Moscow law office "Kovalev Tugushi & partners"

NEW RULES IN THE AREA OF CIRCULATION OF MEDICAL PRODUCTS AND MEDICAL DEVICES

  1. Custom duties exemption
  2. Template agreement for provision of identification codes
  3. Maximum prices for medical products during pandemic
  4. Liability for unlawful circulation of medical drugs and food supplements

The legislator prepared a number of documents regulating protection of public health that are primarily aimed at preventing the spread of coronavirus disease (COVID-2019). The spread of infection, alongside with other factors, has given rise to changes in legislation on circulation of medical products and devices.
Medical goods imported from abroad for the purposes of warning and preventing the spread of coronavirus disease shall not be subject to import customs duties. The resolution of the Council of the Eurasian Economic Commission № 21[1] amended the resolution of the Customs Union Commission № 130[2] supplementing the list of goods exempt from customs duty. The measure is applicable within the period from March 16, 2020 to September 30, 2020 to the following goods: goods used for manufacture of desinfectants, vaccines, diagnostic test kits, tubes, hoses and hose fittings, boxes for transporting patients, syringes, catheters and other instruments, equipment used in medical practice and etc. The abovementioned measures are effective on the territory of the Customs Union and are a reasonable and expected response to the possible increased demand for such goods.
The Industry and Trade Ministry approved a standard-form contract for rendering services on provision of marking codes to the subjects of circulation of medical products (non-residents) (hereinafter referred to as “the Contract”). The Executive Order of the Industry and Trade Ministry № 338 dated February 4, 2020 “On approving a standard form contract for rendering services on provision of marking codes to subjects of circulation of medical products (non-residents)”[3] was published in accordance with Regulation of the Government № 577[4]. Under this Regulation the procedure for charging duties for provision of marking codes is specified in the contract between the operator of medical drug traffic monitoring system (Operator) and subject of circulation of medical products (a foreign company), a standard form is approved by the Industry and Trade Ministry. The amount of payment under the Contract is 50 kopecks per 1 marking code (without VAT). A subject of circulation of medical products pays for services on provision of marking codes by making advance payments to the Operator’s bank account before including information on marking the package of medical product to the medical drug traffic monitoring system. The amount and regularity of advance payments is defined by the subject of circulation of medical products depending on the number of marking codes required for continuous manufacturing of medical products. Most provisions of the Contract provided in the Executive Order № 338 are in line with the provisions of the contract in the previously published Executive Order of the Industry and Trade ministry № 3381[5]. The novelties of the Contract approved by the Executive Order № 338 imply provisions on the order of activities of the parties who signed an agreement on electronic communication. In such case the Contract and other documents (applications, notification, etc.) endorsed with electronic signature shall be deemed equivalent to documents drawn up in writing, sealed and signed by handwritten signature. The subject of circulation of medical products who signed the document with electronic signature authenticates in the system of medical drugs monitoring using login/password set by the subject and the onetime password generated by the system of medical drugs monitoring. Therefore, the new standard form approved for non-residents regulates electronic communication between the parties of the Contract.
Russian Government is entitled to set price limits for medical products under emergency conditions. The new Federal Law № 67-FZ dated March, 26 “On introducing amendments to article 60 of the Federal Law “On circulation of medical products” and article 38 of the Federal Law “On fundamentals of public health protection in the Russian Federation”[6] came into force on March 26, 2020. Under this Federal law Russian Government is entitled to set price limits for certain medical products in the following cases:
1) emergency situation;
2) threat of spread of the disease dangerous for the public;
3) if Russian Government indicated price growth in the constituent entities of Russia by more than 30 percent within 30 days after the adoption of resolution on monitoring retail prices for medical drugs that are not included in the list of vital and essential drugs[7].
Russian Government compiles a list of medical drugs that are subject to price control. The realization of drugs in violation of the price limits is prohibited within 90 days from compilation of such list. The Federal Law № 99-FZ dated April 1, 2020 “On the introduction of changes to the Code of administrative offences of the Russian Federation”[8] provides for the following system of fines for the violation of the limits set by the Russian Government:
· in the amount of 250 to 500 thousand rubles for officials;
· for persons carrying out entrepreneur activity without formation of a legal entity – in the amount exceeding twice the income received from realization of medical drugs due to unlawful overpricing during the whole period of overpricing but in any event not more than 1 year;
· for legal entities - in the amount exceeding twice the income received from realization of medical drugs due to unlawful overpricing during the whole period of overpricing but in any event not more than 1 year.
The Russian Government is entitled to limit manufacturer’s prices as well as wholesale and retail prices by preparing a special list of medical drugs subject to such measures[9]. Such power is extremely important since regulation of solely retail prices would serve the consumer’s interests, meanwhile manufacturers and wholesale traders would be able to establish higher prices causing damages to retail traders.
Circulation of medical masks, gloves, protective clothing and respirators restricted. Limitation of the scope of persons entitled to sell certain medical devices (filtering respirators, medical masks and gloves, gauze, protective clothing) was one of measures undertaken by the Government as a response to the increased demand for such devices. Regulation of the Russian Government № 431[10] stipulated that it is only the federal operator-coordinator (JSC “Corporation Rostekh”) and regional operators (organizations licensed to the wholesale of medical drugs for human goods and supplying medical drugs in accordance with Regulation of the Government № 1416[11]) that can sell such medical devices on wholesale basis. Constituent entities of the Russian Federation shall provide information on the supplies of the relevant medical devices on their territories as well as information on the need for such devices. Organizations that obtained a license for retail trade of medical drugs for human use are the only ones that can sell such goods on the retail market. The second measure taken by the Russian Government was the regulation of the prices for medical devices: under the Regulation № 431 the price premium to the manufacturer’s actual prices shall not exceed 10 percent in the whole product supply chain whereas the retail price premium shall not exceed 10 kopecks for one item of goods. Restrictions provided by the Regulation of the Russian Government № 431 were intended to eliminate speculative offers and satisfy the real citizens’ needs for the medical devices. The legislator obviously found the measures too harsh and suspends their effect from April 21, 2020[12].
Stricter liability imposed for illicit circulation of medical products, devices and food supplements on the Internet and mass media. Federal Law № 89-FZ dated April 1, 2020 “On introduction of changes to the Code of administrative offences of the Russian Federation”[13] supplemented article 6.33 of the Code of administrative offences providing for a specific liability for the sale of medical products, devices or food supplements with the use of mass media, information and telecommunication networks in the amount of:
· 75 to 200 thousand rubles for citizens;
· 150 to 600 thousand rubles for officials;
· 150 to 600 thousand rubles for sole proprietors;
· 2 to 6 million rubles fine for legal entities or administrative suspension of activity for a term of up to 90 days.
The Federal Law № 95-FZ dated April 1, 2020 “On the introduction of changes to article 238.1 of the Criminal Code of the Russian Federation”[14] increased the penalties for illicit manufacture, sale or importation of medical products, devices, food supplements in the Russian Federation with the use of mass media and information and telecommunication networks. The liability amounts to 750 thousand to 2.5 million rubles, compulsory works for a term of 4 to 5 years. Let us notice that criminal liability is imposed if the value of illicitly manufactured, imported or sold medical products, devices or food supplements exceeds 100 thousand rubles. The legislator definitely paid its attention to illegal circulation of medical products and devices on the Internet due to the wide spread of e-commerce.
The following measures have been taken by April 20, 2020:
1. Import customs duties will not be imposed on the goods from the list approved by the Resolution of the Council of Eurasian Economic Commission № 21 that are/were imported in Russia from March 16, 2020 to September 30, 2020;
2. a standard from (template) contract for rendering services on provision of marking codes to subjects of circulation of medical products (non-residents) is approved;
3. the Russian Government is entitled to set price limits for medical products from the approved list, the law providing for liability for the violation of such limits came into force on April 4, 2020;
4. a ban on retail and wholesale trade in certain medical devices (masks, gloves, etc.) was introduced on April 13, 2020 and will be suspended after April 21, 2020;
5. stricter liability will be imposed for illicit sale of medical products, devices and food supplements.
The novelties mentioned herein strengthen the regulation of circulation of medical products in the Russian Federation and serve the interests of citizens, inter alia, in view of the increased demand for medical products and devices. Nevertheless, all legislative measures are introduced taking into account the interests of pharmaceutical manufacturers and traders.

