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Reform of pharmaceutical regulation in Kazakhstan

As of the end of 2017, active work on legislation change and update is going on in Kazakhstan in the area of healthcare and pharmaceutical business.

Such legislative activity is aimed at harmonizing the laws of the Republic of Kazakhstan with the laws of the Eurasian Economic Union as well as implementing the States of the Nation Address by the President of the Republic of Kazakhstan, "Third Modernization of Kazakhstan: Global Competitiveness" dated January 31, 2017 and "New Opportunities under the Fourth Industrial Revolution" dated January 10, 2018. Today the draft law On Introduction of Amendments and Addendums to Certain Legal Acts on the Issues related to Circulation of Medicines and Medical Items as well as the draft concept and the draft of the new Code of the Republic of Kazakhstan On Health of the Population and the Healthcare System are being considered.

Introduction of regulation of prices for all medicines as well as ethical norms of promotion of medicines and medical items are among the major changes under consideration in the area of pharmaceutical business.

  • Regulation of prices for all medicines

As it is known, currently prices for medicines procured within the framework of the guaranteed volume of free medical aid (GVFMA) and the system of mandatory social medical aid (SMSMA) are subject to regulation in Kazakhstan.  Prices for medicines sold at retail market are not subject to regulation, and thus they may substantially vary in practice.  It is planned to introduce regulation of prices for medicines sold in wholesale market in order to secure maximum economic availability of medicines for the population. At the basis of the new regulation lies the maximum price for a medicine above which it may not be sold.

The new regulation will, first of all, be contained in the Code of the Republic of Kazakhstan On Health of the Population and the Healthcare System. The respective amendments to this legislative act and many other legislative and subordinate acts will be made within the framework of the draft law of the Republic of Kazakhstan On Introduction of Amendments and Addendums to Certain Legal Acts on the Issues related to Circulation of Medicines and Medical Items. According to the publicly available information1, this draft law was approved by the Majilis (lower chamber) of Parliament of the Republic of Kazakhstan on November 28, 2018 and was sent to the Senate (upper chamber). The introduction of the new regulation is scheduled for the beginning of 2019.

Moreover, the representatives of the pharmaceutical industry of Kazakhstan were presented with the draft Rules of Formation of Prices of Medicines and Medical Items for discussion in September 2018. The draft envisages several elements of regulation of prices of medicines. In particular, it envisages registration of the manufacturer's price, determination of the wholesale and retail markups, determination of the maximum prices for wholesale and retail sale, and determination of the maximum prices for procurement in the framework of GVFMA and SMSMA.

With regard to foreign medicines, the draft envisages external reference pricing on the basis of Ex Works price in certain reference countries. In addition, it also provides for a possibility to include associated costs into the calculation of the manufacturer's price in certain cases.

It is important to note that this draft of subordinate act contains a number of flaws and unclear provisions. For this reason, it is expected that it will be revised and changed substantially. For example, it is possible that the new regulation (in relation to retail pricing) will not cover medical items.

  • Ethical norms of promotion and advertisement of medicines and medical items

One of the most discussed amendments concerns regulation of the time for promotion by representatives of manufacturers (distributors) of medicines and medical items. The draft of the new Code of the Republic of Kazakhstan On Health of the Population and the Healthcare System envisages that, in particular, such activity shall not be permitted in medical organizations and organizations of education in the area of healthcare during "working hours". Given the ambiguity of the proposed wording, it is expected that this limitation may be revised in the process of discussion of the aforementioned new Code of the Republic of Kazakhstan On Health of the Population and the Healthcare System.

Other amendments relating to the advertisement of medicines and medical items have also been envisaged by the draft law of the Republic of Kazakhstan On Introduction of Amendments and Addendums to Certain Legal Acts on the Issues related to Circulation of Medicines and Medical Items. For example, it is proposed to delete Subparagraph 7 concerning the prohibition of advertisement of "medicines, medical items and medical equipment without a licence for carrying out the respective type of activity" from the list of prohibitions set out in Paragraph 3 of Article 18 of the current Code of the Republic of Kazakhstan On Health of the Population and the Healthcare System. The list of prohibitions proposed by the draft of the new Code of the Republic of Kazakhstan On Health of the Population and the Healthcare System does not contain such a prohibition as well. Certain interpretation of the aforementioned amendment may suggest that foreign manufacturers of medicines and medical items would be able to conduct advertising activity in Kazakhstan regardless of the form of their presence in Kazakhstan and presence or absence of the respective license.

It is evident that the aforementioned amendments to the legislation of Kazakhstan in the area of healthcare and pharmaceutical business will significantly impact the participants of the pharmaceutical market of Kazakhstan and possibly will require reassessment of the business models currently used by them.

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