Cooperation with global pharmaceutical corporations should be intensified. It is important to attract investors, ensure the transfer of technology and the latest developments. It is necessary to expand the scope and range of off-take contracts with domestic manufacturers. The share of domestically produced medicines and medical products must be increased from the current 17 to 50% already in 2025.
K.K.Tokaev
The pharmaceutical industry is one of the key ones in the structure of the national economy and in the global market. The pharmaceutical industry is a significant part of the global healthcare system and occupies a special position in the global economy.
The Kazakh pharmaceutical industry, thanks to effective government support measures, has enormous potential to reduce import dependence. The domestic pharmaceutical market is one of the most dynamically developing in the Eurasian space.
Creating a production cycle with a high share of localization, allowing to reduce dependence on import supplies, transfer of modern technologies and localization of new production with the maximum involvement of Kazakhstani raw materials, personnel and goods is a priority direction for the pharmaceutical industry of Kazakhstan.
In accordance with Article 247 of the Code of the Republic of Kazakhstan “On the health of the people and the healthcare system,” supporting domestic production is one of the main directions in the activities of the Unified Distributor.
We will take measures to stimulate domestic production. It is necessary to increase the share of products produced in Kazakhstan; We will fully launch the system of offtake contracts. Our main task is to support domestic business.
Prime Minister of the Republic of Kazakhstan - O. Bektenov
The Unified Distributor, being an operator for the purchase and supply of medicines and medical products within the framework of the guaranteed volume of free medical care and compulsory social health insurance, takes an active position in the development of the domestic pharmaceutical industry and pays special attention to this. In this article we will analyze in detail all the instruments of state support.
LONG-TERM CONTRACTS
To date, the support provides preferences for domestic manufacturers::
Thus, manufacturers of medicines and medical devices in Kazakhstan have the opportunity to launch new or modernize existing production thanks to a guaranteed ten-year government order for pharmaceutical products.
The rules approved by order of the Ministry of Health of the Republic of Kazakhstan dated June 7, 2023 No. 110 regulate the methods of concluding long-term contracts with domestic producers and contract manufacturing customers:
1) concluding long-term supply contracts among potential suppliers who intend to create and (or) modernize the production of medicines and (or) medical devices;
2) concluding long-term supply contracts for original patented medicines with contract manufacturing customers.
These standards allow us to develop our own development of medicines, as well as the transfer of innovative technologies for the domestic production of medicines and the production of original drugs in the Republic of Kazakhstan.
To date, there are 94 long-term contracts concluded between the Unified Distributor and 35 domestic manufacturers for the supply of 3,948 types of medicines and medical devices.
As a result of the implementation of investment projects, there is a positive dynamics of purchases according to the List of the Unified Distributor, which shows an annual increase in the share of purchases from domestic producers.
Since 2009, there has been a systematic increase in the share of Kazakhstani drugs in the procurement of the Unified Distributor. Most of the domestic drugs are purchased under long-term contracts concluded with domestic producers for 10 years.
If in 2010 the share of domestic producers in monetary terms was 15% in the amount of 4.8 billion tenge, then at the end of 2023 the share of purchases in monetary terms increased 2 times, amounting to 31% (in the amount of 137.55 billion tenge). Of the volume of medicines purchased from domestic producers in 2024, 77% was purchased through long-term contracts.
Extension and termination of long-term contracts
A mechanism for extending a long-term contract has been introduced. A domestic producer, within the framework of its existing long-term contract, has the right to submit an application for the extension of a long-term supply contract for a period of up to 3 years. The procedure for extending long-term contracts is regulated by paragraph 2, chapter 6, section 3 of the Rules, approved by order of the Ministry of Health of the Republic of Kazakhstan No. 110.
It is worth noting that since 2020, for the first time, work has been carried out to terminate long-term contracts, the main reasons for which were the unregulated production of medicines, violation of the obligations stipulated in the contract and the deadlines for the implementation of investment projects. Thus, the Unified Distributor terminated 29 long-term contracts with 23 domestic manufacturers.
STATE REGULATION OF PRICES
State regulation of prices for medicines and medical products within the framework of the guaranteed volume of free medical care and in the compulsory social health insurance system is carried out by the Ministry of Health of the Republic of Kazakhstan on the basis of the formation of maximum prices and markups on medicines.
