The Healthcare, Pharmaceutical & Clinical Trial Environment in Russia

THE HEALTHCARE, PHARMACEUTICAL & CLINICAL TRIAL ENVIRONMENT IN RUSSIA
2006 RM Consulting
THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

CONTENTS
1.0 Politics and Economics ......................................................................................................... 5 1.01 Background ...................................................................................................................... 5 1.02 The Economic Situation................................................................................................... 6 1.03 Risks .................................................................................................................................. 9 1.03.1 Political ...................................................................................................................... 10 1.03.2 Security ..................................................................................................................... 11 1.03.3 Legal ......................................................................................................................... 11 1.03.31 Intellectual Property Rights ................................................................................. 11 1.03.4 Foreign Direct Investments ....................................................................................... 13 1.04 Demographics ................................................................................................................ 13 1.05 Infrastructure .................................................................................................................. 17 1.05.1 Transportation ........................................................................................................... 17 1.05.2 Communication ......................................................................................................... 18 2.0 Pharmaceutical Market......................................................................................................... 19 2.01 History ............................................................................................................................. 19 2.02 Pharmaceutical Expenditures ....................................................................................... 21 2.03 VAT on Medicines .......................................................................................................... 22 2.04 Market Segmentation ..................................................................................................... 23 2.05 Market Drivers & Restrainers ........................................................................................ 25 2.06 Pharmaceutical Regulation ........................................................................................... 26 2.07 Drug Registration ........................................................................................................... 27 2.07.1 Documents Requirements for Registration of Foreign Drugs .................................... 28 2.08 Certification Requirements ............................................................................................ 30 2.09 Pharmaceutical Promotion and Advertising ................................................................ 31 2.10 GMP ................................................................................................................................. 31 3.0 Healthcare in Russia ............................................................................................................ 33 3.01 Healthcare Policy ........................................................................................................... 33 3.02 Healthcare Spending ...................................................................................................... 35 3.03 Structure of the Healthcare System .............................................................................. 37 3.03.1 Provision of Primary Care ......................................................................................... 39
3.03.11 Health Posts ....................................................................................................... 39 3.03.12 Health Centres .................................................................................................... 39 3.03.13 Polyclinics ........................................................................................................... 39 3.03.2 Hospitals ................................................................................................................... 40 3.03.3 Health Institutions...................................................................................................... 40 3.03.4 Sanatoriums and Health Resorts .............................................................................. 40 3.04 Health of the Nation........................................................................................................ 41 3.04.1 Population Demographics ......................................................................................... 41 3.04.2 Life Expectancy and Causes of Death ...................................................................... 42 3.05 Disease Prevalence ........................................................................................................ 43 3.05.01 Cardiovascular Disease .......................................................................................... 44 3.05.02 Cancer .................................................................................................................... 45 3.05.03 Tuberculosis ............................................................................................................ 46 3.05.04 Diabetes .................................................................................................................. 46 3.05.05 Drug Addiction and Alcoholism ............................................................................... 47 3.04.06 Mental Disorders ..................................................................................................... 48 3.04.07 Sexually Transmitted Disease (STD) ...................................................................... 48 3.04.08 HIV .......................................................................................................................... 49 3.04.09 Dermatologic Diseases ........................................................................................... 50 3.04.10 Injuries, Poisoning and Other Accidents ................................................................. 50 3.04.11 Hepatitis .................................................................................................................. 50 4.0 Clinical Trials in Perspective ............................................................................................... 52 4.01 History of Clinical Trials in Russia ............................................................................... 52 4.02 Growth in Trials .............................................................................................................. 54 4.03 The Russian CRO Industry ............................................................................................ 55 4.04 Why Conduct Clinical Trials in Russia? ....................................................................... 56 4.04.01 Benefits of the Post-Soviet System ......................................................................... 57 4.04.02 Access to Investigators ........................................................................................... 58 4.04.03 Cost Saving Opportunities ...................................................................................... 59 4.04.04 Access to Patients................................................................................................... 59 4.04.05 Fast Recruitment Rates .......................................................................................... 60 4.04.06 Patient Compliance ................................................................................................. 61 4.04.07 Quality of Work........................................................................................................ 61 5.0 Clinical Trial Issues .............................................................................................................. 63 5.01 Study Costs .................................................................................................................... 63 5.01.1 Investigators Fees .................................................................................................... 63 5.01.2 Equipment Expenses ................................................................................................ 64
5.01.3 Monitoring Expenses ................................................................................................. 64 5.02 Language ........................................................................................................................ 64 5.03 Logistics.......................................................................................................................... 65 5.03.1 Travel ........................................................................................................................ 65 5.03.2 Mail and Courier Services ......................................................................................... 66 5.03.3 Communication ......................................................................................................... 67 5.04 Background Therapy...................................................................................................... 67 5.05 Cultural Differences ....................................................................................................... 68 5.06 Recruitment Issues ........................................................................................................ 68 5.07 Logistics and Local Support ......................................................................................... 69 5.08 Monitoring ....................................................................................................................... 69 5.09 Data Management ........................................................................................................... 70 6.0 Study Set-Up ......................................................................................................................... 71 6.1 Regulatory Compliance - the Federal Drug Law ............................................................ 71 6.2 Selection of a CRO and External Vendors ..................................................................... 72 6.3 Site Identification/ Investigator Selection ...................................................................... 73 6.31 Medical Institutions....................................................................................................... 75 6.4 Local IECs ......................................................................................................................... 76 6.5 Protocol and CRF Design ............................................................................................... 76 6.51 Protocol ........................................................................................................................ 76 6.52 CRF.............................................................................................................................. 77 6.6 Legal Issues, Insurance and Contracts .......................................................................... 77 6.61 Patient Information and Informed Consent Form ......................................................... 78 6.62 List of Documents to be Submitted to Local IRB/IEC or Regulatory Authority ............. 78 6.63 Local Insurance Policy ................................................................................................. 79 6.64Contracts with Investigators and Investigative Sites ..................................................... 80 6.7 Study Approval ................................................................................................................. 80 6.8 Patient Recruitment ......................................................................................................... 81 6.9 Site Training...................................................................................................................... 82 7.0 Importing Clinical Trial Materials ........................................................................................ 83 7.10 Importing the Study Drug .............................................................................................. 83 7.10.1 A Centralised Approach ............................................................................................ 84 7.20 Importing Other Materials .............................................................................................. 85 7.20.1 Study Documents ...................................................................................................... 85 7.20.2 Devices ..................................................................................................................... 85 7.20.3 Laboratory Kits .......................................................................................................... 85 7.20.4 Packing Materials ...................................................................................................... 85
7.30 Exportation of Biological Media .................................................................................... 86 7.40 Export of Other Clinical Trial Materials ........................................................................ 86 7.50 Summary ......................................................................................................................... 87
1.0 Politics and Economics

1.01 Background
By the 1980s, communism in the USSR was not working. In 1985, Mikhail Gorbachev came to power and introduced many reforms in an attempt to modernize the economy and make the Communist Party more democratic. These reforms ultimately led to the break up of the USSR and the end of the one-party Communist rule.
Figure 1.01: Changes in the Macro-Environment
1997 President Boris Yeltsin: ill, erratic, surrounded by corrupt oligarchs. 2003 Vladimir Putin: fit, consistent, pragmatic, surrounded by technocrats from young professional elite. Improved relations, especially with the US but also with Western Europe and Japan. Discussions in place on closer relations with NATO and membership of the WTO. Partner with the West in business, in supplies of oil and in the fight against terrorism. Centralisation and consolidation of power under Putin. Regional governors brought into check. Parliament aligned to Presidential Administration policies and priorities. Smaller group with increasing economic power but decreasing power and influence in politics. Increasing importance of the new entrepreneurial class. New managers are installed and motivated to carry out real restructuring and value creation for shareholders. More consistent, stable and reliable. Putins priority. Progress will be gradual but significant improvements have been made already. Policy engaged to reduce corruption through restructuring, corporate governance and legal reform. Personal 13%; Corporate 24% and major simplification of tax codes. BP announces $6.75 billion investment for 50% of TNK.
World Status
Uncertain engagement with US and NATO, following Cold War. Risky emerging market. Serious concerns about law, ownership and commercial contracts. Continuing strong influence of the Communists in the Duma. Major conflicts within parliament and the Regions. Focus on (conflicting) personal agendas. Small group with enormous economic power and political influence. Dominant in all important sectors. Asset shifts with very little attention to value creation. Used to enrich a few at the expense of economic development. Unstable, frequent changes.
International Perception of Russia
Government
Oligarchs
Industry Restructuring Policy Continuity Corporate Governance
Major abuses the norm.
Corruption
Pervasive. Personal 30%; Corporate 35% and dozens of hidden taxes. BP at war; calling foul.
Taxes
FDI
With Boris Yeltsin came democracy. Many in the West saw him as a democrat and reformer. He helped bring down the communist system; but, his biggest mistake, both for Russia and for himself, was his failure to establish strong political institutions enforcing the economic and financial stability of the country. In August 1998 the Russian Financial crisis occurred causing a major downturn in worldwide financial markets as the rouble was devalued. After this event, foreign investments in the country were virtually non-existent negatively impacting not only on the economy but also on the reputation of Russia itself. Following the election of Vladimir Putin many reforms to the legal system and political infrastructure have been implemented. The confidence of foreign investors has returned and the overall picture has changed considerably since the 1980s - Russia has become more stable politically, economically, socially and commercially and is now one of the fastest growing economies in the world.
1.02 The Economic Situation

In recent years positive economic growth in Russia has attracted much attention form international markets. Many multinational giants have expanded their operations into Russia covering industries such as: energy and power, manufacturing, retail, healthcare and many others.
Figure 1.02.1
Key Economic Performance Indicators
45 40
Persentage (unless mentioned)
35 30 25 20 15 10 5 0 -5 2001 2002 2003 2004 2005p 2006e 2007e 2008e

GDP Growth % Imports (G+S) % Change Inf lation (CPI) % Local Currency to US$ Consumer Spending % Change Exports (G+S) % Change Population Growth % Local Currency to Euro
p preliminary results, e estimates Source: World Market Analysis: Global Insights Russia, The Economist Country Profile, Russia
The gradual slow down in GDP growth is a natural result of the economy reaching maturity. GDP per capita; however, shows no signs of slower growth suggesting a further increase in the standards of living in Russia.
Figure 1.02.2
Source: DataStream
Slowing growth in imports is a direct result of current government policy and reform - the import substitution program aims to start substituting imports with domestic production thus supporting the domestic manufacturers and strengthening the economy. However, it must be noted that growth is still positive thus encouraging foreign investments into the country.
Figure 1.02.3
Source: DataStream
In 2005, real disposable income was on the rise as were corporate profits fuelling an increase in investments in fixed capital.
Figure 1.02.4
Source: Bank of Russia, January 2006
As was the case in 2004, consumer spending grew faster than household income in 2005 while the propensity for consumption increased and the share of household spending on savings declined. Although, there are no clear signs of a deterioration in consumer spending, slower growth is predicted - real consumer spending grew by 10.7% in 2005 (year on year) compared to 11.8% in 2004. The increase in consumer spending was accompanied by rapid growth in bank lending to individuals. The share of household money income spent on the purchase of goods and services rose by 1.1 percentage points in 2005 (year on year) to 70.9%. 1
Figure 1.02.5
The Bank of Russia, January 2006 outlook
At the same time consumer prices grew by 10.9% in 2005 compared to 11.7% in 2004, thus supporting rising consumer confidence and affordability.
Figure 1.02.6
While the pace of economic growth has been enviable over the past several years, the signs are now clear that record-high world market oil prices are not enough to maintain this momentum. Oil prices have boosted export earnings, but this has been accompanied by an upward pressure on the currency and domestic prices. With a dual focus on the exchange rate and inflation, the Central Bank has been unable to rein in inflation effectively. The enormous long-term potential for Russia, based on its abundant natural resources and human capital, is not in doubt; but unlocking this potential will require dedicated, uninterrupted structural economic reforms and astute macro-economic management.
1.03 Risks
The principal risks to a modestly optimistic medium-term forecast for Russian economic growth are varied. They include an extended period of sharply lower world-market oil prices, which would threaten investment growth as well as the country's fiscal situation. Additional major concerns include the failure of the Russian government and Parliament to manage key unfinished elements of structural reform effectively, or even an attempt to roll back some elements of privatization in the interest of increasing the direct influence of the State over strategic sectors of the economy.
1.03.1 Political
During his first term, Putin worked hard at bolstering his authority and that of his presidential administration in engineering a system that is regarded as a managed democracy.
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The
strengthening of authoritarian tendencies has been accompanied by reinforcement in the apparatus of repression. This includes promoting the role of special services, a general attack on democratic and civil rights, and ever-more aggressive policy in favour of the wealthy. Three years of Putins rule have achieved much in this direction:
13% income tax was introduced; aggregate social benefits tax was reduced by 5%; pension reform was initiated (aiming to turn all pensions over to privately held investment funds); the diminution of already threadbare social programs and benefits continues; the long-planned reform of energy systems and of the provision of communal services and utilities is beginning to be put into action.
Figure 1.03.1: Russian Political System

The Presidency
(Administration)
Federal Assembly
(Legislature)
Higher Courts
(Judiciary)
Prime Minister
Federal Council
Constitutional Court
Council of Ministers (Government)
State Duma
Supreme Court
Supreme Arbitration Court
The State Duma is the lower house of the Russian parliament with United Russia (Edinaya Rossiya) being the dominant party. The continued predominance of United Russia in the State Duma and the positive public support of President Putin and his reforms gives the government
2
Managed democracy is a system, under which those problems that it is possible to solve democratically are solved by democratic means. And those problems, not susceptible to democratic solutions are solved by authoritarian means. The decision is made by the President and administration. (World Socialist Web Site, V. Volkov, Russian elections, Dec 2003).
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the strength that it needs to bring stability to the country in the short-term, (until the 2008 Presidential elections at least). High oil prices have allowed the government to balance the budget, but this has masked the fact that liberal economic reforms are needed to create long-term stability. Nevertheless, despite the apparent dominance of Putin and his genuine desire to implement these reforms, the inherent conservatism of the United Russia party has the potential to become an obstacle to reform in the medium-term. There is concern over whether or not the Duma elections in 2007 will allow liberal and reformist politicians fair representation or sufficient power to act on their agenda. The election of a new president in March 2008 will present the biggest opportunity for real change. Government bureaucracy is at the moment one of the main issues for foreign investors as it creates unofficial inter-regional trade barriers and the power of the regional authorities may get in the way of business development. However, this situation is changing in a positive direction as regional governors will now be appointed by the President instead of being elected as before.
1.03.2 Security
Organised crime is one of the main drawbacks of doing business in Russia. The post-1991 period has witnessed a real explosion in organised criminal and semi-legal activity. In line with economic development and growth there is still concern that around 45% of consumer goods and services fall into the shadow economy. The problem is worsened by widespread corruption in the police force. Today control over this activity is tightening as the government is constantly working towards the elimination of organised crime.
1.03.3 Legal
There has been rapid legislative reform since the election of President Vladimir Putin and a more compliant parliament, with overhauls of land, labour, tax and company law bringing much-needed changes, at least on paper. Better intellectual property legislation was passed in 2002 as Russia prepared its bid to join the WTO.
1.03.31 Intellectual Property Rights Russias laws on the protection of intellectual property protection are well drafted and meet many international standards. Russia also belongs to most of the international conventions on patents, trademarks, copyrights and other intellectual property. Nevertheless, Russias record on the actual protection of intellectual property has been inadequate at best in the past decade, and the
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country is on the 301 watch list for IPR infringements. Infringement of intellectual property rights is a nationwide problem but the situation is especially poor in the Russian Far East. The top 3 industry sectors to be affected by counterfeiting include: the music business (~ 75%), video products (~ 85%), and computer software (~ 97%); nevertheless, practically all medicines of commercial interest regardless of their brand names have been targeted at some point. It should be mentioned that Russian pharmaceutical companies produce mostly low-cost/high volume generic drugs and are therefore generally not targets for counterfeiters it is the imported, innovative product market (around 70% of market share in dollar terms), that is affected. The Coalition for Intellectual Property Rights (TSIPR) estimates that counterfeit drugs account for about 15% of total pharmaceutical market resulting in large amounts of lost profits for legal companies. According to official reports, 63 counterfeit medicines were discovered in 2004. Authorities have taken steps to strengthen relevant legislation, to allocate law enforcement resources for combating IPR crime, and to conduct raids of pirate plants. In the pharmaceutical industry - where counterfeit drugs can seriously harm their users - the government has worked successfully with companies to counter this grave danger to public health. In the event of an infringement of intellectual property rights, the IPR owners can apply to several different agencies to enforce the protection of their rights. To stop illegal usage of a trademark, a company should contact the Regional Department of the Ministry of Antimonopoly Policy and Business Support (MAPBS). The MAPBS will send a written order instructing the infringing party to stop illegal usage of a trademark, and may also impose a penalty. To reimburse lost profit and restore the companys reputation through the mass media, a company should apply to the local Commercial (in Russia called Arbitration) Court. In addition, Russian Customs can help trademark and brand name owners to combat counterfeit goods coming into Russia from other countries. The trademark/brand name owner should file an application with the State Customs Committee requesting assistance in protecting the owners intellectual property rights. The applicant should also provide such documentation as identification data for the goods to be protected, the main entrance points of the goods into Russia, and a list of authorised dealers and distributors. It is recommended that a wider description of the invention or product be used, omitting insignificant details in the patent formula when patenting a product or invention in the Russian Patent Department. It is also recommended that companies consult with patent agencies before filing a patent application. If a company intends to patent a process, it should also patent the end product of this process.
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1.03.4 Foreign Direct Investments

