LawFlash

Mandatory Ceiling Price Adjustment for Essential Drugs in Russia

January 24, 2020

Last month, the Russian government passed a decree[1] (the Decree) amending the rules on state regulation of ceiling prices for drugs included in the Vital and Essential Drugs List (Essential Drugs), which is approved annually.

Wherever the Price Is Lower

Under the Decree, foreign originators are required to constantly keep their prices for Essential Drugs in Russia in line with the lowest price in any of 12 foreign reference states[2], while the prices of generics and biosimilars (except for orphan[3] generics and biosimilars) should follow the prices of their "reference" drugs[4], less a reduction coefficient.

Original drugs

The originator must decrease the registered ceiling price in Russia, if it has lowered a sale price of the drug in any foreign reference state below the registered ceiling price in Russia plus customs duties.

In particular, the holder of the marketing authorization (MA) for the originator’s drug in Russia is required to apply for a decrease of the ceiling price to the Russian Ministry of Health (MoH) within 30 days of the date when a decision of the competent state authority of the respective foreign reference state on the decrease of the price took effect. 

Generics and Biosimilars

A generic or a biosimilar producer must apply for a decrease of its ceiling price within 30 days after the decrease of the relevant original drug’s ceiling price, if such generic or biosimilar ceiling price is higher than the decreased originator’s ceiling price.

In addition, the registration of the ceiling price of the second foreign or local generic or biosimilar, which will generally be lower than the first one, will trigger a necessary reduction of the registered ceiling price of the first foreign or local generic or biosimilar if they have the same international nonproprietary name (INN) and similar dosage forms and dosages. 

However, such reduction is required only if (i) the ceiling price for the relevant originator’s drug (having the same INN and dosage form) is registered at the time of registration of the ceiling price of the second generic or biosimilar, and (ii) the ceiling price of the first generic or biosimilar has not been adjusted in 2019-2020, as required by the Decree (please see the next section for details).

The application for such reduction should be filed with the MoH by the MA holder within 30 days upon registration of the ceiling price of the second generic or biosimilar.

Neither originators nor generic or biosimilar producers who have decreased their ceiling prices in any of the above circumstances, are entitled to an annual ceiling price mark-up in the same calendar year due to an increase of their manufacturing costs or exchange rates fluctuations.

If the holder of the MA for an Essential Drug fails to apply for the decrease of its ceiling price in a timely manner, the Federal Antimonopoly Service of Russia (FAS) may issue a warning and set a 20-business-day deadline to adjust the ceiling price. A failure by the MA holder to meet the deadline serves as a ground for the termination of registration of the ceiling price, which means that such Essential Drug may no longer be sold in Russia until and unless the ceiling price is registered again.

One-Time Mandatory Ceiling Price Adjustment in 2019-2020

In addition, the Decree requires pharmaceutical companies (both foreign and local) to go through a one-time mandatory ceiling price adjustment for all Essential Drugs, except for the following drugs produced in the Eurasian Economic Union (EEU) (which Russia is a part of):

  • Immunobiological drugs (vaccines, antitoxins, toxins, serums, immunoglobulins, and allergens);
  • Narcotic and psychotropic drugs; and
  • Drugs in the low-price segment (i.e., if the price does not exceed 100 Russian Rubles).

A failure by the originator or a generic or biosimilar producer to go through the mandatory ceiling price adjustment will debar its drug from sale from January 1, 2021.  

Originators Do Not Come First

The Decree sets different procedures for the mandatory ceiling price adjustment for originators and producers of generics and biosimilars.

 Original Drugs

The MA holders for original drugs are required to apply for the adjustment of their ceiling prices registered before June 7, 2019 and provide the following documents to the MoH by February 18, 2020:

  1. An application for the adjustment of the registered ceiling price;

     

  2. Information on the manufacturing license and MA for the drug;

     

  3. Calculation of the ceiling price;

     

  4. Information on minimum sale prices of the drug in the foreign reference states (at the official average weighted exchange rate for the respective foreign currency established by the Central Bank of Russia for 2018);

     

  5. Evidence of the minimum sale prices of the drug in the foreign reference states (there are no specific requirements to such evidence yet); and

     

  6. A power of attorney for (or an agreement with) the person, who is responsible for the submission of the documents on behalf of the MA holder.

 

The adjusted ceiling price of the drug for each dosage form, dosage, and pack size may not exceed any of the following prices:

  • The minimum sale price of the drug in any of the foreign reference states plus customs duties;

     

  • Its existing ceiling price in Russia; and

     

  • If the registered ceiling price of the drug in Russia was cancelled less than three years ago from the date of application for the adjustment, – that registered ceiling price.

If the MA lists several manufacturers or manufacturing sites for the drug sold under the same trade name and several ceiling prices are registered, a unified adjusted ceiling price (Unified Adjusted Ceiling Price) for each dosage form, dosage, and pack size shall be registered regardless of the pack composition unless minimum sale prices for different pack compositions differ by more than 10% in any of the foreign reference states.

