Falsified, Substandard, and Counterfeit Medicinal Products

Anna Ivanova, Attorney at BRACE Law Firm

June 21, 2022

According to Article 4 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"), a falsified medicinal product is a medicinal product accompanied by false information regarding its composition and/or manufacturer.

A substandard medicinal product is 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 instrument.

A counterfeit medicinal product is a medicinal product in circulation in violation of civil legislation.

The circulation of falsified, substandard, and counterfeit medicinal products is illegal. For instance, Article 47 of the Law on Circulation of Medicinal Products prohibits the import of such medicines into Russia. Notably, these concepts have different meanings and differ regarding the elements of the offenses associated with the circulation of medicines.

This article examines the legal regulation and law enforcement practice regarding liability for the circulation of falsified, substandard, and counterfeit medicinal products.

Administrative Liability Measures for the Circulation of Falsified, Substandard, and Counterfeit Medicinal Products

Under Article 6.33 of the CAO RF, the production, sale, or import into Russia of falsified medicinal products, or the sale or import into Russia of counterfeit medicinal products, unless these actions constitute a criminally punishable offense, shall entail an administrative fine:

• on citizens in the amount of 70,000 to 100,000 rubles;
• on officials — from 100,000 to 600,000 rubles;
• on individual entrepreneurs — from 100,000 to 600,000 rubles or administrative suspension of activities for up to 90 days;
• on legal entities — from 1,000,000 to 5,000,000 rubles or administrative suspension of activities for up to 90 days.

The sale or import into Russian territory of substandard medicinal products, or the illegal production, sale, or import of unregistered medicinal products, unless these actions constitute a criminally punishable offense, shall entail an administrative fine:

• on citizens in the amount of 70,000 to 100,000 rubles;
• on officials — from 100,000 to 600,000 rubles;
• on individual entrepreneurs — from 100,000 to 600,000 rubles or administrative suspension of activities for up to 90 days;
• on legal entities — from 1,000,000 to 5,000,000 rubles or administrative suspension of activities for up to 90 days.

Effective April 1, 2020, Article 6.33 of the CAO RF was supplemented with Part 3, which introduces liability for the sale of falsified, counterfeit, substandard, or unregistered medicinal products committed using mass media or information and telecommunications networks, including the "Internet,"[1] provided these actions do not constitute a criminal offense.

The following administrative fines are established for such an offense:

• on citizens in the amount of 75,000 to 200,000 rubles;
• on officials — from 150,000 to 600,000 rubles;
• on individual entrepreneurs — from 150,000 to 600,000 rubles or administrative suspension of activities for up to 90 days;
• on legal entities — from 2,000,000 to 6,000,000 rubles or administrative suspension of activities for up to 90 days.

It is important to note that since 2020, this article of the CAO RF also contains a note stating that it is not an offense if the sale and/or import of unregistered medicinal products or medical devices is permitted under the legislation on the circulation of medicinal products, and/or if said medicinal products are not manufactured in Russia, and/or if said medicinal products are recommended for use by the World Health Organization (WHO).

Thus, according to Clauses 3.1 and 3.2 of the Law No. 61-FZ, the import of a specific batch of unregistered medicinal products containing narcotic drugs or psychotropic substances is permitted to provide medical care for life-saving indications for a specific patient or group of patients. This applies if there is a decision by a medical commission of a medical organization regarding the ineffectiveness or impossibility of using other registered medicinal products (including those with different active ingredients) and the necessity of importing a specific unregistered medicinal product, specifying its International Nonproprietary Name (INN) (or chemical or grouping name), dosage form, and quantity.

Additionally, until December 31, 2022, the import and circulation of registered medicinal products in packaging intended for circulation in foreign states are permitted in cases of drug shortages or the risk thereof due to economic sanctions against Russia.[2] This is conditional upon the imported medicines meeting the requirements established during their registration (except for primary and secondary/consumer packaging requirements) and having a self-adhesive label on the secondary (consumer) packaging containing information about the medicinal product in Russian.

Notably, regarding the sale of medicinal products recommended by the WHO, changes are possible if a bill on suspending Russia's participation in the WHO is adopted. However, the State Duma Committee on Economic Policy returned this bill to its drafters in May of this year. Consequently, we believe this legal provision will remain in its current version in the near future.

As an example from judicial practice, a legal entity was sentenced to an administrative fine of 1,000,000 rubles. The court also ordered the destruction of medicinal products seized under an inspection protocol where the integrity of the primary packaging was compromised, and the batch number and expiration date were missing.[3]

When conducting inspections to identify counterfeit medicinal products, compliance with the procedure for drafting an administrative offense protocol is crucial. For example, by the decision of the Arbitration Court of the Krasnodar Territory dated December 23, 2019, in case No. A32-52532/2019, the administrative body was denied the petition to hold a company administratively liable. The denial was based on a violation of the procedure for holding the company liable—specifically, the failure to properly notify the legal representative of the legal entity about the drafting of the administrative offense protocol.

