Licensing of Pharmaceutical Activity Performed by Wholesale Trade Organizations for Medicinal Products

 

Anna Ivanova, Attorney at BRACE Law Firm

January 20, 2023

BRACE Law Firm ©

 

Wholesale trade in medicinal products for medical use, as well as the storage and transport of medicinal products and medicinal preparations, are subject to licensing as pharmaceutical activities performed by medicinal product wholesale trade organizations.

Despite the exhaustive list of activities subject to licensing within the pharmaceutical industry provided above, pharmaceutical market participants frequently raise questions regarding the necessity of obtaining a license depending on the type of pharmaceutical products planned for sale.

For instance, questions often arise in practice regarding the licensing requirements for the sale of homeopathic medicinal products. In this case, one should refer to the State Register of Medicinal Products, which includes homeopathic medicinal preparations. Consequently, a license may also be required for their sale. Pursuant to the Federal Law No. 61-FZ dated April 12, 2010, On the Circulation of Medicinal Products (the "Law No. 61-FZ"), the production, manufacturing, storage, transport, import into the Russian Federation, export from the Russian Federation, advertising, dispensing, sale, transfer, use, and destruction of medicinal preparations are permitted in Russia only if they are registered by the relevant authorized federal executive body. Thus, the circulation of medicinal products is possible only upon their registration and provided that the person selling them holds the appropriate license, regardless of whether the medicinal product is homeopathic.

Until September 1, 2022, the primary regulatory act establishing licensing requirements in the field of pharmaceutical activity, including the wholesale trade of medicines, was the Decree of the Government of Russia No. 1081 dated December 22, 2011, On Licensing of Pharmaceutical Activity. However, as of September 1, 2022, the specified document became ineffective following the approval of the new Regulation on Licensing of Pharmaceutical Activity by the Decree of the Government of Russia No. 547 dated March 31, 2022 (the "Regulation on Licensing of Pharmaceutical Activity"), which also entered into force on September 1, 2022, and will remain effective until September 1, 2028.

List of Performed Works and Rendered Services Constituting Pharmaceutical Activity

In accordance with the appendix to the new Regulation on Licensing of Pharmaceutical Activity, the following list of performed works and rendered services constituting pharmaceutical activity has been established:

• Wholesale trade of medicinal products for medical use.
• Storage of medicinal products for medical use.
• Storage of medicinal preparations for medical use.
• Transport of medicinal products for medical use.
• Transport of medicinal preparations for medical use.
• Retail trade of medicinal preparations for medical use.
• Dispensing of medicinal preparations for medical use.
• Manufacturing of medicinal preparations for medical use.

The specified list is completely identical to the previously effective licensing regulation and has not undergone changes. Thus, the wholesale trade of medicines is fully subject to the regulation of the new Regulation on Licensing of Pharmaceutical Activity.

Key Requirements for Licensees and License Applicants for Wholesale Trade of Medicinal Products

Let us consider the primary requirements for license applicants and licensees. As a general rule under Part 1 of Article 52 of the Law on Circulation of Medicinal Products, organizations and individual entrepreneurs, specifically medicinal product wholesale trade organizations, may obtain a license to perform pharmaceutical activity.

Under Clause 34 of Article 4 of the Law on Circulation of Medicinal Products, a medicinal product wholesale trade organization is an organization engaged in the wholesale trade of medicinal products, their storage, and transport in accordance with the requirements of the Law on Circulation of Medicinal Products.

At the same time, disputes regarding the necessity of a license for wholesale trade of medicines often arise during procurement procedures. For example, according to Roszdravnadzor, a retail seller that does not hold a pharmaceutical activity license specifying the work (service) of "wholesale trade of medicinal products for medical use" is not entitled to engage in the wholesale trade of medicinal products.[1] FAS Russia holds a similar opinion. Specifically, if the object of procurement is the supply of medicinal products, the Customer must establish a requirement for the bidders to comply with the legislation of the Russian Federation; namely, if the bidder is not a manufacturer of medicinal products, it must hold a pharmaceutical activity license from a wholesale trade organization specifying "wholesale trade of medicinal products". A retail seller lacking a pharmaceutical activity license specifying "wholesale trade of medicinal products" cannot be a bidder or a supplier of medicinal products under a state contract.[2]

Roszdravnadzor acts as the licensing authority, specifically the Department for Licensing and Control of Compliance with Mandatory Requirements. The Division for Licensing of Pharmaceutical Activity and Activities Related to the Circulation of Narcotic Drugs, Psychotropic Substances, and Their Precursors, Cultivation of Narcotic Plants, and Control in the Sphere of Circulation of Medicinal Products of Roszdravnadzor performs the licensing of pharmaceutical activity regarding activities carried out by medicinal product wholesale trade organizations. The Roszdravnadzor order granting the license is signed by the Head of Roszdravnadzor. Meanwhile, the notification of refusal to grant a license is signed by the head of the Roszdravnadzor department performing the licensing of pharmaceutical activity (the head or deputy head).

