced therapy medicinal products. The Ethics Committees must release their opinion within 30 days from the receipt of the relevant request.  

With respect to clinical investigations on medical devices, the Memorandum provides that promoters must agree on the study protocol with the principal investigator, submit requests for opinion to the Ethics Committees and transmit to the Ministry of Health the notification of the clinical investigation (for devices not bearing CE marking), or the communication of the beginning of the investigation (for devices bearing the CE marking).  

For clinical devices not bearing the CE marking, the term for the adoption of the opinion of the Ministry of Health and of the Ethics Committees is of 60 days for Class III devices and active implantable devices and of 30 days for Class I or II devices. A 30-day term is also provided for the issuance of the opinion of the Ethics Committee in case of investigations devices bearing the CE marking.

The AIFA and the Antitrust Authority signed the Memorandum of Understanding to protect competition and the patients' health

On January 19, 2017, the AIFA and the Antitrust Authority signed a Memorandum of Understanding aimed at promoting the collaboration between the two authorities in order to detect possible anti-competitive conduct and to ensure the protection of patients.

To this end, the Protocol provides that each Authority must report to the other those cases in which, within the proceedings under its jurisdiction, it has detected possible violations of provisions whose implementation falls within the competence of the other party, with particular regard to: (i) negotiations of prices for medicinal products carried out by the AIFA with pharma companies; and (ii) cases of counterfeiting and/or online sales of drugs detected by the Antitrust Authority.

Other forms of cooperation provided for in the Protocol concern the preparation of joint reports to Parliament or to the Government, the collaboration within surveys and investigations and the coordination of institutional interventions with respect to matters of common concern.

A working group has been created to analyze the direct distribution of drugs

On January 17, 2017, the Ministry of the Economic Development and the Ministry of Health held a meeting, which was attended by all the stakeholders of the pharmaceutical supply chain, aimed at analyzing the critical issues related to the "direct" and "on behalf of" distribution of drugs.

During the meeting, Federfarma (the Italian Federation of Private Pharmacies) submitted a report comparing the two distribution systems. According to the report, the distribution through private pharmacies, as opposed to direct distribution, is more beneficial for the public expenditure as it reduces the costs to be borne by healthcare establishments.

For these reasons, Federfarma proposed to ascertain the costs incurred by the National Health Service for the distribution of medicines through the two existing systems, to assign the sale of established use medicines and medicines with expired patents to private pharmacies and to move those medicines that do not require particular precautions for their administration from direct distribution to distribution "on behalf of".

The outcome of the meeting was to set up a working group with the specific aim of drawing up proposals to align the direct distribution to the real needs of the national and regional health service.

Spain

New regulation on distance selling of veterinary medicines

A new royal decree (Royal Decree 544/2016, of November 25) that regulates the distance selling to the general public of veterinary medicines which are not subject to veterinary prescription (hereinafter, "Royal Decree") was published at the end of last year and came into effect on December 14, 2016.  

The Royal Decree implements the Spanish Law on Guarantees and Rational Use of Medicines and Medical Devices (i.e., Spanish Legislative Royal Decree 1/2015, of July 24), which introduced distance selling of veterinary medicines, in order to ensure that it is carried out with all corresponding health guarantees and that it responds to the growing demand from citizens to facilitate the acquisition of this kind of medicine through the possible use of electronic means, especially the Internet.  

The Royal Decree covers the main aspects of distance selling of medicines, such as transportation and delivery of medicines, dispensing requirements, and the obligations of sales websites, among which are the following:  

  • The term "distance selling" includes not only the sale through electronic means, but also through ordinary correspondence.
  • Only veterinary medicines which are not subject to medical prescription are allowed to be sold through electronic means or by correspondence (pharmacy preparations, auto-vaccines for veterinary use, and, of course, non-authorized medicines, as well as medicines for human use, are excluded from the scope of this Royal Decree).
  • It shall only be carried out by pharmacy offices and authorized commercial retail establishments, provided that they have a pharmaceutical service responsible for the custody, conservation and dispensing of these medicines. Moreover, those pharmacy offices and authorized commercial retail establishments must notify the corresponding regional authorities at least 15 days prior to the implementation of such selling system. Intermediaries are not allowed in the sale process. That is, orders must be made directly to these establishments/pharmacy offices.
  • The recipient must be within the customs territory of the European Union, and the corresponding veterinary medicine must be duly authorized in the country of destination (and in Spain).
  • The sale must be carried out with the intervention of a responsible pharmacist, and the buyer must provide its contact details if the pharmacist considers that he must provide additional information on the veterinary medicine purchased.
  • The seller is ultimately responsible for the transportation of the medicines.
  • The seller must keep a record of orders placed for a period of five years.
  • The website must comply with certain parameters, such as the name of the holder and the information of the professional school to which it belongs, information (telephone, email, etc.) that allows direct and effective communication with the seller, contact information of the competent authority, etc.
  • No refunds can be accepted once the veterinary medicine is dispensed and delivered to the buyer (with minor and logical exceptions, (i.e., supplied due to seller's error).

