BRACE Law Firm reports that effective February 1, 2018, state contracting authorities must utilize a standard form contract when procuring pharmaceuticals for medical use.

The Ministry of Health of the Russian Federation approved this standard form contract for the supply of pharmaceuticals for medical use via Order No. 870n dated October 26, 2017 (which entered into force on January 1, 2018). The Ministry published the form in the Unified Information System (UIS) on January 16, 2018. Upon the expiration of 30 calendar days from its publication in the UIS, state contracting authorities became legally obligated to implement this standard form.

Scope of Application of the Standard Form Contract

The standard form contract applies to public procurements of all pharmaceuticals intended for medical use, irrespective of the initial maximum contract price (IMCP), quantity, or delivery methods. The approved form does not extend to the procurement of veterinary medicines.

Concurrently, the regulatory framework establishes rather broad exemptions from this scope. Specifically, the form does not apply to:

• procurements executed under the State Defense Order;
• procurements of goods to meet state and municipal needs where the relevant procurement notices were published in the UIS prior to January 1, 2018.

Furthermore, Rule 18 of the Rules for the Development of Standard Contracts and Standard Contract Terms (approved by Government Resolution No. 606 dated July 2, 2014) prescribes an extensive list of exemptions. If the applicable information card does not mandate the use of a standard contract or standard contract terms, the form remains inapplicable in the following instances:

• cash-based procurements;
• requests for quotations conducted to support the contracting authority's operations within a foreign jurisdiction;
• requests for quotations organized to deliver emergency or specialized urgent medical care, or to maintain essential public welfare;
• sole-source public procurements determined by decrees or orders of the President of the Russian Federation, or directives of the Government of the Russian Federation—provided that such legal acts explicitly authorize contracting without utilizing standard forms or terms;
• procurements necessitated by accidents, natural or man-made emergencies, or force majeure events requiring urgent or emergency medical intervention (provided the goods are not included in the Government-approved list of emergency response or humanitarian aid supplies), where alternative time-consuming supplier selection methods are impractical;
• procurements of pharmaceuticals prescribed to specific patients by decision of a medical commission due to medical indications (such as individual intolerance or life-saving necessity).

Structural Overview and Core Provisions of the Standard Contract

The standard contract incorporates conventional boilerplate language governing pharmaceutical supplies. Specifically, it regulates the subject matter, pricing structures, party interactions, packaging, transportation, delivery mechanisms, acceptance protocols, selective sampling, payment terms, performance security, liabilities, and the overall term of validity.

Key provisions of the standard contract for the supply of medical pharmaceuticals include:

• Mandatory Delivery Details: Parties must specify whether delivery involves unloading operations or simple drop-off;
• Subcontractor Engagement: The text mandates suppliers to engage subcontractors if stipulated by the procurement documentation, requiring submission of subcontractor details to the state authority within 5 business days of contract execution;
• Packaging and Labeling: The framework establishes rigorous requirements for the packaging and labeling of pharmaceutical products;
• Selective Inspection: The clause delineates comprehensive procedures for the contracting authority to perform selective product testing;
• Laboratory Testing Allocation: Suppliers must provide pharmaceutical samples for laboratory testing at their own expense, separate from the primary contract quantities;
• Strict Acceptance Timeline: The text enforces a maximum 15-business-day window for the contracting authority to inspect and sign the acceptance certificate;
• Remedial Testing Options: Contracting authorities may demand the replacement of the entire shipment or inspect each unit at the supplier's expense if selective sampling reveals non-compliance, though specific testing timelines remain undefined;
• Extensive Documentation: The framework appends a significant number of mandatory annexes (specifications, technical characteristics, schedules, acceptance certificates, reconciliation statements) and supplementary documents (shipping instructions, summary registries, performance execution certificates).

Payment Terms and Regulatory Deadlines

The standard contract mandates wire transfers for all transactions, requiring explicit clauses regarding the presence or absence of advance payments and the underlying funding source. Additionally, it itemizes the mandatory documentation required from the supplier to process payments, alongside formatting standards. Payment deadlines shall not exceed 30 days, or 15 business days for Small and Medium-Sized Enterprises (SMEs) from the date the contracting authority signs the acceptance or performance certificate. The framework permits both phased payments and single lump-sum payments upon full delivery.

Modification of Standard Contractual Terms

Pursuant to Rule 7 of the Rules for the Development of Standard Contracts and Standard Contract Terms (Government Resolution No. 606 dated July 2, 2014), standard contracts consist of the following components:

a) a fixed portion, which remains unalterable during its application in any specific procurement process;

b) a variable portion, allowing contracting authorities to select one or multiple options from an exhaustive list prepared by the competent authority, or to populate specific procurement data and procedural mechanisms.

The non-negotiable fixed portion of the pharmaceutical public procurement contract encompasses price modification procedures, packaging and labeling criteria, acceptance protocols, quality checks, and selective testing rules.

Conversely, the variable portion—which the contracting authority may adjust—includes delivery methods, payment structures, and timelines for returning performance security. Suppliers may only submit a protocol of disagreements regarding these variable provisions.

Liability and Indemnification Framework

The contract defines the financial liability of both the contracting authority and the supplier for delayed performance, capping penalties at one three-hundredth ($1/300$) of the Bank of Russia's refinancing rate effective on the payment date. It further outlines a schedule of fines for distinct non-performance events (excluding delays), limiting the cumulative sum of fines and penalties to the total contract value.

If a supplier engages subcontractors, that supplier retains ultimate liability before the contracting authority for any breach of contract. Moreover, the framework penalizes the supplier for failing to engage subcontractors in the agreed volume, or for submitting late or inaccurate documentation regarding such entities.

Ambiguities and Regulatory Discrepancies within the Standard Form Contract

Several provisions within the standard contract introduce legal ambiguity. For instance, the requirement to execute the contract in multiple identical hard copies implies paper-based processing, whereas the vast majority of pharmaceutical supply contracts have transitioned exclusively to electronic documents.

Value-Added Tax (VAT) treatment also presents practical challenges. The text leaves unclear who may modify the default "inclusive of VAT" clause to a "(specify exemption basis if VAT-exempt...)" variant, or at what stage this can occur. This issue directly impacts suppliers operating under the Simplified Taxation System (STS).

The document itself contains extensive annotations for completion. Furthermore, the approved information card outlines concrete metric thresholds for applying the standard form (product name, OKPD 2 classification codes, and IMCP levels). To mitigate confusion, the Ministry of Health issued Clarification Letter No. 418/25-5 on February 14, 2018, addressing frequently asked questions.

Despite these efforts, certain contractual formulations remain insufficiently precise. Furthermore, specific clauses directly conflict with the upcoming amendments to Federal Law No. 44-FZ (effective July 1, 2018). For example, the updated law restricts mandatory bid security requirements to procurements exceeding 5 million rubles, a threshold omitted in the standard contract form. Consequently, public procurement authorities may initially face compliance hurdles when preparing these standard forms and their respective annexes.

Professional Legal Services

Providing comprehensive legal support within the sphere of public and commercial procurement represents a core practice area for BRACE Law Firm. Our life sciences and regulatory experts stand ready to deliver sophisticated legal counsel on drafting, executing, and managing pharmaceutical supply contracts, as well as resolving disputes arising from public procurement awards. To discuss your requirements, please contact us at +7 (499) 755-56-50 or via email at This email address is being protected from spambots. You need JavaScript enabled to view it..