Today's trend in the Russian health-care system is the strengthening of state regulation mechanisms with the aim to use the available limited resources to their best and to reduce the costs.

Trends towards improvement on the pharmaceuticals market that took shape in the second half of 1999 remained throughout the year 2000. Imports grew 48 percent in 2000 over 1999 and exceeded $1.23 billion; the performance of the Association of International Pharmaceutical Manufacturers (AIPM) looked even more impressive. The share of AIPM members in the total of Russia's medicine imports increased and equaled 58 percent; AIPM members confidently got to hold leading positions on Russia's pharmaceutical market.

Foreseeing further growth, AIPM anticipates a 20-25 percent increase in sales in 2001 over 2000.

Among factors positively affecting the market's development and its attraction for investments are its liberalization and the harmonization of state regulation policies with international norms and rules as well as improvement of the customs and tax legislation.

Pricing

Price regulation for medicines should be maximally harmonized with the time-tested methods employed in other countries. Regulations should apply only to those medicines and medicinal items that are directly subsidized by the state, and policies in this field should be adopted only on the federal level of authority.

Subjecting medicines and medical items to value-added tax (VAT) only serves to increase the expenses of both the consumers and the state while market-determined and competitive pricing serves not only to reduce the government's spending on health care but also promotes quality and variety of goods and services. Unfortunately, the governments of many countries mistakenly resort to methods that involve direct control of medicine prices seeking to limit their health-care spending.

Customs regimes

Attempts to restrain the inflow and sales of certain imported medicines are arousing serious concern in the pharmaceutical market's participants. It is obvious that the measures proposed would damage the interests of consumers, limit their access to high-quality medicines and may cause a number of highly efficient medicines, which are imported, to disappear from the drugstores.

In the longer run, restraints on medicine imports would not facilitate the process of the domestic pharmaceutical industry's restructuring and development, while at the same time such measures would detrimentally affect the attraction of investment in Russian enterprises in the eyes of foreign investors.

Such measures would only complicate the process of Russia's integration in the international economic community and would contradict the principles of liberal free-market organization Russia has declared.

In this view, the association welcomes the State Duma's recent vote declining the proposed legal amendments that would impose restrictions on the imports of medicines in Russia.

In our opinion, the existing customs duties on medicines should be reduced because they inevitably promote increases in the retail prices. Imports of medicines, including "in bulk," components, raw materials, packaging materials, etc., should be exempt from customs duties. This will provide a strong stimulus for both Russian and foreign companies to invest in Russia.

Price hikes will inevitably cause the consumption and the imports to go down, and will eventually lead to a decline in customs revenues.

Cost optimization

International experience demonstrates that a clearly formulated health-care strategy is required for the elaboration of a medicine-provision policy. Such a strategy should be prepared with due respect for all members of the health-care system and the pharmaceutical market.

The main objective of such a strategy is to increase the accessibility of modern medicines, both the reproduced ones and the new ones. It is necessary to stimulate cost-reduction measures, to consolidate the available budget funds and keep control over overall expenses on fighting certain diseases, not on separate segments of the market.

Instruments for implementing such a strategy include encouragement of competition and market liberalization and decision-making should be based on the medical substantiation principles.

State-subsidized medicines should meet the modern international standards based on the medical substantiation principles. Corrections and amendments in the lists of state-subsidized medicines should be made on the basis of clinical and economic results of their application, including distant results. The whole system of medicine-provision and state compensations should be simple, open and clear.

It is necessary to elaborate objective criteria to evaluate the efficiency, quality and safety of medicines included in lists, harmonize them with international standards and rules and observe these rules irrevocably (GMP, GCP, GLP, GDP, GSP, GPP).

A real money-saving effect, without any detriment to public health care, will be achieved through cutting the purchases of old and low-efficiency medicines and using the funds thus liberated on buying effective, quality and safe medicines, including innovative ones.

Investment climate

Investment attraction is an important objective for any government. But it must be noted that investments in the pharmaceutical sector involve a complicated scheme that is not limited to building factories to produce chemicals. However important factories may be, it is impossible to develop the pharmaceutical sector without investments in the research and development of new medicines and their sale.

