Considerable Sanctions-Related Changes in Regulations and Intellectual Property in the Pharmaceutical Sphere

11 March 2022
Nikita Ayrapetov
Boris Malakhov

On 8 March 2022, Federal Law No. 46 “On Amending Certain Legislative Acts of the Russian Federation” entered into full force and effect, suggesting considerable changes in regulations and intellectual property in the pharmaceutical sphere.

Regulatory Changes

The Government intends these amendments to prevent a deficit of medicines imported from the so-called “unfriendly” states,1 as well as to keep track of the economic consequences of sanctions.

In particular, medicines and medical products, in case of shortage or a risk of shortage will be registered in accordance with the procedure set forth by Government Resolutions No. 441 and No. 430, respectively (Federal Law “On Circulation of Medicines”, Art. 13(8); Federal Law “On the Fundamental Principles of the Protection of Health of the Citizens in the Russian Federation”, Art. 38(5.1)). In terms of practice, this opens the door for expedited registration of analog drugs and medical products that the market may lose due to sanctions.

Furthermore, changes in currency exchange rates will now be taken into account in setting caps for prices for vital and essential medicines (Federal Law “On Circulation of Medicines”, Art. 61(9)).

The amendments specifically provide for the Government’s right to introduce restrictions on export from the Russian Federation of medical products previously imported from the territories of “unfriendly” states (Federal Law “On the Fundamental Principles of the Protection of Health of the Citizens in the Russian Federation, Art. 38(24)). Such medical devices restrcited on export has already been enlisted in Government Decree No. 311 dated 9 March 2022.

Significant amendments have also been made to the procedure for state procurement.

In particular, the amendments have increased the maximum volumes that can be procured from a sole supplier as regards medicinal drugs, medical consumables and products of Russian and foreign manufacturers other than those that belong to “unfriendly” states, with the annual cap set at no more than RUB 50,000,000 for medicinal drugs or medical consumables and no more than RUB 250,000,000 for medical products (Federal Law “On the Contract System in the Sphere of Procurement of Goods, Works, and Services for Federal and Municipal Needs”, Art. 93(1)(5.1)).

From now on, the parties may agree to amend the material terms and conditions of contracts made before 1 January 2023, if performance of such a contract has been frustrated by circumstances beyond their control (Federal Law “On the Contract System in the Sphere of Procurement of Goods, Works, and Services for Federal and Municipal Needs”, Art. 112(65.1)). Thus, in case of changes in the terms of delivery due to sanctions, disruptions in flights, etc., the supplier is expected to be able to have the terms of performance of a state contract modified.

Intellectual Property

The law also empowers the Government to enact, in 2022, a list of goods that will be exempt from certain provisions of the Russian Civil Code on the protection of exclusive rights to intellectual property (Law, Art. 18(1)(3)(13)).

This effectively means suspension of protection for patents, trademarks and other IP with respect to certain goods. Such a resolution is anticipated to affect medicinal drugs, medical products, and consumables.

Although such a measure may be excessive and may lead to grave adverse consequences (in particular, a considerable increase in the share of counterfeit and low quality goods), it is being considered as one of the tools for import phaseout.

It should be noted that last year, a new version of Art. 1360 of the Russian Civil Code was adopted that significantly expanded the scope of compulsory licensing for the “protection of life and health of individuals” (link). Moreover, early last year, the first-ever compulsory license for Remdesivir was issued to a Russian generic drug company (link), and on 6 March 2022, the second compulsory license was announced for the same drug for another Russian company (link).

This shows that the practice of compulsory licensing is rapidly building momentum.

It is clear that Government Resolution No. 299 will serve as an additional stimulus, as it excludes payment of royalties under compulsory licenses to patentholders from “unfriendly” states. According to Government Resolution No. 1767, royalties for patentholders from “unfriendly” states equal the same meagre 0.5% of the actual proceeds from the sales of the generic.

A separate Government Resolution on the compulsory use of inventions for export purposes is expected to be adopted very soon. As we indicated earlier (link), such a compulsory license may be required to manufacture generics in the Russian territory for the purposes of exporting the same without the patentholder’s consent, but subject to a notification and payment of a proportionate compensation (Russian Civil Code, Art. 1360.1).

We expect that compensation for this type of compulsory licenses will be similarly set at a minimum or entirely excluded, in particular, with respect to “unfriendly” states.

1]These countries are: Albania, Andorra, Australia, Canada, EU member states, Iceland, Japan, Lichtenstein, Micronesia, Monaco, Montenegro, New Zealand, North Macedonia, Norway, San Marino, Singapore, South Korea, Switzerland, Taiwan (China), Ukraine, United Kingdom, United States of America.