State Regulation on the Prices of Medicines
An Order of the Acting Minister of Health of the Republic of Kazakhstan dated April 19, 2019, № KR-42 "On approval of the rules of price regulation for medicines" (hereinafter the "Rules") came into effect on May 14, 2019.
Previously, the state legislation only had a provision for regulating the prices of medicines and medical devices which could be procured under the Guaranteed volume of Free Medical Care (GFMC) as well as in System of Compulsory Social Health Insurance (SCSHI). With the introduction and implementation of Rules, the state regulations now apply to prices of medicines sold in wholesale and retail.
With Rules coming into effect, former Rules like the Formation of Marginal Prices and Markups on Medicine and Medical Products procured under the GFMC and in the SCSHI; which were approved by the Order of the Acting Minister of Health and Social Development of the Republic of Kazakhstan dated July 30, 2015 № 639; lost its legal effect.
The State regulation determined by the Rules can be divided into two main sections:
Price regulation of medicines sold in wholesale and retail
Price regulation of medicines intended for the provision of GFMP and SCSHI
In this review we will primarily discuss price regulation of medicines sold in wholesale and retail.
Price regulation for wholesale and retail sales of medicine involve the following stages/processes:
Registration of the price or re-registration of the registered price for wholesale and retail sale basis the trade name of the medicine
Establishing margins on wholesale trade
Calculating limit prices for the trade name of medicine for wholesale
Approval of the limit prices for the trade name of medicine for wholesale
Establishing margins on retail sale
Calculating limit prices for the trade name of medicine for retail sale
Approval of limit prices for trade name of medicine for retail sale
Introducing marginal prices for the trade name of medicine for wholesale trade in the Register of prices
Recording marginal prices for trade name of medicine for retail sale in the Register of prices
Registration or re-registration of the registered price for wholesale and retail sales
The prices for wholesale and retail sales are separately registered or re-registered for consumer packaging based on each trade name, considering its dosage form, dosage, concentration, volume and packing of medicine.
An Electronic application form is submitted online via the website of RSE "National Center of Examination of medicines, medical devices and medical equipment" (www.ndda.kz) (hereinafter – "National Center of Expertise") along with physical documents or documents signed by electronic digital signature (incase physical documents are not submitted).
Registration or re-registration of the registered price of a domestically manufactured medicine is based on:
Manufacturer's price
Safety and quality expenses
Marketing expenses
Registration or re-registration of the registered price for imported medicine is carried out on the basis of:
Producers price for wholesale and retail sales
Transportation costs from the manufacturer to the border of the Republic of Kazakhstan
Customs expenses
Safety and quality assessment expenses
Marketing expenses
Changes in the registered price for wholesale and retail sales can be made only once in the reporting half-year.
Registration or re-registrations of medicine prices take place, provided they meet the following criteria:
The price provided by the manufacturer for the Republic of Kazakhstan for imported medicine does not exceed the average Ex-Works price compared to the number of reference countries filed in the application. Similarly, in the absence of state registration of medicine in reference countries, the price does not exceed value of Ex-Works price in the country of manufacture
The price quoted by the manufacturer for imported medicine cannot be higher than the maximum value of prices specified in the documents
Marketing expenses specified in the application for price registration or re-registration of the registered price do not exceed 50% of the manufacturer's price value for wholesale and retail sales for the Republic of Kazakhstan
In case the above criterions aren’t met, the applicant is provided with a reasoned refusal to register the price or re-registration of the registered price for wholesale and retail sales on the established form.
The rules also provide for elimination of comments in the case of an incomplete package of documents, lack of required information or the need to clarify the information contained in the submitted documents.
Establishment of wholesale margins, calculation and approval of marginal prices for wholesale trades
The maximum wholesale prices for medicines are approved by the Ministry of Health of RK every six months and are calculated by adding to the registered price for wholesale and retail sales of wholesale markup, differentiated based on the value of the registered price.
Wholesale margins are differentiated according to the regressive scale of margins and can vary from 10% (for medicine priced more than 500 000 tenge) to 21% (for medicine priced up to 350 tenge).
