Russia Cuts Original Drug Prices by 40-65% the Moment a Generic or Biosimilar Enters the Market
Manufacturers of original drugs usually prepare for generic entry well in advance. They monitor the patent register, calculate the exclusivity horizon, and plan their post-patent marketing budgets. By the time the first competitor is registered, economics has already made the decision for them: a government formula predetermines the exact percentage by which the maximum limit price will drop, and negotiations with retail have nothing to do with it.
Over the past year and a half, a second layer of pressure has been added to this formula. The list of Strategically Significant Medicines (SZLS) has been formed under new rules since March 2026, and by July it had expanded to nearly 350 international nonproprietary names (INNs). The price of an originator drug is now suppressed not only by a specific market competitor, but by the mere presence of the molecule on this list.
Both mechanisms grew out of a single idea, then diverged in practice. The procurement rule known as «second-is-a-crowd» determines who gets the government contract in the first place. The pricing methodology determines how much that contract will cost, regardless of who won it. Regulatory managers at pharmaceutical companies should keep both frameworks in mind at once, since they are triggered by different events at different times.
For Ten Years, the «Third-Is-a-Crowd» Rule Depended on the Number of Bids
Until 2025, national treatment in pharmaceutical procurement relied on the «third-is-a-crowd» rule. Government Decree No. 1289 of 30 November 2015 (hereinafter, Decree No. 1289) rejected a foreign bid only when at least two bids were submitted by manufacturers from the Eurasian Economic Union (EAEU). If there was only one local participant, a foreign drug could still win the tender.
An additional mechanism was a 15% price preference for domestic goods. If a foreign manufacturer won the tender, the buyer could demand an additional discount of that size, leveling the terms against local competitors. Competition remained real, and the price of the original drug fell gradually as new local analogues appeared, not all at once after the very first one was registered.
The Ministry of Industry and Trade discussed a tougher mechanism as early as 2021, against the backdrop of the pandemic and the results of the «Pharma-2020» state program. At the time, the proposal stayed at the stage of draft amendments to Decree No. 1289. A working version appeared only three years later.
The rituximab market offers a clear example. In 2015, Roche’s patent on MabThera expired, and Biocad launched its biosimilar, Acellbia. In its first year, the Russian drug captured 61% of the market, and Roche’s share fell to 39%. In 2017, R-Pharm registered Reditux, and the «third-is-a-crowd» rule itself kicked in against MabThera: two local bids excluded the original drug from tenders entirely.
That whole process, from patent expiry to the original drug’s complete removal from procurement, took more than two years. Under today’s rules, the same scenario takes one tender cycle.
From Counting Bids to Automatic Rejection
Government Decree No. 1875 of 23 December 2024 (hereinafter, Decree No. 1875) changed this logic starting 1 January 2025. For drugs on the Vital and Essential Drugs List (VED), the buyer must reject any bid offering a foreign product if at least one participant has offered a drug of Russian origin. Localization depth and bid price play no role at this stage: the mere presence of a domestic brand closes the tender to imports. The rule applies to procurement under both Federal Law No. 44-FZ and Federal Law No. 223-FZ, covering federal and regional institutions as well as state corporations and companies with state participation.
In parallel, the status of the SZLS list was changing. Federal Law No. 268-FZ of 23 July 2025 (hereinafter, Law No. 268-FZ) added the concept of «strategically significant medicines» to Article 4 of Law No. 61-FZ «On the Circulation of Medicines» and gave the government authority to approve the procedure for forming the list. The provision took effect on 1 September 2025, but the government approved the actual selection criteria for individual drugs only the following spring.
| Parameter | Before 2025 (Decree No. 1289) | After 2025 (Decree No. 1875, Law No. 268-FZ) |
|---|---|---|
| Condition for rejecting an import bid | At least two bids from EAEU manufacturers | Any bid offering a Russian drug, regardless of how many bids there are |
| Role of localization depth | Not considered directly | Not considered at the base level for VED drugs |
| Status of the SZLS list | A departmental list kept by the Ministry of Health | Set in law; the government approves the formation procedure |
| Legal basis | Government decree | Federal law plus government decree |
The sequence here matters. The basic version of the rule took effect on 1 January 2025 for two lists at once, VED and SZLS. At that point the SZLS list still existed only in its old 2010 departmental form. The stricter version, which gives preference specifically to full-cycle manufacturers, could only take effect for SZLS once the government had approved new selection criteria for the list. That step took nearly a year and a half.