At the same time, maximum prices for medicines are formed on the basis of statements from manufacturers and an analysis of prices registered in reference countries. Registration and analysis of prices, as well as the formation of draft maximum prices for INNs, are carried out by the National Center for Expertise of Medicines and Medical Devices and sent for approval to the Ministry of Health of the Republic of Kazakhstan.
Price regulation for medicines within the framework of the Guaranteed volume of free medical care and compulsory social health insurance includes:
The rules of regulation, formation of maximum prices and markups on medicines within the framework of the guaranteed volume of free medical care and in the compulsory social health insurance system were approved by order of the Ministry of Health of the Republic of Kazakhstan No. KRDSM-247/2020.
Together with the List of the Unified Distributor, the Ministry of Health of the Republic of Kazakhstan approves the maximum prices for INN, by order No. KRDSM-96.
CT-KZ – LEVEL OF LOCALIZATION OF DOMESTIC MANUFACTURERS
State support provided today within the framework of public procurement, including purchases under long-term contracts of the Unified Distributor, is subject to the provision of ST-KZ and industrial certificates by the business.
At the same time, production conditions are not aimed at increasing the localization of product production. Accordingly, it is enough for manufacturers to fulfill the minimum requirements for the production of goods, which does not contribute to the creation of jobs, payment of tax payments, and at the same time receive government support.
With this approach, a unified policy to support Kazakhstani commodity producers is not formed, aimed at effectively ensuring the growth of production and export of products with high added value. That is, the ST-KZ certificate, which confirms the level of localization of production in Kazakhstan, does not allow us to see the dynamics of deepening localization.
The Unified Distributor, being an operator for the purchase of medicines and medical devices, during purchases checks for the presence of a certificate of origin of goods for internal circulation ST-KZ and an industrial certificate. The data obtained do not make it possible to assess the real depth of localization of domestic pharmaceutical products.
In order to increase the level of localization of domestic pharmaceutical production, the Unified Distributor has developed a number of proposals to increase and growth the share of Kazakhstani content.
The proposals of the Unified Distributor were sent to the Ministry of Trade and Integration of the Republic of Kazakhstan. And to increase the level of localization of the domestic pharmaceutical industry, the Procurement Rules establish counter-requirements and criteria for Kazakh manufacturers.
Currently, the Ministry of Trade and Integration of the Republic of Kazakhstan is working to transition to a new approach to confirm the Kazakh origin of goods - the Register of goods of Kazakh origin instead of ST-KZ and industrial certificates.
The register of goods of Kazakhstan origin involves the inclusion of information about domestic producers if they fulfill the conditions for the production of goods established by authorized government agencies and aimed at ensuring the highest possible level of localization or its gradual growth over the years.
At the same time, it is proposed to provide state support measures only to those manufacturers whose information is included in the Register, as the only source of information about the Kazakhstani origin of the goods.
Cooperation with the Committee for Technical Regulation and Metrology and the National Chamber of Entrepreneurs “Atameken”
The Unified Distributor is actively working together with the committee for technical regulation and metrology, the National Chamber of Entrepreneurs of the Republic of Kazakhstan "Atameken" on the methodology for determining the country of origin of goods.
A memorandum of understanding and cooperation has already been concluded between the Unified Distributor and the Committee for Technical Regulation and Metrology of the Ministry of Trade and Integration of the Republic of Kazakhstan to improve quality standards and localization of medical pharmaceutical production.
The task and purpose of the memorandum is to develop cooperation to systematically increase the level of localization of domestic pharmaceutical production while receiving appropriate measures of government support.
By joining forces with the Committee for Technical Regulation and Metrology, it is planned to carry out systematic work to increase the level of localization of our own pharmaceutical production and timely monitor expected changes in the legislation of the Republic of Kazakhstan. The result of bilateral cooperation will be a contribution to the implementation of strategic programs of Kazakhstan aimed at the development of the domestic pharmaceutical industry.
EXPORT OF DOMESTIC MEDICATIONS
One of the goals of creating a Unified Distributor is to support and develop domestic pharmaceutical production in Kazakhstan, including increasing export potential.
