December 9, 2020 saw a hybrid conference, with attendees both online and offline, which was dedicated to the market for public procurement of medicines.
The COVID-19 pandemic has significantly affected the pharmaceutical market as well as the public procurement segment. The conference organizers brought together players in the public procurement market: pharmaceuticals manufacturers and experts fr om the regulating authorities openly discussed the ways to ensure timely supplies of modern drugs to general public as well as the outlook for the public procurement system, the future market for orphan drugs, the pros and cons of long-term contracts, innovative models of medicine provision, import substitution, and trends for its regulation in the procurement, lessons learned fr om the COVID-19 pandemic in the public procurement system, etc.
The event was attended by the specialists from the Ministry of Health, Ministry of Industry and Trade, Federal Antimonopoly Service (FAS), the newly created Federal center for planning of general medical care as well as representatives of professional associations, pharmaceuticals manufacturers, heads of medical institutions, research centres and universities.
CEO of NANOLEK Maxim Stetsyuk participated in the session “Long-term contracts - recommendations to government customers, in which cases would that be appropriate?”
The order of the President of the Russian Federation (issued in 2014) on development and implementation of long-term contracts covered, among other things, the drug market. This topic has been actively and for a long time discussed in the pharmaceutical community, and there is even a common practice of concluding contracts for 2 and 3 years. In May 2019, the Ministry of Health summed up the results of the first auction for the purchase of vaccines with a delivery period of more than 1 year. The Ministry purchased a pentavalent vaccine for 8.3 billion rubles under a two-year contract with Farmimex. The Russian Ministry of Health also announced its plans to conclude three-year contracts for vaccines: In 2020, the Ministry signed a three-year contract for the delivery of Lenalidomide under the 14 VZN (acronym for Seven Nosologies) program. However, cases wh ere such contracts are concluded are still isolated.
For example, a 2-year contract under which NANOLEK has delivered vaccines from 2019 proved to be effective: cyclical production, advance planning, no shortage in the regions, execution of the contract amidst the pandemic according to the approved deadlines. Experts of NANOLEK believe that the practice of concluding government contracts for longer periods (3, 5, 7 years) is extremely important.
Olga Konstantinova, Deputy Head of the Department of Drug Supply and Regulation of Circulation of Medical Devices at the Ministry of Health of the Russian Federation: Nevertheless, there is a “but” and this applies to all long-term contracts. This is an issue related to requirements planning. This is probably the most difficult situation we are facing today, wh ere we can’t always plan correctly. An expensive drug may not always be in demand. There is a danger that these drugs may be written off due to absence of patients. This is why the experts from the Ministry of Health believe that long-term contracts are a convenient option in general. However, there are still risks that needs could be created in a wrong way, and this could then cause the medicines to be written off.”
Olga Konstantinova added that long-term contacts could bring budget savings of 15-25% and cited the example of one of the large contracts on the supply of drugs concluded by the Ministry of Health for a period of three years: “We managed to agree on a price reduction of 30% when signing a three-year contract. With the reduction of 30% we save 1.7 billion rubles. I don’t think it will be a benchmark for all contracts — by 30%. But reduction of 15 to 25% might well be the case.”
Maxim Stetsyuk expressed the opinion that it is extremely important for any manufacturer to understand in advance which vaccines, in particular, and which technologies will be in demand for the Ministry of Health as a customer, after a certain period of time. This is necessary to ensure uninterrupted production and supplies of medicines.
“We have been in talks about the issue of long-term contracts with all participants in the process for a long time. There are two basic options here. The first one is mid-term contracts for 2-3 years, and I would say that we have gained positive experience in terms of accurate planning. As far as long-term investment contracts are concerned, it makes sense to talk about 7-year horizon or even longer periods. In this case, the manufacturer realizes in which project he is investing money and resources since investing in pharmaceuticals is one of the most risky and complex tasks. In this case we need to develop subsidiary mechanisms or an offset system. There is a clear view on the market how to build the entire production chain, but it is essential to realize the needs of the customer (Ministry of Health of the Russian Federation). A collaboration with research centers and institutes having the required capacities and laboratory to develop the products progresses quite well and modern manufacturers can scale up the production. There are only a few companies that maintain a full cycle production (from early stages of development to the scaling of complex production facilities). We believe that these areas should be given special attention and it should be developed beyond all doubts.”