IHS Global Insight Perspective | |
Significance | The Ministry of Health and Social Development has drafted a drug pricing policy that would require producers to agree to a fixed maximum price for new drugs during the registration process. |
Implications | A new essential drugs list would be created among treatments currently available on the retail market, and listed drugs would be the only ones bound by the new law. The ministry is pushing for international reference pricing for imported medicines, and national reference pricing for domestically produced treatments. |
Outlook | The draft policy is a stronger pricing control than the one touted by the ministry in March, but its restriction to a predetermined list of essential drugs will result in unequal pricing levels on the market, which will artificially skew competition among treatments. |
Russia's federal Ministry for Health and Social Development has issued a draft regulation that could see work begin on developing the country's first-ever pricing regulations by the end of the year. According to the Vremya Novostey newspaper, the draft document sets out the government's position on determining the value of essential medicines, and establishes the Ministry of Health as the central player in determining the public price of medicines and holding all data related to such decisions. President Vladimir Putin's stamp of approval is required for the draft to become legally binding, after which the actual pricing policy can begin to be thrashed out.
The drugs that could potentially be affected by the pricing regulation are those that are sold in pharmacies but are not included in the Supplementary Medical Guarantee reimbursement plan for citizens on benefits. Within the retail sector, the ministry intends to establish a list of essential medicines; only those treatments will be subject to the new guidance. Determining which drugs are included in the list will be a three-part process, with attention paid to clinical safety and efficacy factors.
The retail sector of Russia's pharmaceutical market had an estimated value of 18.6 billion roubles (US$571 million) in February this year, up 13% from the previous month (see Russia: 8 April 2009: Retail Pharmacy Sales in Russia Jump 13% from January to February). At present, manufacturers are only optionally required to register the maximum sales price for their retail products with the ministry, and there are no restrictions on the wholesale and retail mark-ups that can be added to the ex-factory price (see Russia: 20 April 2009: Margins Account for 60% of Pharmaceuticals Prices in Russia).
One major concern held by the ministry is the deliberate underestimation of prices on medicines that are imported into Russia from overseas. Importers reportedly declare lower prices than the drugs are actually worth in order to be able to add larger mark-ups before selling them on. Given that more than three-quarters of drugs sold in Russia are imported, this phenomenon has the potential to artificially inflate the prices of a considerable number of retail drugs, making them difficult for end-users to afford. The ministry is looking to work closely with the Federal Customs Services to curb the practice.
Other federal agencies due to be more involved in drug pricing negotiations would include the Ministry of Industry and Commerce, the Federal Tariff Service and the drug safety watchdog Roszdravnadzor. According to the source, the ministry is planning to make determining a maximum producer price an integral part of registering new drugs with Roszdravnadzor, a process that all drug makers must complete prior to obtaining Russian marketing approval. Foreign drug makers would see their drug prices determined through comparison with prices in other national markets, in what amounts to a first nod towards the possibility of international reference pricing in Russia. Domestic producers, meanwhile, would see their drug prices determined through means of comparison with similar treatments already available on the Russian market. As the majority of Russian-made drugs are generics, this would conspire to keep the price of Russian drugs low, especially compared with imported medicines.
Outlook and Implications
Price controls mooted by the ministry earlier this year received pledges of support from President Dmitriy Medvedev, but this week's draft is of an altogether tougher and more organised nature, suggesting that Russia is at last preparing to implement long-lasting pricing reforms within its pharmaceutical market (see Russia: 6 March 2009: Health Ministry Considers Capping Drug Price Growth as Imported Medicines Inflate Russian Market). The potential use of national and international reference pricing on new treatments is a step in the right direction, and will make it much easier for the ministry and other players to have a clear picture of retail drug prices in Russia. This will also be beneficial to drug makers considering approaching the Russian market for the first time, or expanding their current presence in the country. However, the draft proposal is not without its faults. By limiting the scope of the regulation to medicines on a predetermined essential drugs list, treatments excluded from the list will continue to see their prices rise, and market competition may become skewed in their favour.