Based on data from the Analytical Portal of Foreign Trade of the Republic of Kazakhstan, the average volume of exports of medicines from Kazakhstan over the past 5 years is 58.8 million US dollars. Since 2017, there has been a positive trend in both export and import of medicines. This is due to the active policy of the state.
Promotion of export products is an important element of business support for the Government of the Republic of Kazakhstan. The task is to develop current initiatives of entrepreneurs and search for new markets for domestic products.
To date, only 9 out of 36 domestic producers with valid long-term contracts export manufactured medicines and medical devices.
The head of state has repeatedly emphasized the importance of intensifying foreign trade activities and promoting Kazakh products to foreign markets, emphasizing the need to regulate the export of basic food products to ensure the domestic market. He noted that it is necessary to continue work on diversifying the economy, expanding the range of goods produced and the geography of exports.
“The world is moving towards the greening of industry and the economy. Today these are no longer just words, but concrete decisions in the form of taxes, duties, and technical regulation measures. We cannot remain on the sidelines – all this affects us directly through exports, investments and technology transfer. This, without any exaggeration, is a question of sustainable development of Kazakhstan.”
K.K.Tokaev
Reimbursement of expenses
In order to stimulate domestic exporters to produce goods with high added value, the state has adopted a package of amendments that provides for reimbursement of the costs of goods with high added value and a share of local content.
At the moment, the state compensates part of the costs of transporting goods, promotion and participation in exhibitions to Kazakhstani manufacturers-exporters. Financial support will also be directed to the maintenance of representative offices, retail space, warehouses and retail shelves abroad. In addition, manufacturers will be reimbursed for part of the costs of procedures for registering trademarks, obtaining permits for franchising and undergoing certification and accreditation.
Partnership with QazTrade
In order to implement the export acceleration program for Kazakh manufacturers, aimed at increasing export potential and expanding foreign trade, SK-Pharmaceuticals and QazTrade entered into a memorandum of understanding and cooperation.
In particular, cooperation involves the promotion of domestic medicines, medical products and medical equipment to foreign markets.
The parties intend to develop a partnership to create conditions for increasing the competitiveness of domestic producers, searching for potential export markets and promoting medicines, medical products and medical equipment to foreign sites.
QazTrade, relying on its professional activities and competence, is ready to assist in the study and identification of barriers to trade in foreign markets, protect national interests within the WTO and the EAEU, and also take part in the implementation of the country’s trade policy.
The above goals are planned to be achieved through a series of events, analysis of foreign markets, interaction with domestic, foreign and international organizations, development of recommendations for improving the legislation of the Republic of Kazakhstan, as well as the exchange of information and experience.
At the initiative of SK-Pharmaceuticals, a training seminar was held from QazTrade to widely inform domestic manufacturers of the pharmaceutical industry on the reimbursement of part of export costs.
QazTrade provides assistance with step-by-step instructions for submitting an application through the export.gov.kz portal, in order to avoid possible mistakes by exporters and related issues regarding the correct submission of applications for cost reimbursement.
At the moment, work is underway to create a focus group to support domestic manufacturers to enter foreign markets. For this purpose, a special chat will be created for prompt interaction with interested parties, including with the participation of industry associations.
QUALITY AND SAFETY OF MEDICATIONS
Issues of the quality of medicines circulating on the market of Kazakhstan fall within the competence of the Committee for Medical and Pharmaceutical Control of the Ministry of Health of the Republic of Kazakhstan, which carries out the registration procedure for all medicines and medical products produced in the country, as well as those imported into its territory.
The registration procedure is preceded by a thorough examination, which consists of several stages. The National Center for Expertise of Medicines and Medical Devices carries out the examination and issuance of an opinion. At the registration stage, the effectiveness and safety of the drug, the feasibility of its presence on the market, and issues of compliance with production technology are determined. The results of preclinical, clinical and laboratory tests are studied.
If patients detect an undesirable reaction or ineffectiveness of medications and medical devices in treating a disease, they can contact their doctor to fill out a yellow message card on the website of the National Center for Expertise of Medicines and Medical Equipment.