According to Clause 4 of the Regulation on Licensing of Pharmaceutical Activity, a license applicant must meet the following requirements.

First, the presence of a production facility or facilities (premises, buildings, structures) and equipment at the place of performance of pharmaceutical activity, held by right of ownership or on another legal basis providing the right of possession and use, or belonging by right of ownership or on another legal basis to another licensee that holds a license to perform works or render services constituting the activity of wholesale trade of medicinal products for medical use, and a contract (for a term of 12 months or more) with the license applicant for the outsourcing of works (services) (regarding the storage of medicinal products for medical use), which comply with the requirements of Article 54 of the Law on Circulation of Medicinal Products, the rules of Good Distribution Practice (the "GDP") within the framework of the Eurasian Economic Union, and the rules of good practice for the storage and transport of medicinal preparations approved by the authorized federal executive body.

Second, the presence of a person responsible for the implementation and maintenance of the quality system for the storage and transport of medicinal preparations and the updating of standard operating procedures for the performance of pharmaceutical activity in the sphere of circulation of medicinal products, in accordance with the rules of good practice for the storage and transport of medicinal preparations.

Third, the license applicant as an individual entrepreneur must hold a higher or middle pharmaceutical education with an accreditation certificate, while a legal entity engaged in the wholesale trade of medicines must have employees who also hold middle or higher pharmaceutical education and a specialist certificate or completed accreditation. It is important to note that the regulation on licensing of pharmaceutical activity does not define a specific number of employees required to obtain a license. In this regard, it may be assumed that the permissible number of employees is one or more. However, this regulation establishes the necessity of having such employees on the company's staff under labor contracts. Consequently, having the status of a self-employed specialist with a pharmaceutical education or hiring such a specialist under a civil law contract will not be considered compliance with the requirements specified above.

Thus, based on the specified list of requirements for a license applicant, one of the primary requirements is the presence of a production facility or facilities (premises, buildings, structures) and equipment at the place of performance of pharmaceutical activity. Such facilities may belong to the license applicant by right of ownership or on another basis allowing for the possession and use of the facilities. It is also permitted to have such facilities owned by a person holding a license for the wholesale trade of medicines, provided that an outsourcing contract for works (services) is concluded with the license applicant, but only regarding the storage of medicinal products for medical use. The term of such a contract must be more than 12 months. Notably, the provision for such an outsourcing contract is only included in the new licensing regulation. Thus, the legislator has provided clarifications that the performance of storage of medicinal products does not require a separate license (only if a wholesale trade license is held). On one hand, this provision allows for the reduction of costs associated with the acquisition or lease of necessary premises for storing medicines. On the other hand, in practice, organizations performing contract storage have not always held relevant licenses, and the submission of such contracts by license applicants to Roszdravnadzor may presumably lead to an increase in the number of inspections of such organizations.

Furthermore, the specified premises must comply with several legal acts simultaneously. Specifically, these are the rules of Good Distribution Practice of the Eurasian Economic Union (the "EAEU") and the rules of good practice for the storage and transport of medicinal preparations.

For instance, the rules of Good Distribution Practice within the framework of the Eurasian Economic Union, approved by the Decision of the Council of the Eurasian Economic Commission No. 80 dated November 3, 2016 (the "Rules of Good Distribution Practice"), contain the basics for implementing a quality management system in medicinal product wholesale trade organizations. The specified rules include the following primary requirements for premises. Premises must be designed or adapted to ensure compliance with the required storage conditions. Medicinal products must be stored appropriately in dedicated and clearly marked zones, with access permitted only to authorized personnel. Any falsified products, expired products, recalled products, or rejected (dismissed from the supply chain) products must be immediately physically isolated and placed in a specially designated zone. A security system must be provided to prevent unauthorized entry into any premises with controlled access. Premises and equipment for storage must be clean and free of accumulated dust and debris. Premises must be designed and equipped to ensure protection against the entry of insects, rodents, or other animals. Restrooms, locker rooms, showers, and toilets for employees must be appropriately separated from storage zones. The following information must be specified in the accompanying documents for medicinal products: date, name of the medicinal product, batch (lot) number, supplied quantity, dosage form, dosage, name and address of the supplier, name and address of the consignee (the address of the wholesale warehouse location if it differs from the legal entity's address), as well as transportation and storage conditions.