AIPM considers that a national investment policy in the pharmaceutical sector should take into account both the importance of building factories and funding research and know-how development.

Clinical tests

The adoption of the Good Clinical Practice (GCP) rules has expanded the opportunities for carrying out international clinical tests in Russia. But one of the biggest problems hampering the organization of clinical tests in Russia is the lack of possibilities for quick (within several days) completion of customs formalities and obtaining permission to import the medicine to be tested. This causes Russia to lose at least $200-300 million worth of foreign investments in the health-care industry every year.

According to the data available to the Health Care Ministry (graphs 1-2, February 2001), the number of clinical tests is growing in Russia but both their number and frequency are still far below those in other countries.

The potential for increasing the number and frequency of clinical tests is unlimited. In order to boost opportunities for organizing international clinical tests in Russia, maintain competitiveness and develop mutually beneficial cooperation, it is necessary to amend existing legal and executive acts so as to ensure quick and simplified completion of customs formalities for the import of medicines and equipment supplied for clinical testing purposes, as well as the export of biological samples for their analysis in laboratories of the medicine's developer.

Also, it is necessary to allow medics to receive payment for carrying out clinical tests. This will be in line with international practice and will remove existing barriers for organizing multi-centered clinical tests in Russia.

To facilitate resolution of these problems, a working group was set up in late 2000. The group included representatives of the following organizations: the Health Ministry's department for efficiency, safety and quality control of medicines and medical items; the Center of Research, Expertise and State Control of Medical Items; AIPM Medical Committee; the State Customs Committee; and a number of other organizations.

We hope that the professional approaches exercised by the Health Care Ministry and the State Customs Committee will have a positive effect on the organization of multi-centered clinical tests in Russia and will promote integration of Russian research and practical medicine into the international research community.

Fake medicines: Production and turnover

AIPM considers that quality of life in Russia will increasingly depend on the quality and accessibility of medical services. Putting the quality of medicines under control will not only have a positive effect on the nation's health but will also help reduce the losses caused by inefficient spending of the limited financial resources.

The idea of simplifying customs procedures for medicines and medical equipment imported in Russia for clinical testing purposes has nothing to do with a general lifting of controls over the material that crosses the border.

Due to its specificity, the pharmaceutical sector is subjected to increased government control in many countries of the world. AIPM approves and supports this approach. The association is deeply concerned with the rapid growth in the number of reported cases of appearance of fake medicines on the Russian market.

Objects of counterfeiting include practically all medicines of commercial interest regardless of their brand names or degree of danger to human health, and no borders or customs procedures can restrain their proliferation. According to official reports, 56 counterfeit medicines were discovered in 2000, while two years ago the figure never exceeded five.

Unless urgent measures are taken, Russia may become a fertile medium for illegal manufacture of counterfeit medicines that represent a very real danger to national security.

Ethical norms of market self-regulation

Ethical norms of pharmaceutical marketing are essential for building up a transparent and fair pharmaceutical market in Russia. Acknowledging that the sector's companies bear a high responsibility and must provide truthful information about their products, AIPM considers that self-disciplining and self-regulation exercised by pharmaceutical associations and leading pharmaceutical companies better corresponds to the interests of the general public than does an excessively strict governmental regulation.

For this purpose, AIPM has adopted and put to use a Code of Marketing Practice which is based on the highest international standards of pharmaceutical marketing, and has elaborated relevant procedures to exercise control and, if necessary, to take measures to prevent possible violations of marketing ethics.

The liberalization and development of Russia's pharmaceutical market appears to be a very complicated and multi-faceted process. It is obvious that the production, marketing, distribution and sale of medicines require stricter regulation than other sectors of industry. At the same time, our proposals have been elaborated with the aim to impose limits on the excessive and arbitrary bureaucratization, which provides a fertile medium for abuses.

The goals formulated above will help Russia to get closer to international standards, to full-fledged membership in international organizations like the World Trade Organization, and will boost Russia's ability to attract investment.

(Robert Rosen is Executive Director of the Association of International Pharmaceutical Manufacturers.)