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of October 30, 2015

About competitive situation in the goods markets of medicines of the State Parties of the CIS

Having heard the Report "About competitive situation in the goods markets of medicines of the State Parties of the CIS" and proceeding from need of increase in competitiveness of domestic manufacturers, requirements satisfaction in medicines and effective use of budgetary funds, the Council of Heads of Government of the Commonwealth of Independent States solved:

1. Approve the Report "About competitive situation in the goods markets of medicines of the State Parties of the CIS" it (is applied).

2. To the governments of the State Parties of the CIS in case of market development of medicines and enhancement of its regulation to consider the conclusions and offers containing in the Report, having paid special attention on forming of necessary regulatory rules and the solution of question of interchangeability of medicines.

3. To interstate council on the antimonopoly policy together with national antimonopoly authorities and the interested ministries and departments of the State Parties of the CIS to continue work on development of the competition and efficiency of drug circulation in the pharmaceutical markets of the State Parties of the CIS.

from the Azerbaijan Republic

The signature (with special opinion)

from the Russian Federation


 from the Republic of Armenia


from the Republic of Tajikistan


from the Republic of Belarus


from Turkmenistan


from the Republic of Kazakhstan


from the Republic of Uzbekistan


from the Kyrgyz Republic


from Ukraine


from the Republic of Moldova



Interstate council on the antimonopoly policy

Executive committee of the CIS

The report on competitive situation in the goods markets of medicines of the State Parties of the CIS


The growing amounts of the pharmaceutical markets, high growth rates of prices of medicines, deficit of separate types of medicines, need of effective expenditure of budgetary funds and the social importance of the markets of medicines cause need of carrying out their careful research and identification of problems of development of the competition. Assortment and price availability of medical care to the population directly depends on extent of development of the competition in the pharmaceutical markets.

Feature of the market of medicines are low price elasticity of demand for drugs from the population, and also the fact that forming of demand for medicines is performed in many respects not by their final consumers, but doctors and druggists. Considerable impact on structure of the market is exerted also compensation of cost of certain medicines from the state and centralized public purchases of medicines.

Taking into account these circumstances within Interstate council on the antimonopoly policy the Working group on studying of questions of competitive situation in the markets of medicines of the State Parties of the CIS was formed.

The pharmaceutical goods markets have pronounced specifics, are characterized by different forms of state regulation. At them there are multinational companies which activities it is difficult for separately taken antimonopoly authority to control. Importance of carrying out joint operation in this socially important sphere is obvious.

The structure of this Report is constructed so that to reveal problems of development of the competition at all stages of drug circulation. In the Report questions of reforming of system of the state regulation directed to implementation of pro-competitive and transparent mechanisms of activities in industries are analyzed.

Implementation of the recommendations provided in the Report can become the important development mechanism of the competition in the pharmaceutical market of the State Parties of the CIS, increase in competitiveness of domestic manufacturers of medicines and requirements satisfaction of the population in available medicines.

I. The overview of foreign practice of development of the competition in the pharmaceutical market

1.1. Influence of entry into the pharmaceutical market of medicines-generics

Entry into the market of medicines-generics (the reproduced medicines) leads to essential reduction of prices of the medicines relating to one therapeutic group and, therefore, is profitable to final consumers, insurance companies and the state realizing state programs of health care.

In July, 2009 the European commission published the closing statement by results of the conducted research in the pharmaceutical market (1) during which the impact assessment of exit of medicines-generics to price situation in the corresponding markets was carried out. The research covered the period from 2000 to 2007. The analysis was performed on medicines from 75 therapeutic groups with already expired for exclusivities and being leaders of sales.

During the research it was determined that in 17 main EU Member States entry into the market of medicines-generics was performed at the prices on average 25% below, than at original medicines during their exclusive presence in the market. After two years of presence in the market of medicines-generics their price was already for 40% of low price of original medicines.

