30 April 2022

Criminal Liability: Illegal Circulation of Drugs & Medical Devices in Russia

April 30, 2022

BRACE ©

Medicinal products, medical devices, and, to a certain extent, dietary supplements (the "Dietary Supplements") are critical components of healthcare services. A patient's treatment process, health, and life depend on their quality. Despite the importance of these components, crimes involving the illegal circulation of medicinal products, medical devices, and Dietary Supplements occur globally. The illegal circulation of medicinal products and medical devices triggers liability for those committing such acts.

Pursuant to Clause 17, Article 5 of Federal Law No. 61-FZ dated April 12, 2010, On the Circulation of Medicinal Products (the "Law No. 61-FZ" or the "Law on Circulation of Medicinal Products"), federal executive authorities in the sphere of medicinal product circulation are authorized to apply enforcement measures for violations of Russian legislation. Authorities impose liability for the illegal circulation of medicinal products, medical devices, and Dietary Supplements in accordance with criminal, administrative, and civil law, with criminal liability being the most severe penalty.

As early as 2005, Draft Federal Law No. 140386-4 proposed amending the Criminal Code of the Russian Federation (the "CC RF") to introduce liability for the illegal circulation of medicinal products, medical devices, and Dietary Supplements. The draft envisaged adding Article 238.1 to the CC RF, establishing liability for the production, offer for sale, sale, storage, transportation for the purpose of sale, and/or import into the Russian Federation of medicinal products accompanied by false information regarding their composition and/or manufacturer (i.e., falsification of medicinal products). However, this bill was never enacted.

In 2014, Federal Law No. 532-FZ dated December 31, 2014, introduced significant changes to the CC RF regarding the circulation of medicinal products, medical devices, and Dietary Supplements. Specifically, the following articles were added to the CC RF:

Article 235.1: Illegal Production of Medicinal Products and Medical Devices;
Article 238.1: Circulation of Falsified, Substandard, and Unregistered Medicinal Products and Medical Devices, and Circulation of Falsified Dietary Supplements;
Article 327.2: Forgery of Documents for Medicinal Products or Medical Devices, or Forgery of Packaging for Medicinal Products or Medical Devices.

These amendments represent a milestone in the development of legislation governing the circulation of medicinal products, medical devices, and Dietary Supplements, as these items are essential to providing medical care to patients.

Illegal Production of Medicinal Products and Medical Devices

Article 235.1 of the CC RF stipulates that the production of medicinal products or medical devices without a special permit (license), if such a permit (license) is mandatory, is punishable by imprisonment and a fine. Liability under this article arises only in the event of production. Notably, the manufacturing of medicinal products constitutes a part of pharmaceutical activity.

However, if harm is caused to health, another criminal law provision may apply — Part 1 of Article 235 of the CC RF. This article provides that engaging in pharmaceutical activity by a person without a mandatory license, if it results in negligent harm to human health, is punishable by a fine, restriction of liberty, compulsory labor, or imprisonment.

While both Articles 235.1 and 235 of the CC RF address pharmaceutical activity without a license, the former specifically concerns the production of medicinal products and medical devices, whereas the latter concerns the performance of pharmaceutical activities that result in negligent harm to health.

Part 2 of Article 235.1 establishes liability for acts committed by an organized group or on a large scale. A "large scale" is defined as a value of medicinal products or medical devices exceeding 100,000 rubles. An example of liability under Part 2, Article 235.1 of the CC RF is a sentence against an individual who engaged in the large-scale illegal production of medical devices (i.e., production without a license).[1] To generate profit, the defendant, acting as the director of a limited liability company, formed a criminal intent to illegally produce dental prosthetics without a license and sell them to the general public. To execute this plan, the individual purchased specialized equipment. Believing the defendant was a bona fide manufacturer and unaware of the lack of a production license, victims consented to the production of dental prosthetics.

Continuing the criminal intent to produce and sell medical devices without a license for profit and in gross violation of effective legislation, the individual illegally produced these items. Consequently, through these illegal activities, the individual (identified as F.) received funds totaling 317,000 rubles, which constitutes a large scale.

In qualifying the defendant's actions as "large scale," the court relied on the Note to Article 235.1 of the CC RF and the fact that F. received payments for the illegal production of medical devices.

The court found F. guilty under Clause "b," Part 2, Article 235.1 of the CC RF and, applying Article 64 of the CC RF, imposed a fine of 350,000 rubles.