All received cards are subject to careful analysis. All factors that caused a serious adverse reaction are checked, drug samples are removed and laboratory tests are carried out.
The practice of "yellow cards" is intended primarily to ensure patient safety. It is precisely these feedback tools that contribute to the development of a patient-centered healthcare system.
The Unified Distributor prioritizes the quality and safety of medicines supplied to Kazakh medical institutions by increasing requirements for suppliers, including using feedback tools such as “yellow cards”.
IMPROVEMENT OF PURCHASING ACTIVITIES
The Unified Distributor has successfully implemented a number of initiatives aimed at improving and increasing the transparency of procurement activities. In the course of improving the procurement process, a transition to an electronic format was developed for long-term contracts for the supply of medicines:
The procurement web portal fms.ecc.kz will allow achieving automation and digitalization of all procurement activities of the Unified Distributor from the announcement of purchases to the signing of the contract and its execution.
The Unified Distributor has successfully implemented a number of initiatives aimed at improving and increasing the transparency of procurement activities.
In the course of improving the procurement process, a transition to an electronic format was developed for long-term contracts for the supply of medicines:
The procurement web portal fms.ecc.kz will allow achieving automation and digitalization of all procurement activities of the Unified Distributor from the announcement of purchases to the signing of the contract and its execution.
IMPROVEMENT OF REGULATIONS AND LEGAL ACTS
An important area in the activities of the Unified Distributor is the improvement of legal and regulatory documents. To date, issues of changing the regulatory framework to support the development of the pharmaceutical industry have been worked out.
As part of its activities to support domestic producers, the Unified Distributor initiated a number of changes to Procurement Rules No. 110. To date, the Rules have been approved in a new edition, which takes into account the following:
The Unified Distributor has also carried out work to introduce changes and additions to regulations regarding the localization of production of pharmaceutical giants and global vendors, as well as the launch of new production facilities in the country.
The ongoing changes in the regulatory legal acts, in terms of improving procurement procedures for the contract production of drugs, medical devices and medical equipment, as well as in terms of simplifying the procedures for concluding long-term contracts and reducing the procedures for entering the market of original drugs, contributed to the signing of agreements on the localization of drug production with Bigpharma.
ATTRACTING INVESTMENTS OF BIG PHARMA
We need to increase the pace of growth, more actively diversify the economy, and attract more foreign investment.
K.K.Tokaev
To develop Kazakh production, the Unified Distributor is actively exploring the issue of localizing the production of BigPharma medicines on the basis of Kazakh manufacturers. Effective tools for increasing the share of domestic production are also the localization of original drugs, the creation of R&D centers and the conclusion of contracts for innovative drugs.
A breakthrough result in this direction was the conclusion of long-term agreements with pharmaceutical giants Pfizer and Roche for the contract production of original innovative drugs in the Republic of Kazakhstan.
As part of a long-term agreement, Pfizer plans to produce and supply a 20-valent pneumococcal conjugate vaccine to Kazakhstan, from the moment the contract production of the innovative vaccine is organized in the Republic of Kazakhstan.
And Roche plans to produce and supply 4 biotechnological drugs for the treatment of oncological diseases, namely breast cancer, developed by Roche.
Memorandums were also signed with such players as AstraZeneca UK Limited JSC, Novo Nordisk Kazakhstan LLP, Bayer KAZ LLP and Johnson&Johnson LLC. Comprehensive work is currently underway to conclude long-term contracts with the above companies.
Work should continue on the transfer of modern technologies and localization of new production facilities.
K.K.Tokaev
Projects in development
The Unified Distributor continues to work on attracting global players to the local market. Negotiations are currently underway at various stages to sign cooperation agreements and readiness for localization with the following pharmaceutical companies:
At the same time, visits to a number of production sites of the world's leading pharmaceutical companies are planned for 2024.
The Unified Distributor created a working group for interaction with BigPharma. The effect of joining forces with global industry players will be the dynamic development of Kazakhstan's pharmaceutical production and increased export potential.
Cooperation with leading foreign companies, including BigPharma, will bring to Kazakhstan not only new technologies, but a whole philosophy of health, which is an integrated approach to understanding and achieving health.
