BRACE Law Firm presents its latest regulatory digest analyzing the legal framework of the Russian life sciences and pharmaceutical industry for May 2019.

During the past month, the Eurasian Economic Commission clarified certain provisions of the instructions for completing customs declarations. This clarification directly impacts customs clearance procedures for pharmaceuticals circulating within the EAEU territory.

The Government of the Russian Federation established the fee structure for pharmaceutical track-and-trace identification codes and determined the 2019 funding allocation standards for providing medical products to children with disabilities.

The Federal Antimonopoly Service (FAS) issued guidance detailing instances where essential medicine supply prices may exceed registered maximum manufacturer prices plus VAT. The FAS also clarified the methodology for calculating maximum manufacturer prices for products included on the Vital and Essential Drugs (VED) List.

The Ministry of Health of the Russian Federation aggressively pursued legislative initiatives in May 2019. The Ministry proposed post-marketing requirements for pharmaceuticals where applicants cannot realistically provide exhaustive safety and efficacy data, defining specific justifications for such omissions. Additionally, the Ministry proposed updating prescription forms to facilitate digital workflows. Most notably, the Ministry drafted procedures for submitting samples of biomedical cell products, cell lines, medical devices, and pharmaceutical substances required for quality evaluations.

Furthermore, May witnessed critical developments in judicial enforcement, with courts providing detailed rationales regarding administrative liability thresholds within the pharmaceutical supply chain.

1. Statutes, Regulations, and Legal Developments

1.1. Eurasian Economic Commission Amends Customs Declaration Instructions for Essential Pharmaceuticals.

Decision of the Management Board of the Eurasian Economic Commission No. 83, dated May 21, 2019, "On Amending Decisions of the Customs Union Commission and the Management Board of the Eurasian Economic Commission"

This enactment amends Decision of the Customs Union Commission No. 257, dated May 20, 2010, "On Instructions for Completing Customs Declarations and Customs Declaration Forms." The amendments dictate that within the Kyrgyz Republic and the Russian Federation, pharmaceuticals classified under domestic law as Vital and Essential Drugs (VED) must be declared as a single item, provided they share an identical name, dosage form, strength, and packaging configuration.

Concurrently, in the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, and the Russian Federation, importers must separately declare goods containing intellectual property objects listed in national customs IP registers from non-IP items.

This regulation will take effect on February 1, 2020.

1.2. Procurement Authorities Allowed to Purchase Pharmaceuticals Without Fixed Initial Maximum Contract Prices.

Federal Law No. 71-FZ, dated May 1, 2019, "On Amending the Federal Law On the Contract System in the Procurement of Goods, Works, and Services for State and Municipal Needs"

When a state or municipal procurement authority cannot determine the exact volume of pharmaceuticals required, the bidding documentation may specify a maximum contract value. Under these terms, the authority shall execute payments based on the unit price of the actual delivered pharmaceuticals, up to the maximum contract cap.

Additionally, this Federal Law establishes strict anti-dumping requirements for tenders involving vital commodities, including emergency medical supplies and pharmaceuticals. If a bidder submits a proposal 25% or more below the initial maximum contract price (or the cumulative unit price), that bidder must submit a comprehensive economic justification to the procurement authority. Acceptable substantiation includes a manufacturer's letter of guarantee detailing pricing and volume commitments, inventory verification documents, or other instruments proving the feasibility of performance at the proposed below-market rate.

1.3. Federal Government Establishes Monthly Pharmaceutical Allocation Standards for Children with Disabilities.

Resolution of the Government of the Russian Federation No. 628, dated May 21, 2019, "On Establishing the 2019 Monthly Financial Allocation Standard Per Citizen Receiving State Social Assistance via Medical Provisioning Schemes Involving Prescription Pharmaceuticals, Medical Devices, and Specialized Clinical Nutrition Products for Children with Disabilities"

Effective June 8, 2019, the monthly financial allocation standard per citizen entitled to state social assistance—specifically for prescription pharmaceuticals, medical devices, and specialized clinical nutrition products for children with disabilities—will be 860.6 rubles, marking an increase from 826.3 rubles in 2018.

1.4. Regulatory Authorities Define Fee Structure for Serialization and Track-and-Trace Marking Codes.

Resolution of the Government of the Russian Federation No. 577, dated May 8, 2019, "On Approving the Fee and Collection Terms for Serialization and Track-and-Trace Identification Codes Required for Mandatory Product Monitoring"

The specific mechanisms for collecting serialization code fees will be governed by standard agreements executed between the system operator and supply chain participants. The Ministry of Industry and Trade of the Russian Federation approves the model form for these contracts.