The Spanish Competition Authority ("CNMC") maintains its position: it is the Spanish legislation that obliges pharmaceutical companies to apply different prices according to the medicine's destination

The pronouncements continue on the problem of double pricing for medicines.

As you will recall, in 2009 the CNC (the old Spanish Competition Authority) decided not to open a sanctioning procedure against PFIZER, S.L.U. ("Pfizer"), holding that Pfizer's contracts do not establish a double-price clause which would involve the application of a different price to medicines depending on whether they are commercialized in Spain or are intended for export.

According to the CNC, the contracts analyzed establish a single price, which is freely determined by Pfizer. Only if the wholesalers prove that the medicine was dispensed in Spain (and is subject to financing by the National Health System) would Pfizer make an adjustment of the price to adapt it to the subsidized price (e.g., factory price).

After the National Court of Appeal nullified this 2009 resolution of the CNC in 2011 and such nullification was confirmed by the Supreme Court in 2014 (mainly due to the consideration that this type of agreement could be contrary to competition law as it seeks to restrict parallel trade, an issue which merited a more detailed analysis by the CNC), the CNMC (successor of the CNC) has just published a resolution in which it sets forth its "re-analysis" of the problem.

In this recent resolution (January 2017), the CNC reaches the same conclusion as in 2009, that Pfizer's commercial policy based on contracts that included the price system described above cannot be considered a double-price policy contrary to competition law because it lacks an essential requirement: the "voluntary" establishment of two different prices in order to avoid parallel trade.

In detail, the CNMC considers that:

  • Pfizer did not voluntarily establish double pricing. Pfizer freely established a free price. However, Pfizer was forced by the legislation on financing medicines in Spain to alter it and apply the subsidized price in the circumstances indicated by the regulations (if the medicine is financed by the National Healthcare System and is dispensed in Spain). Thus, Pfizer cannot be accused of establishing double pricing in order to avoid parallel trade.
  • The CNMC also argues that the 2009 ECJ judgment on the GSK case cannot be applied to Pfizer's conduct, thus contradicting the judgments of the National Court of Appeal and the Supreme Court in this case, since the circumstances were not similar, i.e., (i) the pricing systems established by GSK and Pfizer are different and (ii) the regulatory frameworks they faced were different.

           (i) Difference in the pricing systems established by GSK and Pfizer

The differences relate mainly the different wording of the pricing clauses: while for Pfizer the "official" price was freely established, and only when the wholesaler proved that the medicines had been dispensed in Spain was the subsidized price applied. Furthermore, Pfizer was obliged to apply that price ("as required under the current legal system"); GSK's pricing clause indicated that the price applicable to its products was the subsidized price, and, if the medicine had been dispensed in Spain (or covered by the National Healthcare System), a different price was applied, the freely established price.

Also, according to the CNMC, GSK obliged its wholesalers to provide information on the medicines sold outside the Spanish territory. This also involved a risk of exchange of information between competitors, as it would allow GSK to adapt its activity in the market in order to prevent parallel commerce.

           (ii) Regulatory framework

Furthermore, the applicable legislation with regard to price fixing in 1998 (the year for which the GSK case must be considered) was Act 25/1990 (in the version introduced by Act 66/1997). Specifically, article 100.2 defines state intervention in the prices of pharmaceutical specialties sold in Spain and financed through Social Security funding. That is to say, any medicine sold in Spain and financed through Social Security would be subject to state intervention.

This requirement of "financed" was met by the mere inclusion of pharmaceutical specialty on the state-financed system: it was not necessary for each specific unit to be actually financed. Therefore all units of medicine eligible for financing were to be sold at set prices. Furthermore, the requirement that the sale be made on a national basis was kept, that is to say, the set price would apply to any sale made in national territory.

GSK, however, included in its contracts that the law demanded setting a price for those specialties financed by Social Security and dispensed in the Spanish territory, i.e., in pharmacies and hospitals. This interpretation of the regulation is what justified the implementation of double pricing.

