BRACE Law Firm presents its regulatory digest of the Russian pharmaceutical and life sciences industry for August 2019.

During this period, the Board of the Eurasian Economic Commission (EEC) adopted the Guidelines on Control of Microbial Contamination Risks of Herbal Medicinal Raw Materials and Herbal Medicinal Products, alongside the Guidelines on the Assessment and Control of DNA-Reactive (Mutagenic) Impurities in Medicinal Products and the Establishment of Limits for Potential Carcinogenic Risk. These regulatory acts aim to enhance the quality of medicines circulating within the Eurasian Economic Union (EAEU).

Furthermore, the Russian legislature enacted significant amendments to current statutory law to bolster the investment attractiveness of the domestic market for major investors. These amendments introduce specific preferences and tax incentives for entering into and executing Special Investment Contracts (SPICs).

The regulators introduced several new requirements governing the contents of registration dossiers for immunobiological veterinary medicines.

Chief among the legislative initiatives is a proposal to approve a standard form of agreement for collecting fees related to the provision of cryptographic serialization (track-and-trace) codes.

The Ministry of Health of the Russian Federation (Minzdrav) proposed a new Procedure for Determining the Interchangeability of Medicinal Products for Human Use.

A detailed review of these updates and other critical regulatory initiatives follows below.

1. Statutes, Regulations, and Legal Developments

1.1. EAEU Adopts Guidelines on Controlling Microbial Contamination Risks for Herbal Raw Materials, Active Pharmaceutical Ingredients, and Herbal Medicines

Recommendation of the Board of the Eurasian Economic Commission No. 24 dated August 6, 2019, “On the Guidelines on Control of Microbial Contamination Risks of Herbal Medicinal Raw Materials, Herbal Pharmaceutical Substances (Products Based on Herbal Medicinal Raw Materials), and Herbal Medicinal Products”

This document applies to the manufacture and quality expertise of herbal products and herbal medicinal products authorized for circulation within the member states of the Eurasian Economic Union.

Under the guidelines, when controlling microbial contamination caused by foreign microorganisms during the growth, cultivation, harvesting, processing, manufacturing, storage, and transportation of herbal products and medicines, operators must account for risks associated with pH fluctuations and elevated storage humidity that facilitates microbial proliferation. To prevent the microbial contamination of cultivated plants, operators must select and carefully control appropriate cultivation conditions. The guidelines strictly prohibit the direct use of human excrement or wastewater as fertilizer during plant cultivation.

The chosen microbial contamination reduction method must exert minimal impact to prevent adverse alterations in chemical composition and physical properties affecting the quality of the finished medicinal product. Furthermore, manufacturers must demonstrate the absence of hazardous degradation products resulting from decontamination processing. Additional regulatory requirements for assessing the microbial contamination of a herbal medicine depend on the quality of raw materials, the manufacturing process, and its intended use, all of which must be justified during validation studies.

The aforementioned document, which enters into force on February 8, 2020, details these and other rules aimed at controlling microbial contamination risks.

1.2. EAEU Clarifies Framework for Assessing and Controlling DNA-Reactive (Mutagenic) Impurities in Medicines and Establishing Carcinogenic Risk Thresholds

Recommendation of the Board of the Eurasian Economic Commission No. 23 dated August 6, 2019, “On the Guidelines on the Assessment and Control of DNA-Reactive (Mutagenic) Impurities in Medicinal Products and the Establishment of Limits for Potential Carcinogenic Risk”

The Guidelines aim to ensure a uniform methodology for the identification, categorization, qualification, and control of mutagenic impurities within active pharmaceutical ingredients (APIs) and finished drug products to mitigate their potential carcinogenic risk. Crucially, this document does not apply to APIs and medicinal products indicated for advanced cancer therapy.

