Russia Pharmaceuticals Sector Update - November 2020

Russian Ministry of Healthcare Considering a Mechanism for Increasing Maximum Sale Prices for Essential Medicines

The Russian Ministry of Healthcare is considering a mechanism for increasing permitted maximum sale prices for essential medicines that may face a shortage because of their manufacture becoming unprofitable. The Ministry’s proposal to implement such mechanism is currently being elaborated together with the Federal Anti-Monopoly Service (FAS). Few details of the status of the proposal are available at present.

Earlier a number of pharmaceutical companies cautioned the Ministry of Trade stating that they might refuse to offer for sale certain medicines included on the list of essential medicines because of the very low maximum prices registered for such medicines. Many market participants also indicated that the situation became worse because of the rouble devaluation and COVID-19 pandemic, which have led to an increase in demand and to imported pharmaceutical substances becoming more expensive.

Some commentators say that a mechanism where the price of medicines is indexed after a deficit has already occurred is too late. Instead, the mechanism of price regulation must become more flexible and able to change quickly. As of now, a medicine manufacturer has the right to request the re-consideration of prices for essential medicines only once a year, and this might be insufficient and inefficient, as the components of medicine can become more and more expensive several times throughout a year.

Clarification of medical device codes for the application of VAT exemptions

On 1 October 2020, a draft decree of the Government of the Russian Federation was published, proposing changes to the List of codes of medical goods subject to VAT at a rate of 10% percent upon their sale.

The project is intended to harmonize legislation in connection with the work previously carried out by the Ministry of Industry and Trade of the Russian Federation to amend the All-Russian Classification of Products by Type of Economic Activity OK 034-2014 (OKPD 2) with respect to the classification of medical devices and detailing the code 32.50.50.000 "Medical devices, including surgical, and others", as well as the cancellation of this code from 1 January 2021.

The project proposes to supplement the List with detailed codes (to the general code 32.50.50.000), based on the names of types of medical devices, including anti-decubitus pillows, nutrient media for in vitro diagnostics, reagents for the determination of analytes for in vitro diagnostics, metal hazardous medical waste containers, medical mattresses, rehabilitation trainers, other ophthalmic instruments and devices, instruments for the implantation of orthopedic prostheses, anesthetic kits, except for surgical , equipment for supplying anesthetic and respiratory gases, breathing simulators [respiratory exercise equipment], intraocular lenses, other intraocular prostheses, orthopedic implants and fixation systems, neurological medical devices, urine bags and colostomy bags, other urological medical devices, medical devices for otorhinolaryngology, other adapted vehicles and transportation, vacuum disposable tubes, screens, protections, restraints radiation.

In this case, the reference to code 32.50.50.000 will remain in the List for those medical devices, registration certificates for which were issued earlier with an indication of this code. Also, on 1 October 2020, the Government of the Russian Federation adopted Resolution of the Russian Federation No. 1574, which updated the codes in the List of medical products, the sale and import of which are exempt from VAT.

These changes will allow the manufacturers and importers of medical devices to maintain tax benefits for VAT.