In the latter case, a separate ceiling price for each pack composition may be registered provided that (i) it does not exceed the minimum sale price in any of the foreign reference states plus customs duties, and (ii) ceiling prices for comparable pack compositions (based on their dosage form, dosage and pack size) do not differ by more than 90%.

Further, if any ceiling price for the drug produced by several manufacturers or manufacturing sites and sold under the same trade name is less than the adjusted ceiling price should be, such lower ceiling price remains intact.

Under the Decree, the aggregate period for (i) the document review by the MoH, and (ii) the review of the calculation of the adjusted originator’s ceiling price by the FAS is 85 business days from receipt of the relevant documents.

However, the MoH is required to pass decisions on the registration of both the adjusted originator’s ceiling price and adjusted ceiling prices for its generics or biosimilars simultaneously.  Adoption of the latter decision will take the regulator another 100 business days, which makes the term for originators equal to 185 business days overall.

The adjusted ceiling price (whether for the originator’s drug or its generic) takes effect within five months from the date of the MoH decision.

Generics and Biosimilars

Unlike originators, generic and biosimilar producers do not need to submit any documents to the regulator. The ceiling prices of their drugs are subject to "automatic" adjustment upon approval of the adjusted ceiling prices of the relevant originators’ drugs by the FAS.

Once the FAS has approved the adjusted ceiling price suggested by the originator, the MoH is required to compile a list of its generics or biosimilars that are authorized in Russia and provide it to the FAS within 20 business days.

The FAS will recalculate the existing ceiling prices of the generics or biosimilars using a reduction coefficient in accordance with the Methods of Calculation of Ceiling Prices of Drugs Included in the Vital and Essential Drugs List[5] within 60 business days from receipt of the list and will make the recalculation public on its website.

The MoH will make a formal decision on the registration of the adjusted ceiling prices within 20 business days upon recalculation of the ceiling prices by the FAS.

The adjusted ceiling price for a generic that has the same dosage form, dosage, and pack size should not exceed any of the following prices:

  • The adjusted ceiling price of the relevant originator’s drug minus the applicable reduction coefficient (except for orphan generics and biosimilars);

     

  • The adjusted ceiling price for the original orphan drug (for orphan generics and biosimilars);

     

  • Its previous ceiling price;

     

  • If its registered ceiling price in Russia was cancelled less than three years ago, – that registered ceiling price.

The rule of the Unified Adjusted Ceiling Price applicable to originator’s drug also applies to generics and biosimilars. In addition, separate ceiling prices for a generic or a biosimilar that has different pack compositions may be registered, if this is the case for the relevant originator’s drug.  

If a generic or biosimilar producer does not agree with the adjusted ceiling price, it may provide substantiating documents to the FAS and apply for another recalculation within one month from the date of the MoH decision.

Based on the provided documents, the FAS must conduct a further recalculation within one month and refer to the MoH for the appropriate adjustment of the new ceiling price, if it considers its previous recalculation to be incorrect.

CONTACTS

If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:

Moscow
Ksenia Andreeva
Roman Dashko
Andrey Ignatenko



[1] Government Decree No. 1683 dated December 16, 2019, "On Making Amendments to Certain Acts of the Government of the Russian Federation Concerning State Registration and Reregistration of Ceiling Prices for Drugs Included in the Vital and Essential Drugs List".

[2] The foreign reference states are: Belgium, Czech Republic, France, Greece, Hungary, Poland, Romania, Slovakia, Spain, the Netherlands, Turkey and the country of origin of the drug (i.e. the country, where the manufacturer is located). 

[3] Under Article 4 (6.1) of the Law on Medicines, an "orphan drug" means "a drug intended for diagnostics or pathogenic treatment of rare (orphan) diseases".  In turn, a disease is treated as rare (orphan), if it affects no more than 10 people out of 100,000.

[4] Russian law does not currently have a definition of the term "original drug".  Under Article 4(11) of the Federal Law No. 61-FZ dated April 12, 2010, "On Circulation of Medicines" (the "Law on Medicines"), a "reference drug" means "a drug, which is (i) registered for the first time in Russia, (ii) its quality, efficacy and safety have been proven in preclinical studies and clinical trials, and (iii) it is used for evaluation of bioequivalence (or therapeutic equivalence), quality, efficacy and safety of a generic or a biosimilar".

The Federal Antimonopoly Service of Russia in its Letter No. AK/10724/16 dated February 20, 2016, "On Registration of Prices of Generics" expressed the position that original drugs shall be treated as reference drugs.

Under the most recent amendments, which take effect on March 1, 2020, the Law on Medicines will be supplemented with the definition of the term "original drug", which means "a drug with a new active pharmaceutical ingredient, which is registered for the first time in Russia or in foreign states, based on the results of preclinical studies and clinical trials that have proven its quality, efficacy and safety".  Further, the definition of the term "reference drug" is being amended to reflect that original drugs shall be principally treated as reference drugs.

[5] Approved by Government Decree No. 979 dated September 15, 2015, "On Making Amendments to Government Decree No. 865 dated October 29, 2010, and Approval of the Methods of Calculation of Ceiling Prices of Drugs Included into the Vital and Essential Drugs List".