Artificial Increase in Prices of Medicines (“MMDs”) and Its Legal Consequences

At present, there is a rapid increase in pneumonia cases in the Republic of Kazakhstan (“RK”), which has led to a surge in demand for medicines (“MMDs”). Citizens on social media report cases of inflated pharmacy prices and instances of non-prescription dispensing of MMDs. President Tokayev acknowledged the legitimacy of public complaints regarding inflated prices for medicines and instructed state authorities to address this issue.

Before discussing the unlawful increase in medicine prices and its legal implications, it is important to note that the regulation of pharmaceutical activity underwent large-scale reform in 2019.

At the end of 2018, the First President of Kazakhstan, N.A. Nazarbayev, signed the Law “On Amendments and Additions to Certain Legislative Acts on the Circulation of Medicines and Medical Devices” No. 211-VI dated 28.12.2018, which was developed in accordance with the Address of the First President of the Republic of Kazakhstan, “The Third Modernization of Kazakhstan: Global Competitiveness.”

This Law significantly changed the regulatory framework for pharmaceutical activity. Amendments were introduced to 34 previously existing regulations and 13 new Orders of the Minister of Healthcare of the RK were developed:

• price regulation for MMDs sold in the commercial market segment was introduced, meaning a registered maximum price (“max price”) is established for each MMD;

• rules for ethical promotion of medicines were approved at the legislative level and became mandatory;

• a system for rational use of medicines was implemented;

• rules for issuing and storing prescriptions were modified;

• rules for wholesale and retail sale of medicines and medical devices were revised;

• amendments were introduced to good pharmaceutical practice requirements;

• within the framework of digital healthcare, electronic health passports were created and a transition to electronic prescriptions was planned for 2020;

• administrative liability was strengthened for violations of requirements and rules relating to the circulation of medicines and medical devices.

These reforms were intended to ensure the efficient and proper functioning of pharmaceutical activity. One of the key requirements is that MMDs must not be sold above their registered max prices. However, the effectiveness and practical enforcement of these requirements during the COVID-19 pandemic remains uncertain.

Reports from various public sources indicate violations of pharmaceutical legislation and MMD circulation rules. The most frequently reported violation concerns inflated prices for MMDs.

If overpricing is confirmed, those responsible are subject to liability under Article 426 of the Code of Administrative Offences of the RK (“CAO”).

Article 426 CAO establishes fines for exceeding registered max prices for MMDs: seventy monthly calculation indices (MCIs) for individuals, one hundred MCIs for officials, one hundred thirty MCIs for small businesses, two hundred MCIs for medium businesses, and one thousand MCIs for large businesses.

If the violation is repeated within one year, pharmaceutical businesses may have their pharmaceutical licence suspended for up to six months.

Thus, the most severe sanction for exceeding MMD prices is licence suspension, meaning a prohibition on conducting business activities involving the sale of MMDs. However, this measure may be counterproductive given public complaints about medicine shortages in pharmacies.

In addition to the administrative fines noted above, local authorities for quality and safety control of goods and services under the Ministry of Healthcare of the RK may conduct pharmaceutical inspections. Following such inspections, they may issue orders requiring correction of violations of Kazakhstan’s legislation, or apply to the court if legal requirements, orders, or decisions issued by authorised officials are not fulfilled or are improperly fulfilled.

However, as of the publication date of this article, no information is available on the official website of the Committee for Quality and Safety Control of Goods and Services regarding any individuals or entities being held liable for exceeding registered max prices for MMDs.