23 October 2022

State Control and Oversight of Pharmaceutical Activities

October 23, 2022

BRACE Law Firm ©

State control and oversight of pharmaceutical activities is one of the most critical types of oversight in the health protection sphere. Its importance cannot be overstated, as it aims to prevent and suppress violations in the circulation of medicinal products.

Before examining this topic, note that under Article 4 of Federal Law No. 61-FZ dated April 12, 2010, On the Circulation of Medicinal Products (the "Law on Circulation of Medicinal Products" or "Law No. 61-FZ"), pharmaceutical activity means activity that includes the wholesale trade of medicinal products, their storage, transportation, and the retail trade of medicinal products, their dispensing, storage, transportation, and the manufacturing of medicinal products.

Pursuant to Part 1 of Article 9 of the Law on Circulation of Medicinal Products, state control (oversight) in the sphere of circulation of medicinal products is carried out through:

Federal state control (oversight) in the sphere of circulation of medicinal products;
Federal state licensing control of medicinal product manufacturing activities.

This article analyzes the rules for exercising state control and oversight (the "State Control" or "Control") over pharmaceutical activities, examines its primary types, and details the rights, obligations, and liabilities of pharmaceutical companies as controlled entities.

Procedure for Federal State Control (Oversight) in the Sphere of Circulation of Medicinal Products

Federal state control (oversight) in the sphere of circulation of medicinal products involves inspections of entities engaged in pharmaceutical activities. Under Article 9 of the Law on Circulation of Medicinal Products, the subject of Control includes:

1. Compliance with mandatory requirements:

Regarding the manufacturing, storage, transportation, dispensing, implementation, transfer, sale, and destruction of medicinal products, and the use of medicinal products;
Regarding the compliance of medicinal products with quality, efficiency, and safety indicators;
Regarding compliance with restrictions imposed when carrying out pharmaceutical activities.

2. Compliance with licensing requirements for pharmaceutical activities.

3. Compliance with requirements for medicinal product circulation entities to provide information on medicinal products.

Roszdravnadzor and its territorial bodies are the authorities authorized to conduct Control.

Government Decree No. 1049 dated June 29, 2021, On Federal State Control (Oversight) in the Sphere of Circulation of Medicinal Products (the "Decree No. 1049") defines the procedure for exercising Control. Additionally, the provisions of Federal Law No. 248-FZ dated July 31, 2020, On State Control (Oversight) and Municipal Control in the Russian Federation (the "Law on State Control") apply to relations involving circulation inspections.

The authorities apply a risk-oriented approach when conducting Control. This means they select the timing and types of control measures based on the risk of harm (damage) to legally protected interests. Roszdravnadzor Order No. 1185 dated February 19, 2022, defines the list of regulatory acts whose compliance is assessed during Control.[1]

Types and Grounds for Pharmaceutical Activity Inspections

Inspections within federal state control (oversight) in the sphere of circulation of medicinal products may be scheduled or unscheduled.

Scheduled inspections are conducted based on an annual plan for scheduled control (oversight) measures, coordinated with the prosecutor's office. Roszdravnadzor publishes the plan on its website by December 31 of the current year, and the General Prosecutor’s Office includes it in the annual consolidated plan on its official website.

The frequency of scheduled inspections depends on the assigned risk category:

Significant risk: once every 3 years;
Medium risk: once every 5 years;
Moderate risk: once every 6 years;
Low risk: scheduled inspections are not conducted.

The authorities conduct one control measure during the specified period.

Roszdravnadzor calculates the risk category according to the criteria set out in Appendix No. 1 to Decree No. 1049. An entity may determine its risk category and the grounds for its assignment by submitting a request to the supervisory authority. One can also check the risk category using the calculator on the Roszdravnadzor website in the "Services" section.

Unscheduled inspections are conducted in the following cases:

If the State Control body possesses information regarding harm (damage) or a threat of harm to legally protected values, or upon the identification of risk indicators. Risk indicators of violations are signs that indicate a high probability of violations.

