National Immunobiological Company Representatives Report on Measures Aimed at Improving the Situation with Procurement of HIV Drugs
10.12.2015
National immunobiological Company representatives (Rostec State Corporation) participated in the national conference 'Implementation of additional measures of the Government Commission on Health Protection and HIV Prevention in the Russian Federation', which took place on December 8-10 in Suzdal. The company was represented by Igor Nikitin, Head of Virology Department, and Ksenia Andreeva, Deputy Director General for Strategic Development. Andreeva gave the presentation 'Tools used to implement decisions of the Russian Government on combating HIV/AIDS'. The meeting was also attended by Anna Popova, Chief Sanitary Inspector of Russia and Vadim Pokrovsky, academician and Head of the Federal Research and Methodological Center for Prevention and Control of AIDS.
In the course of the event Andreeva told the experts and industry professionals about the current situation with the provision of HIV drugs in Russian regions, and also outlined the company's proposals on its improvement and development of the company's own production in the Russian Federation.
Andreeva noted that the current situation when the regions have to procure antiretroviral drugs of their own accord has led to the following results: there's a huge number of tenders in the regions (there are over 3000 tendering procedures), medical institutions have to perform unusual functions of procurement instead of treating patients, and price by region can vary 30 times for the same drug. Andreeva noted, "As a result, substantial amount of budget funds goes to those distributors who actually set drug prices in the regions."
The report also noted: at the moment the issue of import substitution continues to be relevant as the dependence of Russian market on imported goods remains as high as 75-90%. In addition, considering current financial instability, the government can't calculate foreign procurement prices in advance. Taking into account the ruble weakening and the increasing number of patients in need of medications, budgetary costs continue to steadily increase.
Representative of the company's management points out, "National Immunobiological Company initiates single-source procurement of drugs for the treatment of HIV and determination of a single supplier, as this will allow the government to fix the drug prices and plan the budget, and the exclusive supplier will be able to set requirements for distributors and manufacturers. Under the existing Russian legislation, the single supplier is entitled to put counterclaims for distributors, and can negotiate drug pricing and localization program directly with the manufacturers," explains Andreeva. "This is the only arrangement that will allow to organize and localize production of the needed drugs in Russia within a few years."
As part of the three-day event, representatives of the professional community discussed measures to fight the HIV spread at the national level, patients treatment, critical issues of sanitary and epidemiological welfare of the population in modern conditions, as well as other pressing issues in the industry. In addition, the issues regarding laboratory support programs for the prevention and control of infectious diseases, which spread carries demographic and socio-economic consequences, were addressed.
National Immunobiological Company was established as part of Rostec State Corporation in 2013 as the organization managing the holding company formation in the immunobiological products development and production. The holding company aims to ensure the independence of the Russian Federation from foreign medicinal drugs (immunobiological drugs and drugs against infectious diseases, in particular) through the development of its own production and scientific expertise. The company's development strategy envisages producing up to 100% of the national vaccine needs by 2020 within the National Immunization Schedule at the holding facilities. A number of manufacturing enterprises including MICROGEN, FORT, Sintez and Metallist will join the holding company in order to support the company's objectives.
Rostec State Corporation is a Russian corporation, created in 2007 to promote development, production and export of high-tech industrial products designed for civil and military use. The corporation comprises 663 organizations, nine of which are currently formed into holding companies in the military-industrial complex and six operate in civilian industries, as well as 32 direct management organizations. Rostec's portfolio includes such famous brands as AVTOVAZ, KAMAZ, Russian Helicopters, VSMPO-AVISMA Corporation and others. Rostec organizations are located in the territory of 60 subjects of the Russian Federation and supply products to the markets of over 70 countries. Rostec revenues in 2014 amounted to 964.5 billion rubles. The total amount of tax deductions amounted to 147.8 billion rubles.