The Rules of Good Distribution Practice pay special attention to the environmental conditions for the storage of medicines, particularly the temperature regime in the premises. It is established that temperature mapping must be repeated in accordance with the results of risk analysis or in the event of significant changes in the facility's layout or temperature control equipment. Since the preservation of the quality of medicines fundamentally depends on the temperature regime, Roszdravnadzor periodically reminds pharmaceutical companies of the extreme importance of its compliance and that such violations will constitute a violation of licensing requirements.[3]

The rules of good practice for the storage and transport of medicinal preparations for medical use, approved by the Order of the Ministry of Health of Russia No. 646n dated August 31, 2016 (the "Rules of Good Practice for the Storage and Transport of Medicinal Products"), also implement a system for ensuring the quality of storage and transport of medicines. It is established that documents regarding the storage and (or) transport of medicinal preparations describing the actions performed by the entity in the circulation of medicines include, among other things, standard operating procedures, instructions, contracts, and reports.

Racks (cabinets) for the storage of medicines are marked and must have rack cards for identification. A security system must also be provided during the storage of medicines. Specific requirements are established for the equipment intended for their storage. Specifically, the equipment must include:

• Air conditioning systems;
• Refrigeration chambers and (or) refrigerators;
• Security and fire alarms; access control systems;
• Ventilation system;
• Thermohygrometers (psychrometers) or other equipment for recording temperature and humidity.

At the same time, the new Regulation on Licensing of Pharmaceutical Activity separately establishes a requirement for the presence of a quality system for the storage and transport of medicinal preparations and the updating of standard operating procedures for the performance of pharmaceutical activity in accordance with the aforementioned EAEU good practices.

It is important to note that previously, questions frequently arose regarding whether a separate pharmaceutical license was necessary for the storage and/or transport of medicinal products, as in some cases, medicinal product wholesale trade organizations involve transport companies for the transportation of medicines. As explained by Roszdravnadzor, in accordance with Clause 33 of Article 4 of the Law on Circulation of Medicinal Products, pharmaceutical activity is activity including the wholesale trade of medicinal products, their storage, transport, and (or) the retail trade of medicinal preparations, their dispensing, storage, transport, and manufacturing. The performance of only the transportation of medicinal products does not require obtaining a license to perform pharmaceutical activity.[4]

However, judicial practice often reaches different conclusions. For example, the Arbitration Court of the Sverdlovsk Region concluded that liability measures under Part 4 of Article 14.1 of the CAO RF should be applied to a medicinal product wholesale trade organization because the pharmaceutical activity license did not include the type of services (works) for the "transport of medicinal preparations for medical use". The wholesale organization performed the transport of medicinal preparations under a contract with a transport and forwarding company that lacked a pharmaceutical activity license according to the register of licenses.[5] At the same time, the new Regulation on Licensing of Pharmaceutical Activity does not provide for the possibility of outsourcing the transport of medicines (under Sub-clause "a" of Clause 4 of the Regulation on Licensing of Pharmaceutical Activity, outsourcing is provided only for the storage of medicines, not for transport). Nevertheless, given that the judicial decision was made prior to the introduction of the new regulation, and considering the clarifications from Roszdravnadzor, the question of whether a license for the transport of medicinal products must be obtained as part of a wholesale trade license without involving another company on an outsourcing basis remains controversial.

We believe that in this case, to avoid liability risks, a wholesale organization should either have the activity type "transport of medicinal products" included in its wholesale trade license or engage a transport company that has such an activity type in its license. However, the latter is difficult to implement in practice. Therefore, we believe that judicial practice regarding this issue is subject to further development, or this issue should be additionally regulated at the legislative level.

It is important to note that the new Regulation on Licensing of Pharmaceutical Activity lacks a requirement for the head of a pharmaceutical organization or an individual entrepreneur to have, in addition to the necessary education, work experience in the specialty of at least 5 years with a middle education and 3 years with a higher education. Thus, there is reason to believe that these measures are aimed at increasing the opportunities for license applicants to attract young specialists.

