We’ve seen this sequence of events before in China, Brazil, and India, and now they may be happening in the Russian Federation.  The government issues regulatory requirements mandating pharma serialization and tracing with crazy-aggressive deadlines and with confusing, sometimes illogical requirements.  Amendments are issued, sometimes helping, sometimes making things worse.  Then just before (or just after) the deadline, when confusion reigns, someone else in the government issues calls for rationality, and the government quickly folds their requirements, rethinks and retrenches.  In China and Brazil it resulted in a full withdrawal and total redesign of their entire approach…and much more reasonable deadlines.  So far in India it has mostly just resulted in pushing the deadline out, again and again, but even there, there are signs that some are proposing a complete withdrawal and redesign.  So far in the Russian Federation, all we have is the posting of a set of very rational recommendations by a group of participants in parliamentary hearings of the State Duma Committee on Health Protection. Their hearings were apparently related to the spotty readiness of the government and industry and their report comes less than 3 months from the deadline for serialization and tracing of all drugs.

First off, if anyone needs a justification of the value of pharma serialization and tracing focused on tax fraud, the posting contains exactly what you’re looking for.  In the posting, filed on October 15, 2019, the authors indicated that in the first year of their limited, voluntary pilot, the Federal Tax Service was able to uncover offenses in the field of drug distribution totaling more than 500 million Rubles (7.9 million US dollars).  This includes expensive drugs purchased under state contracts that were stolen and re-sold under government contracts in other regions of the Russian Federation.  That’s not necessarily a health benefit, but, wow, the corruption!

The report starts with a very nice overview of all of the government decrees that led to the entire pharma serialization and tracing program known as MDLP.  Most of that is a review for those who have been following the movements closely.  However, the report provided some clarity around the shortening of the crypto-code “signature” data element from 88 to 44 characters (see “Russia Officially Cuts Length of Crypto-code in Half”).  According to this new report, that shortening only applies to “…foreign organizations holding or owning marketing authorizations that are not recognized as tax residents in the Russian Federation”.  At least that’s how I read this new document.  There is an English translation floating around the industry but I’ve found a Russian version that Google Chrome seems to translate better in spots and worse in other spots.  I can’t share the English version with you but the Russian copy can be found here.  The text below was provided by the automated translation built into Chrome, so beware.  It may not be accurate.

CLUES TO WHAT’S COMING

The new report provides clues to what is coming:

“The Ministry of Health of Russia is currently developing amendments to the […] Decree regarding the possibility of pre-payment for the labeling code and cancellation of its validity period (180 calendar days from the date of receipt).”

[…]

“The draft Order of the Ministry of Health of Russia ‘On the Content of Publicly Available Information Contained in the Monitoring System of Movement of Medicines for Medical Application, the Requirements for the Frequency of Publication and Update of the Information on the Internet’ is currently under development.”

[…]

 “Draft amendments to the decrees of the Government of the Russian Federation have been developed that are aimed at including the need to apply identification marks to medicine packages in the list of the licensing requirements and conditions.”

WARNINGS

The report also explains the costs for obtaining the crypto-codes from the government service.  The cost will be .5 Rubles per crypto-code, not including Value Added Tax (VAT).  That’s about .8 US cents ($.008).  The authors predict that the cost of the new labeling will result in an increase in the cost to produce medicines by 1-2 Rubles, not including the cost of acquiring the crypto-code.  The report expresses concern about shortages resulting from these extra costs since the prices of medicines in Russia are controlled by the government.  And the dire warnings continue:

“Given that during the [pilot], new basic principles for the functioning of a unified marking system were established, it is difficult today to formulate the final user specifications. In this case, conditions appear that fundamentally change the entire established production process.

In addition, most suppliers of T&T solutions are still not there.  According to manufacturers, depending on the supplier of the T&T solution, the company’s infrastructure and the global nature of production, the processes of processing, exchanging data with the operator’s information system, including updating the software, testing it and further validating it on production lines, take from 6 months to 1 year since the finalization of technical specifications and requirements.  Positive test results for applying crypto-marking with 44 [characters] are observed only for individual manufacturers who installed the latest equipment on the lines.  In addition, the technical documentation that is necessary for setting up equipment and production processes according to the new requirements for applying a crypto code has not yet been approved.

“Upon completion of the [pilot], the MDLP system will have to track about 6.5 billion packages, cover over 1,000 manufacturers, 2,500 wholesale organizations, 350,000 medical and pharmacy organizations.

“However, the current situation and the readiness status of the drug labeling system using crypto coding, taking into account the number of participants registered in the system (about 15%), as well as the number of drugs for which data are entered into the system (about 8% of the estimated volume of all items drugs in circulation on the territory of the Russian Federation), is of serious concern and indicates high risks for the full industrial implementation of one temporarily MDLP all stages of operation of the system for all traded drugs [as of] January 1, 2020.”