The Ministry of Health of Russia has approved[2] two risk indicators:

The controlled person's acquisition of ethyl alcohol in a volume exceeding 200 decaliters over the past calendar year;
The controlled person's possession of a medicinal product for which monitoring of official websites of foreign regulatory agencies has yielded information on new quality indicators that are absent in the State Pharmacopoeia of the Russian Federation, the EAEU Pharmacopoeia, or requirements established during registration.

Instructions from the President of Russia or the Government of Russia regarding a specific person;
A prosecutor's demand to conduct a control measure within the framework of oversight of law enforcement or the protection of human and civil rights and freedoms based on materials and appeals received by the prosecutor's office;
Expiration of the deadline for executing a control body’s prescription to eliminate an identified violation.

As a general rule, the authorities conduct an unscheduled inspection after coordination with the prosecutor's office. Exception: a threat of harm (damage) to legally protected values. In such cases, the control body commences the inspection immediately and notifies the prosecutor's office within 24 hours. The controlled person is not notified in this instance.

Moratorium on Inspections in 2022 and 2023

It should be noted that a moratorium on inspections was established in 2022. According to Government Decree No. 336 dated March 10, 2022, scheduled control (oversight) measures and scheduled inspections under the Law on State Control and Federal Law No. 294-FZ dated December 26, 2008, On the Protection of Rights of Legal Entities and Individual Entrepreneurs in the Exercise of State Control (Oversight) and Municipal Control are generally not conducted in 2022.

Exceptions were introduced for unscheduled inspections. Unscheduled control (oversight) measures and unscheduled inspections are conducted exclusively on the following grounds:

1) Subject to coordination with the prosecutor's office:

Upon an immediate threat of harm to the life and grave harm to the health of citizens, or based on facts of such harm;
If an unscheduled onsite inspection or an unscheduled inspection visit is necessary due to the expiration of the deadline for executing a prescription to take measures aimed at eliminating violations that pose an immediate threat to the life and grave harm to the health of citizens, national defense and state security, or the occurrence of natural and (or) man-made emergencies. Unscheduled onsite inspections and unscheduled inspection visits are conducted only if it is impossible to assess the execution of the prescription based on documents or other information available to the control (oversight) body.

2) Without coordination with the prosecutor's office:

By order of the President or the Chairman of the Government adopted after the entry into force of this decree, or by order of the Deputy Chairman of the Government adopted after the entry into force of this decree and coordinated with the Deputy Chairman of the Government – Head of the Government Staff;
At the request of a prosecutor within the framework of oversight of law enforcement or the protection of human and civil rights and freedoms based on materials and appeals received by the prosecutor's office;
Upon the occurrence of an event specified in the inspection program (when exercising federal state control (oversight) in the sphere of circulation of medicinal products);
Upon the submission by the controlled person of documents and (or) information on the execution of a prescription or other decision of the control (oversight) body for the purpose of obtaining or renewing a previously suspended license, accreditation, or other permit;
Unscheduled inspections upon receipt by the state control (oversight) body or municipal control body of an application from a legal entity or individual entrepreneur for the granting of legal status or a special permit (license) to carry out specific types of activities.

In 2023, scheduled inspections will also not be conducted, with the exception of:

Enterprises and organizations whose activities fall under the categories of extremely high and high risk;
Facilities that are Class II hazardous production facilities and Class II hydraulic structures.

Importantly, the moratorium on inspections applies only to those inspections regulated by the Law on State Control and Federal Law No. 294-FZ. In particular, the moratorium does not affect tax, currency, customs, and several other types of inspections to which the Law on State Control does not apply.

Types of Inspection Measures Regarding the Circulation of Medicinal Products

Pursuant to Part 3 of Article 9 of the Law on Circulation of Medicinal Products, the following types of control (oversight) measures are conducted during state control:

Documentary inspection;
Onsite inspection;
Selective quality control;
Test purchase;
Inspection visit;
Observation of mandatory requirements (safety monitoring) (Pharmacovigilance).