Extracts from Andreeva's report
When the company was created in 2013, the main objective was stated as providing the health care system with drugs (primarily immunobiological) with full-cycle manufacturing organized in the Russian Federation. Our company is run by the Board of Directors which includes representatives of the Russian Ministry of Industry and Trade, the Russian Ministry of Health and Rostec State Corporation.
First and foremost, National Immunobiological Company is a manufacturing company that aims to ensure import substitution and provide the health care system with medications. Drugs against HIV and viral hepatitis are one of our target segments.
As for our vision of the drug market for the treatment of HIV and viral hepatitis and the state of production of these drugs in Russia: in the last few years the regions have been forced to provide their facilities and their patients with medicines and to conduct tendering procedures independently. At the end of the last two years, the differentiation of prices for certain medicines (that are included in the list of essential drugs and must have a fixed price) has reached 25-30 times for the same drug. During the year more than three thousand tendering procedures are held for drug procurement. We believe that medical institutions have become a never ending purchasing body which has to engage in necessary tendering procedures instead of treating patients. The aforementioned price differentiation has led to the fact that at least one billion rubles of budgetary funds has been pocketed by those distributors who set drug prices in the regions. Besides the fact that the funds are spent ineffectively, medical facilities have to perform a huge number of unnatural functions.
As for the state of drug manufacturing in Russia in the segment of HIV and viral hepatitis, we are still 75-90% dependent on imports. There are only two Russian medicinal drugs that are fully manufactured in Russia - that is their entire production cycle is performed with means purchased in accordance with the Government decree. Only two! What does this mean? It means that there are only two drugs, which price doesn't depend on the difference in exchange rates for both manufacturer and customer and the price is entirely formed in Russia. As for all other drugs, their cost relies heavily on oil prices and the ruble exchange rate. Thus, in times of current financial instability, there are objective prerequisites for the federal and regional budgets to be limited. The government can no longer afford to run the risks in such circumstances every year, not knowing how much imported drugs will cost. This is why there are certain measures that will help provide Russia and our patients with the needed medicines at an affordable price for the government.
National Immunobiological Company put forward an initiative. We also wrote an appeal to the President and the Prime Minister about the necessity to single-source procurement and determine a single supplier. There is a lot of speculation and questions why this should be done. Currently, the customer is represented by the Ministry of Health, its regional departments and the regions in whole. They are obliged to provide drugs, but under the existing legislation they have no mechanisms to make counterclaims to the distributors and drug manufacturers, including the drug pricing. Thus, single-sourcing of purchases will bring other positive results in addition to the obvious effects that are associated with the neutralization of price differentiation. Single-sourcing of procurement at the Ministry of Health will allow to essentially form a state procurement for certain drugs. Considering the country's one-year budget, the Ministry of Health can also find itself in a difficult situation like the regions that depend on manufacturers and distributors. This situation may lead to what we are now witnessing in the regional and centralized procurements: when the customer announces the price of drugs, distributors do not bid, forcing the customer to raise the contract price. The Ministry of Industry and Trade can't affect the order either and can't offer counter obligations to those manufacturers who are potentially ready to localize their production. Moreover, in the framework of the federal special-purpose program, a situation when the Ministry of Industry and Trade can't order a particular manufacturer to localize the production of a particular drug in Russia leads to the fact that it's commercial interests of the manufacturer and not the patient's needs that define which drugs will be registered in Russia.
Given all of the indicated issues, negative appeal of the Russian market for foreign manufacturers may worsen in the next few years. it may become completely unprofitable for drug importers, and they will leave our market for financial reasons, not to mention the new drugs which they will not register in this country.
Based on the above, neither the Ministry of Industry and Trade, nor the Ministry of Health are able to solve the problem of drug provision for our patients in the long term. That is why National Immunobiological Company proposes a mechanism: to determine a single supplier as part of single-source procurement. Such supplier will be legally entitled to stand counterclaims for drug manufacturers. Moreover, when the procurement is centralized and a single supplier is determined, the state can fix prices in advance. The Government order on single provider fixes the price for the validity period (for several years), and the budget can be planned effectively. Under the existing Russian legislation, the single supplier is entitled to put counterclaims for distributors, and can negotiate the pricing and potential localization directly with the manufacturers.