Subsequently, Act 55/1999 of December 29, which entered into force on January 1, 2000, and which was applied to the Pfizer case, sets outs that the maximum industrial price for each medicine of the Spanish health authority is only applicable to the sale of medicines (eligible for financing) which are in fact intended to be dispensed to patients in Spain.

  • Finally, with respect to the efficiencies which Pfizer's system could bring, the CNMC indicates that such efficiencies could exist (for a possible analysis under Article 1.3 of the Spanish Competition Act and Article 101.3 TFEU), but since, as the conduct was previously shown not to be contrary to competition law, it did not analyze them or pronounce in detail on them.

With this resolution, the CNMC clearly rejects the arguments indicated by the National Court of Appeal and the Supreme Court – as well as the ECJ in the GSK case – and aligns with the conclusion reached by other Spanish national courts, though of lower rank, such as the Provincial Court of Madrid in 2015. That court concluded that the double-price system is not anti-competitive since pharmaceutical companies' freedom to establish prices for medicines is restricted by legislation.

In any event, this resolution of the CNMC can be appealed before the National Court of Appeal; it could even go before the Supreme Court. Thus, the saga will probably continue.

Turkey

Turkey tightens deadlines and revises fees for license applications in 2017

Recent Development

The Turkish Medicines and Medical Devices Agency (the “TİTCK”) recently announced deadlines and procedures for the payment of scientific analysis and assessment fees in license applications subject to the new price tariff in 2017.

Background

The TİTCK announced a new price tariff for medicine applications in 2017. Scientific analysis and assessment fees payment deadlines were updated along with the price tariffs.

What the announcement says

The TİTCK advises pharmaceutical companies to meet the new deadlines for the payment of scientific analysis and assessment fees for their ongoing license applications. The finalization of license applications may be delayed if there is failure to comply with the deadlines. The deadlines and procedures below will apply to the ongoing license applications in 2017:

  • Companies should have paid their scientific analysis and assessment fees between January 2, 2017 to February 17, 2017.
  • The evaluation process on the license applications of the companies who have paid the fees by February 17 will continue, whereas the applications of the companies who have missed the deadline will be waitlisted until November 30, 2017.
  • Applications for scientific analysis and assessment fees that are not paid by November 30 will be cancelled.

Conclusion

Pharmaceutical companies should take note of the new deadlines for payments to prevent any delay in their license applications and should follow any further announcements made by the TİTCK.

Ukraine

Reference pricing and reimbursement

As reported in the previous issue of our Newsletter, on November 9, 2016, the Cabinet of Ministers of Ukraine (the "CMU") approved regulations "On the State Regulation of Prices for Pharmaceuticals" No. 862 (the "Pricing Regulation") and "On the Introduction of the Reimbursement of Prices for Pharmaceuticals" No. 863 (the "Reimbursement Regulation"). In December 2016, the CMU introduced certain amendments into the Pricing Regulation. Additionally, the MOH developed and approved a number of bylaws required for implementing the Pricing and Reimbursement Regulations.

Pricing Regulation: implementing by laws and further proposed changes  

By way of background, the Pricing Regulation established that, as of January 1,  2017, the maximum wholesale prices for a number of pharmaceuticals should not exceed the reference prices established by the Ministry of Health of Ukraine (the "MOH"). Furthermore, the Pricing Regulation declared invalid the maximum retail and wholesale mark-ups for both the retail and public procurement market which were established by CMU Resolution "On Measures to Stabilize Prices for Pharmaceuticals and Medical Devices" No. 955 dated October 17, 2008. On December 28, 2016, however, the CMU re-enacted this resolution by way of adopting Regulation No. 1006. Consequently, the previously eliminated regulation of mark-ups has been reinstated. In addition, CMU Regulation No. 1006 has established a transition period during which pharmacies could sell pharmaceuticals purchased at prices exceeding the maximum wholesale prices until February 1, 2017.

It should be noted that, formally, the Pricing Regulation became effective as of  January 1, 2017. However, its actual implementation is subject to the approval of certain MOH orders. Some of the required MOH orders have been adopted as detailed below, while approval of the remaining order establishing the procedure for calculating maximum mark-ups for the respective pharmaceuticals is pending.

