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The declared right of socially supported groups to get necessary medicines for free, restricted only by an established list and a doctors readiness to prescribe them, has resulted in an upswing of demand for free medicines. In 2006 another failure of the newly created system was revealed. The approach, which provided a choice to socially supported groups between pharmacological support and its monetary compensation, brought up a problem of unfavorable selection, which is a typical bottleneck of social security system. Monetary compensations were chosen by those, who applied for free medicines only occasionally. As opposed to them, regular consumers of medicines, who suffer of serious chronic diseases and can expect their aggravation, have preferred the benefit of free medicines. However, the average cost of healthcare portion of a standard social package (i.e., pharma cological support and health resort vouchers), the equivalent of which is paid to those who chose monetary compensations (RUR 424 in 2006), was estimated as an average figure for the majority of socially supported population. Now, when about a half of that group with the highest demand for medicines has stayed in the program, the expenditures for their support will be higher, than the cost of initially estimated average package, multiplied by the number of program participants.

As a result of all the above factors, expenditure liabilities of the program of supplementary pharmaceutical support too the socially supported groups of popu lation in 2006 have exceeded the expenditures of the preceding year.

Please, refer to the information on monitoring results of implementation Federal Law No. 122 FZ as of 22.08.2004 for 9 months of 2006 to: http://www.mzsrrf.ru/inform_fz/548.html.

Data base on Organization of Financing and Management of Healthcare in Russian regions.

http://www.socpol.ru/research_projects/pdf/proj14_2005report.pdf.

Section Social Sphere The total amount of invoices, issued by the suppliers of medicines, has reached RUR 63 bln by the end of the year. To cover the deficit, RUR 10 bln was al located from the federal budget in 2006. With account to RUR 5 bn, saved in and spent in 2006, the total expenditures for medicines, provided to the socially supported groups in 2006, should amount to RUR 50.1 bn. The difference between that amount and the invoices of suppliers makes RUR 12 bln. As per the information of the Federal Fund of Mandatory Medical Insurance, the invoices for at least RUR 3 bn, which inconsistent with relevant requirements, will not be paid. The issue of payment under the other invoices for RUR 9 bn is still open.

Another step, made as a reaction to the deficit, was a cut down of the list of medicines, provided to the socially supported groups, which was reduced by nearly 15 per cent from November 1, 2006. 74 items were excluded from that list, among them medicines for treatment of HIM, AIDS and tuberculosis. These medicines will be supplied within the framework of prioritized national Project Health and targeted federal program Prevention and combat against diseases of social char acter. 436 items are left in the list, approved by the Ministry of Healthcare and So cial Development. It is planned to take under special control over prescriptions of nearly 78 medicines for treatment of diseases of blood, cancer, disseminated scle rosis, cardio vascular system. The general trend of those measures is quite justi fied. However, basing on the experience of medicines provision before 2005, one can hardly predict, how the control functions will be performed. The above experi ence leads to conclusion, that the balance in the system of surplus medicines sup ply (i.e., a stable balance between its liabilities and their funding) will be reached through noticeable and irregular downgrading of the level of social security due to increased burden of expenses for medicines to some categories of socially unpro tected population.

4.5. The Situation in Science and Innovation Activity 4.5.1. The Main Directions of State Policy in In 2006, the main directions of state policy in the sphere of science and inno vations were as follows: further improvement of the mechanisms of target program financing, including the determination of new priority areas and critically important technologies; the formation of appropriate mechanisms and instruments for pro moting innovation activity (venture funds, technoparks, indirect regulation mecha nisms). Toward the years end, the personnel problems faced by science once again became the focus of attention. At the same time, the rate of organizational transformations going on in the government sector of science became slower.

The governments activity was mainly focused at the development, coordina tion and approval of the normative legal acts that addressed the sphere of science and the promotion of the innovation activity. Certain amendments were introduced to the Federal Law On science and the state policy aimed at science and tech nologies, as well as to Part IV of the Civil Code, which had to do with the rights to the results of intellectual activity. In the course of last year, some 25 presidential RUSSIAN ECONOMY IN trends and outlooks decrees and decrees and ordinances of the Government were issued, which ad dressed the problems of regulation in the sphere of science and innovations. At the same time, the practical measures aimed at restructuring the government science sector and creating new organizational forms were implemented on a very moder ate scale, precisely because the institutional conditions were just evolving.

In the sphere of target program planning, the development of FORCYTE (or FORECAST) began. This computer simulation method is new for Russia and is ap plied for determining the most promising directions of scientific and technological development, in coordination with the existing socio economic conditions and the potential consequences of the implementation of new technologies. This method is now being applied in more than 30 countries across the globe and represents a process of selecting strategic areas of scientific and technological development at the national level, with due regard to the opinions voiced by the major subjects within a national innovation system. The method has been implemented with the highest degree of success in those countries where there exist well developed horizontal connections and long established interaction networks, supported at the government level. In Russia, the FORCYTE procedures, similarly to many other ini tiatives, were developed in accordance with the departmental principle. The Minis try of Public Education and Science, the Ministry for Communications and Informa tion and the RF Ministry of Industry and Energy (Minpromenergo) began to elaborate their own procedures for applying FORCYTE.

Simultaneously, the Ministry of Public Education and Science completed the revision of the list of priority directions and critical technologies that had been started in 2005. As a result, the previously existing 9 priority directions and 52 criti cal technologies were replaced by a set of 8 priority directions and 35 critical tech nologies47. As follows from the comparison of the new and old lists of priorities (Ta ble 16), they do, indeed, coincide in many points.