While the vast majority of FDI in Russia remains in the natural resource sector, there has been much activity across all sectors; notably in the retail sector, the retail banking sector and in the food and beverage sector which is set to expand from Moscow and St. Petersburg and into Russia's regional centres. A study conducted by the Association of International Pharmaceuticals Manufacturers (AIPM) and PricewaterhouseCoopers released in August 2005, suggested that the more progressive reforms in conjunction with improved economic, political and industrial development in Russia, is attracting more FDI into the country. According to this study, over 50% of 23 major foreign pharmaceutical companies (Pfizer, Sanofi-Aventis, Novartis, GlaxoSmithKline, to name a few) operating through representative offices in Russia are planning to set up local production within the next five years. Specifically, about 33 percent of these companies plan to bring their local production subsidiaries on-stream in the next two-three years, while 19 percent plan to do so within the next five years. While the government continues to implement reforms and to encourage greater inflows of FDI, fundamental outstanding issues continue to plague investment confidence. Highest on the list of complaints by foreign businessmen is the pervasive influence of government bureaucracy in all areas of business operations, as well as unofficial barriers imposed by regional authorities and the arbitrary application of the rule of law. Bureaucratic barriers include:
unexpected changes to tax laws; customs authorities; tax authorities; unexpected changes in trade policy; harassment by the authorities; inter-regional trade barriers.
1.04 Demographics
In 2005, the population in Russia was estimated at around 145 million. Roughly 75% of people live in the European part of Russia (west of the Urals); in addition, most of the industrial cities with over 1 million inhabitants are also located in the European part. This is mainly due to the high level of trade and industry in the region leading to better work prospects and generally better living conditions.
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The Russian population is in decline due to natural causes as well as migration form former USSR; however, an influx from the Baltic countries has helped Russia to compensate for population losses - for the period of 1989 - 2004, 5.7 million people left the country while around 10 million migrated into Russia.
Fig 1.04.1: Major Russian Cities
Fig 1.04.2: Summary of the 10 Major Russian Cities The largest city in Russia. The Russian capital - its political, historical, architectural, scientific and business centre. Moscow Population > 10 million Very good transportation and telecommunication infrastructure. All global companies from all industries are represented here. Location of all major research institutions and scientific centres. High industrial and economic development. www.mosreg.ru The second largest city and the largest seaport in Russia. St. Petersburg Population ~ 5.1 million A major rail junction and industrial, cultural and scientific centre. Most global companies in most industries are represented here. Very good healthcare infrastructure.
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High industrial and economic development. Flight time to Moscow: 1h 30 mins http://www.spb.ru/eng/ A large Port on the Volga River with a developed transportation and telecommunication infrastructure. There are several affiliates of the Russian Academy of Science, and about 100 Nizhny Novgorod Population > 1.5 million scientific research laboratories. Well organised healthcare system. High industrial and economic development. Flight time to Moscow: around 1h www.government.nnov.ru A centre of scientific and technological progress. An entire scientific region inside the city comprised of universities, large scientific Novosibirsk Population > 1.4 million institutions and laboratories. Good transportation and telecommunication infrastructure. High industrial and economic infrastructure Flight time to Moscow: 3h 5 mins www.adm.nso.ru The main industrial and cultural centre of the Ural region. A highly industrial and resource rich city. Yekaterinburg Population ~ 1.3 million Healthcare system well structured and one of the most advanced in the country. Good transportation and telecommunication systems. High level of FDI. High industrial and economic development. Flight time to Moscow: 2h 45 min http://www.ekburg.ru/ A dynamic, industrial city with a healthy growing economy and relatively high consumer income levels. Samara Population > 1.2 million One of the main ports on the Volga river. Developed rail and air transport systems. Well organised healthcare system. Lack of research institutions and laboratories.
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10 pharmaceutical manufacturers. High industrial and economic development. Flight time to Moscow: 1h 45 mins www.adm.samara.ru A significant Volga river port. Well developed transportation and telecommunication sectors. Volgograd Population > 1 million Well organised healthcare supported by local government. A number of research institutions. Good industrial and economic development. Flight time to Moscow: 1h 35 mins www.volganet.ru One of the major industrial centres in Russia. Developed transportation and telecommunication sectors. Chelyabinsk Population > 1 million Well organised healthcare system. Scientific research mainly done by the State Medical Academy. Good industrial and economic development. Flight time to Moscow: 2h 30 mins www.ural-chel.ru A city of commercial and cultural importance being located on the coast of the Don river. A major passenger-oriented and industrial shipping port. Rostov on Don Population > 1 million Located in the heart of trade routes connecting 3 seas (Black, Azov and Caspian). The third largest city in imports/ exports turnover with good transportation and telecommunication infrastructure. High economic and industrial development Flight time to Moscow: 1h 45 mins www.rostov-gorod.ru Irkutsk Population ~ 1 million Industrial and scientific city in the heart of Siberia. Well developed telecommunication structure and good transportation system.
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Local government supports and develops the healthcare system. A number of scientific research centres. Good industrial and economic infrastructure. Flight time to Moscow: 5h 35 mins http://www1.irkutsk.ru/
1.05 Infrastructure
1.05.1 Transportation
Although Russias infrastructure is vast, the lack of investment in recent decades has had a negative effect on its quality. The majority of Russian ports, airports, railways and power stations are around 45-50 years old. Nevertheless, the transportation network has undergone significant changes in the past ten years, transitioning from a centrally managed system with lack of private initiative to a Western-type model. The transformation has led to a rapid increase in quality and a more diversified infrastructure and service. Money is being spent on improving the quality of the road network, while ports and railways are being reconstructed to attract more business and investments. Overall, the transportation system in Russia is good regardless of whether you are travelling around the country or just within a city. The main problems are delays and relatively old technical support systems. The best and fastest way to travel around the country is by air - all cities in Russia and almost every town can be reached by air. Air travel is most popular for long distances (for example to Siberia or Asian Russia). A 2 hour flight would typically cost around 3000-5000 roubles (US$ 103173 economy class) depending on the airline; however, there are a variety of low-cost carriers available that make air travel more affordable to the wider population. The car is the second best mode of transport but traffic conditions can be notoriously bad. Trains tend to be cheaper than air travel (depending on the class of travel) and relatively reliable; however, the conditions and service are not perfect for long-distances. Moreover, trains take much longer than air travel - for example, the flight from St. Petersburg to Moscow is just over 1 hour, whereas the fast train takes around 6-7 hours; the flight to Novosibirsk is around 3.5 hours while the train takes 48 hours and will cost between US$400 (1 class) and US$70 (3 class). Inner city travel is generally pretty good barring a few delays.
st rd
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1.05.2 Communication
The countrys telecommunication infrastructure is patchy in terms of both quality and geographical coverage. The IT market has grown by an average 30% per annum over the last few years, but is generally confined to the main urban centres with Moscow making up as much as one-quarter of users, and the citizens of St Petersburg coming in next. Fixed line and mobile networks are present in every city speeding up business processes; however, fax transmissions can be unreliable. Although long-distance and international calls are quite expensive by Russian standards, there are prepaid calling cards that can help to make these calls more affordable. Internet providers exist in every Russian city. In the smaller cities, the internet is mostly dial-up which is not very reliable; but in more developed areas, one can good quality dial-up and broad band services. In the major cities, new wireless internet technology is slowly coming onto the market. Due to an undersupply and scarcity of electricity resources, as well as under-financing of this sector by local government, electrical supply can be a problem. Consequently, in some areas the electricity is turned off for a period of time in the day (veer); although, this is not common in the major cities. It should be noted that in the 10 aforementioned major cities the communications infrastructure is very well developed and one would not experience any constraints in sending, receiving or shipping parcels, in mobility, or in communication. All major world couriers are present in Russia: DHL, TNT, Fed-Ex; providing a fast and reliable way for companies to import goods and materials into the country. DHL offices are located in almost every town and city; whereas Fed-Ex and TNT have more limited coverage. Moreover, the Russian mail system can be used although it is generally not as reliable as the courier system.
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2.0 Pharmaceutical Market

2.01 History
Prior to the financial crisis of 1998, the pharmaceutical market was viewed as being relatively successful in Russian terms; however, by Western standards it was considered underdeveloped. By 1997, consumption of pharmaceuticals had overtaken pre-reform levels and the market reached $3.1billion in terms of ex-manufacturers prices. The 1998 economic crash made a huge impact on the market. Consumer spending shrivelled, along with federal and regional funding for healthcare, and the value of the market tumbled to an estimated $2.4billion. Imports accounted for $1.3billion (55%) and Russian production was
$1.1bn (45%). Total imports during the first six months of 1999 amounted to $0.33billion, equivalent to about 40% of the 1998 level for the corresponding period.
Fig: 2.01.1: Russian Pharmaceutical Sales
2003a 2002a 2001a 2000a 1999a 1998a 0 500 1000 1500 2000 US$ million 1713 1624 2330 2500 2039 2297
3124
3000
3500
Source: US Census Bureau; Economist Intelligence Unit
Post-crisis, the Russian pharmaceutical market has witnessed a steady and fast recovery, exhibiting 10 - 20% annual growth and reaching $7.4billion in retail price terms in 2005 and it is still growing. Growth can be attributed to both a rise in real production volume and an increase in buying power. Stabilisation of the exchange rate against inflation means that people have more cash available to spend on more effective and expensive drugs, which in turn has led to the substitution of Russian produced medicines by foreign ones. Thus, by 2004 the market share of imported pharmaceuticals reached 60% of the total market in dollar value. Nowadays, the Russian Pharmaceutical market consists of two main segments: the retail
pharmacy sector (80%) where over 40% of pharmacies are privately owned and provide an
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excellent outlet for expensive, imported products; and the hospital segment (20%) which mainly focuses on relatively inexpensive generic drugs.
Fig: 2.01.2: Russian Pharmaceutical Market
$bn
0 2000 2001 2002 2003 2004 2005e Ex-works prices Retail prices Wholesale prices Linear (Retail prices)
Source: Brunswick UBS Warburg, Boston Consulting Group, LCP
However, it must be noted that cheap, domestically produced drugs continue to dominate the market in terms of volume of sales. This is due to the fact the majority of healthcare expenditure is financed on an out-of-the-pocket basis and that the income of an average citizen (excluding Moscow and St. Petersburg) precludes them from buying expensive imported pharmaceuticals.
Fig: 2.01.3: Market Share of Imported vs. Domestic Drugs
29 75 75 76 71 25
June
29
29
71
71
25
July
24
August June July August
Share, $
Domestic
Imported
Share, packs
Source: Retail Audit of Russian Pharmaceutical Market by DSM Group, 2005
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Fig: 2.02.1: Drug consumption per capita (August 00 August 01)
500 450 400 350
452 381
$ per capita
300 250 200 150 100 50 0
223 184 177 160 152 138
127 89 67 53 26 26
St at es Ja pa n* * Fr an ce Ca na da G er m an y
Ita ly
ai n Ze al an d Ar ge nt in a Po la nd M ex ic o
gd
Br a
Sp
te d
Ki n
Un i
te d
Un i
Source: World Health Organization: * GDP for Russia is estimated for 2001; ** Including hospitals
2.02 Pharmaceutical Expenditures

Russians spend very little on pharmaceuticals compared to Western populations and Central Europeans - almost 5 times less compared to Poland and 47 less than in the US. In spite of this fact, the per capita consumption of pharmaceuticals and healthcare products in Russia is expected to increase in the long-term.
Fig: 2.02.2: Reimbursed vs. Privately Funded Pharmaceuticals
100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%
Au s
tra lia
/N
ew
Privately purchased drugs (Pharmacy) Reimbursed drugs (Pharmacy) Hospitals
19 95
19 97
19 99
Source: Russian Ministry of Health
20 02 E 20 03 E 20 04 E 20 05 E 20 06 E
20 01
19 96
19 98
20 00
Ru s
si a*
om
zi l
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2.03 VAT on Medicines

The levying of VAT on pharmaceuticals was seen as an important source of revenues in the Russian government's efforts to render the major changes in Russia's new tax regime revenue neutral. The compromise amendment to the Tax Code, passed by the Duma in December 2001, introduced a reduced 10 percent rate on drugs (provided that the drug in question has a valid registration certificate). The introduction of the VAT was more or less conducted according to the original plan. The Customs Committee issued instructions to all customs posts clarifying that the 10 percent VAT rate should be levied on pharmaceuticals as of January 1, 2002. Application of the new reduced rate of VAT on pharmaceuticals became the source of much misunderstanding at customs posts. Some customs inspectors began to request registration certificates for the drugs, issued by the MoH. Previously, import permits for the pharmaceuticals were the only documents necessary for importation. In cases, where such registration certificates are not provided, customs officials are charging a 20 percent VAT. This has caused problems for pharmaceutical products undergoing periodic re-registration, since in the absence of a valid registration certificate, they are subject to the 20 VAT percent rate. The customs authorities' actions contradict the MoH position, which holds that an import license and a letter indicating that a product is undergoing re-registration should be sufficient to qualify for the reduced 10 percent rate. Such lack of consistency or coordination between the two government agencies is causing substantial damage to importers. Not surprisingly, the levying of VAT on pharmaceuticals is an unpopular measure among consumers and manufacturers. Russian consumers have little disposable income, and have difficulty meeting the increased price levels. Consequently the pharmaceutical companies will be obliged to absorb some of the additional costs of VAT in order to maintain the market. Some analysts worry that VAT on pharmaceuticals will harm Russia's numerous poor and pensioners, many of whom will be forced to sacrifice on other basic necessities to buy medicines. Russia is not unique in having a VAT on pharmaceuticals. Many Western countries levy 15-17 percent VAT on all goods and services, including pharmaceuticals. Such a policy has few opponents in the West since medical insurance often covers the cost of prescribed drugs. Russia does not have a developed system of government reimbursement for drugs, and the majority of patients pay the full price for prescribed drugs. Those eligible for reimbursement include the disabled, the war veterans, Chernobyl liquidators, and families with many children, people with HIV, and cancer and diabetes patients. Many pharmaceutical industry analysts believe that VAT on medicines is stimulating another problem because of the high price of all medicines, particularly imported ones, making copycat
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drugs and selling them in Russia has become a highly profitable business for counterfeiters who have already captured around 15% of the total market share.
2.04 Market Segmentation

Market segmentation in Russia is considerably different to Western Europe, with branded generics the strongest growth segment. A list of essential drugs was compiled by the MoH, containing 7,100 products. The prices for these drugs must be registered with the State. Hospitals and polyclinics are encouraged to
restrict themselves to the administration of drugs on this essential list, but compliance is incomplete. There have also been attempts to encourage the prescribing of generic generics, but this has been problematic. Firstly because the supply of unbranded products is unreliable, but secondly because a new wave of more informed patients with increasing amounts of disposable income are emerging who want to use branded products.
Fig 2.04.1: Market Segmentation Comparisons, Western Europe vs. Russia Segment OTC Western Europe 35 40% Russia 35 40% Trend Western goods substituted by low cost providers after crash Comfort products unlikely position Innovative Brands 50 55% 5 7% OTC segment growing in general Not affordable to wider population Stable, if small, consumer group with modest growth prospects Branded Generics Generic generics 5 10% 25 30% 5 10% 30 35% High level of customer/patient loyalty Most promising segment Western products vulnerable to low cost alternatives Will continue to be an unstable segment to regain
There are about 800 companies who manufacture pharmaceutical products in Russia, and some 70,000 pharmacies. Of the 800 pharmaceutical producers, only 300 are domestically owned; these mainly manufacture generics drugs, using imported APIs. Many also import bulk tablets/capsules for blister packing.
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Collectively, the top eight domestic producers account for around 60% of total domestic pharmaceutical output (by volume) and for about 15% of the entire pharmaceutical market by value.3 The State owns 35% of all pharmacies and around 100 domestic pharmacy chains operate in the country the pharmacy market is so fragmented that the top ten chains control a mere 10% of market share. In Moscow, private pharmacies account for 59% of the market, and around half of these are part of a chain. The company 36.6 is Russias largest domestic pharmaceutical retailer by turnover.1
Fig 2.05.2: Top Russian Manufacturers and Top Foreign Importers
Top Russian Manufacturers

Sales, $ (1Q 2005) Veropharm Nizhpharm Moskhimpharmpreparaty Otechestvennye Lekarstva Akrikhin Bryntsalov Biokhimik Biosyntez Dalhimpharm 28.3ml 21.2ml 10.8ml 10.8ml 7.7ml 6.3ml 5.8ml 4.7ml 3.9ml
Top Foreign Importers