It should be noted that, in addition to the requirements listed above, additional requirements are imposed directly on licensees, namely compliance with:

• Articles 53, 54, and Part 7 of Article 67 of the Law on Circulation of Medicinal Products. These requirements establish the circle of persons to whom wholesale trade organizations may sell medicines (with the exception of the pharmaceutical substance of ethyl alcohol (ethanol);

The following persons are included:

• Other medicinal product wholesale trade organizations; § Medicinal product manufacturers for medicine production purposes; § Pharmacies; § Scientific research organizations; § Medical organizations and individual entrepreneurs holding a license for pharmaceutical or medical activity.

Furthermore, a medicinal product wholesale trade organization is obliged to comply with the maximum deadlines for shipping medicines requested by a pharmacy and is not entitled to refuse a pharmacy when concluding a supply contract if the wholesale seller has such medicines available. Thus, the Order of the Ministry of Health of Russia No. 267n dated April 18, 2022, established that the maximum shipping deadlines within a city of federal significance, a municipal district, or an urban okrug are 10 working days from the date of registration of the pharmacy's request addressed to the wholesale medicine seller. In other municipal formations, this period will be 15 working days.

• The Rules of Good Distribution Practice within the EAEU;
• The Rules of Good Practice for the Storage and Transport of Medicinal Preparations;
• The Rules for the Registration of Operations Related to the Circulation of Medicinal Products included in the list of medicinal products for medical use subject to subject-quantitative accounting in special logs for accounting operations related to the circulation of medicinal products, and rules for maintaining and storing special logs for accounting operations related to the circulation of medicinal products;
• The requirements of Article 57 of the Law on Circulation of Medicinal Products (prohibition on the sale of falsified, substandard, or counterfeit medicinal products);
• The Rules for the Storage of Medicinal Products and the Rules of Good Practice for the Storage and Transport of Medicinal Preparations for Medical Use;
• The requirement for advanced training of specialists with pharmaceutical or veterinary education at least once every 5 years.

Based on the analysis of these requirements, it follows that the new Regulation on Licensing of Pharmaceutical Activity, which entered into force on September 1, 2022, shows a trend toward orienting toward EAEU legislation to align Russian legislation with the unified requirements of the Eurasian Economic Union.

It is also important to note that according to the Decree of the Government of the Russian Federation No. 2164 dated November 29, 2022, On Amending the Regulation on Licensing of Pharmaceutical Activity, as of September 1, 2023, the norms of the new Regulation on Licensing of Pharmaceutical Activity regarding the procedure for evaluating documents submitted by a license applicant are further specified. While it is currently established that the licensing authority makes a decision to grant a license within 15 working days from the date of receipt of the application, as of September 1, 2023, Roszdravnadzor undertakes to send the following inter-agency requests:

• To the FAS Russia, to obtain data on the INN, OGRN, or OGRNIP of the applicant;
• To the Pension and Social Insurance Fund, to obtain information confirming that the license applicant has an employee (employees) who has concluded a labor contract with them and whose activity is directly related to the circulation of medicinal products;
• To the Rosreestr, to obtain information confirming that the license applicant holds by right of ownership or on another legal basis the production facility or facilities (premises, buildings, structures) necessary for performing pharmaceutical activity;
• To the Rosobrnadzor, to obtain information confirming that the employee has a higher or middle pharmaceutical education, as well as a specialist certificate, or a higher or middle veterinary education, as well as a specialist certificate;
• To the Rospotrebnadzor, to confirm the presence of a sanitary-epidemiological conclusion issued in accordance with the established procedure regarding the compliance of the premises with the requirements of sanitary rules regarding pharmaceutical activity in the sphere of circulation of medicinal products.

The applicant is entitled to submit such documents independently. Notably, regarding sanitary-epidemiological conclusions, during the period of the now-ineffective licensing regulation, Rospotrebnadzor provided clarifications that when issuing sanitary-epidemiological conclusions for pharmaceutical activity in the sphere of circulation of medicinal products, the wording of works and services provided for by the Regulation on Licensing should be used in the sanitary-epidemiological conclusion forms. We believe that this clarification applies to the new Regulation on Licensing by analogy.[6]

The evaluation of the license applicant's compliance with licensing requirements will be carried out within a shortened period of 10 working days from the date of submission of the application, and if the applicant intends to perform activities on the territory of a closed administrative-territorial formation, the specified evaluation period is increased to 20 working days.

