BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/09
At the beginning of February, president Vladimir Putin issued a decree stating how the government must intervene to deal with soaring drug prices. The decree calls for the government to arrange for oversight of drug pricing at the retail level and to report the results on a monthly basis. The government is also working with regional officials to investigate the possibilities of establishing state or municipal pharmacies to assure universal access to medicines. The government is looking into how these new pharmacies might be supported. In addition, the cabinet has been tasked with building an automatic tracking system that would follow the route of medicines from manufacturer to consumer. The intention is to monitor the quality of medicines and reduce the amount of drug counterfeiting.
About 40 % of the medicines sold in Russia are subject to administratively regulated prices. The Duma this week approved a law that would make it possible to increase once a year prices of drugs in lower price categories in the list of regulated drugs, in order to guarantee drug manufacturers a minimum level of profitability. At the moment, many drug firms are losing money and may even be compelled to shut down their production.
Efforts are made to mitigate the higher costs of imported medicines subject to regulated pricing by substituting imports with domestically produced drugs – however, often of lower quality. By some estimates, only 15–20 % of Russian pharmaceutical manufacturers comply with the Good Manufacturing Practices (GMP) promulgated by the World Health Organisation.
Support to domestic producers is also provided in the form of import restrictions. The cabinet is currently considering a decree that would prevent foreign drug makers from participating in competitive bidding for public procurements if at least two manufacturers operating in Russia or inside the Eurasian Economic Union are taking part. The decree has been criticised precisely for the fact that domestic production is not considered to be of particularly high quality.
The government is currently preparing an action plan for replacing imports with domestic production. The programme strongly focuses on the pharmaceuticals industry, for which it would provide, among other things, low-interest loans. Further, companies building new drug plants in rural areas would e.g. get easier access to infrastructure for municipal heat, water and electrical services.