Sales, $ (3Q 2004) Sanofi-Aventis Berlin-Chemie Pharmastandard Gedeon Richter Pfizer International Inc Novartis Pharma Servier KRKA Nycomed 42.5ml 34ml 27.1ml 26.7ml 26.5ml 21ml 19.7ml 18.3ml 18ml
The wholesale sector is highly consolidated. The largest companies are Protek (2003 revenue of US$900m, 26.6% market share) and SIA International (2003 revenue of US$755m, 22.3% market share). Together, they supply around 16,000 pharmacies and hospitals. 1 Local production cannot meet pharmaceutical demand - imports help to address this problem, but there is still a large unsatisfied demand for many classes of medicine.
The Economist Intelligence Unit, Russia, 2005
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Fig 2.05.3: The Best Selling Drug Classes in the Russian Pharmaceutical Market, 2003 Drug Class Cardiovascular Analgesics, Antiseptics and Anti-Inflammatory Drugs Antibiotics Vitamins Tranquilizers, Psychotherapeutic and Central Nervous System Stimulants Antivirus Antihistamine Preparations Purgatives (Laxatives) Digestive Aides Other Pharmaceuticals 5.8 4.2 3.3 3.0 17 14.3 9.8 7.5 Percentage (%) of Total Demand 18.2 16.7
Source: http://www.hccp.ru/business/export/farma_market.htm
2.05 Market Drivers & Restrainers

Overall, the social and cultural factors which are driving the positive development of the Russian economy are very favourable for the development of the pharmaceuticals market in general and the pharmaceutical distribution market in particular:
The population of the Russian Federation has been and remains an ageing population; The amount of disposable income and, therefore, the level of pharmaceutical spending, have grown substantially since 1990; Lifestyle changes combined with positive attitudes towards new products and services have led to alterations in consumer consumption; The level of consumerism has increased significantly.
The income per-capita is disproportionately distributed, with large cities boasting higher than average income, with the wealthiest inhabitants (on average) residing in Moscow and St. Petersburg. Market restrainers can be generally attributed to the fact that healthcare is a low government priority:
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There is a corresponding low level of healthcare financing; Far fewer than 50% of those entitled to reimbursed medicines can actually realise their right; Outside of the major centres exists a cash-strapped population with low purchasing power; A poor national insurance system with underdeveloped private health insurance and a crippled obligatory State health system;
VAT introduction on medicines introduced an added burden on price.
2.06 Pharmaceutical Regulation

Russia has developed a system of State control over the circulation of drug, narcotic and psychotropic preparations which includes:
Licensing of their production and imports; State registration and certification; State control over standards, quality, efficiency and safety; State regulation of pricing; and Organisation of manufacturing and wholesale trade.
Nevertheless, Russia still lacks a solid legislative base and regulation of the pharmaceutical sector has suffered as a result of decentralisation and is no longer as coherent as it was in the 1980s. The main government body involved in the regulation of the pharmaceutical industry is the Ministry of Health (MoH). The MoH maintains control over practically every aspect of regulatory activity and is supported by a number of other agencies involved in regulating specific areas of the market for example: the State Standards Committee; State Customs Committee; the Ministry of Industry, Science and Technology; the Ministry of Economic Development and Trade; the State Patent Office; and the Ministry of Antimonopoly Policy. The MoH, supported by various regional and local certification committees, is responsible for:
Registration of pharmaceutical products; Obligatory and voluntary certification of such products; and Issuing licenses for the wholesale trade of pharmaceutical products, narcotics and psychotropic substances.
Certification standards have to be approved and coordinated by the State Standards Committee. However, the MoH has the lead in developing actual certification standards.
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The Ministry of Industry, Science and Technology is responsible for issuing licenses for drug manufacture; however, these licenses have to be approved by the MoH in advance. All imports of medicines must be accompanied by an import license issued by the Ministry of Economic Development and Trade. The import license requires approval from the MoH.
2.07 Drug Registration

Generally, the Russian drug registration system is very different from the practices adopted in major developed countries. It is a complicated process which includes a patent search and potentially, further clinical trials to demonstrate safety and efficacy although, drugs can be registered without a trial having been conducted in the country. The registration and clinical trial period for bringing a single product to the Russian market for the first time can take anything up to two years or more. There are many grey areas in registration procedures and the system continues to lack clarity and transparency. In addition, cultural and language barriers often become a challenge to foreign companies attempting to register pharmaceuticals by themselves without appropriate legal advice or help from experienced distributors or consultants. As the registration procedure is quite complicated and because the documents tend to change due to constant changes in the regulatory requirements, the only way to accomplish registration of a pharmaceutical product in Russia is through one of the following types of companies: a company incorporated in Russia and belonging to the foreign parent company; a Russian distributor/authorized agent or a consulting company.
The registration procedure begins with the signing of a contract and the submission of a number of required documents to a special entity affiliated with the MoH - the Federal State Enterprise "Scientific Centre for Expert Assessment of Medical Products". The "Centre" conducts reviews and expert assessments of the registration documents and directs all required stages of the registration process. The "Centre" works in close cooperation with a number of expert committees, including the Pharmacology and Pharmacopoeia Committees, and the Committee on Ethics, as well as research institutes on conducting reviews of the documents, pre-clinical, clinical, toxicological, laboratory and other tests required for registering a drug. The cost of registering a single foreign drug is around $12,000 while the fee for a domestically produced drug is $6,000. The registration is valid for 5 years. It should be noted that this fee does not include any costs of trials which might be assigned to a drug.
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The registration certificate is issued by the Department of State Control over Drugs and Medical Equipment of the Ministry of Health. Registration cannot be conducted by phone, e-mail or any type of correspondence and involves establishing direct contact and an ongoing working relationship with an expert from the Centre. Foreign manufacturers should perform registration either through an authorized agent or distributor, in-house Russian-speaking registration personnel or via a regulatory contact permanently based in Russia. Many foreign companies have established good working relations with the MoH and have successfully overcome difficulties in registering or re-registering medical products in Russia. The good thing about the system is that it is pretty centralised and the applicant needs only to deal with a few departments within the MoH. Again, legal advice and assistance from the distributor is strongly recommended.
2.07.1 Documents Requirements for Registration of Foreign Drugs

General:
i. Application for the State registration of a pharmaceutical including the name and contact information of the manufacturer; ii. The name of the pharmaceutical preparation, including international non-proprietary name, scientific name in Latin, trade name and main synonyms; iii. iv. v. vi. List of active ingredients and components; Recommended dosage, instructions for use; Description of the drug and its packaging, shelf life and storage conditions; Power of Attorney issued by the manufacturer to the authorised company for carrying out registration procedure (notarised original with apostil);
Certificates:
i. ii. iii. iv. A copy of the Free Sales Certificate (must be notarised and apostilled); A copy of the license of pharmaceutical manufacture (must be notarised and apostilled); A copy of the GMP certificate (must be notarised and apostilled); A copy of the Certificate of manufacturer registration in their own country (must be notarised and apostilled); v. The original Certificate of analysis of the drug and its active substance (must be signed and stamped by manufacturer); vi. vii. A copy of the Certificate of trade mark (must be signed and stamped by the manufacturer); Information of registration of the drug in the country of manufacture and other countries;
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Information and test reports:

i. ii. Summary of method of drug manufacture (must be signed and stamped by manufacturer); The complete description of the quantitative and qualitative control methods with references to the pharmacopoeia and specification (must be signed and stamped by manufacturer); iii. iv. v. Stability data of three drug series - by date; Spectral and chromatogram data; Report on the pharmacological (specific) activity study substantiating the indications for use which are described in the instruction; vi. vii. Test report of the drug toxicity (acute, sub-acute, sub-chronic, chronic toxicity); Test report of specific influences (carcinogenicity, mutagenic and teratogenic effects, embryotoxicity, allergic and local-irritative effects); viii. ix. x. xi. Trial report of the medicine usage in the clinic; Copies of publications of medicine usage after its registration in the country of origin; Pharmacokinetics and bioequivalence data; Summary information on side effects, in comparison with other analogous medicines, used for the same indications; xii. Instruction for use (must be signed and stamped by the manufacturer);
Samples and packaging:

i. Information on packaging materials: Certificates of packaging materials (must be signed and stamped by the manufacturer); ii. iii. iv. The colour and design of internal and external packages (Original and Russian version); Samples of active substance for quality control; Standard and referenced samples of the drug for the binding examination of quality (must be in the standard package).
The MoH, at its own discretion, determines whether existing regulatory approval documents are sufficient for an exemption of the drug from clinical and other testing in Russia before issuing a registration certificate. Officially Russia does not recognise FDA and EU certificates. The registration procedure is not transparent. Lists of registered drugs are published (but often incomplete); however, information on drugs under registration and on the status of the registration are not available. Confidentiality of the files provided by the applicant cannot be guaranteed and the registration system has been unable to prevent counterfeit drugs and low-quality (sometimes
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dangerous) products entering the market. To combat these problems, a new certification system was introduced which applies to all domestically produced and imported drugs.
2.08 Certification Requirements

In April, 2002, Government Resolution #287 added medicines to the List of Products subject to mandatory conformity assessment (certification) in Russia. This new certification system was intended as a tool to combat counterfeit drugs as well as a means of toughening control over imported drugs. Previously the drugs were subject to selective, batch-based certification at each stage of their circulation in the market. Certificates for foreign drugs were issued based on quality certificates provided by the manufacturers. The new certification system which came into effect on December 15, 2002, requires total control and inspection of locally made and imported medicines. The Ministry of Health together with the State Standards Committee accredited 8 regional certification centres located in Moscow, St. Petersburg, Nizhny Novgorod, Novosibirsk, Yekaterinburg, Khabarovsk and Rostov-on-Don. Well-established Russian and foreign drug manufacturers may undergo simplified certification procedures. All other companies must undergo full-scale quality and safety testing prior to customs clearance. The certification, required now for each and every batch of medicines entering the market costs 2,000 roubles (US$ 69) for domestic companies and 3,000 (US$ 103) for foreign firms. Certificates previously required at each stage of the sales chain were replaced by a single certificate issued when the product enters the market. This new certification system led to additional costs associated with the storage of products in bonded warehouses while tests were carried out. Testing could take up to several months and these increased costs led to an increase in retail drug prices. Both the Association of International Pharmaceutical Manufacturers (AIPM) and the American Chamber of Commerce in Russia have been actively working to eliminate this administrative barrier for foreign manufacturers. To expedite the certification procedure for well-established pharmaceutical suppliers, the MoH introduced a new decree into existing certification rules. According to MoHs new legislation, in certain cases the number of trials and tests for quality can be reduced if the producer has extensive experience and there have been no concerns regarding its products over a given period of time. The MOH publishes a list of qualifying companies - around 60% of which are foreign. Vitamins and biologically active additives in the majority of cases are registered and certified in the same way as ordinary drugs. However, imports of these products should be accompanied by a certificate of hygiene which is issued by the Institute of Nutrition of the Russian Academy of Medical Sciences. The hygiene certificate is valid for three years.
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The new Law on Technical Regulations, which came into effect in the summer of 2003 was aimed at reforming the existing certification system and will bring the process into compliance with international standards by making a shift from obligatory certification to technical regulations, clear-cut standards and manufacturers certificates of conformity. However, a lot of issues still
remain unresolved. According to the law, the transition period to the new system will take seven years. In addition, there is a lot of uncertainty about which international standards Russia will accept, which standards should be obligatory and which voluntary, and what the role of the government body should be in development and enforcement of the standards.
2.09 Pharmaceutical Promotion and Advertising

Appropriate promotion and advertising of pharmaceuticals is of critical importance to the development of the Russian healthcare system. However, promoting and adhering to strict ethical standards when marketing pharmaceutical products is essential. Two pieces of legislations regulate the marketing and advertising of pharmaceutical products: the Federal laws About Advertising and About Pharmaceutical Products. These Laws state:
i. Only pharmaceuticals that have the appropriate license and which are registered in Russia can be advertised; ii. Advertising of prescription drugs as well as the promotion of medical products and technology can only be placed in specialised medical and pharmaceutical publications.
Advertising of non-prescription products is allowed provided that the manufacturer produces registration and license documents and that the advert clearly states all side-effects and does not give any medical guarantees. Pharmaceutical advertising should not position products as unique, the most effective or the safest. It is also forbidden to make comparisons between similar pharmaceutical products. Because pharmaceutical companies are barred from selling directly to patients and doctors and cannot advertise medicines on mainstream television, radio and print media; as in other major pharmaceutical markets, the industry relies on medical representatives to network with medical professionals and institutions to create demand.
2.10 GMP
Most Russian pharmaceutical companies do not operate in accordance with GMP standards, a fact that has prevented them from competing in the international arena.
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With Russia's move toward WTO accession, control over the manufacturing process in compliance with GMP standards became an important issue; therefore, the MoH mandated that all Russian manufacturers should switch to GMP standards by January 1, 2005 or their licenses would be recalled, a mandate that was supported by President Putin. This drive to bring Russian manufacturers up to international standards has been hampered by delays in writing and implementing new legislation which remains ongoing; in the interim the MoH has developed a voluntary system of manufacturing process certification as a means of effective control over production. GMP implementation is an expensive process (costing at least $5ml) and not all domestic producers can afford to pursue this strategy thus smaller firms have two options: either to become part of larger entity or to exit the industry. Consolidation in the industry is expected to rise with a corresponding increase in competitive intensity in the marketplace. On upside, poor quality producers will be eliminated boosting consumer confidence in locally produced products. The strengthening of domestic production has public health implications and is expected to improve the overall health situation in Russia. Some of the larger Russian manufacturers have grouped together to drive through change. Veropharm, Pharmsynthez, Nizhpharm, Otechestveni Lekarstva, Ufa-Vita, and the chemicalpharmaceutical factory Akrihin comprise the newly-formed Association of Russian
Pharmaceutical Manufacturers (ARPM) whose mission is to develop the Russian pharmaceutical industry. The association's goals include: bringing Russian producers up to GMP and ISO production standards, actively fighting counterfeits, developing staff, supporting research, and lobbying for changes in legislation. The National Pharmaceutical Inspection unit (NPI) has recently been established. Plans are to recruit 60 inspectors during 2005 and 2006 for GMP, and eventually 200 to 300 inspectors for GDP.
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3.0 Healthcare in Russia

3.01 Healthcare Policy
Historically healthcare in Russia has been the responsibility of the Russian Ministry of Health (MoH). The MoH oversees the healthcare system and is responsible for central policy formation. It is also in charge of initiating federal health programs, the management of federal level health facilities, the training of medical personnel, health monitoring and planning, and the regulation of pharmaceuticals and medical devices. In theory, the provision of care is uniform throughout the country. In practice, wide regional differences in the provision and scope of care exist, largely due to the high degree of autonomy of provincial and municipal governments. Major capital investments within the health sector are funded at State level although decisions regarding the setting of budgets for overall health spending have gradually shifted to the regions. The MoH supervises the Federal Mandatory Health Insurance Fund (FMHIF), which in turn regulates the Territorial Mandatory Health Insurance Funds (TMHIFs). Under current legislation every Russian citizen is entitled free access to a basket of basic healthcare services including:
Primary healthcare; Emergency healthcare; Preventative healthcare; Hospital care (via referral); and Pharmaceuticals used in in-patient care.
More than 100 million Russians are covered by free, State-financed medical insurance policies with one-third of the 2,000 Russian insurance companies working with the State on the mandatory medical insurance programs. The newly restructured Russian Ministry of Health and Social Development has announced modernisation of the Mandatory Medical Insurance system as one of its primary goals. The current Mandatory Medical Insurance system is inadequate and unable to guarantee access for the population not only to quality, but in some cases to basic healthcare treatment. The government believes that sound GNP growth supported by tax reform will provide sufficient revenues for the Mandatory Insurance Funds. However, analysts predict that the Government wont be able to significantly increase funds available to cover free medical treatment. In the best case scenario the government will be able to bring more order into the system and to create a clear-cut list of free services guaranteed by the government. This list should be complemented
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by a list of fee-based services. The government has actually admitted that it will have to take measures to legalise private healthcare services so that the payment for these services is based on invoicing and carried out through a cashier versus unofficial payments directly to doctors, a common current practice. According to the Constitution of the Russian Federation, all citizens have the right to receive free healthcare. However this right in the majority of case exists in name only. Public health programs for health promotion, disease prevention and family planning remain low priorities. Low wages and inadequate training for primary care physicians who do not have full access to the latest medical technology, results in an underdeveloped national healthcare infrastructure. Because preventive care has never been an objective, the population has to resort to hospitalbased care, which generally makes the Russian healthcare system inefficient and very expensive, precluding investments in other segments of the system. Because public financing of healthcare is insufficient and voluntary health insurance coverage is very limited and does not include serious, life threatening diseases, the Russian population is forced to pay out of pocket to cover a significant portion of the cost of drugs and healthcare services. In addition, doctors are interested in unofficial payments as their wages are generally very low (in the region of $100-200 a month). According to research conducted by the Independent Institute for Social Policy, one-third of the families which need out-patient treatment pay for it out-of-pocket. At the same time half of the families which need in-patient treatment are also forced to pay out-of-pocket. Wealthy citizens spend significantly more out-of-pocket on healthcare than the less wealthy. Despite the common myth that the major part of out-of-pocket money is paid unofficially to doctors under the table, the research showed that only one-third is really paid under the table while two-thirds are channelled through cashiers. Unofficial payments are more common in in-patient hospitals than in out-patient clinics. Generally, the level of legalisation of private services in the system is quite high, and informal payments usually complement formal ones. There are several major categories of informal payments:
to medium level personnel for conducting procedures such as injections and so on; to personnel conducting diagnostic tests; to attending physicians who are assigned to supervise the patient for in-patient care; to operating surgeons.
Other categories include payments for drugs, supplies and medical devices. There are also several channels through which drugs, supplies and devices are sourced by the patients: they
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can be purchased from doctors, in pharmacies, middlemen or informally from the clinics themselves. The existing insurance system is definitely inadequate and chances that coverage by the Mandatory Insurance Funds will increase in the foreseeable future are low. The entire system needs massive reforms, but taking into account the realities, reform will only be able to clarify the existing system of guarantees, their provision procedures, lists of free services and standards of free healthcare. As voluntary medical insurance is underdeveloped, out-of-pocket coverage of services will remain significantly high. The government will be forced to legalise increasing portions of the healthcare treatment by enforcing the list of paid services. Because paying doctors directly, both under the table and legal payments has deep roots in Russian culture, analysts predict that it will be an inevitable trait of the Russian healthcare system in the future. Russia is an ageing nation with a demographic structure mirroring much of Western Europe. Namely, the country has a highly urbanised population and declining fertility. In addition, there is a high mortality rate amongst the working-age population. Problems with the existing underfunded, under-equipped and overstretched health system will be subject to even further funding pressure in coming years as diminishing numbers of workers have to fund a growing class of pensioners. The need to increase the cost effectiveness of healthcare delivery is now the main driver behind the current primary care restructuring program taking place throughout the country. The main aim is to decrease the number of low-budget and poor performing polyclinics and hospitals. Since 2004 there has been a 2.2% decline in the number of district medical centres resulting from the closure of under-performing, small, suburban hospitals and general clinics. The overall efficiency of the remaining polyclinics has increased and the number of emergency services remains unchanged. Healthcare provision for the elderly and handicapped remains poor, but the situation is being addressed with a focus on home healthcare and further restructuring of the system to increase the bed count in specialised centres thus giving these patients better access to priority treatments.
3.02 Healthcare Spending