The SZLS List Was Split into Two Tiers of Support
The two sections of the SZLS list took shape with Government Decree No. 277 of 17 March 2026 (hereinafter, Decree No. 277), which set out the rules and criteria for forming the list. Three general criteria apply to both sections: the drug must be registered in Russia or the EAEU, included on the VED list, and purchased by state or municipal bodies over the past three years.
A drug enters the first section if it meets at least one additional condition:
it is a vaccine from the national immunization schedule;
it is derived from blood, or serves as a blood substitute, perfusion solution, or infusion solution;
it is on the list of narcotic and psychotropic substances subject to control in Russia.
Drugs for particularly dangerous infections enter the first section without needing to meet the three general criteria at all.
The second section covers drugs with no Russian equivalent in the same medical indication and chemical group, which are also used for disabling diseases, pose a danger to others, belong to socially significant disease categories, are antibiotics, are needed for federal projects, or are dispensed free or at a discount to certain population groups under Decree No. 890 of 30 July 1994.
The two sections carry different procurement protection. Drugs in the first section get priority directly in bid evaluation, meaning the full «second-is-a-crowd» logic from Decree No. 1875 applies. Drugs in the second section get a softer price preference rather than automatic exclusion of foreign bids, since the government has less confidence that mature, full-cycle local manufacturing already exists for that part of the list.
Decisions on adding or removing drugs are made by a commission under the Ministry of Health, with representatives from the Ministry of Industry and Trade, the Ministry of Finance, the Federal Antimonopoly Service (FAS), and Roszdravnadzor. Meetings are held quarterly, and decisions require a two-thirds vote of the members present. Drugs already on the old SZLS list (Government Order No. 1141-r of 6 July 2010) are protected from removal until 1 January 2031.
Either a company or a government body can initiate the addition or removal of a drug. An application with supporting justification goes to the Ministry of Health, which checks the data and requests opinions from experts and from the Ministry of Industry and Trade before the matter goes to a commission vote. An application can be turned down for inaccurate information or for failing to meet the criteria, and decisions are published on the Ministry of Health website within ten days of the meeting.
The updated list itself was approved by Order No. 942-r of 23 April 2026: 206 INNs. Two and a half months later, Order No. 1478-r of 7 July 2026 expanded the list by nearly 150 positions, mostly blood products and immunoglobulins, along with oncology and antiviral drugs.
Industry reaction to the Decree No. 277 rules has been mixed. Russian manufacturers broadly welcomed the document: splitting the list into two blocks with different support logic matched what they had expected. International companies pointed to a different gap.
The rules include no criterion requiring the absence of an active patent, and no requirement that a patent must have expired several years before the application is filed. Formally, this opens the list to generic and biosimilar drugs that cannot yet legally enter circulation because of an active originator patent. A separate comment concerned the structure of the first section: oncology and diabetes drugs stayed in the second section, even though these two disease groups account for the highest mortality and disability in the country.
Methodology 805 Turns the Price Cut into a Ready-Made Formula
Separately from the procurement rules, price regulation works on its own track. Government Decree No. 805 of 30 May 2025 (hereinafter, Decree No. 805) took effect on 1 September 2025 and remains in force until 1 September 2031. It sets out the methodology for calculating maximum limit prices for drugs on the VED list, including the formula for the first generic or biosimilar product.
The maximum limit price of a generic or biosimilar (P_gen) cannot exceed the value calculated by the formula:
P_gen = P_ref × (1 - Kp / 100) × Kd × Kpack
where P_ref is the registered maximum limit price of the reference (original) drug per pack; Kp is the reduction coefficient, expressed as a percentage; Kd and Kpack are conversion coefficients for dosage and pack size. The value of Kp depends on the price bracket of the reference drug and on whether the price is registered first by an EAEU manufacturer or a foreign company.
For the segment above 100,000 RUB per pack, the methodology sets fixed values.
| Drug category | First analogue, EAEU manufacturer | First analogue, foreign manufacturer | Second and later, EAEU | Second and later, foreign |
|---|---|---|---|---|
| Generic drug | 40% | 55% | 50% | 65% |
| Biosimilar drug | 25% | 40% | 30% | 45% |
A worked example shows the scale of the effect. If the reference price is registered at 200,000 RUB per pack, the first generic from an EAEU manufacturer cannot be priced above 120,000 RUB, and one from a foreign manufacturer cannot exceed 90,000 RUB. For a biosimilar of the same reference drug the ceiling is higher: 150,000 RUB for an EAEU manufacturer and 120,000 RUB for a foreign company, since biosimilar development is treated as more costly than copying a chemical molecule.