On December 29, 2016, the MOH approved the Procedure for Calculating Maximum Wholesale Prices based on Reference Prices No. 1423 (the "Price Calculation Procedure") (text in Ukrainian is available here). Maximum wholesale prices are set for those products included on the list of INNs, the prices for which are subject to reimbursement (as detailed in the annex to the Reimbursement Regulation). Maximum wholesale prices will be calculated based on prices for pharmaceuticals with the same INNs in five reference countries (Poland, Slovakia, Czech Republic, Latvia and Hungary). The maximum wholesale price should not exceed the minimum price of each dose and strength of the respective pharmaceutical in the reference countries.  The register of maximum wholesale prices was approved by MOH Order No. 53 dated January 23, 2017 (available in Ukrainian here).

On December 29, 2016, the MOH published the draft procedure for calculating maximum mark-ups (the "Mark-Ups Calculation Procedure") (text in Ukrainian available here). The draft Mark-Ups Calculation Procedure sets out the formula for calculating the maximum purchase price for wholesalers and the maximum retail price for pharmacies. The maximum wholesale mark-up will be calculated based on the maximum wholesale price (i.e., the reference price established by the MOH). The maximum retail mark-up will be calculated based on the maximum pharmacy purchase price. As of the date hereof the Mark-Ups Calculation Procedure has not been approved.  

New register of reference prices for insulin preparations

On December 29, 2016, the MOH approved a new version of the Register of Reference (Reimbursement) Prices for Insulin Preparations (available in Ukrainian here).

As noted in the previous issue of our Newsletter, this register is required to enact CMU Resolution "Issues of Implementing State Control of Prices for Insulin Preparations" No. 73 dated March 5, 2014, which provided for the launch of a pilot project on state price regulation and reimbursement for insulin preparations as of April 1, 2016. The pilot project has not been implemented in practice due to the absence of the necessary implementing acts. Currently, the only remaining act required for project implementation is register of patients requiring insulin therapy.

Draft procedure for calculating reimbursement sums

On December 23, 2016, the MOH published the draft procedure for calculating the reimbursement sum for pharmaceuticals covered by the Reimbursement Regulation (text in Ukrainian is available here).

Based on the draft, the products covered by the Reimbursement Regulation will be divided into two groups:

  • products whose cost should be reimbursed up to 100 %; and
  • products whose cost will not be reimbursed

The first group will include pharmaceuticals the wholesale price of which falls into a range between the maximum wholesale price (established based on external reference pricing) and the minimum wholesale price (established based on internal reference pricing). As currently drafted, it may be interpreted in such a way that, potentially, the prices for pharmaceuticals covered by the Reimbursement Regulation may exceed the maximum wholesale prices (established based on external reference pricing). However, this would contradict the Pricing Regulation, which sets out that the wholesale prices may not exceed the reference prices established by the MOH.

As follows from the draft, the reimbursement price will be based on the wholesale reimbursement price, with due regard to the maximum wholesale and retail mark-ups as well as the VAT. In turn, the wholesale reimbursement price will be calculated as "the minimum between the maximum wholesale price and the minimum wholesale price".

The draft also stipulates that the prices for pharmaceuticals will be included into the register of reimbursement prices based on the application of the products' marketing authorization holder or its representative. However, as already mentioned above, this provision may not override the mandatory nature of maximum wholesale prices established in accordance with the Pricing Regulation.

Licensing of pharmaceutical activities The long-awaited licensing conditions on turnover of pharmaceuticals become effective  

On November 30, 2016, the Licensing Conditions for Conducting Business Activities on Manufacturing, Wholesale and Retail Trade in Pharmaceuticals, Import of Pharmaceuticals (save for active pharmaceutical ingredients) were approved by Regulation No. 929 of the CMU. The Licensing Conditions consolidate requirements for all types of economic activities connected with pharmaceuticals, specifically: import, manufacture, wholesale and retail trade. To find out more about this development, please follow the link to the dedicated legal alert.

State registration of pharmaceuticals Procedure for reviewing registration materials for pharmaceuticals registered in strict jurisdictions

On November 17, 2016, the MOH adopted the Procedure for Reviewing Registration Materials Submitted for State Registration (Re-Registration) and Materials on Amending Registration Materials While Registration Certificate is in Force for Pharmaceuticals Registered by the Competent Authority of the United States of America, Switzerland, Australia, Canada, as well as Pharmaceuticals Registered under the Centralized Procedure by the Competent Authority of European Union No. 1245 (the "Procedure") (text in Ukrainian is available here). The Procedure became effective on December 30, 2016.