It is difficult to estimate total healthcare expenditure in Russia. Central government health budgets are usually very small and inefficiently administered and it is not unusual for actual government expenditure to be lower than the budgeted figure.
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The share of healthcare expenditure in the consolidated budget 4 of the Russian Federation has increased over the past years; however, Russia still spends less than 4% of GDP on healthcare, well below the OECD average of more than 8%. Public spending makes up about three-quarters of total health spending.
Fig 3.02.1
Trend in Healthcare Spending

1000 490 160 100 112 122
Value
10 6.1
16.4
17.5
4.2 1 1998a 1999a 2000a 2001a 2002a 2003a
2004a
Healthcare Spending (Rb bn) Healthcare Spending (US$bn) Physicians (per 1000 population)
Healthcare Spending (% of GDP) Healthcare Spending (US$ per head)
Source: US Census Bureau; Economist Intelligence Unit; a actual
In December 2005, parliament approved the State healthcare budget for 2006 after a third and final reading. Some 113.4 billion roubles (US$ 3.9bn) was set aside for the budget, of which 40.6 billion roubles (US$1.4bn) will be used specifically at the territorial (regional) level for much awaited improvements. The president announced that healthcare spending will be increased by 60% in 2006. A planned increase in the rate of unified social tax from 0.8% to 1.1% will partly fund the budget as well as profits from high oil prices. The vast majority of health expenditure is funded through the public sector via the central budget and a mandatory insurance system. The Federal Mandatory Health Insurance Fund (FMHIF) oversees the insurance system and monitors the activities of the Territorial Mandatory Health Insurance Funds (TMHIFs). At a local level the TMHIFs were expected to appoint independent, private sector insurance companies to purchase care and promote competition between third-party payers in a bid to reduce the cost of healthcare. In cases where there are no private purchasing companies the TMHIFs have the responsibility of establishing so-called branch funds (BMHIF) to act as short-
The consolidated budget consists of federal budget and regional budgets.
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term insurers for the local population and make provision for those not covered under the mandatory system. Generally simple and primary medical services are the only ones provided free via the State system, with public health policy of little help to those patients requiring a serious operation or for those in receipt of long-term, expensive and/or sophisticated treatment. The lack of coverage of the mandatory health insurance has resulted in the burden of healthcare spending becoming increasingly the responsibility of employers or citizens themselves - with outof-pocket spending and private insurance driving growth in healthcare expenditure. Out-of-pocket spending increased from 27.5bn (US$ 0.95bn) roubles in 2000 to 87bn (US$ 3bn) in 2004, and is growing at a faster pace than total government spending. Moreover, the low income population are becoming victims of this trend being forced to undergo longer, more painful and lower quality treatments. However, the situation is changing for those entitled to social benefits. At the beginning of 2005, the government introduced a new system of drug reimbursement for these people called Additional Pharmaceutical Provisions (DLO in Russian). Under the old system, people on benefits were entitled to free healthcare and free medications; but due to a lack of financing, the system did not work well especially on a regional basis. As a result, beneficiaries were unable to receive medications and treatments in time or were finding hospitals and polyclinics being short of supply. The new scheme - which provides compensation for medicines from a list of over 1,800 - has seen cash payments to those on social benefits replaced via a discount-card system. These patients can now receive timely medications by purchasing drugs in pharmacies and polyclinics at discounted prices using the money equivalent of their benefits. The price differences are reimbursed to the manufacturer by the government. A lot of pharmaceutical companies are now fighting for the right to supply products under the DLO scheme.
3.03 Structure of the Healthcare System

In recent years, the healthcare system has gradually become more decentralised with more responsibility afforded to the federal regions although the MoH retains a considerable hold over healthcare policy. Russia has 89 federal units comprising republics, provinces and regions with smaller subdivisions at the local level. Federal health departments report to the MoH and are responsible for funding over half of all healthcare expenditure. District Health Authorities (DHAs) play an executive role at local level although, again, their remit varies greatly across the country.
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The lack of the enthusiasm and motivation of many healthcare workers in Russia is noticeable and can be attributed in the main to low levels of pay. The Ministry of Health estimated that the average salary of a doctor in 2004 was 4730 roubles per month (approximately $169). There is of course, much variation from region to region for example doctors practicing in St. Petersburg and Moscow receive around twice that amount, while doctors in smaller cities and rural areas receive in the region of $100 - $135 per month. Salary also depends on the specialisation of the doctor, experience and the institution in which he/she works.
Fig 3.03.1: Russian Healthcare System
The Ministry of Health of the Russian Federation

Federal Mandatory Health Insurance Fund (FMHIF)
Territorial Mandatory Health Insurance Funds (TMHIF)
Federal Health Departments
District Health Authorities
Local Insurance Funds
Health Centres
Polyclinics
Hospitals
Sanatoriums & Health Centres
Other
Health Posts
There are rumours that low remuneration is leading to a decline in the number of doctors in Russia. However, according to the Minister of Health - M. Zubarov - the actual number of doctors
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in the country has grown by 10% over the past 8 years (from 550,000 to 610,000) hence today there are around 6 doctors per 1000 citizens. Statistics indicate that around 60% of physicians are specialists, 20% work in the primary care sector and a further 20% hold administrative and/or research positions.5
3.03.1 Provision of Primary Care

The primary care network overlaps slightly with secondary and tertiary care. General practitioners and other primary care personnel are employed by the facilities in which they work and contracted indirectly to local government, which provides the core funding for primary care services. Some primary care facilities also secure contracts with local insurance funds in order to obtain compensation for services provided to insured patients. It should be noted that many patients in Russia have no primary care physician. Patients have the right to visit any specialist (hospital or polyclinic) without any referral from a GP or nurse.
3.03.11 Health Posts Often found in rural areas, health posts offer immunisation services, basic health examinations and routine examinations. Health posts often treat minor injuries and make home visits or offer emergency services. 3.03.12 Health Centres Generally staffed by a general practitioner, a paediatrician and often a gynaecologist, health centres offer a range of primary health services including the treatment of minor ailments and the supervision of chronic conditions. Physicians at health centres, who are supported by nurses, are permitted to prescribe pharmaceuticals. Health centres offer a limited supply of beds, which can be used to carry out minor in-patient procedures. 3.03.13 Polyclinics Polyclinics offer first line treatment for acute and chronic conditions and longer term chronic care. Staff at polyclinics comprise of a number of general physicians supported by auxiliary staff, as well as other specialists in areas of cardiology, oncology and obstetrics/gynaecology. Patients are assigned to polyclinics by postcode.
The World Market Analysis, Russia, Healthcare Infrastructure
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3.03.2 Hospitals
According to the Russian statistics agency (Goskomstat), there are around 10,700 hospitals throughout the country staffed with highly trained personnel. However, many hospitals and other facilities would require heavy capital investment and increased funding for modern diagnostic and medical equipment to bring them in-line with Western standards. There are a few thousand private hospitals, clinics and other health facilities (around 3,000), which are located in larger urban areas and offer Western standards of care. Many private clinics and hospitals are costly facilities with high-quality equipment and personnel established by Western firms. A large number were established to cater for diplomatic personnel, businessmen and ex-patriots, although the number of Russian patients has increased gradually over the last decade. Nevertheless, establishment of private health facilities remains complex due to bureaucracy and licensing issues.
3.03.3 Health Institutions

A feature of the Russian healthcare system is the existence of huge specialised institutions dedicated to a specific area of medicine, for example the Institute of Oncology, the Research Institute of Cardiology, the Vivalov State Optical Institute, etc. These institutions are well respected and are considered to provide the best of care; institutions also provide outpatient facilities, conduct research and are usually involved in teaching.
3.03.4 Sanatoriums and Health Resorts

There are many sanatoriums and health centres in Russian that have few analogues in the rest of the world (aside from Germany). Here patients are treated using only natural medicines and therapies. Health centres and sanatoriums have become more popular over the last few years due to the stabilisation of the economy and rising disposable income. These facilities are mostly used for:
prophylactic treatments; recovery support; and for those undergoing long-term treatment for chronic diseases.
There are more than 2.4 thousand sanatoriums spread around the country providing around 450 thousands beds the majority being located in the wealthier, European part of the country. According to a report issued by the MoH, the number of beds has been on the increase thus suggesting growth and strengthening of this particular sector of the healthcare system. Statistics
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shows that in 2004, over 5.7million patients received treatment at various health resorts compared to around 5.3 million in 2003. Because health resorts and sanatorium are so popular amongst the Russian population, there has been much investment in constructing new centres and re-developing existing facilities this activity has also attracted much foreign investment. The number of private sanatoriums and health resorts is also on the rise. According to Rosstat (Russian Statistics database); in 2004, 38% of patients treated in these centres and resorts were sponsored by government, 12% were sponsored by their employer and 22% of patients financed their stay as an out-of-pocket expense.
3.04 Health of the Nation

3.04.1 Population Demographics
For much of the last decade, the country has suffered a population decline unprecedented for an industrialised state outside of wartime. Russias population declined from 149 million in 1992 to 143 million in 2003, and in the next 50 years it could fall by 30% to 100 million. With rapid ageing of the population, this fall is increasing the dependency ratio (the ratio of the economically dependent part of the population to the productive part) and producing an economic burden that Russia may not be able to afford, given that its gross domestic product (GDP) is the lowest of all the G8 countries (the eight most industrialised countries).
Fig 3.04.1
Source: EarthTrends 2004, Country Profile, Russia
There are many contributing factors to the population decline including: poor diet, high alcohol consumption, and the general average-to-low standards of living and lack of government benefits outside major cities. The latter being the major concern discouraging people from starting a
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family. However, because the Russian economy is developing fast, small cities and towns are becoming wealthier as more and more employment opportunities are created.
3.04.2 Life Expectancy and Causes of Death

Russia is one of the few developed countries where life expectancy has fallen in recent years. Massive regional variations in life expectancy exist. The situation is at its worst in the Far North and Far East, as well as in many rural areas due to both environmental conditions and low incomes. Russia's total life expectancy of 66 years lags behind that of Japan by 16 years, the European Union by 14 years, and the United States by 12 years. High mortality and morbidity from non-communicable diseases, along with a low birth rate, mean that Russias overall population is rapidly becoming smaller and sicker. The situation is compounded by the stresses
related to economic transition - collapse of the social safety net, lack of strict road safety measures, poor diet, and sedentary lifestyles. Furthermore, when the burgeoning epidemics of HIV infection, multiple drug resistant tuberculosis, intravenous drug use, sexually transmitted disease, and hepatitis C are also taken into account, the severity of Russia's health crisis is magnified substantially.
Mortality for Russian men substantially exceeds that in countries with similar per capita income levels. Within Russia, mortality varies fourfold between regions, and differences in life expectancy can be as much as 18 years. The picture is different for women, who live about 14 years longer than men much greater than the average gender gap of eight years found in other G8 nations. Morbidity and mortality from non-communicable diseases and injuries - the leading causes of death - in Russia are three to five times higher than average rates in the European Union. At 994 per 100 000, Russia has one of the highest death rates from cardiovascular disease in the world, accounting for 52% of all deaths nationally each year. Similarly, the rate of traffic injuries, at 20.6 per 100 000, is double that in EU and G8 countries, and the rates for cancer mortality, homicide, and suicide far exceed EU levels.
Fig 3.04.2: Causes of Death in Russia
Causes of Death Per 100,000 citizens 2001 Total Includes: Circulatory diseases Cancer and cancer related problems 869.4 204 913 204.5 927.5 202.5 895.4 201.7 1564.4 2002 1627.9 2003 1636.5 2004 1596
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External causes Out of which: Alcohol poisoning Road accidents Suicide Murder Respiratory disease Digestive disorders Certain infections Includes: Tuberculosis
230.1
236.8
233.6
227.5
28.5 28.3 39.7 29.8 65.9 482 24.5
31.2 29.1 38.6 30.9 70.5 52.7 25.8
31.4 30.3 36.1 29.1 70.5 56.8 25.9
29.7 29.1 34.3 27.3 64.6 59.3 25.7
20
21.8
21.9
21.4
Source: World Market Analysis, Healthcare, Russia, 2004
In 2003, deaths from cardiovascular disease, cancer, and injuries accounted for 15.2 million lost years of potential life. Around 75% of deaths and 46% of the disability adjusted life years (DALYs) in Russia can be attributed to high blood pressure, high serum cholesterol, and tobacco use. Six out of 20 men smoke, but alcohol is also a big killer, accounting alone for 16.5% of the total DALYs lost in 2002.
3.05 Disease Prevalence

All patients with diagnosed pathologies are registered in regional databases - every year there are around 200 million new disease registrations, the most frequent being:
respiratory disease (26%), cardiovascular disease (11%), and digestive disorders (8%).
Moreover, every year around 1million people become registered as disabled. Lifestyle ailments like heart diseases and diabetes are on the increase.
Fig 3.05: Number of Registered Patients, 2004 Disease Type Total Number of Registered Patients Cardiovascular (per 100,000 citizens) Malignant tumour & other oncology (per 100,000 citizens) Tuberculosis (per 100,000 citizens) 81.3 21,840 326
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Diabetes Drug Addiction Alcoholism Mental Disorders Sexually Transmitted Diseases HIV/AIDS (estimated) Hepatitis
2.3ml 342,000 >3.5ml 7.7ml >730,000 860,000 (>1.3ml) >5ml