“According to information from domestic manufacturers of pharmaceuticals (228 manufacturers), 45% of 788 production lines are fully equipped, for 11% of packaging lines delivery of equipment is expected in accordance with concluded agreements, 44% of packaging lines are in the process of being equipped.

“In addition, there is no objective information about the readiness to implement the MDL system of the remaining links of the distribution chain (wholesale organizations, pharmacy and medical organizations).

“It is disturbing that the full-scale testing of the entire system for monitoring the movement of drugs has not yet been carried out taking into account the new requirements and the participation of all entities of the distribution chain (manufacturers, distributors, pharmacy chains, medical organizations) using a crypto code.

THE RATIONAL RECOMMENDATIONS

The listing of these challenges are set-up for the final rational recommendations, which is the real purpose of the document.  Here they are in their translated entirety, without interruption:

“Having listened to the reports and speeches of deputies of the State Duma, representatives of ministries and departments, legislative and executive authorities of constituent entities of the Russian Federation, associations of pharmaceutical manufacturers, manufacturers of pharmaceutical products, heads of medical organizations, participants in the parliamentary hearings recommend that the Government of the Russian Federation:

1. “In order to guarantee the sustainability of the drug supply for the population and prevent a disruption in the supply of drugs for medical use, together with the State Duma, consider the possibility of phased introduction of drug labeling after the industrial functioning of the federal state information system for monitoring the movement of drugs for medical use for drugs ‘seven high-cost nosologies’ throughout the logistics Supply chain.
2. “To envisage measures to prevent a substantial increase in the prices of medicines for medical use, their shortages, paying special attention to medicines for medical use costing less than 100 rubles.
3. “Consider reducing the fee for providing the marking code and increase the value of the maximum selling price of the manufacturer, below which there is no charge for providing marking codes.
4. “Together with the State Duma, to develop and introduce amendments to the legislation of the Russian Federation aimed at securing the right of participants in the federal state information system for monitoring the movement of drugs for medical use to receive online information on the presence of residues and the movement of drugs shipped by them for the purpose of accurate the formation of production plans, sales and regulation of drug balances, as well as other possible other changes.
5. “To speed up the adoption of regulatory legal acts of the Government of the Russian Federation aimed at including work in the federal state information system for monitoring the movement of drugs for medical use in licensing requirements and conditions of activity.
6. “By November 1, 2019, inform the State Duma of the preliminary results of the [pilot] on labeling with control (identification) marks and monitoring the circulation of certain types of drugs for medical use.”

“To deputies of the State Duma – members of the Inter-Fractional Working Group on Improving the Legislation in the Field of Medicinal Supply of Citizens and Circulation of Medicinal Products:

1. “As part of working with voters in constituencies, to check the readiness of participants in the system for monitoring the movement of drugs (manufacturers, distributors, drugstores and drugstore organizations, medical organizations) located in the respective constituent entities of the Russian Federation to introduce a federal state information system for monitoring the movement of drugs for medical use.
2. “Continue parliamentary oversight of the implementation of the federal state information system for monitoring the movement of drugs for medical use.”

“To the Ministry of Industry and Trade of the Russian Federation:

1. “Together with the Ministry of Health of the Russian Federation and with interested ministries and departments, manufacturers of medicines, wholesale drug distribution organizations, pharmacy and medical organizations, to conduct full-scale testing of the federal state information system for monitoring the movement of drugs for medical use with the participation of all entities of the distribution chain, and also monitor their readiness for implementation.
2. “To work out the issue of additional support for drug manufacturers with low profitability.”

“To the Ministry of Health of the Russian Federation:

1. “To speed up the revision of the Unified Directory-Directory of Medicinal Products and providing it to participants in the federal state information system for monitoring the movement of pharmaceuticals for medical use.
2. “Together with the Federal Service for Supervision of Healthcare, to work out the issue of amending the regulatory legal acts of the Russian Federation aimed at suppressing the secondary sales of medicines in the territory of the Russian Federation.”

“To the executive authorities of the constituent entities of the Russian Federation:

1. “Provide state and municipal pharmacy and medical organizations with a connection to the Internet information and telecommunication network.
2. “To develop measures aimed at raising the awareness of drug circulation entities on the introduction of a system for monitoring the movement of drugs for medical use.”

“To the Operator-CRPT LLC:

1. “Accelerate the provision of drug distribution entities with disposal registration devices.”

WILL THEY HAVE ANY EFFECT?

The only way these recommendations could be followed is if the January 1, 2020 deadline is set aside and the entire mandate is reconsidered.  Will they do it?  Can they do it?  Who would do it?  Vladimir?  Are you there?  Are you listening?

Dirk.