The Guidelines establish that the acceptable intake of mutagenic impurities must rely on developed risk assessment strategies. In the early phases of clinical development, regulators set the acceptable risk at a theoretically calculated level of mutagenic impurity content that corresponds to a human oncogenic frequency of approximately 1 in 1,000,000. For new medicinal products in later developmental stages and for already registered medicines, the acceptable increase in carcinogenic risk is set at a theoretically calculated human oncogenic frequency of 1 in 100,000.

Industry experts anticipate that this document will ensure only a negligible increase in carcinogenic risks, ultimately raising overall pharmaceutical quality standards.

The document enters into force on February 8, 2021. The requirements of these Guidelines do not apply to medicinal products registered in accordance with EAEU law prior to the aforementioned effective date.

1.3. Russian Ministry of Health Clarifies Alignment of Dosage Form Names Between VED List and Marketing Authorization Applications

Letter of the Ministry of Health of the Russian Federation No. 25-1/I/2-6859 dated July 31, 2019

The Ministry clarified that it issued this guidance primarily in response to a high volume of inquiries regarding how dosage forms listed in the 2019 Vital and Essential Drugs (VED) List (approved by Decree of the Government of the Russian Federation No. 2738-r dated December 10, 2018) align with the official nomenclature of medicinal dosage forms for human use (approved by Order of the Ministry of Health of the Russian Federation No. 538n dated July 27, 2016).

In its letter, the Ministry provides a cross-reference table correlating the dosage forms specified across both regulatory documents. For instance, the term “compressed gas” in the VED List corresponds to “compressed medical gas,” while “prolonged-action film-coated tablets” aligns with “extended-release film-coated tablets,” among other equivalents.

1.4. Statutory Amendments Overhauling Special Investment Contracts (SPIC) Take Effect

Federal Law No. 290-FZ dated August 2, 2019, “On Amending the Federal Law 'On Industrial Policy in the Russian Federation' Regarding the Regulation of Special Investment Contracts”

Federal Law No. 269-FZ dated August 2, 2019, “On Amending Parts One and Two of the Tax Code of the Russian Federation”

As a matter of background, the Special Investment Contract (SPIC) framework requires an investor to establish, modernize, or implement the commercial manufacturing of industrial products within the territory, continental shelf, or exclusive economic zone of the Russian Federation. In return, the counterparty—the Russian Federation or a constituent entity thereof—commits to providing industrial incentives throughout the term of the contract, subject to the scope of the agreement.

The amendments insert Chapter 2.1 into the Federal Law “On Industrial Policy in the Russian Federation.” This chapter specifies that a SPIC must involve the implementation or the development and implementation of technologies essential for manufacturing and processing operations. The Government of the Russian Federation compiles and updates this registry of advanced technologies. The law now mandates that a special investment contract explicitly list the industrial incentives available to the investor, contingent upon the fulfillment of its contractual obligations. Conversely, the contract must exclude any standard statutory incentives that are accessible to the investor independently of the SPIC. Furthermore, before submitting bids, participants in the competitive selection process for a SPIC must coordinate the prospective manufacturing site with the relevant constituent entity of the Russian Federation and the local municipality, submitting proof of such approval as part of their tender application.

For projects with an investment volume of up to RUB 50 billion, the law extends the maximum term of the investment contract to 15 years. If the capital investment exceeds this threshold, parties may conclude the contract for a term of up to 20 years.

For taxpayers participating in special investment contracts, the federal corporate income tax rate is set at 0% for the duration of the reduced tax rate period applied by the relevant constituent entity's budget. Generally, the 0% rate applies provided that the SPIC generates more than 90% of the investor's total revenue. The amendments to the Tax Code also introduce provisions allowing for the separate accounting of the investor's income streams.

Concurrently, regional authorities may reduce the corporate income tax rate allocable to their budgets down to 0%. This preferential rate applies from the tax period in which the investor realizes its first profit from the project until the reporting (tax) period in which the entity loses its status as a SPIC participant. However, this incentive cannot extend beyond the reporting period in which the total volume of tax expenditures and foregone budget revenues resulting from these incentives exceeds 50% of the total capital expenditures stipulated in the contract.