Source: The Russian Ministry of Health statistics
3.05.01 Cardiovascular Disease

Over the last 40 years cardiovascular disease (CVD) and stroke mortality rates in Japan, Western Europe and North America have fallen very sharply. In the US, for example, the age-adjusted decline between 1965 and 2000 was over 56%. Russia, by contrast, suffered an explosion of cardiovascular deaths over the same period. In 2004, 285,000 adults were newly registered bringing the total number of patients registered with cardiovascular disease to 24.8 million in this year. The increase in cardiovascular mortality has been attributed to stress brought on by the social and economic changes; alcoholism, which is on the rise in both men and women; tobacco smoking and a more sedentary lifestyle with very little focus on any exercise other than walking. Because many of the elements associated with the surging mortality rate are connected to social behaviour and the need for education, there is little hope that the government, with its regionally limited medical infrastructure, will be able to incorporate enough changes to slow or stop the trend in the near future. However, improvements in the quality of diagnostic procedures have resulted from the development and implementation of regional healthcare programs.
Fig 3.05.01: Number of Patients with Circulatory Diseases Disease groups and other illnesses Absolute Numbers 2003 Blood circulation disorders Hypertension Ischemic heart disease Out of which: Stenocardia Acute myocardial infarction 2,429,577 163,776 2,639,814 166,803 2,166.50 146 2,329.20 147.2 22,671,358 6,945,151 5,867,346 2004 24,754,099 7,883,877 6,262,714 Per 100,000 citizens 2003 20216.4 6,193.1 5,232 2004 21 841.6 6,956.3 5,525.90
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Repeated myocardial infarction Complications following myocardial infarction Other major ischemic conditions Cerebro-vascular disease Endarteritis, thromboangitis, obliterating endarteritis Other
24,471 2,817 45,321 5,603,262 435,794
24,305 2,812 50,201 6,169,500 471,460
21.8 2.5 40.4 4,996.50 388.6
21.4 2.5 44.3 5,443.60 416
3,819,805
3,966,548
3,406.20
3,499.8
Source: The Russian Ministry of Health statistics
3.05.02 Cancer
A major unmet need in Russian healthcare is the development of a system that allows for the early detection and diagnosis of cancer. Currently, a large percentage of different cancers are only detected at very late stages (III-IV):
69.5% of mouth and throat cancers; 57% of intestinal cancers; 39.5% of cervical cancers.
Patients themselves are partially to blame - around 30% of patients only present at late stages (there exists a mentality of not wanting to bother the doctor). Surgery is the most popular treatment for malignant tumour (44. 3% of cases). Around 18% of malignant tumours are treated by radiotherapy. Drug treatment is quite rare and only used in about 6% of cases - on average only around 2.6% of cases receive chemotherapy simply because the money is not available to pay for it.
Fig 3.05.02: Number of First-Time Patients with Malignant Tumour (per 100,000 citizens) Localisation Per 100,000 citizens 1999 Total malignant tumours Oesophagus Stomach Colon Rectum Pancreas Trachea, bronchial, lungs 302.5 5.4 33.5 17.4 14.2 8.9 43.2 2004 326.3 5 30.8 20.3 15.9 9.3 41.2 6,9 -8 16.5 11.6 4 -6.1 % Change*
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Skin - malignant melanoma Other malignant skin tumours Kidney Bladder Thyroid gland Lymphatic and haematopoietic tissue
4 31.6 8.8 8.1 4.8 13.3
5.1 37.8 10.7 8.7 5.8 15.2
24.2 16.9 21 8 17.4 13.9
* The percentage change has been adjusted for disease dynamics for the 5 year period
Source: The Russian Ministry of Health
3.05.03 Tuberculosis
Tuberculosis remains a problem in Russia; however, a new and more thorough system has been put into place to control the spread of the disease through earlier diagnosis and more effective treatments. As a result, there has been a significant reduction (8.4%) in the tuberculosis epidemic over the past 4 years. Improvements in the standard of living in the poorer areas are needed to offer the hope of further stabilisation of the tuberculosis situation in the country.
3.05.04 Diabetes
Russia occupies third place in the top 10 of countries with the highest number of people with diabetes in the world obesity is on the increase, unhealthy diets high in fatty foods and alcohol over-consumption all contribute to health complications in the Russian population. In 2004, there were 2.3 million patients registered with the diabetes, of which 260 thousands were registered with type I diabetes; but according to the International Diabetes Federation (IDF), it is currently estimated that diabetes is present in approximately 9.613 million people - 90% of which have diabetes type II. Such a large number of unregistered cases can be attributed to a lack of awareness on the part of people with diabetes and of healthcare professionals. In general, most cases of diabetes are only detected by general practitioners when patients present with other health concerns.
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Fig 3.05.041: Prevalence of Diabetes Type I in Selected Russian Regions
Bryansk Region Mari-El Republic Kalmikija Tambov Region Nizhny Novgorod Region Perm Region Moscow Region Komi Republic Orlov Region Tver Region Saratov Region
0 50
66.5 75.3 78 102.6 112.2 122.2 132.1 156.2 175.4 185.9 249.1
100 150 200 250 300
Number of patients with Diabetes Type I per 100 000 people

Source: The Ministry of Health of Moscow region, Diabetes epidemiology report, 2004
Fig 3.05.042: Prevalence of Diabetes Type II in Selected Russian Regions

Tver Region Bryansk Region Orlov Region Kalmikija Mari-El Republic Tambov Region Perm Region Komi Republic Saratov Region Nizhny Novgorod Region Moscow Region 0 200 400 600 800 1000 1200 1400 1600 112.1 579.5 685.4 714.9 817.8 839.5 1242.9 1266.1 1345.1 1671.9 1744.7 1800 2000
Number of patients with Diabetes Type II per 100 000 people Source: The Ministry of Health of Moscow region, Diabetes epidemiology report, 2004
3.05.05 Drug Addiction and Alcoholism

Another burden on the health system is the spread of addictive disorders - around 2.4% of the total Russian population are affected. Alcoholics account for the majority (over 84%) and in 2004, it was estimated that about 70% of men and 47% of women were drinkers; with spirits comprising three quarters of the total alcohol consumption. However, the alcohol addiction growth rate is
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reported to be slowing down 8.4% in 2003 compared to 4.3% in 2004. Psychological diseases caused by the alcoholism are also on the increase. Drug addiction is also a growing concern with the majority (88%) being addicted to opium. The total number of hospitalisations due to addictive disorders has been on the increase and amounted to 707 thousand in 2004.The increase was mainly driven by the rise in hospitalisations due to alcoholic connected disorders (1% increase).
3.04.06 Mental Disorders

In 2004, there were over 7.7 million patients registered with mental disorders - most of those being over 18 years of age, but a significant number of 0 -14 year olds (>800 thousand) also suffer with some form of psychological disease. Overall, the mental health of Russia's population has deteriorated considerably over the past decade and the number of newly registered patients is on the increase (4.9% increase from 2003 to 2004). Not all people have access to psychiatric assistance in Russia. The reason for that is the high number of regions, low population density, and the low level of development of transport networks. In addition, psychiatric clinics receive only about 50% of the funding to which they are entitled. At the same time, the ongoing State program for the development of psychiatric services is aimed at "making psychiatric assistance available to the wider population." To achieve this goal, it is planned to open psychiatric rooms in polyclinics and psychotic sections in hospitals. However, these plans are not being implemented as fast as wished to date.
3.04.07 Sexually Transmitted Disease (STD)

In the 1990s, Russia experienced a rapidly increasing incidence of syphilis and gonorrhoea sterility caused by STD is also the hidden factor behind the collapse of Russia's birth rate. But STDs are now on the decline the number of registered patients is almost 3 times less than in 2001, standing at around 730 thousand in 2004. However, experts do not believe that this reflects reality. The trouble is that the official figures are based on records generated by the system of state registration of diseases inherited from Soviet times. The recent rapid expansion of commercial medical services offering anonymous treatment without registration removes an increasing proportion of cases from the statistics. Moreover, even where registration does still occur it tends to be at a later stage of the disease, as people delay seeking treatment for economic reasons - in particular, out of fear of losing their job if their employer finds out that they are syphilitic. This shift also biases the figures downward.
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The number of people carrying and suffering from syphilis in Russia remains very high - more than 10 times greater than in Europe and the younger the age group, the faster the spread of syphilis within it. Thus between 1992 and 1998 the prevalence of syphilis increased by 5.5 times among adults, but by 17 times among children under 15. Unlike the figures for adult syphilis, those for child syphilis have continued their upward trend in the last few years, presumably because the economic motives for concealment do not apply to children. The incidence of congenital syphilis, which is largely preventable, is high because many infected pregnant women are treated inadequately or too late in their pregnancy. There is also a developing concern in the country about treatment resistant Chlamydia trachomatis and human papilloma virus (HPV). Alternative treatments to antibacterial drugs need to be approved and included in treatment lists for Chlamydia and there is a growing need for the early diagnosis and treatment of HPV.
3.04.08 HIV
Fig 3.04.08: HIV Registrations
Number of new HIV cases registered in Russia
60 52,342 50 39,699
Thousands
40 30 20 10 0 2002
33,000
2003
2004
Source: UNAIDS
Russia has one of the fastest growing Aids epidemics in the world, with 100 new infections every day and accounting for 70% of all cases in the Eastern Europe and Central Asia region. There were an estimated 860,000 people living with HIV at the beginning of 2004, but it is widely acknowledged that this figure is vastly underestimated and there could be closer to 1.3 million HIV infected individuals in the country. Many HIV/AIDS cases are among the young (18 29 years) and the problem is no longer limited to injecting drug users. Increasingly, women and their infants are being affected (roughly 40% of all new registered cases of HIV in 2004 were women, most of who are of childbearing age).
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The number of new HIV cases being reported is falling however, with 88,577 new cases reported in 2001, 52,349 new cases in 2002 and 39,699 cases in 2003. This reduction could be due to fewer people being tested, or it could be that HIV prevalence rates have reached saturation point amongst injecting drug users, or it could be that there is a real reduction in the growth rates of HIV amongst adults resulting from heavy anti-AIDS campaigns.
3.04.09 Dermatologic Diseases

The prevalence of dermatologic disease is considered an epidemic. Over the past 10 years there has been a 16% rise in dermatological disorders with almost 9 million dermatologic patients registered in 2004 this equates to 6% of the total population and around 7% of all diseases. This figure continues to rise.
3.04.10 Injuries, Poisoning and Other Accidents

Over the last few years the number of injuries, poisoning and other accidents has been constantly rising. In 2004, the absolute number of injuries was in excess of 13 million. Out of every 100 people, 9 -10 are receiving injuries that require medical help or even hospitalisation. The number of injuries/poisoning amongst the teenaged population is the greatest being 6% more than that amongst children and 12% more than that amongst adults.
3.04.11 Hepatitis
There is a high incidence of infectious disease in Russia, hepatitis in particular. In 2005, the healthcare system was stretched by another hepatitis A outbreak. This event was associated with the consumption of contaminated food and liquids; some even claim there to be terrorist links. The rates of hepatitis A decreased during the 1990s thanks to improvements in water supply and better quality food stuff; but the rates of hepatitis B and hepatitis C increased steadily. Reasons may be a sharp increase in intravenous drug use, lack of hygiene, and high-risk sexual behaviour. Half the patients with acute hepatitis B and hepatitis C are 11 to 30 years of age. Mass vaccination of children against hepatitis B and support for the development of a vaccine for hepatitis C are needed to control these diseases. Yet the population does not participate in vaccination programs actively; the reason being that in most cases they have to fund it at their own expense, and a vaccine against hepatitis costs about $100 which not everyone can afford. Nevertheless, the fact that vaccinations will be funded by the State from 2006 will help to improve the situation.
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It is estimated that about 200 thousand carriers of the hepatitis virus and about 75 thousand people with chronic hepatitis are identified in Russia every year. In 2004, in excess of 5 million people were registered with hepatitis in Russia - with hepatitis B forming around 10% of cases, and hepatitis C, 80% of cases. The numbers of newly registered cases and of chronic forms of the disease are growing. The incidence of all forms of hepatitis vary on a regional basis and depend largely on the availability of emergency and hospitalisation services, as well as the underlying socio-economic conditions.
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4.0 Clinical Trials in Perspective

4.01 History of Clinical Trials in Russia
Large-scale clinical trials have been conducted in Russia since 1989. The major driver for the increased interest by Western pharmaceutical companies to include Russian sites in multinational projects has been the enormous enrolment potential which offers a solution to the competition for patients among clinical trials in North America and Western Europe. There are a large number of hospitals that are huge and highly specialised, as though they were specifically designed for clinical research. These medical centres may have modest interiors but this does not preclude their clinicians from doing quality work. However, back in 1989 when interest in Russia first began, regulators and the medical research community were largely unaware of good clinical practice (GCP) and clinical trials were not governed by any regulations anyone could do anything. There was the Constitution of the USSR, which protected patients rights, but that was it, ethics committees had yet to be established. The Clinical Pharmacological Research Institute (CPR) carried out the first translation of the GCP guidelines in 1989. A decade later in 1999, the official text of ICH GCP in Russian was published. That same year the Russian language version of GCP - National Standard OST 42-511-99, a close translation of ICH GCP - became a part of national regulations on clinical research. The whole process took so long because domestic regulators did not want to accept international rules; instead, they wanted to produce their own national GCP guidelines in support of Russian drug companies who did not have the resources to conduct well-designed clinical studies. In the interim, double standards operated GCP for Western pharmaceutical companies, and RussianGCP for poor domestic drug manufacturers; until in 1999, when it was finally agreed by a new generation of Russian officials that it was not wise to continue operating the double system. At the same time, at the end of the 80s, no customs regulations were in place therefore, any drug could be imported. It was up to each customs-house officer to decide what could cross the border. The situation was even worse in the field of communications. Faxes and copy machines were prohibited by law. There were no automatic phone connections, no private foreign economic activity, no hard currency transfers from abroad, and no money exchange points. Foreign pharmaceutical companies had no representative offices in Russia. Things have changed drastically, and nowadays an established system of national regulations for drug development and clinical research exists, with clinical trials being approved in a way similar to that in the West. More than a hundred foreign pharmaceutical companies are now accredited in Russia, mostly
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located in Moscow. In addition, many international companies which do not have representation in Russia still conduct clinical trials there. Many major CROs have opened representative offices and in addition, there are several local CROs. Moreover, some federal medical and science institutions, while undertaking scientific research projects and developing new technologies, also engage in large programmes for helping practical healthcare such as clinical research and drug discovery.
Fig 4.01.01: Medical Institutions Involved in Clinical Trials in Russia, 2005
Educational institutions, 29.20%
Clinical hospitals and outpatient clinics, 39.20%
Scientific institutions, 31.60%

Source: www.regmed.ru
Companies involved in the organisation of clinical trials in Russia include: representative offices of pharmaceutical companies; representative offices of the international CROs; and CROs of Russian origin.
Fig 4.01.02: Companies Involved in Clinical Trials in Russia 2000-2005
55% 37% 21% 10% 42% 25% 29% 46%
35%
2000-2003
2004
2005 (Q 1-3)
Local pharmaceutical and biotechnological companies International pharmaceutical and biotechnological companies Contract Research Organizations
The number of these companies has grown amazingly fast during the last few years, especially the numbers of Russian CROs.
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4.02 Growth in Trials

The number of clinical trials conducted in the country has increased considerably over the past 10 years and this trend continues with on average close to 100 new trials being approved every year. Interestingly, the number of trials outsourced to specialised CROs is also growing allowing international companies to benefit from local recourses, intelligence and expertise.
Fig 4.02.01: International Clinical Trials Approved in Russia, 1992-2005
250 200 150 100 50 0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 (Q1-3)
Source: www.regmed.ru/
The slight decline in the number of clinical trials approved between 2003 and 2004 can be attributed to the increase in the number of mergers and acquisitions in the healthcare sector worldwide at that time. Post-integration companies focus on internal reorganisation thus we see an increase of number of trials in 2005 as these new entities resume normal operations.
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Fig 4.02.02: Multi-Centre Clinical Trials in Russia by Therapy Area, 2005
4.03 The Russian CRO Industry

When clinical trials first came to Russia, foreign pharmaceutical companies had no representatives in the country. Thus, they started to work through local groups of researchers. The first group was based in the Research Institute of Cardiology in St. Petersburg which later became the CPR Institute. The first CROs began to appear around 1990 - the first three were:
The Clinical Pharmacological Research (CPR) Institute (St. Petersburg); PSI Pharma Support Inc. (St. Petersburg); and Innopharm (Smolensk).
The role that these first three played in shaping the clinical research market in Russia cannot be underestimated. They translated GCP guidelines and introduced them to regulators, medical professionals and the community; implemented the most reliable communication technologies; established data management systems; and implemented modern methods of statistical analysis. They created comprehensive standard operating procedures (SOPs) and invented effective project management technology. In the early days, there was no competition each CRO worked in its own niche. The second half of the 1990s was marked with rapid development of local CROs as well as an invasion of international ones.
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There are currently around 10 international and domestic CROs in Russia the largest domestically owned companies include: (for a more detailed profile see the Appendix)
PSI Pharma Support - now the largest CRO in Russia and CIS running trials across 11 times zones, from Kaliningrad in the Far West to Yuzhno-Sakhalinsk in the Far East; CPR Institute, now called Evidence-CPR - the first CRO to conduct multinational clinical trials in Russia and Eastern Europe. With offices in St. Pertersburg, Moscow, Siberia, the Republic of Georgia, and Ukraine the company has moved its corporate headquarters to California, USA in order to better serve study sponsors; Innopharm Ltd founded by the faculty members of the Department of Clinical Pharmacology of Smolensk Medical Institute, originally as an SMO. InnoPharm has since expanded into an independent CRO offering a wide range of services across Russia and Ukraine; Congenix based in Moscow, this independent CRO operates in Russia and in the countries of the former USSR; RCT Global - established by a group of research professionals in 2001, the company is located in St. Petersburg and performs clinical research across the breadth of the Russian Federation, in the former Soviet Republics and in Eastern Europe; OCT (Outsourcing Clinical Trials) - a CRO with head office in St. Petersburg, Russia. The company was founded to provide services to Pharmaceutical companies interested in conducting clinical trials in Russia, Ukraine, Baltic States, Bulgaria and Eastern Europe. At the beginning of 2006, OCT expanded its operations into Latvia and Lithuania.
The main difference between Russian CROs (including the Russian offices of international CROs) and CROs in other countries is that in Russia all clinical research associates (CRAs) are medical doctors. The CRO is able to pay much higher wages than government owned medical institutions, and can therefore select the best, most highly experienced professionals. Many CRAs speak fluent English, which helps a great deal in communication between investigators and sponsors, in monitoring, in reporting, and so on. Russian CRAs are trained in GCP, and many are also members of international professional organisations such as DIA and ACRP. Russian CROs provide the full spectrum of services including regulatory submissions, medical monitoring, project management, handling clinical trial supplies, reporting, medical writing, and so forth.
4.04 Why Conduct Clinical Trials in Russia?