Scheduled inspections are conducted in the form of a documentary inspection, onsite inspection, or inspection visit. Scheduled selective control and scheduled test purchases are not conducted.

During a test purchase, onsite inspection, or inspection visit, inspectors may use photography, audio, and video recording to document violations. Decree No. 1049 regulates the requirements for these procedures in detail:

An inspector designated as responsible for the control (oversight) measure conducts photo, audio, and video recording using cameras, voice recorders, video cameras, as well as mobile devices (telephones, smartphones, tablets);
The equipment used must have the technical capability to display the current date and time and save data on the location of the recording;
Information on the photo, audio, and video recording must be reflected in the report of the control (oversight) measure, specifying the type and brand of equipment used;
Photo, audio, and video materials are attached to the report of the control (oversight) measure.

Let us examine each type of inspection measure within federal state control (oversight) in the sphere of circulation of medicinal products in more detail.

1. Documentary Inspection. A documentary inspection is conducted at the location of the control body. Its subject matter is limited to information contained in the documents of controlled persons. The duration is 10 working days. During the inspection, the control body may perform the following control actions: obtaining written explanations, requesting documents, and conducting an expert examination. The deadline for complying with a Roszdravnadzor request for additional documents or written explanations is 10 working days from the date of receipt.

2. Onsite Inspection. An onsite inspection is conducted at the location of the controlled person if it is not possible to:

Assess the compliance of activities and utilized control objects with mandatory requirements without a visit;
Verify the completeness and accuracy of information in the requested documents and explanations of the controlled person.

The control body notifies the controlled person of an onsite inspection by sending a copy of the decision to conduct it at least 24 hours in advance. The duration is 10 working days. Limits are established for the total duration of interaction with the supervisory body:

For small enterprises: no more than 50 hours;
For micro-enterprises: no more than 15 hours.

During an onsite inspection, the following control actions may be performed: inspection, questioning, obtaining written explanations, requesting documents, sampling, instrumental examination, testing, and expert examination.

3. Selective Quality Control of Medicinal Products. Selective control is conducted exclusively during unscheduled inspections. It involves sampling and (or) instrumental examination to confirm the compliance of a medicinal product with mandatory safety and (or) quality requirements. It is conducted at the locations of their use, storage, and operation. Specialists and experts are involved in its execution. Medicinal product samples for instrumental examination, testing, and expert examination are taken in quantities necessary for a two-fold reproduction of quality control methods. The State Control body sends the samples to an expert organization with copies of the sampling report attached. Controlled persons are not notified of selective control. The duration of selective control depends on the time required for standard sampling and expert examination.

Based on the results of selective quality control, in addition to the decisions provided for by the Law on State Control, the following decisions are made:

On the further civil circulation of the series or batch of the corresponding medicinal product if the results of the tests confirm quality compliance;
On the withdrawal from civil circulation of the series or batch of the corresponding medicinal product if the results of the tests reveal non-compliance with quality requirements;
On transferring the medicinal product to batch-by-batch selective quality control in the event of repeated identification of quality non-compliance and (if necessary) on inspecting the medicinal product circulation entity. The manufacturer or Marketing Authorization Holder (MAH) pays the costs associated with batch-by-batch selective control.

4. Test Purchase of Medicinal Products. A test purchase is conducted to verify compliance by entities engaged in the retail trade of medicinal products with the rules for dispensing medicinal products and (or) the prohibition on the sale of falsified, substandard, and counterfeit medicinal products. During a test purchase, an inspection and experiment may be performed. The experiment involves simulating a violation of mandatory requirements regarding the dispensing and sale of a medicinal product. During the experiment, the inspector selects the medicinal product independently or with the assistance of an employee of the controlled person, performs the actions necessary to purchase the product, and requests documents and (or) information on the product provided for by Russian consumer protection legislation.

A test purchase is conducted only if it is the only way to verify compliance with mandatory requirements. It is performed without prior notice in the presence of two witnesses or with video recording. Remote purchases (using the Internet, postal services, etc.) are permitted. After completion (except for remote purchases), the official announces the test purchase, presents their service ID, and provides a copy of the decision to the controlled person. The funds spent must be returned to the official, and the purchased medicinal products returned to the employee of the controlled person.