The Procedure sets out the following:

  • the list of documents and application forms required for state registration and variation of registration materials for pharmaceuticals registered in the United States of America, Switzerland, Australia, Canada and the EU (under the centralized procedure);
  • the timelines and the procedure for reviewing materials submitted by the applicant to the State Expert Centre of Ministry of Health of Ukraine (the "SEC") for state registration, re-registration and variation of registration materials for the above pharmaceuticals;
  • the procedure for verifying the fact of registration/variation by the SEC in one of the abovementioned countries; and
  • the grounds for rejecting the registration of a pharmaceutical.

The Procedure also repealed the Procedure for Verifying Materials Supplementing the Application for State Registration of Pharmaceuticals regarding their Scope as approved by MOH Order No. 460 dated July 23, 2015. As such, a new procedure has been established for expert review of registration materials for certain pharmaceuticals registered in the US, EU, Switzerland, Japan, Great Britain, Australia and Canada.

Approval of the Procedure is a significant step forward in implementing the simplified registration procedure introduced into the Law of Ukraine "On Pharmaceuticals" on May 31, 2015. Nevertheless, full implementation of this procedure requires amendments to the procedure of state quality control of pharmaceuticals imported to Ukraine and the procedure for confirming compliance of pharmaceuticals’ manufacturing conditions with good manufacturing practice. No respective bylaws have yet been adopted.

New guidance on bioequivalence studies

On January 12, 2017, the MOH adopted the Order "On Approval of the Guidance "Pharmaceuticals. Bioequivalence Studies" No. 22 (the "Guidance") (text in Ukrainian is available here). The Guidance repealed MOH Order No. 396 "On Approval of the Guidance "Pharmaceuticals. Bioequivalence Studies" dated June 13, 2014. The Guidance sets out the rules for designing, conducting and assessing of bioequivalence studies that are harmonized with EU legislation.

State control over business activities

Laws on liberalization of state control activities

On January 1, 2017, two laws on the liberalization of state control over business activities became effective, specifically: (I) the Law of Ukraine "On Special Aspects of Conducting State Surveillance (Control) Measures in the Area of Business Activity" No. 1726-VIII (the "Law on Moratorium"); and (ii) the Law of Ukraine "On Amending the Law of Ukraine "On Basics of State Control (Surveillance) over Business Activities" related to "Liberalization of the State Control (Surveillance) System over Business Activities"" No. 1728-VIII (the "State Control Law").

The Law on Moratorium established: (i) a moratorium on scheduled inspections of business entities until December 31, 2017; and (ii) a limited list of grounds under which an unscheduled inspection can be conducted by a state supervision authority. More details regarding the Moratorium Law can be found in the previous issue of our Newsletter.

The State Control Law introduced a number changes to the business entities' inspections procedure, including, among others, the following:

  • introducing an integrated automatic system of state control. This system will be freely available to the public and will include information on planned scheduled inspections, their results, imposed sanctions, etc.;
  • limiting the frequency and duration of scheduled inspections, as well as grounds for conducting unscheduled inspections;
  • allowing business entities to rely upon consultations issued by state inspection authorities within relations with government and municipal authorities as well as in court. A business entity cannot be held liable if it acted in compliance with the consultation, in particular, if such consultation was repealed or amended; and
  • establishing that for first-time violations, the fine cannot exceed the minimum amount established by the respective law.

Furthermore, the scope of the Law of Ukraine "On Basics of State Control (Surveillance) over Business Activities" has now been extended to cover additional state authorities, including the State Fiscal Service of Ukraine, the architectural and construction surveillance authorities, the labor law control and other authorities. The specifics governing inspections by such authorities are set out in separate laws.

Approval of the State Control Law is an important step towards enhancing transparency, predictability and certainty of state controlling activities, in particular due to the introduction of the online inspection tracking system and allowing business entities to rely on consultations issued by the state inspections authorities in relations with state authorities and in court.  

Fines for violations related to providing information at the AMCU's request

In December 2016, the Antimonopoly Committee of Ukraine (the "AMCU") fined a major Swiss pharmaceutical company for failure to provide information at the AMCU's request. The amount of the fine is UAH 108,800 (approximately USD 4,076). The AMCU also imposed a fine on one of the biggest Ukrainian distributors for untimely provision of information to four AMCU requests. The amount of the fine is UAH 432,000 (approximately USD 16,184).

The fines were imposed in the course of the ongoing investigation of the Ukrainian pharmaceutical market. More information regarding previous fines imposed on other market participants can be found in the October and November issues of our Newsletter.

