KPMG Pharma Bulletin Issue #7, 2018 (July)

KPMG Pharma Bulletin Issue #7, 2018 (July)

Victoria Samsonova

Director, Head of Healthcare & Pharmaceuticals

KPMG in the CIS


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Rules clarified for setting the starting maximum price for state procurements from a sole supplier

The Order of the Russian Ministry of Healthcare dd. 26.06.2018 # 386н amended the procedure of setting the starting (maximum) price of the contract (SMPC) for pharmaceuticals procured by the state customer from a sole supplier, namely:

- grounds and rules are specified for applying wholesale mark-ups when setting the SMPC,
- prior to July 01, 2019, price per unit of a pharmaceutical shall be calculated based prices under historical contracts exclusive of VAT; after this date – exclusive of VAT and the wholesale mark-up,
- application of reference prices for SMPC purposes is postponed till January 01, 2019; previously, reference price was supposed to become one of the three SMPC setting methods from July 01, 2018. I.e. the customer was to calculate the price under three methods: under the tariff method, based on the weighted average price for 12 months and under the reference price method and then select the minimal resulting value as the SMPC.

Now, the reference price method is not to be applied for SMPC calculation till 2019. Other methods are still in effect.


Methodology developed to calculate the fee for state GMP assessment of foreign manufacturers

The Russian Ministry for Industry and Trade posted for public discussions the Methodology for determining the fee for GMP inspections of foreign pharmaceuticals manufacturers for the purposes of GMP compliance certificate issuance.

The document contains a list of procedures (works) to be performed during the inspection, rules for calculation the maximum fee due, as well as standard types (names) of the works to be performed and their actual labor costs (manpower input).

The fee is to be calculated for each applicant individually, with account to the necessary works to be performed (as per the above list), their estimated manpower input and the attributable justified labor and material costs.

The entity empowered for conducting GMP assessments is the State Institute of Pharmaceuticals and Good Practices under the charge of the Ministry for Industry & Trade.


Procedure improved for scientific consultancy procedures on pharmaceuticals circulation

The Russian Ministry of Healthcare has placed for the public discussions the draft law introducing changes to Articles 13 and 15 of the Federal Law dd. 12.04.2010 # 61-FZ “On Circulation of Pharmaceuticals” (61-FZ). The amendments are supposed to improve the procedure of scientific consultancy by state authorities and institutes on matters related to pharmaceuticals circulation.

The need for updating the procedure was driven by the low demand for the said consulting. Under the current version of the Law 61-FZ, federal state budget entities under the charges of the Ministry of Healthcare are entitled to provide scientific consultancy on pharmaceuticals circulation, however are not involved in expert examination of pharmaceuticals in course of their registration; consequently, the said entities do not appear to possess the necessary specific scientific and practical resources and competencies on the subject matter.

The draft proposes limiting the range of entities providing the scientific consultancy. Particularly, it is suggested that only the state institutions which perform expert assessment of drugs may provide consultancy to producers on matters related to (pre)clinical trials, expert assessment of quality, efficiency, safety and state registration. The consultancy shall be provided at request and at the expense of the drug registration applicant.

The procedure of rendering scientific consultancy is supposed to be set out by the regulation of the corresponding federal executive body.


State Duma proposes to oblige pharmacies to inform customers on analogous pharmaceuticals

On July 12, 2018, the State Duma introduced the draft law # 509038-7 which amends Article 55 of the Federal Law dd. 12.04.2010 # 61-FZ "On Circulation of Pharmaceuticals". Under the draft, pharmacies’ staff shall be obliged to inform customers about availability of cheaper analogous pharmaceuticals.

"Entities selling pharmaceuticals in retail shall, first of all, inform a customer about availability of the cheapest analogue of a pharmaceutical demanded (i.e. containing the equivalent international non-proprietary name)".

The Russian Federal Antimonopoly Service has already supported the initiative.

In January, the Government approved the FAS roadmap “Promotion of Fair Competition in Healthcare” which also proposed obliging pharmacies to offer customers in the first turn the cheapest drugs analogues and to inform customers about the availability of cheaper alternatives and their prices.

Also, the Ministry of Healthcare reminded that, according to the law, “a pharmacy professional must not hold back information about the availability of other drugs having the same INN and their prices as compared to the pharmaceutical demanded”.

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Medical devices

Medical device elements criteria are approved for EEU

The EEC Collegium has approved the criteria for distinguishing elements that are integral parts of a medical device for the purposes of its registration.

The Resolution of the EEC Collegium # 116 dd. 24.07.2018 determines a template pattern for identifying core items (parts), components and accessories of a medical device. If, for example, an element is not consumed while a medical device is used, ensures performance of medical procedures in accordance with its functional purpose and is not a spare part, it shall be classified as a core item (part) of a medical device. If it is a spare part, it shall be classified as a component (accessory) of a device.

The Resolution which comes into force on august 25, 2018 allows unify the EAEU member states’ national approaches to the subject matter and ensure mutual confidence for results of expert assessments of the safety, quality and efficacy of medical devices.