5. Inspection Visit. An inspection visit is carried out without prior notice at the location (place of activity) of the controlled person. The duration is 1 working day. During an inspection visit, the following control actions may be performed: inspection, questioning, obtaining written explanations, and requesting documents that must be at the location (place of activity) under mandatory requirements.

6. Observation of Mandatory Requirements (Safety Monitoring) (Pharmacovigilance). According to Article 64 of the Law on Circulation of Medicinal Products, all medicinal products in circulation in the Russian Federation are subject to efficacy and safety monitoring. This involves the collection and analysis of information on adverse actions, undesirable and unforeseen reactions during the use of medicinal products, individual intolerance, lack of efficacy, as well as other facts and circumstances posing a threat to human life or health (the "adverse events").

Part 3 of Article 64 of Law No. 61-FZ obliges medicinal product circulation entities to report all identified adverse events at all stages of their circulation in the Russian Federation and other states. Roszdravnadzor Order No. 1071 dated February 15, 2017, On Approval of the Procedure for Carrying Out Pharmacovigilance establishes the procedure. Notices are sent to Roszdravnadzor through the Roszdravnadzor Automated Information System (the "AIS Roszdravnadzor") or by email.

Officials may be held liable for failing to report or concealing such information. In particular, administrative liability is possible under Article 19.7.8 of the CAO RF, Failure to submit information or submission of deliberately unreliable information to the federal executive body exercising control and oversight functions in the sphere of healthcare, with fines on officials from 10,000 to 15,000 rubles and on legal entities from 30,000 to 70,000 rubles. Criminal liability under Part 1 of Article 237 of the Criminal Code of the Russian Federation, Concealment of information on circumstances creating a danger to the life or health of people, carries a maximum penalty of imprisonment for up to 2 years with a deprivation of the right to hold certain positions or engage in certain activities for up to 3 years.

While medical organizations and manufacturers encounter adverse events most frequently, pharmaceutical organizations are not exempt from safety monitoring. To comply with legislation, an organization must appoint a person authorized to collect and transmit information on adverse events, develop a Standard Operating Procedure (SOP) for recording and collecting this information, and conduct regular briefings for employees. For the absence of a monitoring system, a pharmaceutical organization may be held administratively liable under Article 14.43 of the CAO RF, Violation by a manufacturer, performer (person performing the functions of a foreign manufacturer), or seller of technical regulation requirements,[3] or under Part 2 of Article 14.1 of the CAO RF, Carrying out entrepreneurial activity in violation of licensing requirements.

Based on the results of safety monitoring, various regulatory measures are provided, such as:

Amendments to the instructions for use;
Suspension of the use of the medicinal product;
Withdrawal of the medicinal product from circulation;
Cancellation of state registration.

Licensing Control of Pharmaceutical Activities

Licensing control is one type of control over pharmaceutical entities. It is carried out taking into account the specifics established by Federal Law No. 99-FZ dated May 4, 2011, On Licensing of Certain Types of Activities (the "Law on Licensing"). The subject of licensing control is compliance with licensing requirements. The list of licensing requirements is defined by Clause 6 of the Regulations on Licensing of Pharmaceutical Activities,[4] including:

Possession of premises, buildings, structures, and equipment necessary for the activity;
Compliance with the rules for carrying out the activity (Good Pharmacy Practice, dispensing rules, storage and transportation rules, etc.);
Possession of employees entitled to perform such work and their completion of advanced training at least once every 5 years.

The assessment of licensees' compliance with licensing requirements is carried out in accordance with the Law on State Control and Decree No. 1049.

If a violation of licensing requirements is identified, the licensee is held administratively liable under Article 14.1 of the CAO RF. For gross violations, the maximum penalty is an administrative suspension of activity for up to 90 days. Furthermore, under Article 20 of the Law on Licensing, the licensing authority suspends the license in cases of:

Holding the licensee administratively liable for failure to execute, within the established deadline, a prescription to eliminate a gross violation of licensing requirements;
Imposing an administrative penalty on the licensee in the form of administrative suspension of activity.