Courts do not always limit punishment to fines under Clause "b," Part 2, Article 235.1 of the CC RF. In some instances, courts sentence defendants to imprisonment. For example, in one case, a defendant was found guilty under Clause "b," Part 2, Article 235.1 and sentenced to five years of imprisonment.[2] The defendant (identified as K.A.V.) engaged in the large-scale illegal production of medicinal products without a mandatory license. To generate profit, the defendant instructed a branch director of an LLC, where K.A.V. served as General Director, to produce medical oxygen and organize its sale to medical institutions. Medical oxygen is officially registered in the State Register of Medical Devices as a medicinal product. The oxygen produced without a license was sold to a state autonomous healthcare institution. The total value of the medicinal products produced and sold amounted to 1,102,462 rubles, which constitutes a large scale under the Note to Article 235.1 of the CC RF. The court found the defendant guilty and sentenced him to five years of imprisonment. However, based on the totality of circumstances, the defendant's character, and his attitude toward the deed, the court applied Article 73 of the CC RF, making the sentence suspended (probation) with a three-year trial period to prove rehabilitation.

Circulation of Falsified, Substandard, and Unregistered Medicinal Products and Medical Devices, and Circulation of Falsified Dietary Supplements

The circulation of falsified, substandard, and unregistered medicinal products and medical devices, along with falsified Dietary Supplements, may lead to their uncontrolled use and distribution, thereby harming human health.

The subject matter of crimes under Article 238.1 of the CC RF includes falsified or substandard medicinal products or medical devices, unregistered medicinal products or medical devices, and falsified Dietary Supplements containing pharmaceutical substances not declared during state registration.

To qualify acts under Article 238.1 of the CC RF, the following basic definitions apply:

Falsified medicinal product means a medicinal product accompanied by false information about its composition and/or manufacturer.[3]

Pursuant to Clause 12, Article 38 of Federal Law No. 323-FZ dated November 21, 2011, On the Fundamentals of Health Protection of Citizens in the Russian Federation (the "Law No. 323-FZ" or the "Law on Health Protection"), a falsified medical device is a medical device accompanied by false information about its characteristics and/or manufacturer.

Under Article 1 of Federal Law No. 29-FZ dated January 2, 2000, On the Quality and Safety of Food Products, Dietary Supplements are classified as food products. Within this context, falsified food products are food products that are intentionally altered (counterfeit) and/or have hidden properties and quality, and/or information about which is intentionally incomplete and/or unreliable.

Substandard medicinal product means a medicinal product that does not comply with the requirements of a pharmacopoeial monograph or, in its absence, the requirements of regulatory documentation or a regulatory document.[4]

Substandard medical device means a medical device that does not comply with the safety and efficacy requirements for medical devices, labeling requirements, or the manufacturer's regulatory, technical, and operational documentation, and which cannot be safely used for its intended purpose as established by the manufacturer.[5]

Under Article 238.1 of the CC RF, the production, sale, or import into the Russian Federation of the aforementioned items, or the illegal production, sale, or import for sale of unregistered medicinal products or medical devices, or the production, sale, or import of falsified Dietary Supplements containing undeclared pharmaceutical substances, committed on a large scale, is punishable by compulsory labor with disqualification from certain positions or activities, or by imprisonment with a fine and potential disqualification.

The actus reus (objective side) of the crime includes the production, sale, or import of the objects of the crime. Production of medicinal products is defined as the activity of manufacturing medicinal products by manufacturing organizations at one, several, or all stages of the technological process, as well as the storage and sale of the produced medicinal products.[6] The production of medical devices must comply with requirements for the implementation, maintenance, and evaluation of quality management systems for medical devices based on their potential risk class, as approved by the Government of the Russian Federation.[7]

The criminal liability introduced in late 2014 for the circulation of falsified, substandard, and unregistered medicinal products, medical devices, and Dietary Supplements has become highly relevant. Modern technological capabilities have made such illegal production feasible. Often, entrepreneurs fail to consider the potential consequences for human health and life. Typically, medical organizations are state-funded institutions, and procurement is conducted pursuant to Federal Law No. 44-FZ dated April 5, 2013, On the Contract System in the Sphere of Procurement of Goods, Works, and Services for Ensuring State and Municipal Needs (the "Law No. 44-FZ" or the "Contract System Law"). This law governs not only the procurement of medicinal products and medical devices but also their expert examination by the Customer or an external expert organization.[8]

One example involved a sentence under Article 238.1 of the CC RF where the provisions of Law No. 44-FZ were also relevant.[9] The defendants (identified as I.S. and G.I.N.), acting as part of a group by prior conspiracy, illegally produced and sold the unregistered medicinal product "Medical Oxygen" on a large scale.