In addition, by the time of entry into the market of medicines-generics also some reduction of prices of original medicines which producers were forced to enter price competition with medicines-generics was observed. Despite it, producers of medicines-generics actively won considerable market share: in rather short terms the share of medicines-generics in structural and natural expression by the end of the first year of their presence in the market on average reached 35%, at the end of the second - 45%.

The research also showed that in 17 main EU Member States purchase costs of the medicines which are selection subject within 3 years after loss of exclusivity of original medicines constituted about 50 billion euros. At the same time economy of costs constituted 14 billion euros, or 28%, in connection with emergence of medicines-generics.

In the report of the European commission it was also noted that in all cases entry of medicines-generics into the market occurred several months later, than exclusivity loss by original medicine (on average for seven months, and for expensive medicines - for four months) that led to decrease in economic effect of exit of medicines-generics on average by 5% of the cost level corresponding to exclusive presence in the market of original medicines.

Thus, in those markets in which medicines-generics become widely available economy of health care system constitutes at least 20% in year after entry into the market of such medicines. Such economy could be even more considerable if entry into the market of medicines-generics happened immediately after exclusivity loss by original medicine.

At the same time entry into the market of new medicines can have bigger positive effect, than short-term reduction of prices for consumers. Therefore the competition from medicines-generics brings benefit to consumers only when it does not reduce for the pharmaceutical companies motivation to implementation of innovative developments and production of new medicines as consumers win not only when the existing medicine is sold at reduced prices, but also when new and more effective medicines come to the market.

1.2. Patent protection and competition

Innovations in the pharmaceutical sector are costly and unpredictable by results as require essential expenses on research and development for the purpose of the invention and testing of new medicines. The pharmaceutical companies can spend up to 10-15 years for development of new medicines until those enter the market. During this time of the company incur essential expenses in case of the high risks caused by the fact that new medicines can not pass clinical tests.

From here retail price on the medicines which successfully passed clinical tests and brought to the market, as a rule, is high as the producer shall compensate the costs. As a result, innovations in pharmaceutical industry assume patent protection more than in any other industry.

Patent protection allows the pharmaceutical companies to compensate essential costs for execution of the invention, testing of new medicines and receipt of approval of regulating body for their release for the market. However determination of optimum ratio between the level of innovations and optimum terms and scales of protection of intellectual property is extremely complex challenge, and each state solves this problem in own way.

As a rule, producer of medicine, having monopoly owing to the patent protection provided to it by the state, continues to support further high prices even after it paid back the investments with profit.

Patent protection stimulates innovations in the different ways.

First, availability of the patent for new medicine creates incentives for the pharmaceutical companies to its implementation by entry into the market with the right of exclusive use of its production during the certain period.

Secondly, patents open information on new medicines which encourages innovations, giving the chance to other pharmaceutical companies to develop close to original medicines.

So, the Congress of the USA accepted regulations on establishment of the periods of exclusiveness when the composition of medicine is in general access and cannot be patented. Besides, establishment of the periods of use of exclusive rights can be applied to motivate the consent of the owner to clinical trials for new use of already existing medicines. In other cases the period of exclusive use of the rights when the prices in which basis market prices were taken not sufficiently stimulated motivation to enhance their properties for certain national groups was applied. The key moment for establishment of the periods of exclusiveness of the rights is the compromise - restriction of the competition in exchange for development of new medicine or new use of already existing medicine.

In the EU the modes of protection of intellectual property are supported by rules about exclusive data. To get approval on medicine entry into the market, the large pharmaceutical company shall conduct researches with use of the data obtained during clinical testing, and expert opinions. Thus, in addition to patent protection the branded companies will receive exclusiveness of data on their products while access to the data necessary for receipt of approval of medicine is not provided to producers of medicines-generics during the certain period. So, according to provisions of the Directive 2004/27/EC(2) of the branded company the 10-year term of market exclusiveness is provided. At the same time the branded company can increase 10-year term owing to prolongation of terms of provision of patent protection if acquired further permission to use of medicine in therapeutic appointment that has "considerable clinical advantage" or if the branded company switches from prescription application on nonprescription, or proves that medicine has "accurately certain appointment".

