Overview of the Medical Devices Market in the Russian Federation

Medical device manufacturing is a critical and rapidly growing segment of the healthcare industry. Manufacturers of medical devices produce a wide range of products - from complex diagnostic and therapeutic equipment to simple medical instruments and consumables that are used in medical institutions, emergency services, rehabilitation of the disabled and at home. Recently, many manufacturing companies in the industry have made major technological advancements and grown exponentially. Despite heavy regulation and financial pressure on the industry, the market continues to grow worldwide.
Currently, the global medical device market is valued at more than USD 425 billion and, according to industry experts, will reach USD 612.7 billion by 2025.

The Russian medical device market accounts for about 1.5% of the world market
market. According to expert forecasts, by the end of 2024 the volume of the medical devices market could reach 450 billion rubles. The share of Russian producers is expected to increase to 32%. Taking into account support measures, the share of Russian manufacturers will increase from 23 to 32% over the period until 2024. Regulatory changes adopted in 2019 will contribute to such market growth.

Significant changes in the regulatory field in 2019

In June 2019, Prime Minister of the Russian Federation Dmitry Medvedev signed a list of medical products, expanded by 14 positions, subject to the Decree of the Government of the Russian Federation No. 102 of February 5, 2015. Proposals to expand the list were prepared by the Ministry of Industry and Trade of the Russian Federation. The decree applies to ventilators, gamma therapeutic complexes of contact radiation therapy of medium and high power, ultrasound machines, endoprostheses of limb joints, intraocular lenses, microsources with iodine-125, adhesive dressings, including those impregnated or coated with drugs, containers for taking, storing and transporting biological samples, including vacuum tubes for collecting venous blood and tubes for capillary blood, containers for urine, feces and sputum, external fixation devices, medical functional beds, intraocular pressure tonometers, air sterilizers, dry-air thermostats and otorhinoscopes.

This year, the Ministry of Industry and Trade of the Russian Federation has developed new mechanisms for state support of the medical and pharmaceutical industry, providing for:

• financial support for the costs of manufacturers for the implementation of projects, starting from the R&D stage and conducting clinical studies/tests to the implementation of the development in industrial production;
• determination of subsidy recipients within the framework of competitive procedures;
• the widest possible list of subsidized costs;
• establishing as the main indicator of the effectiveness of project implementation the indicator of revenue from sales of products created within the framework of the project;
• determination of recipients of subsidies within the framework of competitive procedures carried out within the framework of each technology included in the list of modern technologies approved by the government of the Russian Federation.

The list of strategic directions for the development of the medical industry includes the development and organization of production of medical products in the field of orthopedics, traumatology and prosthetics, test systems for in vitro diagnostics, detection of cancer and pathologies of the cardiovascular system.

In addition, there was a minimum investment volume of 750 million rubles.

 A clause has appeared regarding the stability of conditions for the investor: he is not subject to legislative changes approved after the date of conclusion of the contract that may affect the implementation of the project. But only if a special procedure is prescribed for SPIC participants on the date of adoption of the changes.

The investor will be determined through a competition. It can be closed if we are talking about technologies related to defense and state security. Both the federal authorities and the investor have the right to initiate the competition.

The contract can be concluded without a competition - by decision of the president, if the project is of strategic importance for the economy or national security, or if a single application is submitted.

The SPIC will specify the indicators that the investor undertakes to achieve: the volume of products produced and sold, the minimum set of taxes, fees and insurance premiums, and the number of jobs. Liability for failure to fulfill or improper fulfillment of the terms of the contract is also established by law.

The investor must separately take into account the income and expenses of the project that is the subject of the SPIC, if he is engaged in some other activity. In this case, the benefits cease to apply if the state has lost or received less than 50% of the total volume of planned investments from the contract.

Amendments to the Tax Code provide benefits for those who have concluded a SPIC: a zero rate of income tax credited to the federal budget, a reduced rate to the budgets of constituent entities. Changes to the Budget Code make it possible to provide SPIC participants with subsidies from budgets of different levels for more than one budget period.

The SPIC under the updated law can be signed before the end of 2030.

The first SPIC in the medical technology industry for 3 billion rubles was signed at the beginning of 2019 by the Ministry of Industry and Trade, the government of the Nizhny Novgorod region and the Russian-Chinese company Snabpolymer Medicine.

