Explanatory Memorandum
On the Draft Federal Law "On Amendments and Additions to
the Federal Law "On Medicines"

The Federal Law "On Medicines" is the sole legislative act in the sphere of medicinal drugs. The adoption of this Law played a positive role and provided the opportunity to form a fundamental normative basis on the issue of controlling the quality of medicines.

However, since the Law was adopted, the pharmaceutical industry has undergone major changes. Hundreds of new organizations of various types and forms of ownership have appeared. The total number of pharmacies is increasing by 12-17% every year and presently encompasses over 65,000 units, including the small retail trade network. At the present time 65% of pharmacies are state-owned, while the remaining 35% have other forms of ownership. Of the 7,000 pharmacy warehouses, only 5% belong to the state. However, the pharmaceutical market is developing chaotically and without proper state control. The current Law regulates only separate and random issues in the sphere of medicines and at the present time does not ensure equivalent legal regulation of the various aspects of activity in this sphere. Systematic and full legal regulation is lacking. Negative consequences of the absence of systematic legal regulation are particularly noticeable in the pharmaceutical market.

The issue of dividing competence between federal and regional authorities in the sphere of medicines has not been worked out from the legal point of view. Regional authorities must be involved and their participation should conform to general state principles.

The Law "On Medicines" includes provisions which must be clarified in order to clear up the appearance of contradictions. In particular, according to Article 12 (Clause 1.3) of the Law "On Medicines," the federal executive agency in the sphere of healthcare develops and approves the statutory legal acts covering pharmaceutical activities. At the same time, the rules for the manufacture and wholesale distribution of medicines, and the procedure for destruction of expired or defective medicines, etc., are developed and approved by the federal body which exercises quality control over medicines (Article 10, Clause 10; Article 17, Clause 2; Article 30, Clause 4; Article 31, Clause 3), and so forth.

The issue of determining entities in the sphere of medicines-- their status and basic characteristics--also remains unsettled from the legal standpoint. As a result of varying interpretations of what constitutes pharmaceutical organizations, for example, the latter are listed under the category of trade organizations, while according to their specific sphere of activity, they fall under the healthcare system; as a result of the absence of a legal definition of pharmaceutical activity, every Subject of the Russian Federation interprets it arbitrarily, proceeding from its own interests, establishing its own requirements, adopting its own legislative acts regulating this sphere of activity, and so on.

In addition, recently adopted laws do not reflect definitions of such things as counterfeit medicines, narcotic and psychotropic medicines, poisonous and strong-acting medicines, synonyms and analogs, production and preparation, certification and certificates of compliance.

The issue of legal regulation of control and supervisory activity is a principal issue in the legal regulation of the sphere of medicines.

The situation is such that the appearance of counterfeit production in the pharmaceutical market has become dangerous for the consumer. It is necessary to adopt legislation confirming the nomenclature of pharmaceutical organizations which are authorized to sell medicines, as well as to develop a clear legal mechanism for assigning specific stages of the circulation of goods to control and supervisory bodies which have been given full responsibility for the organization, coordination and effectivness of the establishment of control and supervisory activity in the sphere of medicines.

It was precisely the objective requirement for complete and systematic regulation in the sphere of medicines, on the one hand, and the task of optimizing the legal basis of this sphere, on the other hand, that prompted the development this draft law.

The draft law specifies the subjects and sphere of application. It establishes a single standard for the development and approval of legislative acts determining rules for activity in the sphere of medicines.

The draft law stipulates a vertical structure of state pharmaceutical oversight. It prescribes a protocol for the exercise of pharmaceutical supervision over the activities of organizations regardless of their institutional affiliation or form of ownerhip, and over individual entrepreneurs as well.

The draft law significantly expands and precisely defines the conceptual apparatus, i.e. it gives the definitions of narcotic and psychotropic medicines, synonyms and analogs, production and preparation; for the first time the draft law precisely defines the meaning of counterfeit medicines. The word "medication" is defined more precisely, etc.

Moreover, the list of documentation necessary for customs registration of medicines brought into the Russian Federation is revised; the status of pharmacy organizations and pharmacists is set forth, and the main components of pharmaceutical activities are stipulated.

The draft law has principal significance for the regulation and further development of the pharmaceutical service and affects the interests of the public, of organizations, and of the state, inasmuch as it regulates the totality of relationships arising in the sphere of medicines and establishes the priority of state authority in questions of the quality of medicines and the quality of pharmaceutical services. It establishes a well thought-out system of governmental bodies within whose competence falls the observance and implementation of the provisions of the law. It is very important to note that the necessary structural changes which must be undertaken can be accomplished on the basis of existing structures and will not require significant additional revenue or personnel resources.

The draft law introduces personal responsibility of those persons and organizations whose activities affect the efficiency and safety of medicinal aid.

The adoption of the draft law will allow the provision of full state regulation in the sphere of medicines; increase government control over the pharmaceutical activities of organizations regardless of their form of ownership, type of property, and agency affiliation; and increase the responsibility of people employed in this sphere-all of which will, in the end, allow the observance of the rights of consumers to obtain high quality and affordable medicines, as well as discounted and free medicines.

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