GROUP PROCUREMENTS
Joint procurement is a global practice that helps increase the availability of medicines. Its main goal is to ensure fair access to specific medical countermeasures and improve the security of supply, as well as establish more balanced prices.
For example, during the pandemic, the European Union carried out a number of procurements using joint procurement mechanisms, in which 25 European states participated. Thus, this has become the basis for confronting cross-border health challenges.
To increase the availability of medicines for patients, Kazakhstan and Kyrgyzstan initiated joint procurement by increasing the volume of medicines and medical devices.
The initiative was formalized in the form of a memorandum of cooperation and understanding concluded between SK-Pharmaceuticals and the Kyrgyzpharmacy State Enterprise under the Ministry of Health of the Kyrgyz Republic. The signing of the document took place in October 2023 at the site of the III International Pharmaceutical Forum “Global Pharm”.
In addition, such a mechanism allows for priority supplies to countries in greatest need to be prepared for the emergence of a serious cross-border health threat. A striking example of this is the global pandemic.
The Unified Distributor is planning to conduct a pilot group purchase of medicines for the Kyrgyz Republic this year. Amendments to the regulatory legal acts are being considered to define SK-Pharmaceuticals as an operator of group intercountry procurement of medicines in 2024-2025.
PROPOSALS FOR THE DEVELOPMENT OF THE PHARMACEUTICAL MARKET
Localization of drug production is critical for national drug security. At the same time, localization must be complete so that it leads to the industrialization of the country.
K.K.Tokaev
The development of the domestic pharmaceutical industry is envisaged through the production of innovative drugs. Today, the portfolio of Kazakhstani manufacturers is represented by low-profit generic drugs. There is no production of pharmaceutical substances in Kazakhstan and a low level of export of finished products.
Over 14 years of work, a support tool in the form of long-term contracts has taken place, however, given the existing problems, a reboot of the pharmaceutical industry system is required.
According to statistics, the TOP 10 BigPharma corporations occupied 36% of the entire Kazakhstan market. The leader in sales growth is the line of innovative products. Sales drivers are oncology, autoimmune diseases, antidiabetic and HIV medications.
In this regard, government support measures are proposed to be provided for the production of medicines and medical devices, based on the real needs of the healthcare system. It is necessary to orient the pharmaceutical industry towards the production of high-tech, innovative medicines and medical products.
One of the proposals is to reconsider the terms of concluding long-term contracts. For example, a regular long-term contract should be concluded for 5 years, and a 10-year document should be concluded for a full cycle.
As for clinical trials conducted jointly by a domestic and foreign manufacturer, it is necessary to ensure that the license for an innovative drug in the Republic of Kazakhstan remains with the Kazakh partner.
EFFECTS
Kazakhstan is interested in attracting investments and advanced technologies necessary for the successful implementation of economic modernization. Key importance is attached to the development of the production of expensive innovative drugs, promotion of the industry in the direction of technology transfer, its digitalization, as well as the development of a cluster initiative.
The main effect of consideration and implementation of the above proposals will be the creation of conditions for a full production cycle, as well as a reduction in the cost of manufactured products to attract direct investment.
Thanks to the involvement of BigPharma through the localization of production, as well as their offices, Kazakhstan is becoming closer to creating a solid infrastructure of a pharmaceutical hub, which will act as a platform for the distribution of medicines and medical products to countries near and far abroad.
The development of domestic production will give a positive economic effect, which implies an increase in production volumes, consumption, tax revenues, a reduction in production costs, as well as the creation of new jobs.
All efforts and results available today are an example of an integrated approach for the progressive development of domestic industry and its clustering thanks to government support measures.
The Unified Distributor, in turn, is the conductor of these measures, ensuring long-term purchases of medicines since 2009, and now from contract manufacturing customers based on local sites. And it takes the initiative to provide a platform for large brands to enter the country from packaging to the full production cycle.
The Unified Distributor studies global experience and is actively working on the comprehensive implementation of best practices in Kazakhstan. By increasing the pace of work and expanding development opportunities, Kazakhstan has all the prerequisites to become a key player in the industry, produce innovative original drugs, increase population coverage and the export potential of domestic production. It is advisable to achieve such a goal through continuous comprehensive work and joint efforts.
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