Public procurement

New version of the National Essential Medicines List

On December 27, 2016, the MOH published the draft Regulation "On Amending the Regulation of Cabinet of Ministers of Ukraine dated March 25,  2009 No. 333" (the "Draft Regulation") (text in Ukrainian is available here).  

The Draft Regulation provides for the following:

  • restatement of the National Essential Medicines List (the "NEML");
  • abolishment of the List of Medicines Produced Domestically and Abroad That Can Be Purchased by Healthcare Institutions Using Full or Partial Financing from State or Municipal Funds, as approved by CMU Resolution No. 1071, dated September 5, 1996; and
  • entities financed from state or local budgets may only procure pharmaceuticals included into the NEML. 

The Draft Regulation provides for a transition period until January 1, 2019 during which entities financed from state or local budgets will be entitled to purchase products not included into the NEML, provided they procure 100% of the required quantity of pharmaceuticals included into the NEML. Based on the Draft Regulation, the MOH will set out the procedure for defining the required quantity of pharmaceuticals. Additionally, within such procurement, preference should be given to pharmaceuticals included into the healthcare industry standards (i.e., clinical protocols, etc.)

The Draft Regulation is currently undergoing public discussion.

Pharmacovigilance

New procedure for conducting pharmacovigilance  

On  January 6, 2017, the Procedure for Conducting Pharmacovigilance, approved by MOH Order No. 996 dated September 26, 2016 (the "Procedure") (text in Ukrainian is available here), became effective.  

The Procedure contains a number of novelties, including:

  • updated classification of adverse reactions;
  • more detailed requirements as regards investigation of adverse reactions to immunobiological products;
  • the requirement to establish a causal link between an event and the use of vaccine, tuberculin to classify such an event as an adverse reaction;
  • detailed requirements for the person responsible for pharmacovigilance;
  • updated requirements for the marketing authorization holder (the "MAH") related to pharmacovigilance (among others, the format of the pharmacovigilance master file and list of safety-related events to be reported by the MAH have been updated);
  • revised frequency for submitting safety reports;
  • detailed requirements regarding the MAH's pharmacovigilance risk management system;
  • extended rights of the SEC. Among other things, the SEC can provide recommendations to the MOH on fully or partially banning a pharmaceutical in case the MAH does not comply with registration certificate requirements or fails to perform all legal obligations; and
  • a separate procedure for approving and conducting post-marketing non-interventional studies.

Anti-corruption

Obtaining consent to terminate employees responsible for implementing anti-corruption programs  

On December 16, 2016, the Procedure for Obtaining Consent to Terminate the Employee Responsible for Implementing an Anti-Corruption Program, approved by Decision No. 74 of the National Agency on Corruption Prevention, dated October 7, 2016, came into effect. This act established a procedure for terminating the employment agreement of such employees. For more details please refer to the following link. 

Implementation of reference pricing for pharmaceuticals delayed until April 1, 2017

On February 1, 2017, the Cabinet of Ministers of Ukraine (the "CMU") adopted Regulation No. 38 (the "Amending Regulation") aimed at postponing the implementation of the CMU Regulation "On the State Regulation of Prices for Pharmaceuticals" No. 862 (the "Pricing Regulation") until April 1,  2017. By way of reminder, the reimbursement of prices for pharmaceuticals under CMU Regulation No. 863 is also due to launch on April 1, 2017.

In particular, the Amending Regulation provides for the following changes to the Pricing Regulation:

  • the state regulation of prices for pharmaceuticals, enforced through a reference pricing mechanism, will be launched on April 1, 2017 instead of January 1, 2017;
  • the period during which pharmacies can sell pharmaceuticals at prices exceeding the maximum wholesale prices has been extended from February 1, 2017 until April 1, 2017.

The actual implementation of the Pricing Regulation is also subject to the approval of certain orders by the Ministry of Health of Ukraine (the "MOH"). Some of the required MOH orders have been adopted, while approval of the remaining order establishing the procedure for calculating maximum mark-ups for pharmaceuticals is pending. The draft procedure for calculating maximum mark-ups was published for public discussion on December 29, 2016. Please refer to our Newsletter for detailed information on available and pending regulations on reference pricing, as well as on reimbursement mechanism.

Conclusion

The implementation of the Pricing Regulation has been postponed. Thus, the reference pricing and reimbursement mechanisms should be launched simultaneously on April 1, 2017. The actual introduction of the reference pricing mechanism is also conditional upon adoption of the MOH order on calculating maximum mark-ups (which has not yet been adopted as of the date hereof).