We have reviewed the primary requirements for license applicants and licensees. Next, let us consider the primary procedural requirements for obtaining a license.

Procedure for Obtaining a License for Wholesale Trade of Medicinal Products

To obtain a license, a license applicant sends an application for a license in electronic form to the licensing authority, specifying the information provided for by Part 1 of Article 13 of the Federal Law No. 99-FZ dated May 4, 2011, On Licensing of Certain Types of Activity (the "Law on Licensing"), namely the name of the applicant-legal entity, the surname, first name, and patronymic of the applicant-individual, INN, the licensed type of activity for which the license is requested, the details of documents confirming compliance with licensing requirements, as well as:

• Information confirming that the license applicant holds by right of ownership or on another legal basis the production facility or facilities (premises, buildings, structures) and equipment necessary for performing pharmaceutical activity, which comply with the established requirements;
• Information confirming that the license applicant has a contract (for a term of 12 months or more) for the outsourcing of works (services) constituting pharmaceutical activity (regarding the storage of medicinal products for medical use), concluded with a licensee performing pharmaceutical activity at the address where the works (services) outsourced by the license applicant are performed (in the case of using outsourcing);
• Information regarding the presence of a sanitary-epidemiological conclusion issued in accordance with the established procedure regarding the compliance of the premises with the requirements of sanitary rules regarding pharmaceutical activity in the sphere of circulation of medicinal products for medical use (with the exception of medical organizations, separate subdivisions of medical organizations, and medicinal product wholesale trade organizations obtaining a license on the basis of a contract (for a term of 12 months or more) for the outsourcing of works (services) regarding the storage of medicinal products for medical use);
• Information regarding higher or middle pharmaceutical education, as well as a specialist certificate or completed specialist accreditation—for performing pharmaceutical activity in the sphere of circulation of medicinal products for medical use.

It is also advisable to attach a receipt for the payment of the state duty to the specified documents (although this document is not mandatory, the actual payment of the state duty is mandatory). Currently, in accordance with Article 333.33 of the Tax Code of the Russian Federation, the state duty for granting a license is 7,500 rubles.

The procedure for considering an application for a license is regulated in more detail by the Administrative Regulation of the Federal Service for Surveillance in Healthcare on providing the state service for licensing of pharmaceutical activity performed by medicinal product wholesale trade organizations for medical use and pharmacy organizations subordinate to federal executive bodies, approved by the Roszdravnadzor Order No. 10935 dated November 23, 2020 (the "Administrative Regulation").

Despite the fact that the document was adopted on the basis of the previously effective licensing regulation, it has not been declared ineffective and generally does not contradict the changes introduced by the new Regulation on Licensing of Pharmaceutical Activity. However, the Administrative Regulation does not contain the innovations regarding the possibility of outsourcing the storage of medicinal preparations, nor does it exclude the requirement for the head of the applicant organization to have work experience in the specialty. Nevertheless, as a general rule, following the adoption of the new Regulation on Licensing of Pharmaceutical Activity, the norms of the specified regulation take priority. We believe that the Administrative Regulation should be aligned with the licensing regulation in the near future. Nonetheless, the Administrative Regulation governs important procedural aspects of the application's consideration.

Specifically, the application and documents received by Roszdravnadzor from the applicant are registered within 1 working day from the date of their receipt on a first-come, first-served basis without prior appointment. The waiting time in the queue is 15 minutes. It is also established that Roszdravnadzor is not entitled to demand documents and information from the applicant whose absence and (or) unreliability were not specified during the initial refusal to accept the documents necessary for the service. At the same time, under Clause 27 of the Administrative Regulation, no grounds for refusal to accept documents are provided.

Currently, according to the Regulation on Licensing of Pharmaceutical Activity, the application is submitted in electronic form and signed with an enhanced qualified electronic signature.

The evaluation of the license applicant's (licensee's) compliance with licensing requirements is performed in the form of an on-site evaluation. If photography and (or) video recording were performed during the on-site evaluation of the license applicant's (licensee's) compliance with licensing requirements, a note of this is made in the evaluation report. Photography and (or) video recording materials are attached to the evaluation report.

When considering the application, Roszdravnadzor is also entitled to involve disinterested experts or expert organizations, as well as organizations subordinate to the licensing authority, to perform the evaluation. Experts are involved on a gratuitous basis.