According to National Immunobiological Company, such mechanism will allow to plan budget expenditures for the purchase of medicines for the next few years, as well as to organize and localize production of the drugs we need, rather than those that generate good profit in the Russian market. As a result, we will become independent from exchange rates and oil prices.
In the course of the event Andreeva told the experts and industry professionals about the current situation with the provision of HIV drugs in Russian regions, and also outlined the company's proposals on its improvement and development of the company's own production in the Russian Federation.
Andreeva noted that the current situation when the regions have to procure antiretroviral drugs of their own accord has led to the following results: there's a huge number of tenders in the regions (there are over 3000 tendering procedures), medical institutions have to perform unusual functions of procurement instead of treating patients, and price by region can vary 30 times for the same drug. Andreeva noted, "As a result, substantial amount of budget funds goes to those distributors who actually set drug prices in the regions."
The report also noted: at the moment the issue of import substitution continues to be relevant as the dependence of Russian market on imported goods remains as high as 75-90%. In addition, considering current financial instability, the government can't calculate foreign procurement prices in advance. Taking into account the ruble weakening and the increasing number of patients in need of medications, budgetary costs continue to steadily increase.
Representative of the company's management points out, "National Immunobiological Company initiates single-source procurement of drugs for the treatment of HIV and determination of a single supplier, as this will allow the government to fix the drug prices and plan the budget, and the exclusive supplier will be able to set requirements for distributors and manufacturers. Under the existing Russian legislation, the single supplier is entitled to put counterclaims for distributors, and can negotiate drug pricing and localization program directly with the manufacturers," explains Andreeva. "This is the only arrangement that will allow to organize and localize production of the needed drugs in Russia within a few years."
As part of the three-day event, representatives of the professional community discussed measures to fight the HIV spread at the national level, patients treatment, critical issues of sanitary and epidemiological welfare of the population in modern conditions, as well as other pressing issues in the industry. In addition, the issues regarding laboratory support programs for the prevention and control of infectious diseases, which spread carries demographic and socio-economic consequences, were addressed.
National Immunobiological Company was established as part of Rostec State Corporation in 2013 as the organization managing the holding company formation in the immunobiological products development and production. The holding company aims to ensure the independence of the Russian Federation from foreign medicinal drugs (immunobiological drugs and drugs against infectious diseases, in particular) through the development of its own production and scientific expertise. The company's development strategy envisages producing up to 100% of the national vaccine needs by 2020 within the National Immunization Schedule at the holding facilities. A number of manufacturing enterprises including MICROGEN, FORT, Sintez and Metallist will join the holding company in order to support the company's objectives.
Rostec State Corporation is a Russian corporation, created in 2007 to promote development, production and export of high-tech industrial products designed for civil and military use. The corporation comprises 663 organizations, nine of which are currently formed into holding companies in the military-industrial complex and six operate in civilian industries, as well as 32 direct management organizations. Rostec's portfolio includes such famous brands as AVTOVAZ, KAMAZ, Russian Helicopters, VSMPO-AVISMA Corporation and others. Rostec organizations are located in the territory of 60 subjects of the Russian Federation and supply products to the markets of over 70 countries. Rostec revenues in 2014 amounted to 964.5 billion rubles. The total amount of tax deductions amounted to 147.8 billion rubles.
Extracts from Andreeva's report
When the company was created in 2013, the main objective was stated as providing the health care system with drugs (primarily immunobiological) with full-cycle manufacturing organized in the Russian Federation. Our company is run by the Board of Directors which includes representatives of the Russian Ministry of Industry and Trade, the Russian Ministry of Health and Rostec State Corporation.
First and foremost, National Immunobiological Company is a manufacturing company that aims to ensure import substitution and provide the health care system with medications. Drugs against HIV and viral hepatitis are one of our target segments.