Ksenia Stepanischeva, Counsel
Ekaterina Pochtareva, Junior associate

[1] Resolution of the Council of the Eurasian Economic Commission № 21 dated March 16, 2020 “On the introduction of changes to certain resolutions of the Customs Union Commission and adoption of the list of goods imported into the customs territory of the Eurasian economic union for the implementation of measures aimed at prevention of spread of coronavirus infection (2019-NCOV) by the member-states of the Eurasian Economic Union”
[2] Resolution of the Commission of the Customs Union № 130 dated November, 27 “On uniform customs and tariff regulation of the Eurasian Economic Union”
[3] http://publication.pravo.gov.ru/Document/View/0001202003250003
[4] Regulation of the Government of the Russian Federation № 577 dated May 5, 2019 “On the approval of the amount to be paid for rendering services on the provision of marking codes required for forming identification means and monitoring circulation of goods subject to mandatory marking with identification means and the procedure for collection of such payment”
[5] The Executive Order of the Industry and Trade Ministry № 338 dated February 4, 2020 “On approving a standard form contract for rendering services on provision of marking codes to subjects of circulation of medical products”
[6] http://publication.pravo.gov.ru/Document/View/0001202003260030?index=1&rangeSize=1
[7] Decree of the Government of the Russian Federation №2406-р dated November 12, 2019
[8] http://publication.pravo.gov.ru/Document/View/0001202004010076
[9] Para. 2 art. 1 Law № 67
[10] Regulation of the Government of the Russian Federation № 431 dated April 3, 2020 “On establishing special features of circulation of medical devices and limitations on wholesale and retail trade of medical devices and the list of such devices”
[11] http://publication.pravo.gov.ru/Document/View/0001201811270022
[12]http://publication.pravo.gov.ru/Document/View/0001202004140001
[13] http://publication.pravo.gov.ru/Document/View/0001202004010051?index=3&rangeSize=1
[14] https://rg.ru/2020/04/06/kodeks-dok.html
Ksenia Stepanischeva Ekaterina Pochtareva Analytics