To remedy procedural violations based on inspection materials recording the sale of counterfeit medicinal products, a new administrative offense protocol was drafted. The court held that drafting a new protocol (upon correcting the deficiencies of the previous one) while following other administrative procedures does not constitute a procedural violation and does not prevent holding a person liable within the relevant statute of limitations.[4]

Another example of a refusal to hold the head of a pharmaceutical organization administratively liable involved a case where the court accepted arguments that hearing the case in the absence of the person being held liable was unjustified. Specifically, the Magistrate's Court established that the head should have been notified of the time and place of the hearing at the location of the legal entity as well as at his place of registration.

The registered letter sent to the place of residence (registration) was returned to the court with a postal mark indicating that the storage period had expired, while the summons sent to the legal address was delivered, as evidenced by the postal notification. However, in the city court session, it was established that two organizations were located at the same legal address simultaneously. Consequently, the court summons addressed to the General Director of one company was mistakenly received by the secretary of the other organization. Furthermore, the head of the pharmaceutical company was on a business trip when the summons was sent.

Under these circumstances, during the appeal of the Magistrate's decision, the court ruled that the person against whom the administrative proceedings were being conducted should have been notified by the Magistrate of the time and place of the court session, but did not receive the summons for reasons beyond his control. On this basis, the proceedings were terminated, and the Magistrate's decision was vacated.[5]

Beyond medicinal products, sellers of dietary supplements may also be held liable under Article 6.33 of the CAO RF. For example, during an inspection, substances were found in a dietary supplement in quantities not permitted under the requirements of the Technical Regulations of the Eurasian Economic Union TR CU 021/2011 On Food Safety (approved by the Decision of the Customs Union Commission No. 880 dated December 9, 2011) and TR CU 022/2011 Food Products in Terms of Their Labeling. Courts generally do not recognize such offenses as minor (insignificant).[6]

It is important to note that in addition to fines, the violator's obligation to destroy substandard, counterfeit, or falsified medicines can be considered an additional liability measure. Under Article 47 of the Law No. 61-FZ, falsified and substandard medicinal products are subject to seizure and subsequent destruction or export from the Russian Federation, while counterfeit medicinal products are subject to seizure and subsequent destruction. The destruction or export of such products is carried out at the expense of the person who imported them.

According to the Rules for the Destruction of Seized Falsified, Substandard, and Counterfeit Medicinal Products (approved by Government Decree No. 1447 dated September 15, 2020), the owner of such medicines must withdraw them from circulation, isolate them, and place them in a designated area or notify the authorized body of disagreement with the decision within 30 days, and destroy the seized medicines within 6 months from the date of the decision. Falsified and substandard medicinal products are subject to seizure and destruction by decision of the owner or Roszdravnadzor, while counterfeit medicinal products are seized and destroyed based on a court decision.

In addition to liability under the CAO RF, authorized bodies may petition the court to protect an indefinite circle of persons upon discovering information on the Internet about the sale of medicines not registered in Russia. In one case, Rospotrebnadzor petitioned the court to block a website containing such information. The court established that during monitoring, the Samara Region Department of Rospotrebnadzor identified a website where information on the sale of dietary supplements was publicly available. The case materials contained no information about the website owner, their contact details, or location. It was also impossible to identify the owner using website registration databases. The court found no evidence that the dietary supplements offered for sale were included in the Unified Register of Specialized Food Products or that the medicinal products were registered in the State Register of Medicinal Products. These circumstances served as grounds for including the website in the Unified Automated System "Unified Register of Domain Names, Website Pointers on the Internet, and Network Addresses Identifying Websites Containing Information the Distribution of Which is Prohibited in the Russian Federation."[7]

Thus, based on the judicial practice cited above, it can be concluded that fines for the circulation of falsified, substandard, and counterfeit medicines are quite high, and courts do not recognize these offenses as minor. To maintain a balance of interests, courts pay special attention to Roszdravnadzor's proper compliance with the procedural order of inspections. Furthermore, such medicines are subject to destruction at the offender's expense, and websites distributing them are subject to blocking.

Criminal Liability Measures for the Circulation of Falsified, Substandard, and Counterfeit Medicinal Products

Currently, criminal liability measures may be applied for the circulation of falsified, substandard, and unregistered medicinal products and medical devices, as well as the turnover of falsified dietary supplements.