The calculation of marginal wholesale prices is carried out by the National center of Expertise. It is based on registered prices for wholesale and retail sales which have to be in accordance with the criteria for registration of price or re-registration of registered Prices for wholesale and retail sales. These are to be filed no later than April 10 or October 10, respectively for each reporting year.
The marginal wholesale price for generic or biosimilar is set below the value of the last marginal wholesale price of the original medicine:
For generics - not less than 30%
For a biosimilar - not less than 10%
In case of absence of the marginal wholesale price of the original medicine, the marginal wholesale price for reproduced/biosimilar product of the domestic manufacturer is established; which does not exceed the maximum current marginal wholesale price set by other manufacturers; with similar international generic name, considering dosage, concentration, volume and packing of medicine.
Establishment of retail margins, calculation and approval of marginal retail prices
The marginal retail prices are approved by the Ministry of Health of RK every six months and are calculated by adding to the marginal price for wholesale trade of retail markup differentiated based on the marginal wholesale price for medicine.
Retail margins are differentiated according to the regressive scale of margins and can range from 10% (for medicine worth more than 100 000 tenge) to 55% (for medicine worth up to 350 tenge).
The calculation of marginal retail prices is also carried out by the National center of Expertise based on marginal prices for wholesale trades.
The marginal retail price for a generic or biosimilar is set below the value of the last marginal price for the retail implementation of the original medicine:
For generic - 30%
For a biosimilar drug - 10%
In case of absence of the marginal retail price of the original medicine, the marginal retail price for the reproduced/biosimilar product of the domestic manufacturer is set; which does not exceed the maximum current marginal retail price of other manufacturers; with similar international generic name, considering dosage, concentration, volume and packing of medicine.
Price Register
The Rules also mention the procedure for maintaining a price register, which is a system containing information on the marginal wholesale and retail prices (hereinafter – the "Register").
The Register of prices is managed by the National center of Expertise electronically.
Each registry entry must contain the following information:
The names of the holder or owner of the registration certificate, the name of the manufacturers involved in the production process (if any)
The names of a medicine (international non-proprietary, or group, or chemical and trade names)
The codes for the anatomic-therapeutic-chemical classification recommended by the World Health Organization
Registration number of the certificate of the medicine (if any)
Medical form with indication of dosage, concentration and volume of medicine and its quantity in consumer packaging
The marginal price for trade name of medicine for wholesale trade for consumer packaging in tenge and the date of its establishment
The marginal price for trade name of medicine for retail sale for consumer packaging in tenge and the date of its establishment.
The Register is published on the official website of the National Center of Expertise. The website is updated with and holds records of all previous registry revisions.
The information on marginal wholesale prices will be stored in the Register for 5 years starting from the year following the year of approval of the marginal prices.
Information on marginal retail prices will also be placed in pharmacies in an accessible format for all interested parties, based on classification of international non-proprietary names of medicine.
Reference Pricing
The Rules introduce referential pricing for medicines managed by the National Center of Expertise which is a system of price analysis for medicine based on the Ex-Works prices presented by the applicant of the same active substance, taking into account the dosage, concentration and dosage in reference countries, as well as the actual supply price to the Republic of Kazakhstan.
According to the Rules, the list of reference countries includes Azerbaijan, Belarus, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Greece, Latvia, Lithuania, Russia, Poland, Romania, Slovakia, Slovenia, and Turkey.
Currency in which prices are recorded
According to the rules, price registration or re-registration of registered prices and approval of marginal prices is carried out in tenge.
Upon conversion of the applicant's price into national currency, the official exchange rates are used on average for the month preceding the application (average exchange rate) of the National Bank of Kazakhstan.
In the absence of exchange rate in the National Bank of the Republic of Kazakhstan information on the reference price is given in US dollars according to the calculated rate of transactions for the previous month provided by the Treasury of the Organization United Nations, indicated on the website www.treasury.un.org.
Information contained in this Client Update is of a general nature and cannot be used as legal advice or recommendation. Please note that Kazakhstan is an emerging economy, and its legislation and legal system are in constant development. Should you have any questions or want to discuss matters addressed in this Client Update, please contact us.
