Universal Drug Insurance to Become Reality by 2010, Says Russian PM

Russian Prime Minister Vladimir Putin and Health Minister Tatyana Golikova have jointly announced plans to roll out a national insurance scheme for medicines that would encompass all citizens for the first time. The drugs plans would be implemented as part of Russia’s existing Federal Mandatory Health Insurance Fund, and will reportedly become effective from 2010. No details have been released yet as to the possible cost or method of funding the new programme.

The creation of such a scheme would dramatically increase the number of Russians eligible to receive either full or partial subsidisation of medicines. At present, public-sector funding for retail prescription drugs is only available to people receiving social benefits and belonging to the DLO drug-reimbursement scheme; hospital drugs are theoretically free, but informal payments to specialists are often made. With many having chosen to opt out of the DLO since its launch in 2005, it is estimated that fewer than 14 million people currently belong to the programme, out of a total national population of over 140 million. Such a major expansion of public insurance for medicines will necessarily imply a much greater demand for reimbursable retail drugs, but the government has been quick to qualify the supply terms of the new scheme.

According to national business newspaper Kommersant, the new drugs insurance scheme will favour Russian pharmaceutical companies as preferred suppliers, with the Ministry of Industry set to unveil a national plan by September on how best to develop the sector's readiness for the task. The announcement reflects a growing body of government thought in recent years that Russia's domestic drugs industry needs to see its status as supplier to the nation protected and expanded, to redress the current dependence on medicines imported from pharma multinationals based overseas. Foreign drug-makers presently supply approximately 80% of medicines consumed in Russia, both within the DLO and outside the scheme.

Outlook and Implications

The proposed insurance scheme for medicines is long overdue and is a crucial step for Russia to catch up with its European neighbours not only in terms of medical insurance coverage, but especially with regard to public health and life expectancy. The scheme also promises to improve the standing of Russia's domestic pharma industry, with exclusive supply contracts set to bring much-needed revenue to companies that have seen themselves increasingly marginalised in recent years by competition from Western drug firms with a wider and more innovative range of treatments. However, the fact remains that financing the medicines insurance plan will present considerable challenges.

Budgeted funding for the DLO in 2008 has been set at approximately 60 billion roubles (US$2.5 billion; see Russia: 7 December 2007: Budget and Suppliers Set for 2008 DLO, as FMHIF Promises to Pay Off Remaining 2006 Debts), but the scheme is already reported to be experiencing difficulties in providing treatments for chronic illnesses in several parts of the country, due to the split in funding between the federal and regional governments introduced at the start of this year (see Russia: 26 May 2008: Regions Demand More Federal Backing for Severe-Illness Drugs as Russia's DLO Funds Dry Up). Kommersant reports that federal healthcare watchdog Roszdravnadzor and the Ministry of Health have since had to step in and pay for the supply of these drugs to be resumed. The scene echoes the much larger DLO funding crisis of 2006, when the scheme's budget was exhausted within the first half of the year and producers went unpaid for months as drug shortages were experienced at pharmacies across the country (see Russia: 29 January 2007: Funding Crisis at Russian DLO Reimbursement Scheme Spells Losses for Europe's Drug-Makers).

With this in mind, it seems at best ambitious and at worst unrealistic to consider launching a much bigger subsidised drugs system in two years' time when the current reimbursement scheme remains fraught with financial and operational difficulties. The most likely method of funding the new scheme would be through an increase in Russia's Unified Social Tax, and it has been reported that a rise of 1-2% would be needed for the scheme—tentatively valued by local market research group DSM at up to 80 billion roubles per year, but likely to be even higher—to be launched.

Another logistical concern is the size and production capacities of the domestic pharmaceutical industry. Despite numerous calls from the government to favour nationally-produced drugs in public healthcare, the fact remains that foreign pharmaceutical companies continue to easily surpass domestic firms in terms of supply and sales, despite rapid growth in turnover at many Russian drug-makers (see Russia: 7 February 2008: Pharmaceutical Imports to Russia Soar 23% Y/Y in January-September 2007 and Russia: 3 April 2008: Industry Ministry to Develop Revival Strategy for Russian Pharmaceutical Sector).

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