Russian Prime Minister Vladimir Putin has sacked a senior health official for publicly criticising controversial new draft legislation to introduce state regulation of drug pricing.

Nikolai Yurgel, head of the Federal Service for Supervision of Health_are and Social Development (Roszdravnadzor) violated civil service law by expressing "his disagreement with the position of the health ministry and the government [and] siding with experts who have not studied the bill in detail or have openly lobbied against it," the government said on Saturday (Feb 6).

It also pointed out that the bill – the draft Law on Medicines Turnover – was passed by the Federal Assembly (parliament) at its first reading. It proposes much stronger controls over drug registration and pricing, including a ban on sales of medicines which are on the list of lifesaving and essential products approved by the government on December 30, 2009, if their prices have not been officially registered.

The 5,000-plus medicines included in the list account for about 35% of drug sales in Russia. Most of them are generics, and around 30% are produced by non-Russian firms.

Manufacturers of products on the list are required register or reregister their maximum sale prices by April 1, under the new pricing regulations. They also state that wholesale prices may only be revised once a year, that they must take account of average prices during the previous six months and that any price increase cannot be greater than the level of inflation. The new system uses different methods for assessing maximum prices based on whether the products are original or generic, if local equivalents are already on the market in Russia and whether a product’s price was registered within six months of its being imported into the country.

However, earlier this month Mr Yurgel and Sergey Novikov, head of the Federal Tariffs Service, wrote to drugmakers and distributors informing them that no price increases for products on the list will be permitted this year, even if they are being sought as a result of production cost rises.

Viktor Dmitriyev, head of the Association of Russian Pharmaceuticals Producers, said this ban discredited the idea of state regulation of drug prices, and warned that it could lead manufacturers to reduce production levels in Russia or increase the prices of products which are not included on the essential drugs list, according to local reports.

The Russian pharmaceuticals market was worth $16.2 billion last year and imports account for 80% of sales. Due to its 141 million population, Russia represents just under one-third of the total central and eastern European drugs market, but in per capita terms it is one of the smallest, says market research firm Espicom.

In late January, Espicom reported that, as a result of the economic crisis, forecasts for market growth in Russia had been adjusted downwards to an annual average of 8.3% in US$ terms over the next few years.

However, also in January, Business Monitor International (BMI) forecast a sharp return to growth for the market over the next five years, following an anticipated contraction of 9.1% in $ terms for 2009. For 2009-14, BMI is now projecting a five-year compound average annual growth rate (CAGR) of 18.13% in $ terms or 13.98% in local currency terms which, it says is “an impressive figure, even when the anticipated appreciation of the ruble is taken into account.”