We anticipate that these measures will positively influence the enforcement and investment landscape, attracting substantial capital to the Russian market, particularly within the life sciences and pharmaceutical sectors.

1.5. Regulatory Framework for Veterinary Medicine Circulation Undergoes Changes

Federal Law No. 297-FZ dated August 2, 2019, “On Amending Certain Legislative Acts of the Russian Federation Regarding the Regulation of the Circulation of Medicinal Products for Veterinary Use”

Federal state oversight of pharmaceutical circulation now encompasses mystery shopping (test purchases) to verify that market participants comply with Good Pharmacy Practice (GPP) rules for veterinary medicines.

State regulatory officials are now legally authorized to conduct test purchases of veterinary medical products.

Under the new rules, registration dossiers for the marketing authorization of immunobiological veterinary medicines must include strain data, including its designation, origin, properties, characteristics, and the depository repository details. Registration also requires a document specifying the name, structure, and general properties of the active pharmaceutical substance. Notably, applicants are exempt from submitting data on impurities, API specifications, batch analysis results, and stability data when registering immunobiological veterinary medicines. Furthermore, applicants no longer need to submit information on the use of novel excipients for these products; however, they must additionally provide data on the state registration of genetically modified organisms (GMOs) intended for release into the environment.

The marketing authorization holder (MAH) of a veterinary medicine must submit pharmacovigilance reports semi-annually for the first two years post-registration in the Russian Federation, annually for the subsequent three years, and triennially thereafter.

2. Draft Regulatory Acts and Legislative Initiatives

2.1. Ministry of Health Drafts New Procedure for Determining Interchangeability of Medicines for Human Use

Draft Decree of the Government of the Russian Federation “On Approving the Procedure for Determining the Interchangeability of Medicinal Products for Human Use, and the Form of Expert Conclusion on the Interchangeability or Non-Interchangeability of Medicinal Products for Human Use Issued by the Federal State Budgetary Institution of the Ministry of Health of the Russian Federation Established to Facilitate the Ministry's Powers to Issue Clinical Trial Authorizations and Marketing Authorizations”

The draft decree proposes to repeal Government Decree No. 1154 dated October 28, 2015, “On the Procedure for Determining the Interchangeability of Medicinal Products for Human Use.”

The proposal introduces a legal provision grouping medicinal products under a single International Nonproprietary Name (INN), chemical name, or grouping name into distinct sub-categories within which the products are deemed interchangeable. A generic medicinal product (or biosimilar/biocomparable product) registered on the basis of bioequivalence or therapeutic equivalence studies is considered interchangeable with its reference product, and the reference product is conversely interchangeable with said generic (or biosimilar) product.

The draft document further establishes that medicinal products in differing dosage forms may also be deemed interchangeable provided that expert reviews reveal no clinically significant differences.

To update the official Registry of Interchangeable Medicines, the expert institution must submit data regarding the interchangeability of human medicines sharing an INN, chemical, or grouping name to the Ministry on a monthly basis, no later than the twentieth day of each month, alongside the expert conclusions issued as of that calendar date.

2.2. Ministry of Industry and Trade Develops Draft Standard Agreement for Crypto-Serialization Fee Collection

Draft Order of the Ministry of Industry and Trade of the Russian Federation “On Approving the Standard Form of Agreement for Collecting Fees for the Provision of Serialization Codes”

Pursuant to the draft agreement, the track-and-trace system operator undertakes to generate and provide the requested quantity of serialization codes based on applications submitted by the participant (the entity requesting the codes), while the participant commits to paying for the code provision services under the terms of the contract.

The participant must settle fees for the provision of serialization codes by transferring advance payments to the operator's bank account prior to recording or entering data regarding the application of the identification means into the Federal System for Monitoring Medicinal Product Circulation.

