The Association of European Businesses together with the Russian Federal Antitrust Service (FAS) has developed and on April 19, 2016 officially presented the Code of Good Practice in the Pharmaceutical Industry (the “Code”).

The Code is the first document on the pharma market that establishes general rules for interaction among manufacturers and other market participants (buyers, distributors, state clients, etc.).

The main reason for the Code being adopted is that Russian law and good practice codes of the pharma industry have no general provisions which could be instrumental to creation of unified transparent rules for interaction among companies working on the pharma market.

According to the Code, its main purpose is self-regulation of the pharma business in Russia, as well as creation of fair, open and bona fide rules for competitive interaction in the pharma industry. Furthermore, another task of the Code is to help improve the health of patients through the development and delivery to the pharmaceutical market of modern, safe and effective medicines.

Becoming a party to the Code allows pharma companies to not only increase the level of their businesses’ compliance with the law, but also to decrease the risks of their business models and relations with other market participants being recognized as anticompetitive. A party to the Code may be any legal entity that:

1)    is part of a group of entities of a drug manufacturer that has the relevant permit for such activity and/or puts products into circulation in the Russian Federation; or

2)    imports and/or puts drugs into circulation in the Russian Federation under a contract with a person belonging to a product manufacturer’s group of entities.

Organizations become parties to the Code by signing a declaration of membership of the Code.

At the same time, becoming a party to the Code means that the company must perform a number of actions. In particular, a company needs to:

• Develop a document regulating the procedure for selling drugs on the Russian pharma market. Such documents are key instruments for pharma companies, regulating their relations with business partners (as regards establishing bonuses, procedure for determining distributors etc.);

• Ensure implementation of effective control systems as to compliance with the law, including anticorruption law and competition law;

• Monitor the safety of drugs and employ best practices in pharmacovigilance;

• Take action aimed at preventing fraud and corrupt practices in cooperation with other industry participants, government officials, administrators, and health professionals. Such action can be taken through the adoption of internal codes of conduct for employees, staff training and implementing control systems and disciplinary sanctions aimed at the detection and suppression of violations.

The Russian FAS believes that adoption of the Code of Good Practice in the Pharmaceutical Industry should lead to greater transparency in the business of pharma companies and to the application of approaches that are the same for all players and, as a result, to a decrease in the number of antitrust cases initiated on this goods market.

It should be noted that adoption of such a document is not something completely new for the Russian antitrust authority. Since 2012 the Code of Conduct of Auto Manufacturers and Distributors has been in effect, which was also developed by the Association of European Businesses together with the Russian Federal Antitrust Service. The monitoring of how it is adopted and implemented speaks for the fact that the number of violations on this goods market has declined. The Russian FAS has stated that this document has allowed making the market more open for its participants.

It is likely that the activity of pharmaceutical companies that become parties to the Code will likewise be analyzed by the antitrust authority as to compliance with its provisions.

Irina Akimova  Of Counsel,  Head of Antitrust Practice                              Moscow   Tel.: +7 (495) 970 1090

Dmitry Gavrilenko   Associate                   Moscow     Tel.: +7 (495) 970 1090

Additional notes

Should any questions arise in connection with the above or if you need any additional materials, please contact Irina Akimova or Dmitry Gavrilenko, Moscow Office of Capital Legal Services.

This Information letter keeps the clients of Capital Legal Services and other interested parties abreast of information that may, to any extent, affect their activity or cater to their particular interests. The opinions and commentaries expressed in this information letter shall not be deemed as legal opinions and do not cancel the need to obtain legal advice or legal opinion on separate issues.