Besides, the branded companies can submit the application for the certificate of auxiliary protection. The purpose of receipt of this certificate - to compensate to patentees time spent on receipt of approval of the regulator before their products are placed in the market. The application can be submitted to patent authorities of number of EU member states to increase effective period of the patent for medical products.

At the same time rules of patent protection can be also used for reasonable stimulation of entry of medicines-generics into the market.

Thus, the patent protection guaranteed by the state, on the one hand, stimulates development and promotion on the market of new innovative medicines that is equitable to consumer interests, providing modern medicines in their order. On the other hand, patent protection forces to make the branded companies public the invention, giving opportunity to the third parties after the termination of term of patent protection to use their invention during creation of medicines-generics or other new medicines.

1.3. The patent strategy interfering entry into the market of medicines-generics

The pharmaceutical companies can lose a lot of things from entry of medicines-generics into the market. Their market shares and the income considerably fall. Therefore such companies have quite strong motives not to allow entry of medicines-generics into the market.

There are both competitive, and anti-competitive methods of how the branded companies in such situation can be effective. Within competitive behavior actions of the branded companies for reduction of price or improvement of medicine can be considered, leaving thereby producer of the medicine-generic entering the market with medicine of last generation.

Types of anti-competitive behavior are much more various.

In research which was conducted by the European commission in the pharmaceutical market different strategy to which the branded companies which received the name "patent strategy" for hindrance to entry into the market of medicines-generics resort in these cases were revealed.

It is possible to carry to the patent strategy used by the branded companies: strategy of patenting; patent disputes; patent agreements (strategy of the conclusion); strategy of influence on regulatory bodies; the strategy prolonging medicine life cycle; cumulative strategy.

Strategy of patenting

During the research two main strategy of the branded companies for the available patents for medicines were revealed:

1) patent clusterization - receipt of numerous patents for the same medicine for the purpose of non-admission of entry into the market of medicines-generics.

During the research it was revealed that some drugs are protected by more than 100 specific patrimonial patents concerning which receipt 1300 applications on all EU member states were submitted. Also during the research it was found out that total number of the granted patents and statements concerning receipt of the patent is 3 times more, than amount of medicines concerning which these patents are effective (237 issued patents / the submitted applications concerning 98 medicines);

2) receipt of the selected patent is caused by the procedure of filing of application about receipt of the selected patent.

As it is provided by the patent law, effective period of voluntarily selected patent cannot be more effective period of the main patent and cannot prolong protection term. However submission of such statement provides the company applicant extra time as consideration of the request according to the selected patent can happen when the main request was withdrawn or on it was refused.

Patent disputes

The research showed that different disputes can also be effective remedy of fight against producer company of medicine-generic, especially if it concerns the small companies.

In many cases the branded companies began trials not to allow medicine-generic entry into the market on purpose. In total in EU member states for the period 2000-2007 698 different disputes over patents were fixed, from them 223 were brought to court and on 149 of which the court passed the final decision. On the remained 326 disputes consideration of the case was or is postponed, or decision still is expected.

In spite of the fact that the branded companies acted as the initiator of the majority of disputes, producers of medicines-generics won more than a half of 149 considered cases. Primary patents were the cornerstone of pre-judicial disputes, subject of lawsuits were secondary patents.

In total lawsuits according to patents concerning 68 medicines (the companies provided to the European commission for research data) cost the parties 420 million euros. According to the European commission, the considerable part of these expenses would be possible to be cut down, having created single all-European system of consideration of disputes over patents, including the unified procedure for consideration of the these cases. It would help to avoid pronouncement of the contradicting decisions and dual prosecution of the same case in several EU member states.