2.3. Ministry of Agriculture Proposes Revised Attestation Rules for Qualified Persons of Veterinary Medicine Manufacturers

Draft Order of the Ministry of Agriculture of the Russian Federation “On Amending the Procedure for the Attestation of the Qualified Person of a Manufacturer of Medicinal Products for Veterinary Use, Approved by Order of the Ministry of Agriculture of the Russian Federation No. 192 dated April 20, 2017”

The draft regulation addresses the rescheduling of attestation examinations and failures to appear. It permits a one-time rescheduling of the applicant's knowledge testing for a maximum of ten business days, provided the applicant submits a prior written notice (no later than one day in advance) to the attestation commission explaining the inability to attend.

Under the proposal, if an applicant fails to appear for the test without prior notice, or fails to appear after a previously granted rescheduling, the Attestation Commission shall issue a formal denial of certification as a manufacturer's Qualified Person.

2.4. Ministry of Finance Proposes Valuation Method for Ethanol Accounting in Alcohol-Containing Pharmaceutical Production

Draft Order of the Ministry of Finance of the Russian Federation “On Approving the Procedure for Evaluating the Accuracy of Accounting for the Volume of Production, Circulation, and/or Use of the Pharmaceutical Substance Ethyl Alcohol (Ethanol) for the Production of Alcohol-Containing Medicinal Products and/or Alcohol-Containing Medical Devices, in the Process of Manufacturing Other Medicines and/or Medical Devices, as well as the Production, Preparation, and/or Circulation (Excluding Retail Sale) of Alcohol-Containing Medicinal Products and/or Alcohol-Containing Medical Devices”

The draft introduces specific mathematical formulas to assess the accounting accuracy of bulk pharmaceutical-grade ethyl alcohol (ethanol). Specifically, for entities engaged in the manufacturing of ethanol as an API, the framework mandates indicators such as: the volume of the pharmaceutical substance (measured in decaliters via calibrated measuring equipment) over a reporting period (24 hours) upon completion of the final processing stage and prior to storage or utilization; and the corresponding volume of said pharmaceutical substance recorded in the company's primary accounting documentation during the same timeframe.

2.5. Ministry of Finance Drafts Natural Loss Allowances for Ethanol and Alcohol-Containing Pharmaceutical Products

Draft Order of the Ministry of Finance of the Russian Federation “On Approving Natural Loss Allowances for the Production, Circulation, and/or Use of the Pharmaceutical Substance Ethyl Alcohol (Ethanol), as well as for the Production and/or Circulation (Excluding Retail Sale) of Alcohol-Containing Medicinal Products and/or Alcohol-Containing Medical Devices”

The document proposes setting the natural loss allowance during the manufacturing of ethanol as an API at 2.21% (expressed as a percentage of pure anhydrous alcohol). For the procurement, storage, supply, transport, and/or use of the substance, the allowances vary by container size and season: for containers up to 1 liter, the allowance is 0.024% in the spring-summer period and 0.008% in the autumn-winter period; for bulk containers exceeding 1,000 liters, it is 0.065% in the spring-summer period and 0.016% in the autumn-winter period. Finally, the draft sets the natural loss allowance during the manufacture of alcohol-containing finished medicines and medical devices at 2.21% for spirituous solutions.

3. Litigation and Enforcement Landscape

3.1. Rospatent Rules in Favor of VITA Pharmacy Chain, Invalidating Confusingly Similar Trademark

Decision of the Federal Service for Intellectual Property (Rospatent) dated August 9, 2019, regarding Application No. 2016727904

Rospatent concluded that the commercial prominence and established market reputation of the VITA group of companies as a pharmacy chain create a high probability of consumer confusion. Consumers would likely misinterpret services marked with the contested trademark as originating from the VITA group, which does not reflect reality. Generally, when assessing whether a designation is misleading, authorities evaluate existing records of trademarks whose legal protection was invalidated on the grounds that the right holder's actions constituted an act of unfair competition or an abuse of rights.

 PDF Version of the Digest