Under Article 238.1 of the Criminal Code of the Russian Federation (the "CC RF"), the production, sale, or import into the Russian Federation of falsified medicinal products, or the sale or import into Russian territory of substandard medicines, or the illegal production, sale, or import for sale of unregistered medicinal products, committed on a large scale, shall be punishable by:

• compulsory labor for 3 to 5 years, with or without disqualification from holding certain positions or engaging in certain activities for up to 3 years;
• or imprisonment for 3 to 5 years with a fine ranging from 500,000 to 2,000,000 rubles (or the amount of the convicted person's salary or other income for 6 months to 2 years) and with or without disqualification for up to 3 years.

A large scale under this article is defined as a value of medicinal products, medical devices, or dietary supplements exceeding 100,000 rubles.

Similar to Article 6.33 of the CAO RF, additional liability measures were introduced in the CC RF in 2020 for the aforementioned acts committed via mass media or the Internet. In such cases, the punishment includes compulsory labor for 4 to 5 years (with disqualification for 2 to 3 years) or imprisonment for 4 to 6 years with a fine of 750,000 to 2,500,000 rubles and disqualification for up to 4 years.

This article (like Article 6.33 CAO RF) does not apply to the sale of unregistered medicines if their import is permitted under legislation on the circulation of medicinal products and healthcare legislation, and/or if said medicines are recommended for use by the WHO.

In practice, situations arise where defendants are charged under both Article 238.1 of the CC RF and Article 235.1 of the CC RF (Illegal Production of Medicinal Products). For instance, in one case, a company head, seeking profit from medical oxygen produced by a branch, instructed a branch director (who was unaware that the organization lacked a production license) to organize the sale of the oxygen to medical institutions. As a result, the oxygen was sold to hospitals. Investigative authorities qualified these actions under Paragraph (b) of Part 2 of Article 235.1 and Part 1 of Article 238.1 of the CC RF. Under Part 1 of Article 238.1, the defendant was charged with the illegal production and sale of unregistered medicinal products on a large scale.

However, the court found the qualification under Part 1 of Article 238.1 to be redundant, as all illegal actions were covered by the offense under Paragraph (b) of Part 2 of Article 235.1 of the CC RF. This was because medical oxygen is officially registered in the state register of medical devices as a medicinal product; thus, its production and sale by registered manufacturers are permitted.[8]

There is also a significant share of court decisions terminating criminal prosecution for first-time offenders under Article 238.1 of the CC RF. Regarding a defendant who, driven by mercenary motives, intended to illegally sell unregistered medicinal products on a large scale, the court concluded:

"By virtue of Article 15 of the CC RF, the crime provided for by Part 1 of Article 238.1 of the CC RF belongs to the category of medium-gravity crimes. In accordance with Article 76.2 of the CC RF, a person who has committed a crime of small or medium gravity for the first time may be released by the court from criminal liability with the imposition of a judicial fine if they have compensated for the damage or otherwise remedied the harm caused by the crime. The court established that the defendant is being held criminally liable for the first time, and no circumstances specified in Article 63 of the CC RF were found."

Consequently, the court terminated the criminal case under Part 1 of Article 238.1 of the CC RF and released the defendant from liability with the imposition of a judicial fine.

This article reviewed the key features of the legal regulation of the fight against the circulation of falsified, substandard, and counterfeit medicinal products, as well as the application of criminal prosecution and administrative liability measures.

We believe that conducting legal expert reviews of medicinal product circulation and implementing internal control systems—involving manufacturers, distributors, and other pharmaceutical market participants—is vital. Such measures could serve a preventive function and reduce the number of violations.

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[1] Ruling of the Supreme Court of the Russian Federation dated July 26, 2021, No. 308-ES21-8342 in case No. A32-22725/2020.

[2] Ruling of the Supreme Court of the Russian Federation dated March 11, 2021, No. 308-ES21-672 in case No. A32-711/2020.

[3] Decision of the Salsk City Court of the Rostov Region dated November 15, 2016, in case No. 12-105/16.

[4] Ruling of the Supreme Court of the Russian Federation dated February 18, 2021, No. 310-ES20-24051 in case No. A68-13548/2019.

[5] Decree of the Supreme Court of the Russian Federation dated December 1, 2016, No. 301-AD16-15928 in case No. A39-6219/2015.

[6] Decision of the Oktyabrsky District Court of the City of Samara dated July 23, 2020, in case No. 2A-2938/2020.

[7] Judgment of the Almetyevsk City Court of the Republic of Tatarstan No. 1-18/2020 1-551/2019 dated May 18, 2020, in case No. 1-18/2020.

[8] Decree of the Dzerzhinsky District Court of Volgograd No. 1-238/2020 dated July 24, 2020, in case No. 1-238/2020.

June 21, 2022