10/06/08
Industry in Ukraine
Pharmaceutical Market in Ukraine
By Katya Shtamburg, Nova Mova staff writer.
Nowadays the pharmaceutical market in Ukraine is growing extremely fast. The key drivers of its development are both imported products and the development of the local drug industry.
Almost all multinational pharmaceutical manufacturers are present in the Ukrainian market, either with representative offices or through local distributors. Companies from Eastern Europe are active in the market and are popular among both patients and doctors, who are familiar with their products as a result of their long-term presence in the market, which dates back to the end of 1990s.
At present there are 58 companies manufacturing drugs in Ukraine, with most of them producing lower-priced products, such as generic drugs and vitamins. The largest companies include Darnytsia, Kyivmedpreparat, Pharmak and Halychpharm. Recently the Ukrainian government approved the merger of the country's fifth- and sixth-largest drug makers, Kyivmedpreparat and Halychpharm, to create the Arterium Corporation, which will engage in research, marketing and distribution of new medicines.
To compare the results of the pharmaceutical market development with the former years let’s look at the performance over recent years. The market reached $1.06 billion in 2004, still small compared to Western European countries, but a significant hike on its $871million value in 2003 and $682 million in 2002. Ukraine’s pharmaceutical market continued to grow at one of the fastest rates in Central and Eastern Europe in 2007.
This growth has been almost wholly driven by the retail market and out-of-pocket spending by consumers. The upside to this is a lack of price controls, with the clear downside being the absence of effective regulation and reimbursement. From a market-value perspective this limits the purchase of higher-value, patented medicines to all but the wealthiest segment of the population. A major audit of state medicine tenders undertaken in 2007 showed a litany of irregularities, highlighting the mix of poor governance and corruption pervading the state healthcare system.
Unfortunately, the lack of regulatory controls and a poorly functioning judiciary also leave many otherwise well-run local companies at risk of rival business groups using lawsuits and other mechanisms to try and wrest assets or control over whole companies. Leading producers Darnytsa and Borshchagovsky claimed to have fended off such attacks from local groups during 2007, prompting an extraordinary show of frustration and solidarity by major producers, who halted production briefly in protest in October.
The report noted that last year's large increase in the size of the drugs market resulted from increased drug imports and higher local drug production. Imported pharmaceuticals accounted for 63 percent of the Ukrainian drugs market last year, with 18.7 percent of drugs imports coming from Germany, 14 percent from India, and 9.5 percent from France. Drugs imports from the United States accounted for only three percent of total imports last year. The domestic industry's exports amounted to a little over $50 million last year.
However, the domestic sector is still going through a transitional phase and a phase in which many state-owned enterprises are being privatized as the country adapts to the changing operating environment in Eastern Europe. Recently the Institute of Public Health published a report underlining corruption and a lack of transparency in the medicines market. So, despite massive market growth potential, the Ukrainian pharmaceutical situation still needs to be improved.
Indeed, the healthcare system remains in a state of drift. The government promises to introduce a medicines reimbursement system and mandatory insurance-based system in 2008. Such moves are indispensable. But it will be many months before any serious reforms could be implemented and this optimistically assumes a level of cooperation between political parties and the cooperation of regional leaders.
Almost all multinational pharmaceutical manufacturers are present in the Ukrainian market, either with representative offices or through local distributors. Companies from Eastern Europe are active in the market and are popular among both patients and doctors, who are familiar with their products as a result of their long-term presence in the market, which dates back to the end of 1990s.
At present there are 58 companies manufacturing drugs in Ukraine, with most of them producing lower-priced products, such as generic drugs and vitamins. The largest companies include Darnytsia, Kyivmedpreparat, Pharmak and Halychpharm. Recently the Ukrainian government approved the merger of the country's fifth- and sixth-largest drug makers, Kyivmedpreparat and Halychpharm, to create the Arterium Corporation, which will engage in research, marketing and distribution of new medicines.
To compare the results of the pharmaceutical market development with the former years let’s look at the performance over recent years. The market reached $1.06 billion in 2004, still small compared to Western European countries, but a significant hike on its $871million value in 2003 and $682 million in 2002. Ukraine’s pharmaceutical market continued to grow at one of the fastest rates in Central and Eastern Europe in 2007.
This growth has been almost wholly driven by the retail market and out-of-pocket spending by consumers. The upside to this is a lack of price controls, with the clear downside being the absence of effective regulation and reimbursement. From a market-value perspective this limits the purchase of higher-value, patented medicines to all but the wealthiest segment of the population. A major audit of state medicine tenders undertaken in 2007 showed a litany of irregularities, highlighting the mix of poor governance and corruption pervading the state healthcare system.
Unfortunately, the lack of regulatory controls and a poorly functioning judiciary also leave many otherwise well-run local companies at risk of rival business groups using lawsuits and other mechanisms to try and wrest assets or control over whole companies. Leading producers Darnytsa and Borshchagovsky claimed to have fended off such attacks from local groups during 2007, prompting an extraordinary show of frustration and solidarity by major producers, who halted production briefly in protest in October.
The report noted that last year's large increase in the size of the drugs market resulted from increased drug imports and higher local drug production. Imported pharmaceuticals accounted for 63 percent of the Ukrainian drugs market last year, with 18.7 percent of drugs imports coming from Germany, 14 percent from India, and 9.5 percent from France. Drugs imports from the United States accounted for only three percent of total imports last year. The domestic industry's exports amounted to a little over $50 million last year.
However, the domestic sector is still going through a transitional phase and a phase in which many state-owned enterprises are being privatized as the country adapts to the changing operating environment in Eastern Europe. Recently the Institute of Public Health published a report underlining corruption and a lack of transparency in the medicines market. So, despite massive market growth potential, the Ukrainian pharmaceutical situation still needs to be improved.
Indeed, the healthcare system remains in a state of drift. The government promises to introduce a medicines reimbursement system and mandatory insurance-based system in 2008. Such moves are indispensable. But it will be many months before any serious reforms could be implemented and this optimistically assumes a level of cooperation between political parties and the cooperation of regional leaders.
Nova Mova Worldwide Business Communication LLC
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