The service fee for issuing track-and-trace identification codes required to generate security labels and facilitate mandatory product monitoring is set at 0.50 rubles per code (excluding VAT). Notably, the regulation waives this fee for essential pharmaceuticals on the VED list with a maximum manufacturer price of 20 rubles or less.

1.5. New Reporting and Auditing Rules for Pharmaceutical-Grade Ethanol and Alcohol-Based Medical Products Take Effect.

Resolution of the Government of the Russian Federation No. 472, dated April 20, 2019, "On the Procedure for Auditing and Declaring Volumetric Production, Commercial Turnover, and Utilization of Pharmaceutical-Grade Ethyl Alcohol (Ethanol), as well as the Manufacturing, Compounding, and Wholesale Distribution of Alcohol-Based Pharmaceuticals and Medical Devices..."

The newly established accounting framework mandates the electronic declaration of production volumes for alcohol-based pharmaceuticals. Companies must submit these declarations via secure telecommunications channels using an advanced qualified electronic signature executed by the executive director. The Ministry of Finance holds the authority to design and finalize the mandatory declaration templates.

The regulation outlines clear procedures to mitigate discrepancies or incomplete disclosures. If an organization discovers errors in previously submitted filings during a current reporting period, it must submit corrective declarations prior to the filing deadline of the subsequent quarter. These amended filings must include a detailed narrative justifying the errors or omissions.

1.6. Ministry of Health Enacts Specialized Geriatric Care Standards Specifying Pharmaceutical Dosing Regimens.

Order of the Ministry of Health No. 190n, dated April 2, 2019, "On Approving the Specialized Medical Care Standard for Senile Asthenia"

The regulation establishes a formalized schedule of pharmaceuticals approved for clinical use across the Russian Federation, mandating specific average daily and course dosages. In particular, the standard defines dosage thresholds for key therapies, including cholecalciferol, apixaban, rivaroxaban, teriparatide, glucosamine, diacerein, alendronic acid, denosumab, fentanyl, tramadol, pregabalin, and memantine.

1.7. Antitrust Regulator Clarifies Application of Wholesale Markups in Public Procurement of Essential Medicines.

Letter of the FAS Russia No. ATs/38800/19, dated May 13, 2019, "On the Application of Wholesale Markups in the Supply of Vital and Essential Drugs Under State and Municipal Contracts"

A non-manufacturer supplier may execute a VED supply contract at a price exceeding the registered maximum manufacturer price plus VAT (up to the maximum regional wholesale markup cap) only if the supplier satisfies the following cumulative conditions:

• if, in federal procurement processes, the initial maximum contract price does not exceed 10 million rubles;

• if, in regional or municipal procurement processes, the initial maximum contract price does not exceed the financial thresholds established by the regional executive authority.

Conversely, if a non-manufacturer supplier participates in a federal tender exceeding 10 million rubles, or a regional/municipal tender exceeding local statutory caps, the final contract price cannot exceed the registered maximum manufacturer price plus VAT. Under these circumstances, the supplier may apply a wholesale markup to the manufacturer's actual selling price only if that actual selling price rests below the registered legal ceiling, and provided the total cost remains under the statutory maximum manufacturer price plus VAT limit.

1.8. FAS Outlines Core Methodologies for Calculating Maximum Manufacturer Prices for Essential Medicines.

Letter of the FAS Russia No. ATs/39362/19, dated May 14, 2019, "On the Regulatory Application of the Pricing Methodology for Vital and Essential Drugs During State Registration and Re-registration Procedures, Approved by Government Resolution No. 979..."

The regulator clarified that if a reference drug possesses multiple registered maximum prices for an identical dosage and volume within its secondary consumer packaging (due to varying primary packaging materials, barcodes, etc.), authorities will enforce the lowest registered price, accounting for its most recent downward re-registration.

In the absence of a registered reference drug or its pricing data, the FAS deems it appropriate to implement an identical comparative valuation matrix.

To determine the maximum price threshold, regulators utilize a drug with a matching INN (International Nonproprietary Name), dosage form, and strength that exhibits the highest single-unit cost. If multiple maximum prices exist for such a drug, authorities calculate a reduction coefficient for each individual consumer pack based on its latest downward re-registration, subsequently deriving an arithmetic mean coefficient to anchor the cap.