To execute their intent, I.S. and G.I.N. produced "Medical Oxygen" at their workplace totaling 3,475,993.24 rubles, constituting a large scale. The defendants were fully aware that their produced medical oxygen was not included in the State Register of Medicinal Products, was not authorized for circulation in the Russian Federation, and had not undergone quality expert examination. The medical oxygen was supplied to medical organizations, including those subject to Law No. 44-FZ, via direct contracts or competitive procedures. Given the difficulty in finding suppliers for medical oxygen, auctions were often declared void, and contracts were awarded to the sole participant. Manufacturers participating in tenders to supply medical oxygen to treatment facilities must hold a valid license for the production of medicinal products (specifically listing "oxygen production" or "medical gases") and a Registration Certificate for the medicinal product "Medical Gaseous Oxygen." The income from selling this product to medical organizations was no less than 3.5 million rubles. The court sentenced the defendants to imprisonment but applied Part 3, Article 73 of the CC RF, concluding that their rehabilitation and the prevention of new crimes could be achieved without isolation from society.

In another case, the Central District Court of Barnaul found a defendant guilty under Article 238.1 of the CC RF and imposed both a suspended prison sentence (under Article 73 of the CC RF) and a fine of 1 million rubles.[10] The defendant (M.A.) purchased medicinal products for subsequent sale that lacked Russian labeling and accompanying documentation, totaling over 1 million rubles (a large scale). M.A. was aware that these preparations were medicinal products containing active substances but were not registered in the Russian Federation according to the established procedure.

In the same period, M.A. also purchased medical devices lacking Russian labeling and documentation for over 1 million rubles. M.A. knew these items were medical devices but were unregistered in the Russian Federation. M.A. sold these medicinal products and medical devices from his place of residence.

Evaluating the evidence, the court found the defendant guilty. The court qualified M.A.'s actions under Part 1, Article 238.1 of the CC RF as the illegal sale of unregistered medicinal products and medical devices on a large scale, sentencing him to three years of imprisonment and a fine of 1,000,000 rubles. Pursuant to Article 73 of the CC RF, the prison sentence was made suspended with a three-year trial period.

Forgery of Documents for Medicinal Products or Medical Devices, or Forgery of Packaging for Medicinal Products or Medical Devices

Documentation and packaging are vital elements of the circulation of medicinal products and medical devices. Along with liability for falsifying the products themselves, liability also arises for forging documents or packaging for medicinal products and medical devices.

Pursuant to "GOST 17527-2020. Interstate Standard. Packaging. Terms and Definitions," packaging is an item intended for the placement, protection, handling, delivery, storage, transportation, and demonstration of goods (raw materials and finished products), used by manufacturers, users, consumers, processors, assemblers, or other intermediaries.

There are two types of packaging for medicinal products: primary packaging (individual) and secondary packaging (group or consumer). Primary packaging directly contains the medicinal products, protecting them from external influences, microbial contamination, and damage. Secondary packaging protects the primary packaging during transportation and storage.

Article 327.2 of the CC RF provides that the manufacturing for the purpose of use or sale, or the use of knowingly forged documents for medicinal products or medical devices (Registration Certificates, certificates or declarations of conformity, instructions for use, or a manufacturer's regulatory, technical, and operational documentation), is punishable by a fine, compulsory labor, or imprisonment.

Typically, individuals committing such crimes realize they are manufacturing forged documents. Such individuals often understand that using such medicinal products or medical devices may have unpredictable effects on the life and health of citizens.

An example of liability under Article 327.2 of the CC RF involves a defendant who not only produced forged primary and secondary packaging but also imported falsified medicinal products into the Russian Federation.[11]

The defendant (identified as Zh.I.E.) was charged under Part 1, Article 238.1 of the CC RF for the import and sale of falsified medicinal products, and under Part 2, Article 327.2 of the CC RF for the manufacturing and use of knowingly forged primary and secondary (consumer) packaging. The court examined the case materials and noted that the defendant fully admitted guilt and showed remorse. Furthermore, the actions were intercepted by law enforcement, and the falsified medicinal products did not enter circulation. The court dismissed the criminal case but imposed a judicial fine as a criminal law measure.