Russia ranks highly among other Eastern European countries on the availability of basic medical resources for conducting clinical trials.
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Fig 4.04.01: Medical Resources in Selected Eastern European Countries Country Major Cities Physicians per 1000 inhabitants Medical Universities Hospital Beds per 1000 inhabitants
Czech Republic Hungary Latvia Lithuania Russia (European part) Slovak Republic Ukraine
1 1 0 0 13 (9) 0 5
3.4 3.6 3.2 3.8 4.2 3.2 4.6
5 4 2 2 55 3 18
8.6 8.4 8.7 9.2 13.1 8 10.4
Source: the Imformer GmbH, Newsletter, June 2003
At present, most clinical trial work is conducted in Moscow and St. Petersburg (owing to better infrastructure, higher population and the presence of major research centres); while the wellequipped academic sites located to the east from the Ural Mountains in Siberia to the Far East (rich regions due to their enormous natural gas and oil resources), remain largely underused.
Fig 4.04.02: Potential Russian Sites
4.04.01 Benefits of the Post-Soviet System

The Soviet structured central healthcare system created large medical institutions specialising in specific therapeutic areas. These institutions, both general and therapeutically aligned, have large patient pools to draw from making enrolment in clinical trials very accessible to the patient and rapid for the sponsor.
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In addition, many of the medical practices in Russia call for hospitalisation, when in the West the same treatment may be done in an outpatient setting. Hospital costs, as part of standard practice, do not add to the trial expenses. The additional level of attention is helpful in informing the patients of their obligations in the trial and providing the opportunity to more closely monitor and instruct the patients early on, thus helping to facilitate compliance. In summary benefits of post-Soviet system include:
A centralized medical system with a chief specialist in each major area; Huge specialized research centres, for example: Cardiology Oncology Infectious disease Psychiatry
Giant multipurpose hospitals in regional centres; Large number of hospitals in cities (> 50 in St. Petersburg alone).
4.04.02 Access to Investigators

Access to experienced, highly motivated and compliant investigators:
Minimum of 6 years in medical school, 2 years in residency, 3 years of specialisation; Licensed every 5 years by the authorities; Certified in GCP and experienced in clinical trials; At least 40% are University professors, around 60% possess PhDs and at least 90% have more than 10 years of professional experience; Many speak English fluently, attend international conferences, and are members of European and American professional societies.
Investigators are highly motivated to participate in multinational clinical trials for several reasons. First, taking part in a global project gives them an opportunity to interact, directly or indirectly, with the international medical community from which they were almost entirely excluded during the Soviet era. Second, Russian clinicians are scientifically curious and the pioneering essence of a new drug always presents an additional incentive for them.
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Third, most investigators are very eager to get familiar with new quality standards and methodological approaches. This is why the GCP concept is normally readily accepted by clinicians who have had no prior practical experience with the guidelines. Finally, the financial component of sponsored clinical trials is extremely important. It is no secret that many physicians in Russia are grossly underpaid. Understandably, investigator fees represent vital support to both investigators and ancillary personnel.
4.04.03 Cost Saving Opportunities

Man-hours are much less expensive in Russia than in the West, so labour can be found at significantly reduced rates. Although some Russian CROs have begun to globalise, and are realising the financial responsibilities of that growth, there are still many local CROs that can provide significant savings in clinical fees. Experienced regional CROs can provide savings upwards of 20 - 50%, compared with those in the West, while still providing experienced MDs as project managers and monitors.
4.04.04 Access to Patients

The demographic setting in Russia can be termed as fast recruitment-friendly. Approximately 150 million people live in the Russian Federation and about one half of those live in town. There are more than 10 cities in Russia with a population exceeding one million people. Almost all patients with diagnosed pathologies are registered in databases managed by their regional healthcare administrations; and data on newly diagnosed patients is collected within these databases on a regular basis - at least annually.
Fig. 4.04.040: Patient Reservoirs, 2002 (millions)
Russia, 150
Sour ce: EVI
European Newly Independent States, 80 Non-members, 34
DEN
European Union, 394
CE Clini cal & Phar mac eutic
Candidates to EU, 168

h, 2003
al Res earc
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The region offers huge numbers of treatment nave patients particularly in oncological, cardiovascular, neurological, respiratory and infectious diseases. As a result, Russia often participates in multi-national mega-trials contributing thousands of patients. This huge and well-educated patient population participates in clinical trials because of a specific medical need. These patients tend to make all the planned appointments and comply with treatment as directed they take all the required medication, they fill in the questionnaires and diaries, and only very rarely do they withdraw their consent. Unlike Western patients, Russian patients hardly ever move from place to place. They usually spend their whole lives in the place they were born. That is good for research and follow-up purposes.
Fig. 4.04.041: Profile of Russian Patients
Academic Degree, 5% Secondary, 7%
University, 38%
High School, 50%
Source: S.Varshavsky et al., GCPJ 2002; 9 (11):11-14
4.04.05 Fast Recruitment Rates

The pace of patient enrolment is rapid, averaging between 2 4 months ahead of sites in more developed areas. Patients in Russia are both eager to participate and extremely compliant. Given the overall healthcare situation of Russia, it is not difficult to understand why patient enrolment continues to be so strong. Typically, the treatment provided in clinical research is better than the standard of care available through the national health services. The protocol requirements for complete physicals and more personal interaction with the investigator may in itself offer incentive enough to join a trial. Combined with the additional incentives of Western medicines and therapies, it is easy to see why the prospective patients are excited to participate.
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Individual patient benefits combined with social factors (a centralised healthcare system, a lack of competition due to the low number of clinical trials in Russia) makes for a fast recruitment environment.
4.04.06 Patient Compliance

Many patients in Russia require specific treatments that are beyond their reach. Participation in clinical trials is a good opportunity for them to get the appropriate long-term treatment because it offers patients free access to:
The best medical facilities The best diagnostic methods; The best physicians; and Potentially the best medications (if it is not a placebo).
Their only cost is to be compliant, which they consider more than acceptable. The high educational level in general with no illiteracy means that there is a high level of understanding in the nature of research and the need to follow treatment regimens. In addition, the combination of a greater respect for authority compared with the West and a settled way of life provides an explanation for a higher level of compliance among patients in Russia. Cultural differences between East and West result in:
Higher acceptance rates; More disciplined patients; Increased compliance with physician instructions; Low drop out and low lost to follow-up rate.
It is worth mentioning two other cultural differences: firstly Russian patients use alternative medicine, particularly physical therapy, herbs, acupuncture, and massage far more frequently than their Western counterparts; and Russian doctors use autopsy several times more frequently than in the West.
4.04.07 Quality of Work

Despite rumours and existing prejudice, Russia remains a solid and reliable arena for conducting clinical trials cases of fraud in general, have been found to be much less frequent than in the United States.
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The European Forum for GCP (EFGCP) supports initiatives for developing better conditions for clinical trials in and around Europe since 2000 it has been supporting efforts in Russia to conduct trials to world quality standards thus paving the way for todays sponsors from the research-based pharmaceutical industry to place their studies in the region with confidence. FDA audit data suggests that data quality in Russia is at least as good as that from other regions around the world.
Fig: 4.04.07: Summary of FDA inspections performed in Eastern European countries, January 1 1994 to March 31, 2002. Country Number of Inspections Czech Republic Croatia Hungary Poland Romania Russia Slovenia Total 2 2 6 5 1 6 1 23 NAI 1 0 2 4 1 4 1 13 Observations VAI 3 4 8 1 0 7 0 23 OAI 0 0 0 0 0 0 0 0
NAI = no action indicated. VAI = voluntary action indicated (objectionable conditions found but justifying only local measures and not any further regulatory action). Any correction is left to the investigator to take voluntarily. OAI =official action indicated. Source: http://www.fda.gov
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5.0 Clinical Trial Issues

5.01 Study Costs
On average, investigator grants are tangibly smaller than in the West and this may represent a substantial saving when a large number of patients are allocated to Russian sites. However, it would be wrong to imply that the cost of clinical studies in Russia is lower than in the United States or Western Europe. It is still possible to save on investigators fees, but local insurance requirements, the imposition of customs duties (including 20% VAT), along with the higher cost of courier services, telephone, and internet communications; will even out the differences. Pharmaceutical sponsors should also be prepared to bear additional costs for miscellaneous items such as installation of additional equipment at study sites. This might be a modern fax machine, a laptop, a filing cabinet, biopsy needles, vacutainer tubes and the like. On the other hand, clinicians taking part in large projects are now learning to reinvest a portion of their studyderived income in computers, communication systems and new diagnostic equipment. In some studies, it may be important to supply concomitant medication to the sites in order to standardise therapy across participating centres. The cost of concomitant treatment in combination with additional equipment may well push study costs over the level incurred in more developed countries. Nevertheless, these added costs are outweighed by the speed of study completion often shaving weeks, if not months off overall study times in comparison to the United States or Western Europe and time costs more than money. To minimize costs, it is advisable to do as much locally as possible, both in terms of basic resourcing (e.g. CRAs) and management (such as negotiation with investigators and local providers).
5.01.1 Investigators Fees

To date fees in Russia have not been higher than in the West - often they are much lower but the amount paid will depend on a number of factors, aside from particular local circumstances. Involvement of the sponsor's local affiliate in negotiations will, in general, tend to keep the price down. On the other hand, sponsor or CRO head office's involvement will tend to raise the price (although this is not often recognised), either due to a lack of local knowledge in negotiating, or because of a perceived need to pay all investigators in a multi-country clinical trial the same (or similar within a tight range). Sponsors are often uncomfortable that an investigator in the United States may receive three times the pay per patient for the same work compared to those in Russia.
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Lastly, one must consider the investigator's expectations based on previous experience with Western sponsors (which will again tend to inflate the price). As with so many issues, this is always best handled by local agents, who will be able to negotiate a fair, low (compared to Western investigators) but motivational price, without engendering any bad feeling.
5.01.2 Equipment Expenses

Instances may arise where investigators, whose medical qualification and access to adequate patient population would make them perfect performers, but the lack of particular equipment or means of communication (such as internet lines, fax machines, scanners etc.) could present an obstacle. In addition the site may lack some diagnostic equipment that is absolutely necessary for the conduct of the study, (e.g. a flow-cytometer, CAT-scan, computerised treadmill, etc). A third party can always be hired to perform certain tests or else a possible solution is to supply equipment to such high recruitment potential sites prior to the study, with arrangements for the payment of the equipment from investigators grants. The equipment and experience then qualifies the site for future trials, an approach which can be beneficial to both the sponsor and the investigative site. Of course, considerable local expertise is required when choosing such an approach, and it should be noted that most equipment costs (such as a laptop, fax machine, modem) will follow international prices, and not be cheaper locally.
5.01.3 Monitoring Expenses

Monitoring expenses will be much lower for a local monitor, however a Western monitor travelling on a co-monitoring visit may well experience prices similar to what they are used to in the West, as they will tend to stay in international hotels at standard rates. As stated above, careful thought must be given when considering sites away from principal cities. The monitoring travel time can be considerable, as even local monitors can be reluctant to fly on some local airlines. Also, the time cost involved for a Western monitor on a co-monitoring visit or QA auditor must be considered.
5.02 Language
Usually the following documents must be translated into Russian:
i. ii. iii. Patient information and Informed Consent Form (ICF); Labels of the investigational product; Study protocol and investigators brochure; and
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iv.
Investigators and site contracts.
Although the vast majority of investigators are fluent in English, language skills among study staff can be a problem:
Good enough for reading, but not for listening or fluent verbal communication; CRFs can remain in English but templates in Russian are very helpful; Training in Russian is an important requirement for setting up studies; If investigators do not have a good command of English, then do not be ask them to make free-text CRF entries in English. The results could be partially or totally incomprehensible records, which in turn will impede in-house review and data entry; It may also be appropriate to offer translation assistance during investigator meetings even where individuals can read and comply with the protocol.
Among medical professions, knowledge of spoken language is usually weaker than written, because improvement of language skills is acquired mainly through reading of scientific papers and not through personal contacts. Russian investigators may often hesitate to speak English because they are afraid of misperceptions due to their accents, pronunciation, or poor vocabulary, although their general knowledge of English is very good. It is important, therefore, to encourage the investigators to speak out and to pose questions. If you wish to attract the attention of Russian investigators, communicate in the local language, particularly in the study newsletters. This will significantly increase interest in the study.
5.03 Logistics
Good communication is a key factor in the success of any clinical trial, and attention to communications: written, telephonic, and travel, are important to success when operating in Russia. Working in large population centres will optimize logistical considerations in relation to travel (for both subjects and the sponsor), communications (postage and telecoms), and any requirements for more advanced IT services. Local-based support both for monitoring and other issues, preferably within the population centre, will further expedite the processes.
5.03.1 Travel
Getting patients and CRAs to the right place at the right time is a fundamental concern in a study. Travel arrangements in Russia, notably outside major cities, can be interesting and should be reviewed carefully before committing to a particular site.
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Throughout the world, rural populations have greater travel requirements than city dwellers, and this is the same in Russia. It is therefore natural to focus on principal cities as the starting point for site and patient recruitment, with their high-density populations. Moscow and St. Petersburg enjoy the best infrastructure in the Russian Federation and also have high populations (>10 million and >5 million, respectively); however, there are 8 further major cities that have a highly developed communications infrastructure and populations in excess of 1 million. Perhaps more important from a patient point of view is the practical organisation of the Russian healthcare system - primary and specialist care is organized around very large hospitals serving very large populations. Once diagnosed, patients are quickly referred to specialists for treatment, or they can go directly to the specialist without a referral. The key point here is that study subjects in Russia expect to travel to large specialist centres for treatment. This is of considerable advantage for clinical trials. CRAs undertaking their monitoring duties also benefit from these arrangements. Journeys are shorter, time on site more productive, and several sites are often within easy reach within a single day. The problem is often the number of study subjects to be reviewed. In conclusion, the value of each site to the study needs to be considered carefully to ensure that any travel difficulties or increased travel costs are compensated for by the contribution of the site to the study, and plans are in place to respond to the requirements of unforeseen travel.
5.03.2 Mail and Courier Services

Careful consideration must be given to confirming how mail, packages, and other deliveries or pickups will be made. While robust in general, the postal and delivery infrastructures may not perform to service standards common elsewhere. Courier services may not be able to guarantee delivery times, sometimes due to the courier's own organisational issues and sometimes due to "paperwork," of which customs clearance is the most significant. Close local attention to this is essential, even if a Western courier's headquarters have given assurances of support and service levels. Familiarity with the specialist needs of clinical trials by Russian courier services is often not as well developed, and may be completely lacking. If courier times are long or unreliable, and critical samples have to be transported under particular conditions back to a central lab, prior understanding of how this can be achieved is essential to success. Contingency planning will help here to both respond to these issues should they arise, and to offer study teams clear approaches to balancing scheduled with unscheduled work.
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5.03.3 Communication
While considerable progress has been made over the past 10 years to improve the communications infrastructure, it is still the case that large variations in equipment and service levels occur. It is therefore essential to review the electronic communications requirements against study requirements, especially when Internet (TCP/IP)-based services are required. The general telephone (voice) infrastructure does not usually present an issue. Where the telephone infrastructure has been upgraded, it is often as good as comparable Western systems. In some instances there is limited access to long distance and international lines but a solution here is to provide pre-paid calling cards. In private buildings (field CRA locations, private clinics) or in more remote locations, older systems may still be present and need to be accommodated (buildings where the exchange has been upgraded, say, but the distribution to individual locations has not). Situations such as this may cause problems if, for example, an IVRS randomisation system is to be used. If the telephone system itself is satisfactory, facsimile transmission will usually be unproblematic. But if fax technologies are essential to the study, provision of dedicated additional lines may result in a bureaucratic exercise with telecom providers. In the absence of fax, sites rely on scanning and email. Services for mobile phones are generally well supported in the principal cities. It should not be expected that mobile phone services will be available in rural or even some urban areas. Mobile phone services such as laptop connectivity should be checked if essential for supporting monitoring visits, as the service levels provided can be mixed, and may not be usable in some areas. TCP/IP (Internet)-based services (email, Web browsing, etc.) using direct connections are widely available and are now often based on the best available technologies. The types of coverage can vary widely, however, and if the reliance required is high (for EDC tools, for example) checks on speed, stability and configurations are essential prerequisites to initiating and training sites.
5.04 Background Therapy

Background therapy may not be marketed or not available:
Check this well in advance; Discuss unification of background therapy with local partner; Involve local partner in protocol review.
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5.05 Cultural Differences

Lack of familiarity with cultural differences may lead to poorer quality data being collected. For example, Russian patients tend to have greater tolerance to pain. Certain side effects may thus seem more apparent in Western European or US studies:
Patients may not report minor problems because they do not want to bother their doctors with a complaint like a headache or dry mouth; Less AEs are reported by investigators; Investigators must be made aware of the problem.
It is also worth mentioning that Russian patients very often use alternative medicines - particularly physical therapy, herbs, acupuncture, and massage. This has the potential to interfere with the trial results and should be taken into consideration. The use of alcohol is also higher than in the West and this factor along with dietary differences, should be taken into consideration. In addition, the importance of relationships should not be underestimated:
Investigators show hospitality and respect; It is very important to allocate more time for communication and socialisation in comparison to Western investigators.
5.06 Recruitment Issues

Currently, the demand for clinical studies lags behind the potential supply. Therefore, the competition between investigational sites for contract research projects and patients is not particularly fierce, and the spirit of fellowship among physicians is very high. However, the big trial sites in the major cities are beginning to get busy notably in Moscow and St. Petersburg. It is not uncommon for respectable clinicians to ask their colleagues from other hospitals to refer patients with a certain diagnosis to them. The request is likely to be satisfied simply due to goodwill shown by fellow physicians. It should also be noted that there are no recruitment companies in the market (no SMOs and advertising for patients is a new concept); however, this is not expected to hamper recruitment rates in the short to mid-term.
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5.07 Logistics and Local Support