 At the end of January 2019, the Ministry of Health prepared amendments to the Decree of the Government of the Russian Federation dated September 30, 2015 No. 1042, which defines the rules for the import into the country of medical goods that are exempt from value added tax.

Difficulties arose at the end of 2016, due to the cancellation of the previously existing All-Russian Product Classifier (OKP) and the transition to a new classifier (OKPD2), in which some of the codes were missing. As a result, many medical products were deprived of VAT benefits.

Amendments to the Resolution prepared by the Ministry of Health supplemented the list of codes of the all-Russian classifier of products by type of economic activity (OKPD2) for most positions.

In August, the Ministry of Finance prepared a draft amending the Decree of the Government of the Russian Federation of September 15, 2008 No. 688 “On approval of lists of codes of medical goods subject to value added tax at a tax rate of 10 percent.”

One of the key events of 2019 was the development of a list of medical equipment for the re-equipment of clinics under the “Healthcare” national project.

 The list for re-equipping clinics under the oncology program of the national project included 147 units of medical devices, including CT, MRI, PET, angiographs, brachytherapy devices, various X-ray equipment and several types of ultrasound scanners. As well as bronchoscopes, gastroscopes, microscopes, including digital ones, endoscopic complexes, operating equipment - anesthesia machines, patient monitoring monitors, control systems. The list also includes a line for clinical and laboratory diagnostics, including several types of analyzers.

To equip regional vascular centers and primary vascular departments located in regional medical organizations within the framework of the federal project “Combating Cardiovascular Diseases,” 29 types of equipment and medical products must be purchased, including angiographic complexes, MRI, CT for studies of the heart and brain, mobile expert-class ultrasound machines for studying the heart and blood vessels, devices for artificial ventilation of the lungs, equipment for neurosurgical operations and medical rehabilitation.

Let us remind you that healthcare institutions are recommended to purchase medical products and equipment from domestic manufacturers at

"equivalent technological characteristics".

For this purpose the Ministry of Industry and Trade of Russia together with State CorporationsRosatom, Rostec and other Russian manufacturers have compiled a consolidated list of products.

 The Ministry of Industry and Trade of the Russian Federation expects that the implementation of the national project will increase the share of Russian manufacturers to 40%.

Throughout the year, there was an active discussion about the possibility of extending the transition period for re-registration of medical devices that have a registration certificate in their country, according to the rules of the EAEU.

And finally, on September 9, Order of the EEC Board No. 142 “On the Draft Protocol on Amendments to the Agreement on Common Principles and Rules for the Circulation of Medical Products (Medical Products and Medical Equipment) within the Eurasian Economic Union dated December 23, 2014” was published.

According to the information provided, Article 11 “Transition period” is stated as follows:

Until December 31, 2021, at the choice of the manufacturer of a medical device or its authorized representative, registration of a medical device may be carried out in the manner established by the Commission or in the manner prescribed by the legislation of the Member State.

A medical device registered before December 31, 2021 in the manner provided for by the legislation of a Member State may be re-registered before December 31, 2026 in the manner provided for by the legislation of that Member State, and may be circulated on the territory of that Member State until the expiration of the documents confirming the fact of state registration of such a medical device, with the right to make changes to the registration documents.

In November 2017, the EEC Council approved the Requirements for the implementation, maintenance and evaluation of a quality management system for medical devices, depending on the potential risk of their use. The document provides for mandatory inspection of the production of medical devices, the use of which poses a high risk to the well-being of the patient.

On March 16, 2019, the transition period that provided manufacturers with a reprieve from inspections ended.

Inspection is provided as part of the registration of medical devices, as well as scheduled and unscheduled. Unscheduled inspections are possible in the event of undesirable events associated with the threat of harm to the health and life of citizens. Scheduled inspections will be carried out at certain intervals. You need to understand that in the event of a negative decision based on the results of unscheduled and periodic inspections, there may be a question of suspension or cessation of production and circulation of the medical device. Depending on the problems identified, it will be possible to eliminate inconsistencies and conduct additional inspections, this time on a smaller scale.

On June 10, at the EEC headquarters, a meeting of the working group was held to assess the regulatory impact of draft EEC decisions, which implies an assessment of their impact on the conditions for doing business in the Union.

At the meeting, it was proposed to provide an integrated approach to regulating the activities of organizations that have the right to conduct inspections of the production of medical devices.

