Grave concerns about the impact of VAT on medicines in Russia

Following the announcement by the Russian government that 20%value-added tax is to be imposed on medicines, grave concern is being expressed as to what effect this will have on the price of drugs, and that making modern therapies unaffordable will encourage counterfeit pharmaceuticals and gray imports.

Russian drug industry leaders have sent an open letter to Valentina Matvienko, deputy chairman of the government, in which they say that imposing VAT on the majority of drugs and medical equipment, which is scheduled to come into force at the beginning of 2002, will raise the prices of medicines by more than 25%, and will lead to lower public satisfaction with drugs. They also contend that among the negative consequences of VAT will be a general worsening of the health of the nation and that it will also affect those domestic drug firms that are preparing their production facilities to meet Good Manufacturing Practice standards by 2005.

Also, in a letter to the Farmatsevitchesky Vestnik journal, PricewaterhouseCoopers' taxation manager, Mr E Veter, warns that, given the intention to have a list of vitally-important drugs exempt from VAT, "one gets concerned about the impartiality of the people who will be responsible for compiling this list. They might abuse their power and take bribes." He too urges the government to rethink its plans, which also propose a profit tax on pharmaceutical firms, which he says will make drugs unaffordable and lead to gray imports.