Upon identifying a license applicant's (licensee's) non-compliance with licensing requirements, the evaluation report must specify exactly which licensing requirements the license applicant does not meet.

Information regarding the issuance of a license is entered into the register of licenses. An extract from the register of licenses is provided in the form of an electronic document without charge. The licensing file of the license applicant and licensee is formed in the automated information system of Roszdravnadzor.

The notification of the granting (re-issuance) of a license is sent 3 working days after the date the entry on granting (re-issuing) the license is made in the register of licenses.

Decision to Grant a License or to Refuse to Grant a License

The licensing authority evaluates the license applicant's compliance with licensing requirements and makes a decision to grant the license or to refuse its granting within a period not exceeding 15 working days from the date of receipt of the application for the license.

At the same time, the Administrative Regulation provides grounds for suspending the procedure for granting a license (providing the state service).

Such grounds include the preparation of the license application and/or the attached documents in violation of the requirements established by the regulation for the content of the application and/or documents, or the submission of documents in an incomplete volume.

In the event of such violations, the responsible Roszdravnadzor official serves the applicant with a notification of the need to eliminate the identified violations within 30 days within 3 working days from the date of their receipt. Such a notification is sent by registered mail with return receipt or, at the license applicant's choice, in the form of an electronic document.

If the license applicant fails to submit the documents within the specified period from the moment of receipt of the notification, the responsible official sends the applicant a notification of the return of the application and the attached documents within 3 working days, with a reasoned justification of the reasons for the return, or sends it by registered mail with return receipt.

The Regulation on Licensing of Pharmaceutical Activity does not contain grounds for refusal to grant a license. According to Clause 67 of the Administrative Regulation, a decision to refuse to grant a license is made in cases of:

• The presence of unreliable or distorted information in the application for a license and (or) the documents (information) submitted by the license applicant;
• Non-compliance of the license applicant with licensing requirements identified during the inspection.

The notification of refusal to grant (re-issue) a license is sent within 3 working days from the date the order refusing to grant (re-issue) the license is signed.

The decision to refuse to grant a license may be appealed through pre-trial (out-of-court) procedure by filing a complaint addressed to the Head of Roszdravnadzor.

According to the Rules for Filing and Considering Complaints against Decisions and Actions (Inaction) of Federal Executive Bodies and Their Officials, Federal State Civil Servants, Officials of State Extra-Budgetary Funds of the Russian Federation, State Corporations Empowered in Accordance with Federal Laws to Provide State Services in the Established Sphere of Activity, and Their Officials, Organizations Provided for by Part 1.1 of Article 16 of the Federal Law "On the Organization of Provision of State and Municipal Services", and Their Employees, as well as Multifunctional Centers for the Provision of State and Municipal Services and Their Employees, approved by the Decree of the Government of the Russian Federation No. 840 dated August 16, 2012, a complaint must contain:

• The name of the body, the official of the body, and/or the entities providing the state service;
• The surname, first name, patronymic (if any), information regarding the place of residence of the applicant-individual, or the name and information regarding the location of the applicant-legal entity, as well as the contact telephone number(s), email address(es) (if any), and postal address to which the response should be sent to the applicant;
• Information regarding the appealed decisions and actions (inaction) of the body and/or official providing the state service;
• The arguments on the basis of which the applicant disagrees with the decision and actions (inaction) of the body and/or official providing the state service. The applicant is additionally entitled to submit documents confirming the applicant's arguments or copies thereof.

A complaint is considered within 15 working days from the date of its registration, unless shorter deadlines for considering a complaint are established by the body providing the state service, the multifunctional center, the involved organization, or the founder of the multifunctional center authorized to consider it. Based on the results of the complaint consideration, a decision is made to satisfy the complaint or to refuse its satisfaction.

The decision to refuse to grant a license may also be appealed through judicial procedure.

We have considered the primary requirements for filing and considering an application for a license, as well as the grounds for refusal to grant a license. These rules must be followed within the procedure for obtaining a license for the wholesale trade of medicines.

Licensing of Pharmaceutical Activity in 2022 and 2023

In 2022–2023, in view of the existing political situation, the state has been providing support measures for several sectors of the economy. These measures also affected certain issues related to the licensing of pharmaceutical activity and the activities of licensees.

The Decree of the Government of the Russian Federation No. 353 dated March 12, 2022, On the Peculiarities of Permitting Activity in the Russian Federation in 2022 and 2023, establishes that the deadline by which periodic confirmation of compliance (initial confirmation of compliance) with licensing requirements must be completed by licensees performing licensed types of activity according to the list in Appendix No. 2 is postponed for 12 months if such a deadline occurs in 2022.