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Draft law on medical care and social assistance to elderly generation

A member of the State Duma Committee on Health Protection introduced a draft law “On Complex Medical Care and Social Assistance to Citizens of the Elderly Generation”. The purpose of the document is improving the legislative bases on providing comprehensive medical care and social assistance to aged citizens and those with signs of premature aging (the elderly generation) under the principles of effective inter-governmental cooperation, to increase life expectancy, preserve or restore the self-service abilities, physical and functional activity, independently of external help in everyday life.

The draft defines, in particular, the following objectives:

- ensuring equal access to comprehensive medical care and social assistance across the elderly generation,
- ensuring workable inter-governmental approach to solving social problems,
- developing a system of long-term social service provision for the elderly generation, creating environment for developing the market of social services;
- creating conditions of engaging entities of various legal/shareholding forms into providing comprehensive medical care and social assistance to the elderly generation.

According to the explanatory note enclosed to the document, “adoption of the draft should allow achieve elaborated and consistent the regulatory and legal base which will govern at the federal level the provision of medical and social services to the elderly people and will establish differential assessment of the relevance of certain medical care and social assistance types to this population, including geriatric care”.


Subventions for pharmaceutical coverage are increased

The Prime Minister has signed the Order dd. 14.07.2018 # 1464-p on increasing subventions for providing certain categories of citizens with pharmaceuticals, medical products and special therapeutic nutrition products for disabled children.

In the 1st quarter of 2018, the number of citizens eligible for state social assistance amounted to 3 415 220 people. The budget funding for the above purposes was increased to RUB 33,514 Bn.

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The criminal case does not abolish the fine on delivery of unregistered pharmaceuticals

LLC “Kislorod”, the manufacturer and supplier of medical oxygen, was fined by the Service on Surveillance in Healthcare and Social Development of the Rostov region for supplying hospitals with medical oxygen that was not registered in accordance with the established procedure (the Resolution of the Arbitration Court of the Rostov region dd. 25.03.2018 in case # A53-1879/2018). The company appealed against the decision in the higher court instances, claiming that the fine of RUB 50 000 does not correlate with the severity of the breach committed and demanding to apply only the sanction in the form of a notice (reprimand).

To prove its position the company used quite specific arguments. For instance, it referred that the first instance court did not assess whether the company had deliberately aimed to do harm to lives or health of people. Another argument was that availability of a pharmaceuticals license should relieve the producer from obtaining the registration certificate for medical oxygen. Further, the company insisted that an administrative fine should not be imposed considering that a criminal prosecution was raised against its director for the same violation. Also, it was highlighted that the judges did not assess the company’s financial position (although the fine was set below the minimum limit envisaged by law).

On July 19, the Arbitration Court of the North-Caucasian District dismissed the appeal claim of the LLC “Kislorod”.А53-1879-2018__20180719.pdf?download=true


Russian Supreme Court partially nullified classification of medical services

The specialized non-commercial partnership uniting major distributors of deaf-aids and the related healthcare providers appealed to the Russian Supreme Court, requesting to nullify the nomenclature of medical services approved by the Order of the Ministry of Health dd. 10.13.2017 # 804н. As per the nomenclature, medical services of section "A" include maintenance services (A23.25.008) and repair (A23.25.008.001) of deaf-aids. According to the applicant, this unlawfully creates double licensing obligations for the business (the medical device itself and the specified medical services have to be licensed separately). This results in dual administrative burden, as the license applicant has to fulfil different licensing requirements imposed by different regulators.

The Supreme Court supported the request, stating that production, maintenance and repair of deaf-aids does not fall within scope of medical services, but should be viewed as an elements of the “deaf-aids” article, subject to licensing as medical devices.

One could suppose that the case might be precedential for some other types of medical devices; for example, such as repair of the orthodontic device (A23.07.001.002), speech processor maintenance (A23.25.007), speech processor repair (A23.25.007.001), glasses repair (A23 .26.009), maintenance of orthopedic devices (A23.30.050).


Statistics on medical cartels identified by the FAS

During 2017, the Federal Antimonopoly Service of Russia (FAS) has initiated 423 cases of violating Article 11 of the Federal Law dd. 26.07.2006 # 135-FZ “On Protection of Fair Competition”, 85% of which involve price-fixing collusions at tenders. These numbers were reported by the Head of the Department for cartels combating on July 26, 2018, when speaking in the meeting of FAS’ territorial bodies of the Far East District.
According to the FAS representative, most of the cartels are discovered in construction industry (24.8%), healthcare (19%), cargo and passenger transportation (9%), food products (8%), housing and utility services (6%).

In addition, during 2015-2018 the number of identified price collusions at tenders for pharmaceuticals procurement was noted to increase multiply, whereas the agreements impairing the fair competition affect almost all the types of pharmaceuticals and medical devices.

“Undermining the fair competition impairs the products’ quality, which is the highest priority”, — the FAS official stated.

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The previous Pharma Bulletin issues are accessible our site.

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