For drugs priced below 100,000 RUB, the coefficient is calculated using a power formula tied to the reference price. For the first generic from an EAEU manufacturer in the 500 to 100,000 RUB range, for instance, the expression is 3.6 × (P_ref)^0.23; for a foreign manufacturer, it is 4 × (P_ref)^0.24. The higher the reference price, the higher the calculated reduction coefficient, though the result never exceeds the ceiling set for the segment above 100,000 RUB. The same logic holds at every price level: a foreign manufacturer gets a deeper cut than an EAEU company, and a biosimilar loses less value than a chemical generic, since biosimilar development costs more.
It is worth being precise about what the methodology reduces directly. The formula caps the price of the new entrant, the generic or biosimilar, and does not automatically recalculate the already-registered price of the reference drug. Decree No. 805 contains no direct legal mechanism that would force an originator to cut its own price the moment a competitor is registered.
Pressure on the originator works through a different channel instead. The reference drug’s own maximum limit price is subject to separate re-registration downward if the lowest manufacturer selling price in the reference foreign countries and in the country of manufacture falls below the already-registered Russian price. Once that re-registration happens and the original drug’s price drops below the price of the active generic or biosimilar, the reset rule kicks in: the reduction coefficient for all future analogues under that INN becomes zero. The first real cut in the originator’s price becomes a permanent price floor for the market, and the formula is not recalculated again when a second or third competitor enters.
In practice the originator sits under two kinds of pressure at once. The «second-is-a-crowd» rule pushes it out of procurement wherever a local competitor exists, while external reference pricing eventually pulls its own price down as well. The overlap of these two processes produces what the industry calls the forced price cut of the originator when a generic enters, even though Decree No. 805 formally regulates only the price of the new entrant.
What to Do
The next steps differ for a company holding the original drug and a company preparing a generic or biosimilar, but both need to check the same set of registries.
Check your portfolio against the SZLS list. Orders No. 942-r (23 April 2026) and No. 1478-r (7 July 2026) together cover around 350 INNs. For every molecule, check whether it falls into the first or second section, and under which criterion, since that determines the applicable procurement procedure.
Recalculate the maximum limit price under Decree No. 805 before filing a generic or biosimilar dossier. Determine the reference drug’s price bracket and the manufacturer’s status so you know the reduction coefficient in advance, instead of budgeting around the originator’s old price.
Prepare a Ministry of Health commission application early if a drug fits the criteria for either section. Meetings are held quarterly, a decision needs a two-thirds vote of the members present, and an application can be rejected for inaccurate data or a criteria mismatch.
Document the drug’s patent status yourself when applying for SZLS inclusion. Decree No. 277’s rules include no criterion on active exclusive rights, so a patent conflict has to be documented independently rather than left to the Ministry of Health commission.
Build a 40-65% price cut for a generic and a 25-45% cut for a biosimilar into the financial model. Use these figures for the segment above 100,000 RUB per pack once the first competitor is registered, and recalculate the power formula for cheaper products.
The «second-is-a-crowd» procurement rule and Decree No. 805 rest on different decrees and answer different questions. The first decides who wins the government contract. The second decides the price at which that contract can be signed at all. The SZLS list keeps growing every few months, and a molecule’s inclusion in one of its sections changes the calculation for every player in the market at once, well before a competitor files a registration dossier. For an originator, it is cheaper to work out the reduction percentage in advance than to react to an already-registered competitor’s price after the fact.
Regulatory framework:
1. Government Decree No. 805 of 30 May 2025
2. Government Decree No. 1289 of 30 November 2015
3. Government Decree No. 1875 of 23 December 2024
4. Federal Law No. 61-FZ «On the Circulation of Medicines» of 12 April 2010 (as amended 23 July 2025)
5. Federal Law No. 268-FZ of 23 July 2025
6. Government Decree No. 277 of 17 March 2026
7. Government Order No. 942-r of 23 April 2026
8. Government Order No. 1478-r of 7 July 2026