Patent agreements

During the research it was revealed that from 2000 till June, 2008 more than 200 different agreements on patents between the branded companies and producers of medicines-generics were signed. These agreements were signed concerning 49 medicines from which 31 medicines (i.e. 63% of total amount) were among leaders of sales, and the term of exclusivity of these medicines expired during 2000-2007. The absolute majority of these agreements was signed during legal procedures.

In half of agreements the provisions significantly limiting possibility of entry into the market of medicines-generics contained. At the same time such agreements contained specifying on material payments to producer company of medicine-generic (either direct payment, or different distributor and license agreements). Instruction on direct payment from the branded company to producer of medicine-generic contained more than in 20 agreements, at the same time the total amount of payments under these agreements constituted 200 million euros.

Strategy of influence on regulatory bodies

The branded companies as showed research, in addition to high activity in the patent sphere vigorously interfered with activities of national regulatory authorities both at registration stage, and at stages of price fixation and inclusion of medicines-generics in programs for budget insurance financing of costs for medicines. At the same time the branded companies adduced the following arguments: low performance of the reproduced medicines; inadequate quality of the reproduced medicines; removal on the market of the reproduced medicine violates their patent laws.

In spite of the fact that in most cases the final decisions were made for benefit of producer companies of medicines-generics, it allowed to detain removal on the market of the reproduced medicines on average for four months.

The strategy prolonging cycle of life of drugs of the second generation

Trying to extend monopoly, the branded companies used also the strategy of switching of demand for the medicines of the second generation. During the research it was revealed that concerning 40% of samples of the medicines which are selected for profound studying which term of exclusivity expired during 2000-2007 the branded companies started the medicines of the second generation (reproduced from the first). The release purpose on the market of medicine of the second generation was not to allow on this market medicine-generic from medicine of the first generation. Those branded companies managed to switch part of potential demand for drugs of the second generation to damage to medicine-generic.

Cumulative strategy

Many branded companies often resorted to use at the same time of several strategy specified earlier. During the research it became clear that the total quantity of the strategy chosen by the branded companies is closely connected with market popularity of medicine. The most part of the listed above strategy was used concerning the medicines which are leaders of sales.

Use of cumulative effect in case of application of several strategy increases probability of delay of release on the market of medicines-generics that eventually causes damage not only to producer companies of medicines-generics, but also all health care system and the certain consumer in general.

Not all specified strategy equally influence competitive situation in the pharmaceutical market, but all from them reduce the level of competitive struggle.

For exception of the numerous patent disputes which are at the same time considered in different EU member states on the same case and acceptance on them mutually exclusive decisions the European commission offered introduction of the Single patent of the EU, and also the single unified system of legal procedure on patent disputes in the EU that will allow to reduce possibility of use by the unfair branded companies of patent disputes as the tool for blocking of entry into the market of medicines-generics.

Besides, the European commission spoke in favor for initiatives of establishment of more high requirements imposed for receipt of the patent that can also become obstacle for the companies concerning receipt of numerous patents for the same medicine, and also on acceleration of procedures of receipt of the patent.

The European commission also strongly recommended EU member states to fix the rule at the national level that no petitions and arguments of the third parties shall interfere with entry into the market of medicines-generics.

Besides, it was offered to EU member states to accelerate significantly procedure for approval of medicines-generics and their release on the market. At the same time the European commission considers that medicines-generics shall pass automatically stages of price fixation and their inclusion in the program for budget insurance financing of costs for medicines if their originals are already present at the market and there passed these stages.

The European commission recommended to relevant organs to take measures in the territories of EU member states if distribution of false information about medicines-generics takes place.

The question connected with patent agreements between the branded companies and producers of medicines-generics in case of settlement of the disputable situations providing material payments to producer companies ("payment for transfer") is more difficult. According to patent agreements in case of settlement of patent disputes the branded company undertakes obligations to pay the producer of medicine-generic which is potentially entering the market certain amount. In exchange the producer company of medicine-generic shall transfer conclusion it to the market for certain term.

