Multinationals Feel the Pain as RUS Gets Real on IRP for EDL

By all appearances, RUS has remembered its substantial international reference pricing (IRP) rule that, until now, was largely ‘bark’, and no ‘bite’.  The set of countries was renewed by the 979 order in October 2015, but authorities in RUS have decided to ramp up its use in order to lower the price of at least 12 EDL (жизненно необходимых и важнейших лекарственных препаратов, or EDL, Vital and Essential Drugs List) therapies. Beyond the sudden reanimation of IRP as a tool in RUS for lowering prices of marketed products, the events are jarring for two other reasons.

First, the unsurprising: the therapies in question all are used for diseases that are designated for coverage under the country’s VZN programme, (often referred to as the ‘Seven Nosologies’ programme) – including such high priority therapeutic areas as multiple sclerosis, CML, and Gaucher’s disease.   Given the national coverage of the VZN, and the high-value / high-priced nature of these largely specialty therapeutics, the wielding of IRP to lower costs here was predictable.

Somewhat surprisingly the directive came straight from the Kremlin in the form of a presidential order on July 27, 2016 (Пр-1452, п.3) to the Federal Antimonopoly Service.  Under threat of cancelling the manufacturers’ products’ EDL price registration if current registered price did not become aligned with that found in other countries, price needed to be reduced quickly in order to maintain their ability to participate in tenders.  Such a cancellation would be devastating to commercial viability; in order to participate in public tenders, the product in question must have a registered price.  By cancelling EDL price registration, the product would remain on the EDL, but commercial sales would be nearly impossible in RUS until the updated price is registered due to the reliance of procurement via tenders throughout the country.

Beyond the source of the demands, the method of illustrating the need for price reduction was also surprising.  In September 2016, the Федеральная антимонопольная служба (ФАС, or FAS, Federal Antimonopoly Service) published a report comparing pricing (excluding VAT) for 24 EDL molecules (78 different products purchased by MoH, when packaging and manufacturers are taken into account) between RUS and 42 other countries.  This was surprising not only because IRP was at last being used as a tool to decrease prices, but because the number of countries referenced was twice that of the 21 actually stated by the government.  Countries included the previously stated 21 countries, as well as the source countries for the products in question – raising the total to 42.

If this alone did not raise an eyebrow, the means of collecting the pricing data surely will.  While the report clearly states that the first references were public list pricing databases and trade missions, others were communicated directly by the referenced countries’ anti-trust authorities, somewhat informally.  At least two significant sources, (CHN and IND) were attained during trade missions.  In these instances, pricing deviation relative to other countries was so significant that even the FAS is being required to double-check their reliability.  Trade missions and anti-monopoly authorities are non-traditional sources for data to support IRP, and represents a unique approach to the data collection effort.

Nevertheless, the impact has been effected – a list of ten molecules, involving 48 different products (again, accounting for packaging and manufacturers), yielded an average of at least 39% premium in RUS relative to ‘other countries’.  The set of manufacturers included several multinational companies, some of which included:

  • NOVARTIS (including SANDOZ)
  • ROCHE
  • JNJ
  • ASTELLAS
  • CELGENE
  • TEVA

 

The ten molecules included:

  • Lenalidomide
  • Tacrolimus
  • Bortezomib
  • Imatinib
  • Rituximab
  • Mycophenolic acid
  • Human von Willebrand factor
  • Dornase alpha
  • Cyclosporine
  • Fludarabine

 

As a result, manufacturers of 12 of these 48 products lowered pricing.  NOVARTIS decreased pricing of products from their SANDOZ generics unit by up to 54%.  They also reduced price of their tacrolimus brand by 29-46% (depending on dosing / packaging) and mycophenolic acid by 10%.  ASTELLAS reduced their tacrolimus price by 12%.  The reasons for pricing of other molecules being higher than in ‘other countries’ is still being evaluated, as announced by FAS – the reductions are not likely to be over.

By maintaining their EDL price designation, these manufacturers have ensured their inclusion in future tenders – for now.  The unusual source of the pricing research, as well as the methods employed in sourcing the price points, combine to spell a renewed focus by the government to control pharmaceutical expenditure by creating a volatile environment for multinational companies.  This is unlikely to be the final time we see such methods employed, and they may spread beyond the VZN programme to help rein in costs, and create a challenging environment for multinationals doing business in RUS.

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