A draft law outlawing the application of special tax regimes (unified tax on imputed income and patent taxation system) by pharmacies has been approved in second reading

On 16 September 2019, the Russian State Duma approved draft law No. 720839-7 in second reading.

The changes relate to Art. 346.27 and Art. 346.43 of the Russian Tax Code. If the draft law is adopted in its current version, pharmacy organizations engaged in the sale of medicinal products will not be able to take advantage of the following special tax regimes: unified tax on imputed income and patent taxation system.

According to the market players, if this law becomes effective, pharmacies will have to increase prices at least by 5% and close unprofitable points of sale in remote settlements.

New rules of granting subsidies to pharmaceutical companies

The Ministry of Industry and Trade of Russia has drafted Resolutions canceling from 2020 the existing pharmaceutical subsidies provided by Resolutions of the Russian Government No. 1045 and No. 1047 of 1 October 2015, No. 1503 of 30 December 2015. Instead, under the new regulations pharmaceutical companies should be able to apply for federal subsidies to compensate the following types of costs:

  1. costs incurred in implementing projects aimed at developing production of competitive pharmaceuticals;
  2. costs relating to granting discount of advance payment under the leasing contracts connected with the investments projects.

The draft resolutions were published on the portal of regulatory acts and passed through the public discussion (draft No. 91091, draft No. 90887)

The drafts provide for the following key amendments in comparison to the current regulation:

  • wider circle of the subsidies recipients;
  • increase of the subsidies amount - up to 100% of the incurred costs;
  • subsidies' limits are differentiated upon each strategic area of pharmaceuticals development;
  • extended list of compensated costs; and
  • competitive selection of subsidies recipients.

According to the explanatory note it is expected that this initiative will increase the share of domestically produced pharmaceuticals, the volume of investment in research, development and technological innovation; the creation and modernization of high-performance jobs in the pharmaceutical industry and export volume of pharmaceuticals.

Ministry of Healthcare will Change the Order for Buying the Essential Medicines

Russian Ministry of Healthcare plans to change the order for buying so called “essential” (important and/or necessary for life) medicines from the suppliers based on state tenders. A copy of the respective order of the Ministry is already drafted and may be adopted soon.

The changes will affect the determination of the starting maximal price of the sales contracts. From now on, a maximal price for the item of goods will also be established in each case. Also, it is planned to more considerably increase the price in course of the repeated arrangement of the state tender in case if the first tender did not succeed.

The Ministry hopes that the new rules will allow to avoid the situations when the contract price was too low for the market participants, so that the suppliers did not participate in the auctions. From the beginning of 2019 about 30% of all state tenders for essential medicines failed. One of the reasons could be the outdated internal methods for determination of the purchase price, hence the new changes are being considered.