Certain directions were merged with others, and the direction Industrial technologies was taken off the list, which, however, happened by no means be cause it had become less of a priority, but simply because it did not belong to the sphere of jurisdiction of the Ministry of Public Education and Science. Other de partments, such as the Minpromenergo, are developing their own priorities, includ ing those in the sphere of industrial technologies. The departmental priorities are not coordinated at the interdepartmental level, and generally there is no coordina tion involved in the process of the determination of priorities. At the same time, to the Ministry of Public Education and Science, in accordance with the RF Strategy In the Sphere Of the Development of Science and Innovations During the Period Until the Year 2015, the role of a top agency is, in fact, assigned the agency that is to determine the countrys priority directions for scientific and technological devel opment. Thus, the department based approach to the selection of new priority di rections has not been abolished. In this connection, our comparison of the ap Priority directions for the development of science, technologies and technical equipment in the Russian Federation and the List of critical technologies of the Russian Federation. Approved by the RF President as of 21 May 2006, Pr 842.

Section Social Sphere proaches to the selection of priority directions, critical technologies and the devel opment of the FORCYTE procedures led to the conclusion that the FORCYTE method had fallen victim to the Russian practices of department based forecasting and target setting even before the onset of its practical implementation.

Table Lists of Priority Directions for the Development of Science, Technologies and Technical Appliances in the RF 2002 list* 2006 list Information and telecommunications technologies and elec Information and telecommunications systems tronics New materials and chemical technologies Industry of nanosystems and materials Technologies of live systems Live systems Ecology and rational use of nature Rational use of nature Energy saving technologies Power engineering and energy saving Prospective armaments, military and special equipment Prospective armaments and military equipment New transport technologies Transport, aviation and astronautical systems Astronautical and aviation technologies Industrial technologies Safety and antiterrorist measures * List of priority directions for the development of science, technologies and technical equipment in the Russian Federation, approved by the President of the Russian Federation on 30 March 2002, Pr 577.

Source: RF Ministry of Public Education and Science.

4.5.2. Financing Priorities and Development of an Approach Based on Target Programs The year 2006 saw continuing growth of budget spending on research and development. This growth had begun in 2002, when The fundamental principles of the policy of the Russian Federation in the sphere of the development of science and technologies during the period until the year 2010 and beyond were adopted, which determined the rate of annual growth of budget allocations to science. From that moment, when the annual size of budget funding is being determined, the ab solute indices stated in that document are taken as the baseline. The growth rate of budget allocations to science in real terms was lower (Table 17) than that indicated in the Fundamental Principles, but at the same time much higher than that in the countries with stable science complexes.

Table Dynamics of Growth of Expenditures in the Federal Budget Allocated to Civilian Science Indices 2002 2003 2004 2005 Approved budget, bn roubles 30.3 40.2 46.2 56.0 71.Budget in 2002 prices, bn roubles 30.3 35.9 37.0 40.3 47.Budget growth in real terms as % of previous year 18.4 3.1 8.9 17.Source: RF Ministry of Finance and computations performed by the IET.

Our analysis of the structure of the research and development budget has shown that it remains conservative, especially from the point of view of the distribu tion of financing by department. The main recipients of the budget funding allo cated to research and development are, as before, the following state department RUSSIAN ECONOMY IN trends and outlooks (in the descending order): the RAS, the Federal Agency for Science and Innova tions (Rosnauka), the Russian Academy of Medical Sciences, the Siberian Branch of the RAS, The Russian Foundation for Basic Research (RFBR), the Far Eastern Branch of the RAS, the Federal Agency for Education (Rosobrazovanie), the Urals Branch of the RAS. As seen from this sequence, these agencies mainly belong to the academic sector. Scientific funds received the amount of funding precisely cor responding to that they were entitled to under existing legislation: 6 % of the ag gregate expenditures allocated to civil science to the RFBR, 1.5% to the Fund for promoting the development of small size forms of enterprises in the sphere of science and technology, and 1 % to the Russian Humanitarian Scientific Fund (RHSF).

Despite the declared reform of the academic sector in the sphere of science and the need for integrating science and education, the assignations earmarked under the subitem fundamental research for the research organizations of the RAS are ten times bigger than the funding under the same item allocated through the Rosobrazovanie to higher educational establishments. It is planned that 77% of the funding under this item should go to six state academies, while all the higher educational establishments, including Moscow State University, will receive only 7.4%. While the funding is being distributed in this manner, it would not be easy to implement an equal integration in the sphere of research and development. From the point of view of the actual amounts of funding being allocated, the gap between academic scientific organizations, as those that carry out research, and higher educational establishments that are responsible for education is by no means go ing to become narrower.

Substantial budget funds were allocated in 2006 through the system of fed eral target programs. Last year, the implementation of the Federal Target Scientific and Technological Program (FTSTP) Research and development along the priority directions of the development of science and technologies in the years 2002 2006 was completed. An analysis of its results made it possible to better adjust certain conditions and approaches, which found their reflection in the new Federal Target Program Research and development along the priority directions of the de velopment of scientific and technological complex of Russia in the years 2007 201248.

The first point that has been proved by the results of the FTSTPs implementa tion is that, after all the initiatives had been put together within the framework of a single program, the implementation of some of them proved to be of little effect.

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