General Criminal Offenses

While the specific offenses related to the circulation of medicinal products, medical devices, and Dietary Supplements were discussed above, liability may also arise under general articles of the CC RF. This includes, but is not limited to:

Article 109: Causing Death by Negligence;
Article 118: Causing Grievous Bodily Harm by Negligence.

Causing death by negligence due to the improper performance of professional duties is punishable by restriction of liberty, compulsory labor with disqualification, or imprisonment with disqualification.[12] Causing grievous bodily harm by negligence due to the improper performance of professional duties is similarly punishable by restriction of liberty, compulsory labor, or imprisonment with disqualification.[13]

Liability under these articles in the context of illegal circulation typically arises when medical personnel are unaware that the medicinal products or medical devices used were, for example, falsified.

The Supreme Court clarified that under Part 2, Article 109 of the CC RF, the "improper performance of professional duties" means behavior that fails to comply, in full or in part, with official requirements or instructions, resulting in the victim's death. A prerequisite for criminal liability is the establishment of legal instructions governing conduct in a specific professional sphere. The absence of a corresponding legal rule (rule of conduct) indicates the absence of the socially dangerous act itself, as one cannot establish a violation of professional duties.[14] Furthermore, the failure to perform a necessary action or the performance of a prohibited action must be an essential condition for the consequence—i.e., a condition the absence of which would have prevented the outcome.

For example, one case involved causing death by negligence to two persons and causing grievous bodily harm by negligence due to improper performance of professional duties.[15] At a production site, medicinal products were manufactured: a 20 mg/ml solution for intravenous and intramuscular injection and a 0.5 g (5 ml ampules) solution for injection. The defendants' negligent actions led to medicinal product packaging containing an unspecified number of ampules of the drug "Lysthenon" being distributed through retail pharmacies and medical institutions. Some of these products were used to treat patients, causing grievous bodily harm and subsequent death. Roszdravnadzor for the Moscow Region learned of the first adverse events, suspended distribution, and initiated a market recall, after which all products were destroyed. Given the conciliation procedures, the court reclassified the defendants' actions from Part 3, Article 238 of the CC RF to Part 3, Article 109 and Part 2, Article 118 of the CC RF, and dismissed the criminal case against them.

The quality of medicinal products and medical devices directly impacts both health and life. The cases cited above demonstrate that illegal circulation can cause irreparable harm if these products reach medical organizations. Despite internal expert examinations, medical staff cannot always identify falsified preparations or forged documents. Often, identification is only possible through a full expert examination, for which most medical organizations lack sufficient funding. Consequently, falsified medicinal products, medical devices, and Dietary Supplements continue to enter circulation.

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References

[1] Sentence of the Lenin District Court of Saratov dated November 29, 2018, in Case No. 1-428/2018.

[2] Sentence of the Almetyevsk City Court of the Republic of Tatarstan dated May 18, 2020, in Case No. 1-18/2020.

[3] Clause 37, Article 4 of the Law No. 61-FZ.

[4] Clause 38, Article 4 of the Law No. 61-FZ.

[5] Clause 13, Article 38 of the Law No. 323-FZ.

[6] Clause 31, Article 4 of the Law No. 61-FZ.

[7] Clause 8.1, Article 38 of the Law No. 323-FZ.

[8] Article 41 of the Law No. 44-FZ.

[9] Sentence of the Shakhty City Court of the Rostov Region dated August 3, 2020, No. 1-199/2020.

[10] Sentence of the Central District Court of Barnaul dated January 18, 2018, in Case No. 1-17/2018 (1-528/2017).

[11] Ruling of the Lyubertsy City Court of the Moscow Region dated January 11, 2018, in Case No. 1-31/2018 (1-964/17).

[12] Part 2, Article 109 of the CC RF.

[13] Part 2, Article 118 of the CC RF.

[14] Review of Judicial Practice of the Supreme Court of the Russian Federation No. 3 (2015) (approved by the Presidium of the Supreme Court of the Russian Federation on November 25, 2015).

[15] Ruling of the Sergiyev Posad City Court of the Moscow Region dated March 26, 2015, in Case No. 1-6/2015 (1-418/2014).