Transcript of the beginning of the meeting:

Vladimir Putin: Good afternoon,

To begin with, today is the day when we begin indexing pensions, and I'd like to know how well prepared government services are for this work. As we all know, social pensions and benefits will be indexed by 6.3%. I'd also like to hear about the next pension indexations scheduled for this year.

Tatyana Golikova: Mr Prime Minister, in accordance with your directive we scheduled the indexation of all pensions for April 1, 2010. Although the Pension Fund has allocated the necessary funds, we had some doubts given the difficult financial and economic situation.

The Pension Fund began recalculating pensions in advance, immediately after you issued your directive, in order to be ready to make these payments starting on April 1.

As you mentioned, retirement pensions were raised by 6.3% on April 1. Also, social pensions were increased by 8.8%, and will be raised again depending on the increase in pensioners' subsistence minimum.

The Pension Fund appropriated 170 billion roubles for these purposes. We will also raise monthly payments during the same period, as required by law. This increase will outstrip inflation by 10%, because these funds were set aside in the federal budget in advance, taking into account the predictions for inflation we were using when we adopted the draft 2010 federal budget and the Pension Fund's budget.

Since April 1 veterans of the Great Patriotic War will be receiving lump-sum payments, which are expected to be paid off in April.

All social payments are currently being issued on schedule. Further resolutions regarding pensions will be made in accordance with the timeline set forth in the budget.

Vladimir Putin: How much funding will go to the valorisation and indexation of pensions?

Tatyana Golikova: A total of 502 billion roubles have been used for valorisation since January 1, 2010.

Valorisation is being paid exclusively with funds from the federal budget. As I said, a little more than 170 billion roubles were budgeted for indexation.

Vladimir Putin: For the current indexation?

Tatyana Golikova: Yes.

Vladimir Putin: What about the next indexation?

Tatyana Golikova: Not much has been appropriated for it, since only social pensions will be indexed.

Vladimir Putin: I hope all government services will function properly and without any major setbacks.

For the second part of our meeting, I would like to discuss the resolution we made concerning regulation of the prices of essential drugs. This issue is very complicated, and we have been dealing with it for a long time. It's understood that it's hard to find a solution to this problem, because this involves the free market and we lack a unified approach for pricing for pharmaceutical products, especially in the present circumstances. I hope that the solution offered by the ministry will make prices stable and low, rather than having the opposite effect.

We discussed this issue yesterday and you said you have concerns over the actual effectiveness of this resolution. In this regard, today I will sign a government resolution granting the Federal Service for Supervision of Healthcare and Social Development, which is subordinate to your ministry, with the authority to regulate prices. The same resolution will give the Federal Tariff Service the authority to regulate wholesale and retail mark-ups.

I'd like to know how you plan to enforce this resolution.

Tatyana Golikova: I'd like to add to what I said yesterday. I discussed the effectiveness of our efforts during the first quarter with the head of the Federal Tariff Service late last night. Prices for a total of 5,769 items had been registered by April 1, in other words, by the time the registered prices for essential drugs came into effect. These 5,769 items comply with the list of 500 International Nonproprietary Names, which includes essential drugs.

All information about registered prices is available online at relevant sites. The Federal Tariff Service is carrying out the same work.

In order to follow up on the directive you issued yesterday, today inspectors from local branches of the Federal Service for Supervision of Healthcare and Social Development visited drugstores to see what effect our previous efforts have had on drug prices. I should add that they do not yet have regulatory authority. We will prepare the first results of the work of the federal and regional government agencies by Monday.

We will continue inspecting drugstores to ensure that they comply with the prices we registered based on the mark-ups outlined for the regions in accordance with the recommendations of the Federal Tariff Service.

I should also add that it applies not only to drugstores but also to hospitals. As we were finishing up our work registering prices, we analyzed the data available on March 29 that we had obtained from monitoring the prices for pharmaceutical products at auctions in the Russian regions and for all segments of the market.

Unfortunately, the prices of 919 out of the 1,448 essential drugs were higher than registered prices, by up to 459%.

This sort of price disparity even extended to government purchases, for which funds are provided from the federal and regional budgets.

Registration will allow us to monitor the prices of essential drugs that clinics buy at auctions.

Vladimir Putin: Good. How do you plan to carry it out?

Sergei Novikov: Mr Putin, all regions, with the exception of the Republic of Ingushetia, have passed resolutions that are in line with federally approved methodology regarding wholesale and retail mark-ups.

Initial analysis of these resolutions shows that they are adequate and conform to federally approved methodology.

Vladimir Putin: This methodology is a new development, correct?

Sergei Novikov: Yes, this methodology is absolutely new.

Vladimir Putin: And now it is in place. What if this methodology makes it possible to increase rather than decrease prices? Are you following me? Before, prices were x, now this methodology will add y, and we will have x+y.

Sergei Novikov: The key difference in what we have now is that these mark-ups will be added to actual producers' prices. In other words, the prices registered by the Federal Service for Supervision of Healthcare and Social Development (Roszdravnadzor) represent the upper limit for prices.

Actual prices are lower than the set limits. Therefore, correct application of the federal methodology should help stabilise retail prices for pharmaceutical products.

We have also made our oversight over the regions' resolutions public by posting all resolutions for all price ranges and types of pharmaceutical products on the Internet.

We have the technical capabilities to do this - I'm referring to the integrated information and analytical system that allows for the automatic exchange of information between all constituent entities of the Russian Federation. It is necessary to monitor these resolutions on a regular basis and to make it public.

Vladimir Putin: What penalties can be imposed on wholesale or retail companies that violate the established order?

Sergei Novikov: Mr Putin, we should primarily supervise regional bodies that pass resolutions regarding mark-ups. To ensure that this oversight is effective, we must have the appropriate authority, including the right to require regional governments to adjust prices in accordance with legislation.

Vladimir Putin: I hope we can do this through a resolution. If not, let's add it. A requirement is a requirement. What more is there to say? You can issue a requirement, but they will still mess around with prices.

Tatyana Golikova: No, I think the issue is quite simple. These are government agencies, and government officials can always be punished.

Vladimir Putin: How?

Tatyana Golikova: If an official does not fulfil his duties, he...

Vladimir Putin: Yes, this is clear when it comes to government agencies. I'd like to warn regional leaders right away that if they do not keep prices at the proper level, which is the purpose of these resolutions, they will be blacklisted. But I was talking about companies.

Tatyana Golikova: A ban on their activities.

Vladimir Putin: How would you impose it?

Tatyana Golikova: By depriving them of their license.

Vladimir Putin: By depriving them of their license. Who makes this decision?

Tatyana Golikova: We will make such recommendations after we are authorised to do so.

Vladimir Putin: There's the ticket. I'd like to ask you to monitor closely everything that is going on in the regions. Mr Zhukov, as deputy prime minister, you should be directly in charge of this at the government level. In the same way as we monitored the labour market. I'd like you to address this problem regularly and to report to me regularly on what is going on.

Alexander Zhukov: Mr Putin, we will monitor the situation and I will regularly report to you.

Vladimir Putin: Okay.