As for our vision of the drug market for the treatment of HIV and viral hepatitis and the state of production of these drugs in Russia: in the last few years the regions have been forced to provide their facilities and their patients with medicines and to conduct tendering procedures independently. At the end of the last two years, the differentiation of prices for certain medicines (that are included in the list of essential drugs and must have a fixed price) has reached 25-30 times for the same drug. During the year more than three thousand tendering procedures are held for drug procurement. We believe that medical institutions have become a never ending purchasing body which has to engage in necessary tendering procedures instead of treating patients. The aforementioned price differentiation has led to the fact that at least one billion rubles of budgetary funds has been pocketed by those distributors who set drug prices in the regions. Besides the fact that the funds are spent ineffectively, medical facilities have to perform a huge number of unnatural functions.
As for the state of drug manufacturing in Russia in the segment of HIV and viral hepatitis, we are still 75-90% dependent on imports. There are only two Russian medicinal drugs that are fully manufactured in Russia - that is their entire production cycle is performed with means purchased in accordance with the Government decree. Only two! What does this mean? It means that there are only two drugs, which price doesn't depend on the difference in exchange rates for both manufacturer and customer and the price is entirely formed in Russia. As for all other drugs, their cost relies heavily on oil prices and the ruble exchange rate. Thus, in times of current financial instability, there are objective prerequisites for the federal and regional budgets to be limited. The government can no longer afford to run the risks in such circumstances every year, not knowing how much imported drugs will cost. This is why there are certain measures that will help provide Russia and our patients with the needed medicines at an affordable price for the government.
National Immunobiological Company put forward an initiative. We also wrote an appeal to the President and the Prime Minister about the necessity to single-source procurement and determine a single supplier. There is a lot of speculation and questions why this should be done. Currently, the customer is represented by the Ministry of Health, its regional departments and the regions in whole. They are obliged to provide drugs, but under the existing legislation they have no mechanisms to make counterclaims to the distributors and drug manufacturers, including the drug pricing. Thus, single-sourcing of purchases will bring other positive results in addition to the obvious effects that are associated with the neutralization of price differentiation. Single-sourcing of procurement at the Ministry of Health will allow to essentially form a state procurement for certain drugs. Considering the country's one-year budget, the Ministry of Health can also find itself in a difficult situation like the regions that depend on manufacturers and distributors. This situation may lead to what we are now witnessing in the regional and centralized procurements: when the customer announces the price of drugs, distributors do not bid, forcing the customer to raise the contract price. The Ministry of Industry and Trade can't affect the order either and can't offer counter obligations to those manufacturers who are potentially ready to localize their production. Moreover, in the framework of the federal special-purpose program, a situation when the Ministry of Industry and Trade can't order a particular manufacturer to localize the production of a particular drug in Russia leads to the fact that it's commercial interests of the manufacturer and not the patient's needs that define which drugs will be registered in Russia.
Given all of the indicated issues, negative appeal of the Russian market for foreign manufacturers may worsen in the next few years. it may become completely unprofitable for drug importers, and they will leave our market for financial reasons, not to mention the new drugs which they will not register in this country.
Based on the above, neither the Ministry of Industry and Trade, nor the Ministry of Health are able to solve the problem of drug provision for our patients in the long term. That is why National Immunobiological Company proposes a mechanism: to determine a single supplier as part of single-source procurement. Such supplier will be legally entitled to stand counterclaims for drug manufacturers. Moreover, when the procurement is centralized and a single supplier is determined, the state can fix prices in advance. The Government order on single provider fixes the price for the validity period (for several years), and the budget can be planned effectively. Under the existing Russian legislation, the single supplier is entitled to put counterclaims for distributors, and can negotiate the pricing and potential localization directly with the manufacturers.
According to National Immunobiological Company, such mechanism will allow to plan budget expenditures for the purchase of medicines for the next few years, as well as to organize and localize production of the drugs we need, rather than those that generate good profit in the Russian market. As a result, we will become independent from exchange rates and oil prices.