Preventive Measures for Pharmaceutical Organizations

In addition to control measures, Roszdravnadzor may conduct preventive measures to prevent legislative violations. These include:

Informing;
Generalization of law enforcement practice;
Issuing a warning;
Counseling;
Preventive visit.

Let us examine each type of preventive measure in more detail.

1. Informing. This is carried out by posting information on mandatory requirements, changes to regulatory acts, risk indicators, and methods for obtaining consultations on the official Roszdravnadzor website, in the media, and in the personal accounts of controlled persons in the GIS.

2. Generalization of Law Enforcement Practice. A report on law enforcement practice in the sphere of medicinal product circulation is posted on the official Roszdravnadzor website by March 1 of the year following the reporting year.

3. Issuing a Warning. A warning is issued if the State Control body has information about imminent violations or signs thereof, provided there is no harm to legally protected interests. A person who receives a warning may, within 15 calendar days, submit an objection with a justification of their position. Objections are sent to the issuing body in hard copy by mail or as an electronic document signed with a UK(E)P. The objection must include:

The name of the legal entity or the full name of the individual entrepreneur; the taxpayer identification number (INN);
The date and number of the warning;
A justification of the position regarding the actions (omissions) specified in the warning that lead or may lead to a violation of mandatory requirements.

The controlled person may attach documents or certified copies confirming the validity of the objections. Based on the review, the State Control body sends a reasoned response within 20 working days.

4. Counseling. Counseling is provided on the following issues:

The existence and content of mandatory requirements in the sphere of medicinal product circulation;
The frequency and procedure for conducting control (oversight) measures;
The procedure for complying with mandatory requirements;
The procedure for executing a prescription issued based on a control (oversight) measure.

Counseling for pharmaceutical companies may be conducted by telephone, via video conferencing, during a personal appointment, or during a preventive or control measure. Written counseling is provided regarding the execution of a prescription.

5. Mandatory Preventive Visits. Mandatory preventive visits are conducted for:

Control objects classified as significant risk;
Persons commencing activities in the sphere of medicinal product circulation (those who received licenses, re-registered licenses for new types of work/services, or started activities at a new address).

A preventive visit is conducted during working hours and may not exceed 8 hours. The person must be notified 5 working days in advance and has the right to refuse no later than 3 working days prior. An act on the preventive visit is drawn up; prescriptions are not issued.

Inspector's Credentials During Inspections

Pursuant to Part 7 of Article 65 of the Law on State Control, when conducting an inspection at the location of the controlled person's activity, the inspector must present to the controlled person (their representative):

A service ID;
A certified hard copy or a decision to conduct the control (oversight) measure in the form of an electronic document signed with an enhanced qualified electronic signature.

The inspector must also provide the registration number of the control (oversight) measure in the unified register of control (oversight) measures.

At the request of the controlled person, the inspector must also provide information on experts, expert organizations, and other persons involved in the control (oversight) measure.

Reporting Results of Pharmaceutical Company Inspections

Following an inspection involving interaction with the controlled person, an inspection act is drawn up. On the day the inspection ends, it is handed to the head of the inspected organization or another authorized person against a signature or sent by registered mail with acknowledgment of receipt. If violations are identified, a prescription is also issued specifying the necessary measures for their elimination and the deadlines for completion. Failure to execute the prescription on time will result in administrative liability under Part 1 of Article 19.5 of the CAO RF.

If signs of a crime or administrative offense are identified, Roszdravnadzor sends the relevant information to the state body according to its competence. If circumstances of harm (damage) to legally protected values are identified, it takes measures to eliminate them, including applying to court. Furthermore, if necessary, Roszdravnadzor posts informational letters on its website:

On the identification of a batch or series of substandard, unregistered, or falsified medicinal products;
On the withdrawal from circulation and destruction of a batch or series of substandard, unregistered, or falsified medicinal products;
On the termination of circulation of a series of substandard medicinal products;
On the transfer of a medicinal product to batch-by-batch selective control;
On the removal of a medicinal product from batch-by-batch selective control.