It is often critical to develop an infrastructure to support multicentre studies. For large projects a regulatory interface with healthcare authorities is recommended both to expedite regulatory review and to facilitate importation of clinical supplies. Some clinical centres are not equipped for long-term storage of large amounts of study drugs, especially of biotech products that require very stringent storage conditions. To resolve this problem a buffer storage for supplies and accompanying GMP-compatible paper work needs to be set up. Sometimes a stand-by car is needed for transporting blood samples from hospitals to contract labs.
5.08 Monitoring
It is critical for the monitor to establish a productive working rapport with the investigator. This should be done from the very beginning of the investigator-monitor relationship. Failing to build mutual respect at the outset often does not result in a second chance. That is why it is generally advisable that a senior monitor or seasoned project manager should recruit investigators. Sending an inadequately trained freelancer will not build respect - an experienced investigator will sense this right away. As a result, instead of the fruitful peer relationship, the monitor will have to withstand being talked down to by the investigator. For this same reason, Russia is not the place where studies can be efficiently monitored by nurses - monitors need to be a physician, preferably with a clinical background, in order to establish the right rapport with the investigator. Most Russian investigators are also scientists and the monitor's ability to competently discuss pet scientific ideas of the investigator is often the best way to win his/her respect. It is not enough for monitors to just memorize the protocol; more importantly, they should be able to provide scientific and methodological rationale for any feature of the study design. Often, due to the large number of subjects per centre and the increased centre support required (in areas such as ongoing investigator training), the monitoring frequency may need to be as much as two to four times higher in Russia than in the West. A strategy of monitoring sites with Western frequencies that have high patient recruitment rates is often a route cause of sponsor dissatisfaction with Russian sites. The reasoning behind this is not just the necessity for recurrent quality control. Most investigators who have little prior experience with international clinical projects feel insecure about their performance in the beginning of the study and often need reassurance and guidance from the monitor. In addition, more patients per week at each site will take more time, and issues will accumulate more quickly. Longer visits at Western frequency will not have the same efficiency as an increased numbers of visits. The consequence is that the
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number of visits may need to increase but it may be that during the study a judgement can be made that the higher level of support can be reduced as confidence increases. The importance of local expertise in setting up and conducting clinical studies has to be stressed. For successful conduct of quality studies in Russia, a profound knowledge of the local medical community, customs, practices, and the language is of paramount importance. There have been clinical studies successfully or semi-successfully monitored from abroad, but those incidents are infrequent. Russia is rapidly becoming more and more internationally minded but, in certain respects, peculiarities remain therefore for the time being Russian sites should preferably be monitored by Russian CRAs. CROs having Russian offices have a definite advantage in this regard.
5.09 Data Management

CRF reviews should be conducted in Russia. Local CRAs are much more efficient in deciphering obscure CRF records and facilitating query resolution. Coding of concomitant medications may become a nightmare when not familiar with numerous combination products used in Russia, which are not listed in international drug databases.
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6.0 Study Set-Up

6.1 Regulatory Compliance - the Federal Drug Law
The Federal Drug Law, 1998, established a legal basis for drug development and clinical trials and brought the Russian system closer to Western standards. It regulates all aspects of clinical studies from ethics compliance to subjects rights and reporting. According to this law only the Department of Quality, Efficacy and Safety of Medicinal Products and Medical Devices from the Russian Ministry of Health (commonly known as the Russian Drug Agency or the Federal Drug Agency) issues approvals for a clinical trial. Within its structure, the agency has the State Pharmacological Committee (SPC), which is responsible for the pharmacological (scientific) content of the study, and the National Ethics Committee (NEC), which provides ethical expertise. The NEC is constituted in strict accordance with ICH guidelines. It should be noted that regulatory requirements in Russia are subject to constant change and require close examination in order to ensure compliance and smooth study conduct. Implications of the Federal Drug Law include:
Only one government body the Federal Drug Agency of the Ministry of Health approves clinical trials. The Federal Drug Agency requires approval from the National Ethics Committee before a trial can commence. Trial subjects must be covered by health insurance acquired locally in addition to any global insurance policies already held by the sponsor. Only medical institutions licensed and approved by the Federal Drug Agency may participate in clinical trails - licenses are only issued to GCP- compliant establishments. The head of the medical institution must approve the study protocol and assign a supervisor which must be a medical doctor with no less than 2 years experience in medical research/clinical trials. The assigned supervisor must be familiar with the results of pre-clinical trials of the study drug and has the right to ask for any additional information regarding the same. The study plan/protocol must be developed in conjunction with the Ethics Committee of the institution performing clinical trial i.e. the local IEC. Vladkovshki per. 18/20 Moscow 101431 Tel: +7 095 973 1735 Administration for State Control of Drugs and Medical Equipment
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Non-registered drugs can be imported for clinical trails purposes; however, an individual shipment license must be acquired for each specific shipment of the study drug from the Federal Agency.
Only drugs manufactured in Russia can be exported thus all unused clinical trial material must be destroyed by Central Pharmacy or specially accredited local companies.
Drugs for clinical trials must be clearly marked For Clinical Trial. No subject can be involved in a study without written informed consent. Clinical trails cannot be conducted on: Orphans, Under-aged children (under 18 years) - unless the drug under trial is being developed especially for paediatrics; or when the aim of the trial is to collect better data for this patient group. In the latter case, the trial has first to be conducted in an adult population. Pregnant women - unless the drug is being developed for this patient population and when there is absolutely no risk to the woman or the unborn child. Military personnel. Prisoners unless they provide a written agreement and that the appropriate authorities are notified.
Any adverse events (AE) must be reported to the authorities; however, the obligations for AE reporting are not transparent - i.e. it is not quite clear when, how and to who the report should be made.
It is worth mentioning that according to current legislation, international agreements in which Russia is participating take priority over and above Russian legislation for in-country projects. This means that, firstly, with the absence of the appropriate norms in Russian legislation the international legislation comes into power. Secondly, if any norm in Russian legislation disagrees with the internationally accepted norm, then the trial should follow the latter.
6.2 Selection of a CRO and External Vendors

Selection of a CRO is an important part of the study set up process. Many large pharmaceutical companies have established their own clinical research units in Russia due to the obvious benefit of conducting clinical research in this region. However, there is still a need for reliable partners in the management and monitoring of clinical trials in the country, especially for smaller pharmaceutical and biotechnology companies.
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It is important to check whether a CRO has a physical presence in Russia many Western CROs still operate via partners. Knowledge of local specific regulations and language is a key success factor and use of local expertise is essential in the smooth running of any study there is great value in familiarity with the capabilities of local sites and the frequently changing regulations. Contract research organisations may represent a new phenomenon in Russia, but they provide the full spectrum of services and many domestic CROs now operate across CEE/CIS borders. To avoid long custom clearance procedures, it is recommended to set-up one central pharmacy in Russia to distribute the study drug to the sites. There are many licensed pharmaceutical warehouses in full compliance with GMP and GCP guidelines. Study drugs sent by courier directly to the hospital (from abroad) must be cleared through customs by hospital administration, a very inefficient and time-consuming process. Contracting a local/central pharmacy is a much more effective drug shipment and distribution process. When it comes to a central laboratory, sponsors usually contract a central laboratory based in a Western European country. However, one may significantly decrease the study cost by contracting a Russian laboratory as the central laboratory for the entire region. Such laboratories have been found to meet the most advanced standards in laboratory procedures.
6.3 Site Identification/ Investigator Selection

More often than not, project managers first look for experienced investigators in Moscow and St. Petersburg. However, when considering a drug trial in one of the most actively researched indications, for example in oncology or cardiology, the most prominent investigators in these large cities are often overloaded with protocols and the best hospitals are already busy beyond their capacity. In such situations, the sponsor should ensure that there will be a qualified physician capable of investing the time necessary to secure smooth performance of the study and that study documentation will be appropriately stored and kept out of other monitors' sight. Where this cannot be ascertained it is strongly advised to explore other locations. There are a large number of good clinical sites in other Russian cities. The cities themselves may lack five-star hotels and have fewer cellular phones per capita, but they do have skilled physicians and well-equipped facilities - in some instances, sponsors may have to invest extra time in educating these investigators to GCP and training them in various clinical trial procedures but the flipside of this is that these investigators will be less spoiled by the courtship of large Pharmacos and more motivated to partake in clinical studies. Those far-sighted enough to do some educational work in advance will be in a more advantageous position to recruit investigators and provide for quality performance on a pan-Russian scale.
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There are a number of clinical centres in Russia that are so large and highly specialised that it would be possible to open several study sites at one particular centre. In some respects, this scenario presents organisational advantages, but in such a setup it is difficult to accurately estimate the enrolment potential. Investigators would be competing for the same patients resulting in fierce inter-departmental competition the results could be poor recruitment rates. When working with a clinical centre for the first time, it is very important to be aware of the hierarchy - the complexity of which should not be underestimated. The general rule is "don't bypass the boss", but there may be numerous nuances that cannot be fully appreciated as an outsider. The investigator is likely to know very well how the local power structure works and sponsors should allow their investigators to navigate them through this hierarchical maze. Sponsors who are unobservant of, or insensitive to whatever subordinate relationships there might be, will pay the price. For example, instead of providing much needed assistance when needed, centre staff will club together to give a united front of carefully calculated inaction. In the worst-case scenario, the study may experience a series of delays and never sail through at this site. Study monitors would be wise to observe any "diplomatic" protocol and think ahead. When selecting an investigator, there are generally two options available:
The opinion leader - a well-known physician, a policy maker and often a full professor, a head of the chair, or director of a hospital; or A less prominent but more enthusiastic individual, usually a departmental head or an assistant professor.
Project managers often strive to recruit opinion leaders but this approach is more expensive because the opinion leader or policy maker expects higher fees. Moreover, opinion leaders are not necessarily good investigators. They may not be good practicing physicians either. They probably will not do the work themselves, but will hire a couple of investigators who will also require salaries. Another problem with the opinion leader or policy maker is that they conduct multiple clinical trials simultaneously sometimes competitive ones so they have less time to devote to each study and lower motivation. This option is generally employed when the sponsors priority is marketing goals and the clinical trial would benefit by being associated with big names. If the study is mostly about the drug's efficacy, reliable hard-working investigators capable of doing a quality job and staying on schedule in terms of patient enrolment are needed. In this instance sponsors often prefer a less prominent but more effective investigator who will seek subjects personally, complete all forms on time, attend all meetings, promptly answer phone calls and work closely with the study monitor.
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Individual projects will require a trade-off between the advantages of the two approaches to decide which one to implement. Feedback suggests that a mixture of both approaches is the most effective way to conduct a study in Russia.
6.31 Medical Institutions

As already discussed, the medical system in the country is highly centralised a heritage of the Soviet past. Each area of medicine has a chief specialist and this is also true for geographical areas e.g. chief cardiologist of Moscow, chief oncologist of North West Russia, etc. However, this system is still very Moscow-centric. There are in general, two categories of medical institutions of interest for conducting clinical studies:
Huge specialised institutions in each field of medicine e.g. Institute of Oncology, Centre for Cardiology. Normally, each will also be a teaching and research hospital with outpatient facilities. Huge multi-purpose regional hospitals covering almost all medical specialities in a certain geographic area and each with an outpatient facility. Such hospitals will be named after a Saint or by number e.g. Saint Elizabeth Hospital, Hospital # 32.
Both types of institution have in general between 500 and 1500 beds and process tens of thousands of inpatients and hundreds of thousands of outpatients annually. The hospitals are well equipped, have more-or-less modern diagnostic and treatment capabilities, and are staffed with highly trained personnel. When it comes to conducting clinical trials, there are a few major differences in the Russian compared to the Western model:
Nurses are much less involved in the process of medical care and are hardly ever involved in clinical trials they may perform study procedures, such as injections or taking blood samples, but they neither deal with subject consent or complete study forms. In most cases, the study drug is kept at the investigators office not in the hospital pharmacy and pharmacists are usually not involved in the clinical trial at all. The hospital administration should not only be notified about the clinical trial, but also be a contractual party in the study agreement.
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6.4 Local IECs

Although not every hospital, out-patient clinic or medical university has its own institutional review board or ethics committee, the situation has changed remarkably since the early 1990s when there were no institutional review boards (IRBs) or IECs at all. Usually, today, there are one or more IECs in every region of Russia. They are usually located at medical universities or at the largest hospitals of the region. The members of these IECs are entitled to review and approve clinical trials in the regions where they work. The number of these committees is on the rise constantly, and the professionalism and skills of their members are improving continuously.
6.5 Protocol and CRF Design

6.51 Protocol
The study protocol must be developed in conjunction with the Ethics Committee of the institution performing clinical trial i.e. the local IEC and approved by the head of the medical institution. This is the case for all sites involved in the clinical trial and this function must be co-ordinated when dealing with multiple sites. It is generally advisable, unless dealing with truly experienced investigators, that the protocol should be somewhat more detailed than an ordinary protocol for a purely Western study. Experienced investigators often accept an outline protocol that leaves a lot of details to their own discretion; but the less seasoned investigator is much more comfortable with a protocol that is explicit rather then implicit about almost every element of the study. However, prior to the commencement of the study, the monitor should emphatically explain that although the protocol as such should be meticulously adhered to, when it comes to purely clinical decisions the investigator should apply his/her best medical judgement rather than anything else. A Russian version of the study protocol must be submitted as part of the clinical trial package to the Federal Drug Agency for review and approval. Some pharmaceutical sponsors also choose to provide investigators with a Russian translation of the protocol. When preparing a Russianlanguage version of the protocol, sponsors should be aware of the potential disastrous consequences of hiring a translation bureau. Translation by a non-medic may quite literally ruin the protocol. This may seem a trivial issue, but, regrettably, this is not a hypothetical situation many sponsors have fallen foul of this process and ended up with protocols that are not only unintelligible and laughable due to faulty translation but also full of statements that are entirely wrong and may be detrimental, if observed, to the study as a whole. Ideally the study protocol should preferably be translated by a physician and in addition, it is strongly advised to provide the
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investigator with the original English-language protocol. If, in the investigator's view, some statement in the translated version does not make much sense, then he/she can always look it up in the original text.
6.52 CRF
Although the vast majority of investigators and CRAs are fluent in English, many may still get lost in an English-language CRF. One possible solution is to prepare an entirely bilingual English/Russian CRF. This would make the CRF substantially bulkier, but would probably be worth it if the study covers a large number of sites in Russia. An alternative solution could be to have a Russian-language template that could be superimposed on the original form prior to making entries. Finally, an additional solution that has worked well in Western Europe would be to have the white CRF page in Russian and the other pages in English. In situations where the investigator does not have a very good command of English, then he/she should not be asked to make free-text CRF entries in English as the result could be partially or totally incomprehensible records, which in turn will impede in-house review and data entry. Unless the CRF is entirely self-explanatory, which is rare, it should contain various tips prompting the correct completion of a particular form. This is not to say that the CRF should be overcrowded, which would both confuse the investigator and complicate subsequent in-house review and data entry. If the CRF cannot be sufficiently instructional by itself, then a CRF instruction manual would be a good idea. Especially in the beginning of the study, the investigator would feel much more confident about filling out the CRF, if he/she had a clear supplementary document to consult.
6.6 Legal Issues, Insurance and Contracts

This is often the most important factor, frequently overlooked by Western sponsors, which impacts the whole process and can significantly delay completion of a project. There are many local regulations and it is sometimes difficult for a central Project Manager based in the U.S. or in the Europe to follow all of them - this is another good reason to rely on local staff based in the country. Local regulations impact mainly four areas of a clinical study:
i. ii. Patient information and informed consent form; List of documents to be submitted to the IRB/IEC or to the Regulatory Authorities;
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iii. iv.
Insurance policy (need for a local insurance policy), indemnity issues; and Contracts with investigators and their institutions.
6.61 Patient Information and Informed Consent Form

The master informed consent form (ICF) should not be translated word-for-word, but Russian specifics and laws should be observed and incorporated into the translated ICF. One cannot assume that the ICF master text is perfect if it contains all GCP-required elements. This is the worst strategy, which significantly delays the study start through double submission. Moreover, such approach discredits the sponsor in the eyes of the local IRB/IEC or Regulatory Authority. Instead, despite including all GCP-required elements, one should review the local regulations, producing a Russia-specific ICF. The internal (sponsors) approval process of the country-specific version should follow applicable standard operating procedures (SOPs). There are two elements in the patient information document that frequently cause problems. One is the indemnity statement. Some sponsors transfer a statement directly prepared by a U.S. lawyer to the ICF text. Such a statement, usually favourable to the sponsor, often does not fulfil expectations of the local IRB/IECs and does not usually comply with ethical principles. It is more reasonable to refer in the ICF text to the insurance policy or outline the insurance/indemnity situation. The second misunderstanding is specifying the jurisdiction, where a claim can be submitted outside the patients country of residency. This is unacceptable for high-standard clinical research. When hiring a third party to translate the informed consent form it should be noted that as with the study protocol poor, commodity translation often carried out by translation bureaus can be disastrous - the translation should be scrutinised by native Russian speakers to ensure that nothing has been missed or inverted.
6.62 List of Documents to be Submitted to Local IRB/IEC or Regulatory Authority