Such agreements are the most often applied strategy of patenting in the USA and the EU and cause concern in competitive departments. Similar agreements should be considered as anti-competitive, and in the future they shall be prohibited.

The European commission during the conducted researches revealed several methods of restriction of entry into the market of the medicines-generics used in the European market.

The most dangerous from the point of view of creation of similar barriers and simultaneous restriction of the competition the European commission recognized the patent agreements containing not only the certain restrictions for entry of medicines-generics into the market but also which are at the same time providing transfer of the certain advantages got by the branded companies from patent protection, to producer company of such medicines.

Thus, the different patent strategy used by the branded companies can serve as the instrument of control of entry into the market of medicines-generics, limiting to that their competition to original medicines.

1.4. Influence of state regulation of the prices of the competition in the pharmaceutical market

The state policy including price regulation and directed to reduction of prices of prescription medicines exerts considerable impact on competition level in the corresponding segment of the pharmaceutical market.

The rules limiting increase in prices, established by the pharmaceutical companies, can lower threshold price values within which producer companies of medicines-generics can compete. Regulation which affects the number of the producers of medicines-generics leaving the market can also be the important factor significantly influencing situation with the prices from entry into the market of medicines-generics.

Foreign specialists note that in case of price fixation on pharmaceutical medicines in the countries with the different regulatory modes there are different approaches.

For example, in the USA price fixation on prescription drugs is practically not regulated. For Italy, France and Japan, on the contrary, tough price regulation is characteristic. In Great Britain, Germany and Canada intermediate options take place.

It was determined that in the USA in the market of production of medicines-generics the high level of the competition and the income for producers of medicines-generics was observed were higher, than in the countries with more essential level of price regulation.

The markets of Great Britain, Germany and the USA also showed considerable price sensitivity to the competition from medicines-generics.

The applied schemes of tough price regulation in Japan, France and Italy reduced the price level and effects from entrance by the market of medicines-generics. In cases with France and Italy producers of medicines-generics usually exposed goods at the prices considerably below on what they could offer them in other large pharmaceutical markets, limiting to that effects of entry into the market of additional competitors.

Regulation of activities of retail drugstores also influenced competitive situation in the market of medicines-generics in France and Italy. In both countries concerning drugstores the regulated distributed price threshold based on the product price is established. Besides, the requirement to the prices and the dosed medicines realized in single packaging reduced the potential for discounts for implementable amount.

One of the conclusions drawn following the results of research is that the system of price fixation based on so-called "posted prices" (as, for example, in Germany) can create powerful motivation to producer companies of medicines-generics to compete and reduce the prices of medicines with certain structures. In the specified system products are classified on the groups based on such criteria as chemical composition, method of action and medical effect. Each commodity group receives "posted price" on the basis of the price of the producer of cheaper products in group. "Posted price" determines the level of the maximum cost recovery on all products in group. Later producers can raise the price above "posted price", savings can be divided between the buyer and the extending druggist, regardless of system approach. It creates opportunity to producers of medicines-generics to occupy share of the branded producer in the market of original medicine due to reduction of price.

This conclusion is very important. By example of Germany other countries (Denmark, Norway and the Netherlands) also established "posted prices" that led to growth of level of the competition in the market of medicines-generics.

In France and Great Britain financial motivations both for therapists, and for druggists are important component of the strategy of development of the market of medicines-generics. In France till 1999 druggists got paid on the basis of threshold values of the price of medicines established by the state, limiting thus market development for cheaper original medicines. Since 1999 the French druggists acquired the right to use such threshold value for medicines-generics as though they sold medicine of the branded companies.

In Great Britain druggists get paid in the form of the fixed fee for the realized medicine plus the price of medicine according to the price list. Thus, if they could sell medicine at the price below, than according to the price list, then could constrain the highest threshold price value.


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