Drug suppliers colluded on ministry contracts, says Russia's anti-trust authority

Russia's antimonopoly authority, the federal antimonopoly service (FAS), has accused 18 drug manufacturers and distributors of various types of collusion including some that resulted in irregularities in state drug purchase tenders in 2008-09 that could cost Rb3.4 billion ($120 million) in overpayments. The alleged collusion occurred in the bidding process for contracts to supply expensive drugs for seven relatively rare and inherited conditions. FAS said it will look into the case on 11 May, but did not say whether any other state bodies will also be involved. The FAS holds no authority to institute criminal proceeding and/or conduct criminal investigation.

In an earlier investigation conducted last autumn, Russia's General Prosecutor's office investigated the patterns of drug purchases over the same two years that FAS examined. The General Prosecutor found that health ministry spending was highly skewed towards a handful of companies. Of more than 160 supply contracts worth Rb66 billion that the ministry entered, almost 130 (worth Rb61 billion) were signed with the same six companies. The General Prosecutors Office estimated the possible damage for the budget as Rb3.4 billion, but the health ministry has vehemently denied the figure.

In its investigation, the FAS discovered irregularities in the bidding process that might account for the skewedness in the ministry’s spending. In particular, FAS found a number of instances where bidders which had been selected as participants in tenders for supplying state medicines had subsequently either not announced their price proposals or failed to turn up at tenders. As a result, state contracts were awarded to the remaining sole bidder at the starting (highest) price.

The head of FAS, Igor Artemyev, told a Moscow radio station that some contract winners inflated their prices up to several times the market rate. He called their actions "breathtaking cynicism". He declined to comment on whether the FAS had evidence of any health ministry's officials' involvement. Mr Artemyev said that the General Prosecutors Office did have knowledge of the involvement of officials, but that the FAS investigation had only proved collusions between the companies including those in tenders.

The FAS proof of collusion includes findings of written and signed cartel agreements, agreements which were drawn up because the management of the companies involved were afraid of being deceived in the deals, he added. Mr Artemyev warned that the collusions actually covered a wider range of activities than state tenders and that could constitute a cartel on the market division.

The companies involved include Russia's largest drug manufacturer, Pharmstandard, and major wholesalers, Protek, Rosta, Apteka-Holding (Alliance-Boots' subsidiary in Russia) and Shreya Corporation. The 13 remaining companies (see Table) are either manufacturers or distributors of a few, often just one, products reimbursed under the state’s programme for seven chronic and life threatening diseases and medical conditions.

Separate reimbursement arrangements for these conditions were established in 2007 when Russia's health ministry split its restricted reimbursement programme into two, one of which applied to especially expensive treatments for haemophilia, mucoviscidosis (cystic fibrosis), hypophyseal nanism, Goshe's disease (cerebrolipidosis), myeloleucosis (leukaemia), multiple sclerosis, and organ/tissues post-transplantation (scripintelligence.com, 17 October 2007). Coral-Pharma representing several Indian companies, Medipal-Onco, Irwin-2 and Optimalnoe Zdorovie – all of which are embroiled in the latest FAS accusations - were among small and little-known drug distributors which won expensive contracts at the first tender for drug supplies for the new programme in December 2007 (scripintelligence.com, 7 December 2007).

In last year's investigation, Russia's General Prosecutor Office found, among other things, that the health ministry improperly refused access to the state tenders to a number of potential bidders and that it often inflated starting drug purchase prices. The investigators said that although all the bids were accepted, usually only one company actually participated in the tender. Some health ministry's officials fell under suspicion, but the ministry strictly denied all the allegations.

However, the General Prosecutor’s Office has opened criminal cases against at least three drug distributors, Protek, Rosta and Irwin-2, but no further information has been released so far.

Colluders? Companies accused of anti-trust behaviour in bids for health contracts

Company	Activity
Pharmstandard	Russia's largest drug manufacturer
Protek	Wholesaler; facing criminal indictment from General Prosecutor
Rosta	Wholesaler; facing criminal indictment from General Prosecutor
Apteka-Holding	Wholesaler; Alliance-Boots' subsidiary in Russia
Shreya Corporation	Wholesaler
P-Pharm	Manufacturer
Irkutsk	Manufacturer
Pharmasintez	Siberia-based manufacturer(not to be confused with St Petersburg-based Pharmsynthez and two Moscow-based companies, Pharm-sintez and Ph-Sintez)
Optimal Health	Distributor
Irwin-2	Distributor; facing criminal indictment from General Prosecutor
Gaemamed	Distributor
Medipal-Onco	Distributor
Manas Med	Distributor
Coral Med	Distributor for Indian companies
Advanced Trading	Distributor
Rusresurs	Distributor
Medical Leasing Consulting	Distributor
Virend International	Distributor
DiMedika	Distributor