In accordance with statistical data from 2018 and 2019, Latvia’s State Agency of Medicines concluded that there is a high risk of unavailability of state-reimbursed medicines in the Latvian pharmaceutical market, mainly as a consequence of the behavior of the wholesalers. The same conclusion was reached by the Competition Council of the Republic of Latvia which, in late 2018 and 2019, published two reports on the availability of medicines. Accordingly, it was concluded that the existing regulatory framework was unable to provide an effective market protection mechanism to reduce the risk that patients in Latvia might not have access to state-reimbursed medicines, because after these medicines are made available in Latvia by producers or importers, they are exported to third countries or other EU member states by other market participants.
On March 17, 2020, Latvia’s Cabinet of Ministers adopted Regulation No.416 “Procedures for the distribution and quality control of medicinal products” (the “Regulation”), comprehensively amending the existing regulatory framework to protect Latvian patients. The Regulation is expected to solve the insufficiencies in the supply of medicines in Latvia.
First, the amendments to the Regulation implement a procedure for controlling and even banning the export of state-reimbursed medicines for which the National Health Service and the producer have concluded an agreement on financial participation. Thus, the National Health Service will be able to exercise control over the amount of medicines that may be exported under any agreements involving it and a producer and, under strictly defined conditions, even ban their export altogether. Imposition of an export ban will only be available where the risk of a potential deficit is demonstrated either by referring to existing interruption of the supply, which has been properly communicated to the National Health Service, or the fact that insufficient availability of the medicines in question has been identified during the previous three-month period. As a result, it is expected that the primary goal of the wholesale activity, which ought to be the local supply of the state-reimbursed medicines, especially within the context of public service obligations, will be ensured.
Second, the amendments to the Regulation establish a system for exchanging information between wholesalers and the State Agency of Medicines (SAM) about the inventory of medicines held by each wholesaler. It imposes a duty on each wholesaler to inform SAM of their inventories on each business day, using an electronic data transfer system. As this information is already available to most wholesalers, only technical modifications were necessary to provide SAM with access as well. In addition, individual pharmacies will also be able to access the system to verify availability of medicines in the inventory of any specific wholesaler.
Third, the amendments to the Regulation establish a more transparent mechanism for ordering both state-reimbursed and non-reimbursed medicines by pharmacies, when their own inventory does not have the necessary amounts. Previously, many wholesalers failed to live up to their public service obligation to provide medicines to requesting pharmacies within a 24-hour timeframe. The new regulatory framework will help to monitor wholesaler compliance with supply obligations and to reduce the risk that wholesalers may prefer to supply their own integrated pharmacies and not dispense the medicines to the pharmacy where the end patient requests it.
Some of the minor amendments to the Regulation involve, inter alia, requirements for complying with good distribution practices for medicinal products in customs warehouses and temporary storage facilities, requirements for the distribution of non-registered medicines, and conditions for provisions of medicines as gifts to medical treatment institutions.
It is yet to be seen whether the new regulatory framework can actually provide a solution to the growing problem of insufficiency of medicines locally. Nevertheless, it is worth noting that the creation of a transparent and functional export and inventory control system is the way forward, in order to balance the interests of all the parties concerned and not to usurp the interests of patients that ought to be the true beneficiaries of the mechanism for state-reimbursed medicines.
By Indrikis Liepa, Partner, and Janis Sarans, Attorney, Cobalt