Also, according to the members of the working group, it is necessary to provide uniform requirements for such organizations and unified procedures for vesting them with inspection powers in one document.

In Russia, inspection of production facilities is entrusted to Roszdravnadzor

In September, the Ministry of Health of the Russian Federation presented draft rules for calculating the cost of inspecting the production of medical devices by Roszdravnadzor of the Russian Federation.

The cost depends on the number of employees of the enterprise, its geographical location (if production sites are located in several cities), as well as the type of inspection - primary or periodic.

The maximum fee for a manufacturer of medical devices in Russia will be 1.9 million rubles, of which 1.27 million rubles are travel expenses and 673 thousand are the work of the inspector itself. Outside the Russian Federation - 2.6 million rubles (1.9 million rubles for travel expenses and 673 thousand for inspection).

Roszdravnadzor will evaluate the design and development of a medical device, documentation and records management, production and final control, and consumer-related corrective and preventive action processes. Separately, you will have to pay for the selection and testing of samples of implantable, invasive medical devices, as well as products for in vitro diagnostics of the third risk class.

Currently, active work is underway to improve the procedure for registering medical software (software).

The Association of Developers and Users of Artificial Intelligence Systems in Medicine “National Medical Knowledge Base” (NBMZ) and the Skolkovo Foundation propose to simplify the state registration of medical software without registering it as a medical product. For this purpose, a draft Federal Law was developed to amend the Federal Law “On the Fundamentals of Protecting the Health of Citizens.” He proposes the introduction of the concept of medical software (MPO), a special procedure for its state registration and the possibility of not subjecting certain types of software included in MPO and software that is not to it.

The Russian Ministry of Health does not support the bill. Roszdravnadzor also believes that the problem of registering medical software must be solved without changing the law, according to which this software is now registered as a medical product - at the level of by-laws.

In October, at an industry workshop of Roszdravnadzor, it was decided to create working groups to resolve issues related to the registration of medical software.

Localized production

An important result of 2019 can be considered the start of sales of localized products at several enterprises. In addition, new strategic partnership agreements were signed between Russian and foreign companies.

Fetal monitors FC 1400, produced at the Ural Optical and Mechanical Plant named after E. S. Yalamov (UOMZ), have gone on sale. The production of new equipment was launched in cooperation with a South Korean company.

UOMZ is part of the Shvabe holding of the Rostec State Corporation.

In the fall of 2019, another enterprise of the Shvabe holding signed a long-term partnership agreement. We are talking about an agreement between the Krasnogorsk plant named after. S. A. Zverev and the leading European manufacturer of endoprostheses

"Limaсorporate".

At the start of the project Krasnogorsk plant named after. S. A. Zvereva will act as a distributor of products and will begin a phased transition to the localization of technologies at its production site.

Gradually, the level of localization will be increased to 51%, and then it is planned to organize full-cycle production in Russia.

In addition, the Double Medical.ru2 company is going to build a plant for the production of implants for traumatology and orthopedics in the Yurga TASED, using technology from the Chinese company Double Medical.

The plant will produce plates for external osteosynthesis, screws, pins for intramedullary osteosynthesis and systems for transpedicular fixation of the spine from titanium and its alloys.

The investor has already entered into an agreement with one of the largest Russian distributors -group "Health", which will sell products not only in Kuzbass, but also in other regions of Russia.

The authors of the project predict the growth of the Russian implant market from the current 6 to 9 billion rubles. by 2021.

In 2019, a cooperation agreement was signed by a Russian enterprise

"Kurganpribor" and the German company "LRS Engineering". According to the terms of the agreement, German partners will provide technology for the production of coronary stents and help with the acquisition of the necessary equipment.

The initial planned capacity should be about 50 thousand stents per year.

At the facilities of a plant near Moscow"Nanoptics"The production of intraocular lenses from the American manufacturer Alcon will be localized. Products marketed under the AcrySof Single Peace brand are used to treat cataracts.

The total investment in the project is estimated at 250–300 million rubles; the plant’s capacity at the first stage will be 140–160 thousand products per year.

Alcon modernized Nanoptika production lines in Zelenograd, carried out technology transfer and trained specialists. The partners intend to occupy at least 30% of the market for these products in Russia.

 The French-Israeli company Luneau Technology Operations (LTO), together with TekhnoSparka LLC of the Rusnano Group of Companies, has already localized the production of medical ophthalmological equipment in Russia.