1.9. Ministry of Health Issues Guidance on Transition and Compliance Deadlines for New Prescription Forms.

Letter of the Ministry of Health of the Russian Federation No. 1127/25-4, dated May 20, 2019, "On the New Prescription Blanks and Prescription Forms for Pharmaceuticals"

The Ministry notes that prior guidance permitted pharmacies to utilize legacy inventory of old-style prescription forms through December 31, 2019.

Accordingly, licensed pharmacies retain the authority to dispense medications against valid legacy prescriptions (Forms No. 148-1/u-06(l) and No. 148-1/u-04(l)), subject to standard expiration terms.

Prescriptions for barbiturate derivatives, codeine-containing combination drugs, and other controlled substances subject to strict quantitative accounting or exhibiting distinct anabolic activity may cover a treatment cycle of up to 60 days. For courses exceeding 30 days, physical paper prescriptions must carry a mandatory "Special Purpose" endorsement, validated by the clinician's signature and the clinic's official prescription stamp. Electronic prescriptions must embed a digital "Special Purpose" flag verified via the advanced qualified electronic signatures of both the attending physician and the authorized corporate representative of the medical institution.

2. Draft Legislation and Regulatory Initiatives

2.1. Proposed Draft Law Introduces Expedited Registration Pathways Coupled with Strict Post-Marketing Obligations.

Draft Federal Law "On Amending the Federal Law On the Circulation of Medicines Regarding Conditional State Registration Linked with Post-Marketing Commitments"

The proposed draft bill establishes a conditional marketing authorization pathway for novel, non-generic, and non-biosimilar pharmaceuticals when an applicant cannot realistically submit exhaustive clinical safety and efficacy data due to specific statutory justifications, including:

• The targeted therapeutic indications occur so rarely that the applicant cannot reasonably collect comprehensive clinical evidence;

• Extant scientific methodologies cannot fully document or evaluate specific safety or efficacy metrics;

• Gathering further clinical data would fundamentally violate universally accepted principles of medical ethics;

• The pharmaceutical addresses previously untreatable pathologies or offers significant therapeutic advantages over existing standards of care.

To secure this accelerated registration, the applicant must formally commit to robust post-marketing compliance requirements, including:

• Restricting product administration exclusively to inpatient medical facilities operating under federal health authority oversight;

• Integrating specific risk-management protocols into corporate compliance programs to monitor adverse reactions and mandate expedited safety reporting;

• Completing mandatory post-marketing clinical trials within strictly defined statutory timelines to continually reassess the product's risk-benefit profile;

• Securing annual renewals of the state registration pending the completion of post-marketing obligations;

• Appending explicit warning labels to the primary and secondary packaging, as well as the patient information leaflet, notifying practitioners that definitive clinical safety data remains pending.

2.2. Draft Ministry Order Enhances Barcode Requirements for Digital Prescription Infrastructure.

Draft Order of the Ministry of Health of the Russian Federation "On Amending Appendices to Order of the Ministry of Health No. 4n 'On Approving the Procedure for Prescribing Pharmaceuticals, Forms of Prescription Blanks, Procedures for Formatting, Tracking, and Storing Said Blanks'"

To support the nationwide rollout of electronic prescription infrastructure, the regulator proposes integrating a dedicated barcode field into Form No. 148-1/u-04(l). This technical optimization aims to streamline state-subsidized drug distribution and enhance compliance controls.

The draft order also reaffirms that paper-based prescriptions for long-term therapies (exceeding 30 days) must bear a physical "Special Purpose" endorsement signed and stamped by the clinician, while electronic equivalents must leverage advanced qualified electronic signatures to validate the long-term clinical necessity.

2.3. Ministry of Health Outlines Sampling Requirements for Quality Assessments of Advanced Cell Therapies.

Draft Order of the Ministry of Health of the Russian Federation "On Approving the Procedure for Submitting Samples of Biomedical Cell Products, Cell Lines, Medical Devices, Pharmaceuticals, Pharmaceutical Substances, and Constituent Substances Used in Quality Evaluations of Biomedical Cell Products, and Repealing Ministry Order No. 841n..."

The draft administrative framework mandates that applicants seeking quality clearances for advanced biomedical cell products (BMCP) must submit product samples to the designated state testing laboratory within 60 business days of receiving an official directive from the Ministry of Health. This procedure forms a mandatory prerequisite for securing clinical trial authorizations.

