A general introduction to pharmaceutical IP and competition issues in Russia

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Overview

Generally, the Russian pharmaceutical market and respective legislation continue to develop. Both international and local pharmaceutical companies are already established in Russia and have launched various projects related to the production of new drugs and vaccines. Some recent trends have focused on the localisation of the production of pharmaceuticals, introducing innovations, and increasing the quality of and access to healthcare.

According to analysts, the pharmaceutical market turned out to be one of the industries that felt the turbulence of 2020 to the greatest extent. The growth of revenues as a result of the high demand for drugs, the increasing role of the public sector, the increased activity of regulators and equally active legislative activity – all these factors have become both strength tests and new opportunities for the industry. The production of pharmaceutical products in Russia in 2020 increased by 19.9 per cent compared to 2019 and reached 486 billion roubles. According to the results of 2020, the volume of pharmacy sales of drugs and their supplies in the state segment in Russia amounted to 1.78 trillion roubles, which is 20 per cent more than a year earlier.²

As we mentioned earlier, in March 2019, the government extended the state programme known as 'Development of the Pharmaceutical and Medical Industry' (Pharma 2020) until 2024, and new targets have been added with respect to ensuring the competitiveness of the pharmaceutical industry.

It is expected that a new strategic document 'Pharma 2030' will be adopted at the end of 2021,³ which will define new targets for the development of the pharmaceutical industry for the period up to 2030.

Russia created a single pharmaceutical market within the Eurasian Economic Union (EAEU). From 31 December 2020, the authorisation of all new drugs in Russia is conducted solely based on the EAEU Rules. Since the first application was filed in March 2018 in Kazakhstan, 403⁴ pharmaceutical products have been authorised using the EAEU procedure. By 31 December 2025, it is expected that all drugs that had been authorised under the National Regulation⁵ will be brought in line with the EAEU Rules.

Further, the government has taken steps to develop and liberalise the market of online sales of drugs (see Section III.i). Initially, the rules allowed only 1 per cent of pharmacies to enter the market of online sales. In light of this, in May 2021 the government adopted decree No. 827,⁶ which cancels (starting from September 2021) the requirement to have at least 10 pharmacies throughout the country and traders' own websites for the purposes of online sales. Finally, it is reported that the Ministry of Economic Development has recently launched an initiative to conduct an experiment in online sale of prescription drugs in the city of Moscow and the Moscow and Belgorod regions.⁷ All these steps are expected to increase the number of players in the market for online sales of medicines in the near future.

In the past several years, patent linkage and compulsory licensing have become active legal issues in the wake of an increasing number of disputes initiated by such international pharmaceutical giants as Novartis, Bayer, Pfizer, Boehringer Ingelheim and Gilead Sciences. There have been multiple cases of the authorisation of generic drugs before the expiry of the term of the original patent that became possible because of legislation peculiarities and contradictory court practice. Also, the government has issued a decision granting the first out-of-court compulsory licence to a Russian company.

The problem of ensuring healthy competition in the Russian pharmaceutical market, as well as in other countries, is of key importance. The Russian competition authority, the Federal Antimonopoly Service (FAS), uses a wide range of its powers (from merger control to suppression of violations connected with unfair advertising), monitors regulatory trends abroad and actively cooperates with foreign competition authorities.

The regulator also focuses on balancing private and public interests in protecting intellectual property rights of drug manufacturers. Often, abuses of such rights by their owners have a negative impact on competition and the availability of mainstream drugs to the public. Among the steps initiated by FAS and taken by the government in this direction is the introduction of a compulsory licensing mechanism. The need to legalise parallel imports for certain groups of goods, including drugs, is also discussed by the government from time to time (although no specific steps have been taken so far).

Legislative and regulatory framework

In Russia, the main legislation providing for the authorisation, pricing, patent duration and public purchasing of pharmaceuticals is based on the Civil Code of the Russian Federation as well as on special laws, including Federal Law No. 61-FZ on the circulation of drugs, dated 12 April 2010 (Federal Law No. 61), Federal Law No. 38-FZ on the advertising of drugs, dated 13 March 2006, and Federal Law No. 135-Ф3 on protection of competition, dated 26 July 2006, and subordinate acts.

Special legislation regarding the development of innovation is also in place in Russia and includes, in particular, regulations related to the activity of the Moscow international medical cluster (Federal Law No. 160-FZ) and Skolkovo Innovation Center (Federal Law No. 244-FZ). These laws contain a set of liberalised rules with respect to companies engaged in the production and use of drugs the territory of the Moscow international medical cluster and Skolkovo Innovation Center.

Such new legal instruments as special investment contracts and offset contracts structured under Federal Law No. 44-FZ,⁸ which were introduced relatively recently (2015–2016), have become effective in terms of implementing projects aimed at promoting national industry, including the localisation of the production of drugs in Russia. The legislation provides various incentives and measures of support (including compensation of certain expenses, the possibility to access funding from the Industry Development Fund at special rates, etc.) for investors that meet certain requirements established by law. The investor under a special investment contract must be approved by the government provided that certain conditions are met (e.g., the investment should equal or exceed 3 billion roubles). Offset contracts can be concluded for up to 10 years with a minimum investment of 1 billion roubles (this type of contract was introduced in 2016).

A number of changes to Russian legislation have been made as a result of the spread of the covid-19 pandemic and the need to take special state measures in response. These changes include, in particular, the legalisation of the online sale of drugs (which had been discussed since 2017); new rights of the government to introduce simplified procedures for state registration and the circulation of drugs for the prevention of emergency situations or the prevention and treatment of diseases that are dangerous to people; the introduction of special procedures for state registration; and the introduction of a special drugs regime for the circulation of drugs for determining the maximum selling price for vital and essential drugs during emergencies, which will be effective until 1 January 2022, as well as the automatic renewal of registration certificates for certain drugs expired in 2020.