In particular, the licensing of pharmaceutical activity is included in Appendix No. 25 to the specified Decree of the Government of the Russian Federation No. 353 dated March 12, 2022, namely in the list of permitting regimes for which specific application rules are established regarding the requirement for a legal entity or individual entrepreneur to have employees under labor contracts who have professional education, the appropriate qualifications, and (or) work experience, in connection with the call-up of such employees for military service under mobilization or the conclusion of contracts by them in accordance with Clause 7 of Article 38 of the Federal Law On Military Obligation and Military Service or contracts for voluntary assistance in performing tasks assigned to the Armed Forces of the Russian Federation.

Appendix No. 24 to the specified decree established that the performance of activity on the basis of a permit in the event of the suspension of a labor contract by a legal entity or individual entrepreneur in accordance with Article 351.7 of the Labor Code of the Russian Federation (in connection with the call-up for military service) regarding an employee whose presence ensures compliance with mandatory requirements within the relevant permitting regime cannot be considered a violation of the specified mandatory requirements within 6 months from the date of suspension of the labor contract regarding other employees whose presence ensures compliance with mandatory requirements within the relevant permitting regime (including a pharmaceutical activity license).

Thus, licensees have the opportunity not to suspend their activity during the period of call-up of employees for military service, and this will not be considered a violation of licensing requirements for 6 months from the date of suspension of labor relations.

Next, let us consider in more detail some questions regarding the practical application of licensing requirements when identifying possible violations.

Practice of Identifying Violations of Primary Licensing Requirements

Since the new Regulation on Licensing of Pharmaceutical Activity entered into force relatively recently, the practice of identifying violations of the new licensing requirements is currently quite limited, and most of the enforcement practice is directly related to the application of the previously effective licensing regulation. Nevertheless, the liability measures for violating licensing requirements are virtually identical under the CAO RF and the Criminal Code.

Thus, according to Part 4 of Article 14.1 of the CAO RF, performing entrepreneurial activity with a gross violation of the conditions provided for by a special permit (license) entails the imposition of an administrative fine on persons performing entrepreneurial activity without forming a legal entity in the amount of 4,000 to 8,000 rubles or administrative suspension of activity for a term of up to 90 days; on officials—from 5,000 to 10,000 rubles; on legal entities—from 100,000 to 200,000 rubles or administrative suspension of activity for a term of up to 90 days. According to the note to the specified article, the concept of a "gross violation" is established by the Government of Russia regarding a specific licensed type of activity. Clause 7 of the new Regulation on Licensing of Pharmaceutical Activity establishes that gross violations of licensing requirements include all violations of requirements for licensees provided for by Clause 6 of the specified legal act. In this regard, a responsible approach to complying with such requirements is particularly important.

The most common violation of licensing requirements is a violation of the temperature regime for storing medicines. At the same time, a fine for violating the rules for storing medicines may be imposed under both Part 4 of Article 14.1 and Part 1 of Article 14.43 of the CAO RF. In the latter case, the fine may reach 300,000 rubles.[7] Nevertheless, for such an offense, retail trade entities for medicinal products are most frequently prosecuted. However, the risks of inspections regarding persons performing the wholesale trade of medicinal products also remain quite significant.

In addition to the specified violation, violations are quite frequently identified during the transport of medicines. In one case, the court established that a wholesale company performs the transport of medicines under a contract with a transport and forwarding company that, according to the Register of Licenses, lacks a pharmaceutical activity license. At the same time, the person prosecuted claimed that the committed offense was insignificant. However, the court did not accept this argument, and the company was prosecuted under Part 4 of Article 14.1 of the CAO RF. In this regard, it is recommended to check whether a counterparty has a relevant license when concluding contracts for the transport of medicinal products.[8]

Furthermore, special attention during inspections is paid to compliance with other requirements for storing medicines. For example, during one of the inspections, it was identified that rack cards specifying the names of medicinal products, batch numbers, expiration dates, and the number of storage units were missing from racks and cabinets (information technologies were not used).[9]

It is also important to note that administrative liability measures in the form of a gross violation of licensing requirements may be applied simultaneously with the imposition of liability for performing activity without using a license.