Applicants must provide samples in quantities sufficient to fully replicate the mandated quality control protocols, as explicitly calculated and detailed by the expert testing institution in its initial notice.

Upon receipt of the materials, the testing facility will issue a formal confirmation to the applicant and must notify the Ministry of Health via electronic or physical filing within 3 business days.

If the initial sample batch proves insufficient for conclusive analytical testing, the assigned forensic expert holds the statutory right to request additional materials from the institution's leadership.

2.4. Ministry of Industry and Trade Details Stringent Compliance Grounds for Track-and-Trace Data Rejection.

Draft Resolution of the Government of the Russian Federation "On Amending the Regulations on the Track-and-Trace System for Medicinal Products"

This draft resolution updates the overarching serialization framework (enacted under Resolution No. 1556) to integrate the statutory fee structures established by Resolution No. 577. The proposal introduces strict grounds under which the system operator may flatly reject or deny serialization data entry, including:

• Absence of valid Global Trade Item Numbers (GTIN) and associated serial numbers within the central track-and-trace registry;

• Failure by the manufacturer to submit serialization reports within the mandatory statutory deadlines;

• Discrepancies regarding the verified emission registration device utilized to transmit the data batch;

• Failure to confirm payment for the specific tracking codes converted into commercial identification marks.

The draft also proposes optimizing cryptographic overhead by truncating the digital verification signature component to 44 characters.

2.5. Regulatory Review Clears 27 New Therapies for Essential Drugs List Inclusion Audits.

Disclosure Concerning the Evaluation of Proposals for Essential Drugs List Inclusion

The Ministry of Health announced that 27 international nonproprietary names (INNs) successfully passed initial administrative screening for prospective inclusion in the 2020 VED schedule. Cleared molecules include high-value therapies such as insulin lispro, macitentan, pegvisomant, vinflunine, elotuzumab, and netakimab.

3. Litigation Trends and Enforcement Landscape

3.1. Appellate Court Upholds Strict Mandate for Calibrated Cold-Chain Equipment but Mitigates Small Business Penalties.

Ruling of the Sixteenth Arbitration Appellate Court, dated May 17, 2019, in Case No. A63-23543/2018

During a compliance audit, the federal healthcare watchdog (Roszdravnadzor) discovered that a retail pharmaceutical entrepreneur stored temperature-sensitive medications in refrigeration units lacking integrated, legally verified, and calibrated measuring devices. To track internal temperatures, the operator relied on uncalibrated, off-the-shelf household thermometers (Model TB-225) that completely lacked verification certifications.

The court conclusively ruled that commercial drug storage operations must exclusively employ specialized, industry-validated temperature monitoring devices.

However, the appellate panel affirmed that the court of first instance acted within its statutory discretion by downgrading the penalty to a formal administrative warning. While Article 14.1, Paragraph 4 of the Code of Administrative Offenses (CoAO) mandates fines ranging from 4,000 to 8,000 rubles or operational suspensions of up to 90 days for sole proprietors, Article 4.1 of the CoAO allows for mitigation based on small-business status and the absence of immediate harm. Consequently, the court rejected Roszdravnadzor's appeal demanding mandatory financial penalties.

3.2. Omissions in Controlled Substance Ledgers Classified as Continuing Offenses Under Extended Limitation Periods.

Ruling of the Sixteenth Arbitration Appellate Court, dated May 17, 2019, in Case No. A63-23543/2018

The defendant pharmacy argued that the prosecution violated the standard three-month administrative statute of limitations. The pharmacy maintained that because regulations mandate recording transactions on the exact day of sale, any failure to log an entry constitutes a discrete offense committed on that specific date, making an extended enforcement window inapplicable.

The court flatly rejected this defense, ruling that a controlled substance ledger represents a continuous, annualized compliance record. The ledger must provide an uninterrupted, transparent audit trail of daily product drawdowns, separated by individual prescriptions and institutional requisitions. Failing to log a transaction does not transform into a fully completed historic violation the following day.

Delayed or missing ledger entries do not relieve the license holder of its permanent obligation to maintain the record in strict statutory compliance throughout the fiscal year. Because accounting regulations mandate storing primary inbound and outbound invoices alongside the ledger, these compliance entries must remain continuously accurate and inspectable. The court concluded that omissions constitute a continuing regulatory violation, effectively extending the enforcement timeline under special statutory limitation periods.

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