Pre-trial Appeal of Pharmaceutical Activity Inspection Results

A pre-trial procedure for appealing inspection results was introduced on July 1, 2021. The appeal is submitted electronically via the Unified Portal of State Services or regional portals. Decisions to conduct control (oversight) measures, acts and prescriptions of the control body, and actions (omissions) of officials during control measures are subject to appeal. The deadline for filing an appeal against a decision to conduct an inspection is 30 days, and against a prescription – 10 working days. A higher-ranking official (higher body) must consider the appeal within 20 working days of its registration. Based on the review, the State Control body:

Leaves the appeal unsatisfied;
Cancels the decision in full or in part;
Cancels the decision in full and adopts a new decision;
Recognizes the actions (omissions) of the officials as unlawful and issues a decision on the merits, including the performance of certain actions if necessary.

The decision on the appeal, including the justification, the deadline, and the procedure for its execution, is posted in the controlled person's personal account on the Unified Portal of State Services no later than 1 working day after its adoption.

Judicial Challenge of Pharmaceutical Company Inspection Results

Decisions issued based on inspection results and the actions (omissions) of the control body may be appealed in court. Challenges are carried out according to the rules of Chapter 24 of the APC RF, Challenging Non-Normative Legal Acts, Decisions, and Actions (Omissions) of State Bodies. To satisfy the requirements, one must prove the existence of a combination of conditions:

The challenged decision or action (omission) does not comply with the law or another legal act;
It violates the rights and legitimate interests of the applicant in the sphere of entrepreneurial or other economic activity, or unlawfully imposes any obligations on them, creating other obstacles to such activity.

The application may be submitted to an arbitration court within 3 months of the date the person became aware of the violation of their rights and legitimate interests.

Inspections of Pharmaceutical Companies by Other State Bodies

As noted above, Roszdravnadzor and its territorial bodies exercise State Control over the circulation of medicinal products.

However, pharmaceutical activity is an object of close attention for other bodies. The following state bodies are also empowered to control pharmaceutical companies:

The Federal Antimonopoly Service (control over state regulation of prices, advertising of medicinal products, and corporate procurement);
Rospotrebnadzor (control over compliance with sanitary legislation, consumer protection legislation, and rules for the sale of goods);
Ministry of Emergency Situations (control over compliance with fire safety requirements and in the field of emergency protection and civil defense);
Bodies carrying out operational-search activities, inquiry, and investigation;
Prosecutor's offices (oversight of compliance with laws and human rights and freedoms).

In conclusion, the control exercised by Roszdravnadzor and other authorized bodies is essential for preventing the circulation of substandard, counterfeit, and falsified medicinal products. In turn, the introduction of a risk-oriented approach should positively influence controlled activities by moving away from formalized inspection measures and reducing the burden on pharmaceutical organizations.

_______________

References

[1] Roszdravnadzor Order No. 1185 dated February 19, 2022, On Approval of Forms of Checklists (Lists of Control Questions, the Answers to Which Indicate Compliance or Non-Compliance by the Controlled Person with Mandatory Requirements) Used by the Federal Service for Surveillance in Healthcare and its Territorial Bodies in the Exercise of Federal State Control (Oversight) in the Sphere of Circulation of Medicinal Products.

[2] Ministry of Health of Russia Order No. 1130n dated December 7, 2021, On Approval of the List of Risk Indicators for Violation of Mandatory Requirements in the Exercise of Federal State Control (Oversight) in the Sphere of Circulation of Medicinal Products for Medical Use.

[3] Resolution of the Fifteenth Arbitration Appeal Court dated March 20, 2017, No. 15AP-1854/17.

[4] Government Decree No. 547 dated March 31, 2022, On Approval of the Regulations on Licensing of Pharmaceutical Activities.