The decision to launch an equipment localization project in Russia was made in mid-2017. And in September 2019, the Russian division of Visionix Rus received the long-awaited registration certificate for the Visionix brand diagnostic device.

In February, at the Russian Investment Forum in Sochi, GE Healthcare and the medical division of Rosatom State Corporation approved a road map for the localization of medical equipment for the diagnosis and treatment of cancer, in particular, positron emission tomographs (PET). The “road map” involves the creation of localized PET/CT production in Russia within one and a half years with an option to expand the product line.

The BSS company was founded in 1996 with the aim of providing the population of the Russian Federation with high-quality medicines.

During its existence, the company has grown from a distributor into a large pharmaceutical company, including its own production, clinic, federal chain of pharmacies, an extensive warehouse and vehicle fleet.

As part of the holding's activities, the sale of medical equipment and consumables is carried out.

The pharmaceutical holding "BSS" opened the "BSS-Lab" direction to diversify its business portfolio. "BSS" is ready to wholesale reagents for laboratory research in the field of immunochemistry, biochemistry, hematology, hemostasis, urinalysis, as well as reagents and products for microbiological laboratories.

The company calls commercial clinics and government budgetary institutions of St. Petersburg and the Leningrad region, as well as Moscow, its potential audience. According to company estimates, the volume of this market in Moscow is about 5 billion rubles, in St. Petersburg - 3 billion rubles. and BSS intends to take a dominant share, since there are no major players in this market yet.

Over the past twenty years, the German company Biolitec AG has been firmly among the top ten world leaders in the production of high-precision medical equipment and is known as the flagship of laser medicine. Medical specialists working in the company constantly conduct scientific research in the field of laser radiation in order to improve existing techniques and medical equipment.

The company's head office is located in Jena, and its branches and research centers are located in different cities in Germany, Malaysia, the USA, France, Scotland, and Latvia.

On May 21, 2007, a representative office of the BIOLITEC AG concern was opened in the Russian Federation in St. Petersburg.

Biolitec AG produces medical and diode lasers, optical fiber, accessories for laser surgery, instruments for photodynamic therapy, and specialized dental equipment.

The company's products are in demand in the following areas of medicine:

• phlebology;
• vascular surgery;
• neurosurgery;
• otorhinolaryngology;
• orthopedics;
• gynecology;
• interstitial thermotherapy;
• dermatology;
• oncology;
• ophthalmology, etc.

Today, Biolitec AG medical equipment can be found both in large clinics and in small offices of private practitioners, since the company has a flexible pricing policy, and the sale of medical equipment is carried out with favorable discounts.

Today the Biolitec AG corporation includes such companies as:

• CeramOptec (produces diode lasers, industrial and medical optical fibers);
• Biolitec Pharma (develops and produces pharmacological drugs for photodynamic oncology and therapy, including the famous innovative photosensitizer Foscan, which is used for modern treatment of neck and head cancer).

MEDICAL DEVICES MARKET AND COVID 19

The COVID 19 virus pandemic could not but affect the development of the medical device market in the Russian Federation.

As part of the fight against the pandemic, the Russian Ministry of Health has reduced to a minimum the time frame for registering medical devices that are objectively necessary for testing and treating coronavirus infection.

Restrictions have been introduced on the export from the Russian Federation of some medical products, such as maxis, respirators, anti-plague suits and others.

However, there is an exception to this restriction, namely if such supplies are not related to the provision of humanitarian assistance to those affected by the pandemic.

We must not forget that the coronavirus infection that has affected the whole world has revealed not only problems in the provision of medical products, but also one of the leading roles of this production sector in the near future.

It seems that the Russian Federation is no less attractive a platform for the production of medical devices, as well as high-precision medical equipment, than China, Germany or the United States.

Since 2014, the state has had a program of territories of advanced socio-economic development, the goal of which is to create powerful and high-tech technology parks based on single-industry towns of the Russian Federation.

The attractiveness of this program lies not only in preferential tax regimes for its participants, but also in the preferential provision of land plots for the location of production, as well as quick connection to utility networks.

Considering that during the pandemic, Europe and Asia are faced with a shortage of not only ventilators, but also medical products with protective functions, we believe that the proposal to organize joint production in the Russian Federation and CIS countries to meet their own needs and requirements should be in demand in the near future