Specifically, Part 2 of the specified article establishes that performing entrepreneurial activity without a necessary license entails the imposition of an administrative fine on citizens in the amount of 2,000 to 2,500 rubles with or without confiscation of manufactured products, production tools, and raw materials; on officials—from 4,000 to 5,000 rubles with or without confiscation of manufactured products, production tools, and raw materials; on legal entities—from 40,000 to 50,000 rubles with confiscation of manufactured products, production tools, and raw materials or without such.

At the same time, the Supreme Court of the Russian Federation established in one case where the simultaneous application of Parts 2 and 4 of Article 14.1 of the CAO RF was appealed that "...a person performing a licensed type of activity but who has not performed the obligation to obtain a license for its conduct and who has committed a violation of licensing requirements will be released from punishment, while the public danger of the aggregate of violations of licensing requirements committed by the person may significantly exceed the public danger of actions related to performing activity without a license. In such a situation, releasing a person from administrative liability for violating licensing requirements will contradict the principles of proportionality of punishment and its inevitability, and the equality of all before the law".[10]

Moreover, criminal liability measures may be imposed for the sale of medicines without a license. According to Article 171 of the Criminal Code, performing entrepreneurial activity without a license in cases where a license is mandatory, if this act caused major damage to citizens, organizations, or the state, or is associated with the generation of income on a large scale, is punishable by a fine in an amount of up to 300,000 rubles or in the amount of the salary or other income of the convicted person for a period of up to 2 years, or by mandatory works for a term of up to 480 hours, or by arrest for a term of up to 6 months. Charging persons supplying medicines under this article is common. Nevertheless, in most cases, courts evaluate mitigating circumstances.

Thus, in one case, the court established that an individual entrepreneur, who knew in advance of the need to obtain a license but did not obtain one, illegally performed the wholesale supply of medicinal products to healthcare institutions and social institutions for use in the current activities of these institutions for a total amount of 5,964,220.57 rubles. However, under Article 76.2 of the Criminal Code, 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 court fine if the person has compensated for the damage or otherwise repaired the harm caused by the crime. This was taken into account by the court, and the accused was released from criminal liability with the imposition of a court fine.[11]

In this article, we have considered the primary licensing requirements for the wholesale trade of medicinal products and the most common cases of the practical application of these norms.

We believe that as Roszdravnadzor conducts relevant inspections, practice regarding the application of the new Regulation on Licensing of Pharmaceutical Activity will be formed. Furthermore, one cannot overlook that the necessity of complying with licensing requirements is of particular importance not only in view of the risks of administrative liability but also because the violation of such requirements may lead to conflict situations with counterparties (for example, due to the supply of low-quality medicines when the rules for their storage and transport are violated). In this regard, in addition to the liability measures imposed by Roszdravnadzor, medicinal product wholesale trade organizations risk incurring significant losses when performing entrepreneurial activity and becoming parties to lengthy judicial proceedings.

References

[1] Letter of Roszdravnadzor No. 01i-71/20 dated January 16, 2020, On Retail and Wholesale Trade of Medicinal Preparations.

[2] Letter of FAS Russia No. IA/64899/17 dated September 19, 2017.

[3] Letter of Roszdravnadzor No. 01i-1193/20 dated June 25, 2020, On Compliance with the Temperature Regime.

[4] Roszdravnadzor: Answers to Frequently Asked Questions // Roszdravnadzor Website.

[5] Decision of the Arbitration Court of the Sverdlovsk Region dated January 4, 2021, in Case No. A60-18195/2021.

[6] Letter of Rospotrebnadzor No. 01/3640-12-32 dated April 9, 2012, On Sanitary-Epidemiological Conclusions for Licensing of Pharmaceutical Activity.

[7] Ruling of the Supreme Court of the Russian Federation No. 309-AD17-1925 dated February 1, 2018.

[8] Decision of the Arbitration Court of the Sverdlovsk Region dated June 4, 2021, in Case No. A60-18195/2021.

[9] Decision of the Arbitration Court of the Orenburg Region dated September 29, 2021, in Case No. A47-8187/2021.

[10] Review of Judicial Practice "On Certain Issues Arising during the Consideration by Arbitration Courts of Cases on Administrative Offenses Provided for by Chapter 14 of the Code of the Russian Federation on Administrative Offenses", approved by the Presidium of the Supreme Court of the Russian Federation on December 6, 2017.

[11] Decree of the Elista City Court No. 1-173/2019 dated April 17, 2019, in Case No. 1-173/2019.