A Good Manufacturing Practice (GMP) certificate for the product manufacturer (drug or placebo) is required, but it needs to be prepared for submission of a sample of the investigational product. To gain study approval, the sponsor is required to submit a clinical trial regulatory package to the Department of State Control of Quality, Efficacy, and Safety of Drugs at the Ministry of Health of the Russian Federation (Federal Drug Agency). The clinical trial package should contain the following core documents:
study protocol and amendments;
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investigators brochure containing data on pharmacology, toxicity, pharmacokinetics, and previous clinical trials;
case report form and other data collection forms; information for patients and consent form; data collection forms for patients (diaries, questionnaires); insurance policy from a Russian insurance company; list of investigative sites; and curriculum vitae of the principal investigator.
The documents should be translated into Russian in full (i.e. the protocol, patient information and informed consent forms) or partly (i.e. the investigators brochure).
6.63 Local Insurance Policy

Many study sponsors have global product liability insurance in place issued by an international insurance company; however, no trial can be approved without an additional insurance policy issued by a local insurance company and should include civil and product liability. Usually there is no indemnity limit, but there is a requirement for a full insurance policy to be submitted (an insurance certificate is not enough). Sponsor representatives and researchers must be insured in addition to patients. This insurance is the full responsibility of the sponsor and the sponsor is fully liable for all adverse patient reactions to the study drug(s) regardless of the fact that patients are made fully aware of the trial specifications and risks. The local insurance policy should be the first document to be arranged while approaching the study set-up phase. No IEC will accept any submission or start to review the planned study if a local insurance policy does not accompany the study protocol. Many international insurance brokers, although very familiar with the legal aspects, may not appreciate the specifics of the clinical research process. Problems may arise in cases of termination of some sites during the study and the recruitment of additional sites which requires the need for a new policy this generates additional costs, delays progress and increases the complexity of documentation. This is a situation where local representation is highly recommended. The cost of such insurance will vary depending on the phase of the study: the earlier the phase the higher the price. For Phase I studies, the cost may reach $80 per patient; whereas in Phase IV, it may be around $40 per patient. All consented patients must be insured, even if they have
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not been randomised (i.e. all patients who have signed the consent form). Cost also varies from company to company.
6.64Contracts with Investigators and Investigative Sites

Even with the best local team, the contract negotiation is usually a time-consuming process and requires a lot of effort, if not well prepared. Ideally, the sponsor should mail the master contract template to the local staff, asking them to customise it to meet local standards. Then, after such customisation, the country-specific template should be reviewed by the sponsors legal adviser and submitted to the investigators and their institutions. Following such process, additional customisation is minor and can be changed without further delay. The signed contract must be in Russian. This presents another challenge for legal advisers based outside the country. Below are two possible solutions to this problem:
i. Prepare a bilingual contract template. Every paragraph (or sentence) in English should be followed by identical text in Russian, often in a different font style. Or: ii. Prepare a local language version and obtain an official certificate from a CRO or other institution in charge of customisation, stating that both versions are identical.
6.7 Study Approval

Approvals for clinical trials are based on the Federal Drug Law and issued by the Federal Drug Agency. The submission process usually does not exceed two to four months and the process flow (Ethics Committee vs. Regulatory Authority) is sequential. As already discussed, the sponsor is required to submit a clinical trial regulatory package to the Federal Drug Agency who then forwards the package to the Federal Scientific Centre for Evaluation of Medicinal Products (the Centre). To process the documents the Agreement should be signed by the study site(s) and the organisation which submits the package (CRO or pharmaceutical company). If it is a CRO, there should be a notarised delegation of authority letter from the sponsor pharmaceutical company (manufacturer of the study drug) in place before the Centre signs an agreement. Both the letter and agreement should be in Russian. A fee of about $1,000 is charged for processing the documents. When the agreement is signed by the Centre, copies of the clinical trial package are simultaneously sent from the site to the State Pharmacological Committee (SPC) and to the National Ethics Committee (NEC). In the case of a vaccine study, the Immunology Committee may also become involved.
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The SPC provides scientific expertise on the study, after approval from the Safety and Efficacy Committees is obtained. The SPC usually has its meetings every two weeks, except in summer months when most members are on vacation. It should therefore be noted, that there are no meetings from mid-June until mid-September. At all other times of the year, SPC approval is normally issued within approximately two months. The National Ethics Committee is established in strict accordance with the ICH GCP. It works effectively and the review procedure does not exceed more than one month in most cases. The most common issue with the NEC is the wording of the informed consent form. If the study has already been approved for US or Western European sites, no issues usually occur during the NEC review. When both the SPC and NEC approve the study, the Russian Drug Agency issues a general approval for the clinical trial. The Agency lists the investigation sites and the total number of patients to be consented (patients who must sign the consent form). Hence, if there is any change or addition to the sites during the study, or if the number of enrolled patients increases, a new approval should be obtained this is something to bear in mind. Although in theory it is possible to apply to the Regulatory Authorities without involvement of the local staff operating in these countries, it is not recommended. Local representatives can communicate with authorities in the native language, which facilitates a more effective dialogue and helps to prevent delays from miscommunication. Such individuals usually are more familiar with the procedures of the regulatory authorities, guaranteeing a more effective follow-up of the regulatory review. Many local CROs offer regulatory and clinical trial approval services - this greatly facilitates the process for international companies planning on conducting trials in the country.
6.8 Patient Recruitment

Russia, with a population totalling approximately 145 million, is the most advanced CIS country having been active in international clinical trials since the late 1980s, yet its huge human resources are still underutilised. Most clinical trial work is conducted in Moscow and St. Petersburg and some sites are getting very busy while well-equipped sites in the rest of the country remain underused. It is a well known fact that Russian study sites recruit patients quickly as Russian patients are less reluctant to take part in high-standard clinical trials as patients in Western Europe. For many of them, international clinical projects sponsored by Western companies, are synonymous with state-of-the-art medical technology. They expect more advanced diagnostic procedures,
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immediate access to modern medical equipment, and supervision and/or monitoring of the process by international professionals. Regardless of the type of study, no subject can be involved without written informed consent. All patients must be fully informed on the reasons, aims, methods, and possible results of the trial as well as to the possible risks and disadvantages of participation. Participants must be informed on their right to decline and/or abrogate the contract at any time. For all trial patients, the physician in charge must provide a written agreement stating the candidate has been fully informed and accepted all the terms and conditions of the trial. For trial subjects unable to give informed legal consent, the informed consent of a legal representative must be obtained and the interests of the patient must prevail over those of science and society. Administration of the medicinal product must be expected to produce a benefit to the patient. In addition to gaining ethical approval prior to the commencement of a study, sites are also inspected for ethical compliance while studies are ongoing. Ethical monitoring teams examine compliance with GCP, as well as with local and international rules. Audit checks usually only occur once during a trial and the length of the audit process depends on the complexity of the study but usually lasts several days.
6.9 Site Training

As already mentioned, language skills among study staff can be a problem; therefore, training in Russian is a must. Particular effort should be made to educate investigators and to monitor clinical sites this is particularly important for sites new to clinical research. Local CROs working in the region often spend substantial time counselling investigators about site management to ensure that work is done properly and that investigator grants are fairly distributed among the team members to maintain efficient site performance.
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7.0 Importing Clinical Trial Materials

When the study has been approved by the authorities, it is necessary to obtain approval for the importation of the clinical trial materials (CTM) from the Ministry of Health it should be noted that study approval does not include an import license. This approval is specific for each shipment and should be obtained every time the study drug is shipped to Russia. The process normally takes between two and three weeks in total but complications can arise.
7.10 Importing the Study Drug

According to the Federal Drug Law, which regulates imports of the study drug to the Russian Federation, it is necessary to get Ministry of Health import approval for each shipment. Gaining such approval is a multi-step process. First, a detailed pro-forma invoice should be submitted to the Russian Drug Agency along with the petition to approve importation. The Drug Agency issues an import approval letter, which then should be signed by the Deputy Minister of Health and sealed by the Permanent Committee on Narcotic Drugs. In the worst case scenario, collection of the signatures and seals may take weeks. Thus, it is strongly recommended that a shipment begins only when the letter with all the signatures and seals is ready. Otherwise the study drug may be embargoed at the Russian customs, waiting for the completion of the paperwork. It is also recommended that a dry run test is performed prior to the shipment of a real drug. A pro-forma invoice needs to be prepared for each shipment of clinical supplies, including the study drug. It should match exactly the shipment content and must be identical to the pro-forma invoice submitted to the MoH for drug shipment approval. It should be noted that specific proforma invoice requirements can vary according to the courier employed. The next step for study drug importation is customs clearance. The selection of a courier is important: the shipping company chosen to deliver the drug to Russia should have strong local representation. Once all the papers are ready, two things should be done: completion of the customs declaration and processing the payment of fees. Customs fees depend on the declared value for customs and the shipping cost. A fee of 20% VAT and the cost of a customs broker must also be added on. As a result, one should expect to spend about 35 - 40% of the declared value. Customs clearance usually takes between two and five days. If a temperature-sensitive drug is to be imported, it should be stored at a certain temperature (typically +40C), and a special
83
agreement with the customs office should be prepared at the entry point, which will allow one to deliver drugs to the storage, satisfying the required conditions before clearance is completed. The drug is then sealed in a quarantine area until the clearance paperwork is done. There is one very important issue relating to the importation of the study drug and other materials into Russia: it is strongly recommended that materials are not shipped directly to the study sites but via a central depot in charge of importation, accountability, inventory and distribution. Sponsor companies are not legally obliged to use this approach; but, it is important to bear in mind that if materials are sent direct to the sites, each site will be obliged to do all customs clearance by itself. A centralised method of importation avoids the difficulties arising from this position.
7.10.1 A Centralised Approach

There are two ways of dealing with the importation of the study materials: centralised methods and decentralised methods. The centralised approach utilised in Russia involves the use of a Central Pharmacy and dramatically cuts down the time and costs associated with the importation. With the centralised approach only one drug shipment needs to be made to the Central Pharmacy with one pro-forma invoice being completed, one time customs clearance and so on. The study materials are sent to the sites from the Central Pharmacy based on the needs of the sites and patient recruitment. The following procedures can be performed at Central Pharmacy: storage, packing, labelling, retention, destruction and accountability of the study drug. Central Pharmacy should guarantee limited access, security, temperature control, alarm systems, and an uninterruptible power supply. There are obvious advantages of using a centralised approach rather than a decentralised one, where multiple shipments of the study materials to the sites are associated with time-consuming multiple pro-forma invoices, multiple customs clearances and so on. A centralised approach allows for some flexibility if the study materials cannot be stored at customs due to the special requirements for the study drug storage. In this case it is possible to receive permission from customs to store the study drug in the Central Pharmacy sealed, while waiting for customs clearance. As soon as the paper work is done, the study drug can be shipped to the sites. Most major courier companies such as DHL, Fed-Ex and TNT, offer their services in Russia. It is helpful to know the specifics of each courier operation in Russia in order to be able to deliver the study materials to the sites within 24 hours.
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7.20 Importing Other Materials

7.20.1 Study Documents
This process is much easier than the importation of the study drug. There are neither specific conditions, nor any need for importation approval. Customs clearance is simple and the customs fee depends mainly on the weight of delivery and the shipping cost.
7.20.2 Devices
Regulations for the importation of the investigational devices are not clearly defined. If the device is not registered in the country, it requires approval from the National Bureau of Standardisation, which may take months or even years to obtain. Temporary importation might be a solution. Unregistered clinical trial materials included in the laboratory kits (such as glass tubes and needles) can be imported into Russia, but nevertheless, the National Bureau of Standardisation will still have to issue an approval letter in this case.
7.20.3 Laboratory Kits

The situation with laboratory kits is similar to that of devices in that there are no regulations for unregistered materials, but the importation rules depend on the content of the kit. Additional approval from the National Bureau of Standardisation may be required. All these material types are subject to customs fees. A good solution for the importation of devices and laboratory kits can be temporary importation, but in this case you would pay for every month the goods are in Russia.
7.20.4 Packing Materials

There are no specific regulations for the importation of packing materials. There may be a requirement for an import license and a certificate of safety has to be obtained in most cases. Customs fees vary for different kinds of packing materials and depend on the weight and content of the package. If possible, some packing materials should be purchased in Russia this saves both time and money as it is generally much cheaper to purchase these materials locally than to import them. This general approach can be used for packing materials (such as cooler boxes and coolers), general study equipment (ECG machines, treadmills and so on) and concomitant medications as well.
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7.30 Exportation of Biological Media

In most international clinical trials there is a need for exportation of blood samples and other biological materials to the central laboratories in Western Europe or in the US. In order to do this, Ministry of Health export approval for the entire study is required. It is important to get this approval before the study commences, otherwise samples can be spoiled or lost. The petition for this approval consists of the detailed description of material including size and/or volume, information on whether the materials are contaminated or not, and the total quantity of samples for the entire study. Sudden changes in regulations may put the entire study at risk. Thus, the selection of a good courier service and intensive everyday monitoring of the regulations is the only way to avoid serious problems. The Ministry of Health will issue one approval (export license) for the specified number of samples per study. It takes 24 hours to deliver biological samples from St. Petersburg and Moscow to central labs located in Europe or the US, and 36 to 72 hours from the other cities. Some sponsors consider using Russian central laboratories to cut down the time and cost associated with the exportation of biological samples.
7.40 Export of Other Clinical Trial Materials

There are no obstacles to exporting study documents or CRFs. However, the export of information on videotapes, diskettes, CDs and so on is regulated. This media may be monitored by customs to confirm that it does not contain information or materials prohibited for export (such as classified information), and such control may cause delays in delivery. It is important to know that only developed film can be exported. According to the Russian Federal Drug Law, only drugs manufactured in Russia can be exported. Therefore, the unused study drug cannot be returned to the sponsor and must be destroyed by the Central Pharmacy or local companies with special accreditation. There are several companies available who can conduct study drug destruction in accordance with the local regulations, GCP and sponsors requirements. Drugs for clinical trials must be clearly marked; for example, labelled For Clinical Trial. Investigational drugs for in-hospital use may be labelled in English, but study drugs for outpatient use should have instructions for the patients in Russian.
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7.50 Summary
Useful tips to successful importation of CTM:
All approvals should be prepared in advance, prior to shipment of clinical trial materials a dry run test prior to real shipment is recommended If a sponsor has no local affiliate, it is of crucial importance to employ a reliable CRO with strong experience in Russia and an excellent record of conducting successful clinical trials in Russia knowledge of local requirements is a must For importation of CTM, it is better to use a centralised approach Wise selection of courier service is very important one with strong local presence in Russia is recommended It is recommended not to export the unused study drug and to avoid circulation of the study materials among different countries
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RM Consulting is now part of Parioforma Limited (www.parioforma.com), an independent business consultancy headquartered in London, UK. For further information on our services and expertise in emerging markets please don't hesitate to contact us for an informal discussion: Either by telephone on: +44 (0) 207 225 3538; or by Email at: charles.rowlands@parioforma.com
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ASSOCIATE OFFICES Intrix Corp, Darien Connecticut IMRP, Moscow
Charles Rowlands Senior Partner 55 Princes Gate Exhibition Road London SW7 2PN United Kingdom Tel: +44 (0) 7803 907577 www.parioforma.com
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The Healthcare, Pharmaceutical &amp; Clinical Trial Environment in Russia

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THE HEALTHCARE, PHARMACEUTICAL & CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

1.0 Politics and Economics

International Perception of Russia

Industry Restructuring Policy Continuity Corporate Governance

Major abuses the norm.

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

1.02 The Economic Situation

Persentage (unless mentioned)

35 30 25 20 15 10 5 0 -5 2001 2002 2003 2004 2005p 2006e 2007e 2008e

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

Source: Bank of Russia, January 2006

Source: Bank of Russia, January 2006

The Bank of Russia, January 2006 outlook

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

Source: Bank of Russia, January 2006

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

Figure 1.03.1: Russian Political System

Council of Ministers (Government)

Supreme Arbitration Court

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

1.03.4 Foreign Direct Investments

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

2.0 Pharmaceutical Market

Source: US Census Bureau; Economist Intelligence Unit

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

Source: Brunswick UBS Warburg, Boston Consulting Group, LCP

Source: Retail Audit of Russian Pharmaceutical Market by DSM Group, 2005

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

Fig: 2.02.1: Drug consumption per capita (August 00 August 01)

500 450 400 350

300 250 200 150 100 50 0

223 184 177 160 152 138

2.02 Pharmaceutical Expenditures

Privately purchased drugs (Pharmacy) Reimbursed drugs (Pharmacy) Hospitals

Source: Russian Ministry of Health

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

2.03 VAT on Medicines

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

2.04 Market Segmentation

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

Top Russian Manufacturers

Top Foreign Importers

The Economist Intelligence Unit, Russia, 2005

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

2.05 Market Drivers & Restrainers

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

VAT introduction on medicines introduced an added burden on price.

2.06 Pharmaceutical Regulation

THE HEALTHCARE, PHARMACEUTICAL AND CLINICAL TRIAL ENVIRONMENT IN RUSSIA

2.07 Drug Registration

The Healthcare, Pharmaceutical & Clinical Trial Environment in Russia

The Healthcare, Pharmaceutical & Clinical Trial Environment in Russia