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State procurement system barriers is in Focus again

16 February 2015

Conference of the Adam Smith Institute was held in Moscow on February 11 and 12. It was dedicated to the regulatory and legal aspects of pharmaceutical companies activities. One of the most interesting sessions was dedicated to a discussion on issues related to state procurement of socially important products. During this session manufacturing companies shared their experiences of participation in auctions. Representatives of regulators also took part in the discussion.

The session was opened by Andrey Ahantiev, Economic Security Director of GEROPHARM. He outlined main barriers actually arising before a manufacturer during tender participation, using the company’s experience in state procurement of insulins as an example. He noted that insulins are special items because of their social importance and capital intensity. On the other hand there are some problems with industry regulation. There are gaps in the legislation, lack of systematic control and regulatory practices and lack of real mechanisms of violated rights restoration.

“We think that the most difficult situation is in areas where state procurement is carried out with violations of applicable law. New economic realities require a reboot of the system. They require the development of fair competition and import substitution through changes in legislation and rapid establishment of regulations. Such regulations shall refer to preferences system for suppliers of drug products with high degree of local processing, to procurement object and model contracts description,” said Andrey Ahantiev. He reiterated that the interchangeability of insulins was confirmed by their therapeutic equivalence and procurement practices in different regions. In such regions procurement structure for specific drug names sometimes dramatically changes from year to year. At the same time, when bidding are conducted for international non-proprietary names, final purchase price of one product package can be reduced by 30% compared with bidding for trade names. In this regard, it is currently extremely important to actively implement import substitution roadmap created by pharmaceutical companies. This roadmap, for example, refers to the formation of a unified practice of enforcement and strict observance of the contract system law, preferences setting depending on the depth of localisation, analysis and generalization of current practice and creation (by regulators) of responsibility mechanisms for evading the provisions of the law.

The main theses put forward in the speech of Andrey Ahantiev was supported by pharmaceutical manufacturers. They confirmed the existence of these difficulties of public procurement procedures implementation.

The session was continued by regulators’ presentations. Tatyana Demidova, Head of the Control Department of Public Procurement, in her speech explained the position of the Federal Antimonopoly Service in regard to the current situation in the legal regulation of the industry. She noted that the legislation in this area was improving and constantly changing. As an example of the latest measures Tatyana Demidova named resolutions on prices limiting and procurement roster management practice using trade names. She also talked about the formation of new regulatory financial supervision authorities and the resolution on the admission of foreign goods upon availability of a national analogue. The government is currently reviewing this resolution. She noted that such discussions between pharmaceutical industry representatives, governmental customer and regulator allow to highlight the most relevant issues and provide consolidated solutions to the problem.

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