The coronavirus pandemic brought many risks and uncertainties to our lives in 2020. Further global economic development will depend on many factors. Ukraine was fortunate enough to avoid a large outbreak of infection at the start of a pandemic which helped the government to introduce strict quarantine measures in time. Nevertheless, the country is preparing for another crisis and the pharmaceutical market is no exception.
The presented Report uncovers the 2019 business trends of the pharmaceutical market of Ukraine and provides the forecast of its development for the next three years (2020-2022) considering all implications related to the COVID-19-concerned crisis. The publication also provides the most recent insight into the country’s socio-political development, including the anticipations regarding the country's economic prospects in 2020-2022. The Report also overviews Ukraine's healthcare system, portrays its epidemiology (including COVID-19 statistics) and demographics. It also depicts pharma regulation features in Ukraine including a step-by-step process of the marketing authorization for pharmaceutical products.
The Report is intended for industry executives, decision-makers, sales & marketing, and market access managers and other stakeholders. "Ukraine Pharmaceutical Country Report 2019" will be useful for top-managers, business owners, consultants and other stakeholders of the Life Sciences industry, who are analyzing, planning to enter or invest in the Ukrainian pharma and/or healthcare market.
The Report covers the 2011-2019 full-year data for the pharmaceutical market and provides a forecast for the period of 2020-2022.
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The first in Ukraine COVID-19 case was registered on March 3. The government of the country has chosen a policy of strict measures to combat the virus. On March 11, the government imposed quarantine throughout Ukraine. Mass events were banned, education institutions were closed. Since March 16, Ukraine has closed the border for foreigners to enter. On March 25, 2020, the government decided to introduce a state of emergency throughout the territory of Ukraine for a period of 30 days, until April 24, 2020, due to the spread of coronavirus disease in 13 regions. On May 5, the Prime Minister of Ukraine announced the beginning of the end of the epidemic. The quarantine measures were partially lifted since May 11.
The number of newly emerged COVID-19 cases was stably growing day-by-day in July. On August 5, there was a record number of new COVID-19 cases revealed in one day – 1,271. As of August 5, there were about 75.5 thousand confirmed cases of COVID-19 in Ukraine. Herewith, 41.5 thousand persons recovered, while almost 1.8 thousand died. The highest morbidity was observed in the South-Western regions of the country (Lviv, Chernivtsi, and Rivne regions) and in the capital. The mortality rate from COVID-19 in Ukraine is 2.6% of the total number of persons infected. This is a much smaller indicator than the global average.
Dashboard. COVID-19 epidemiology statistics in Ukraine as of 02/07/2020 (Sources: Johns Hopkins University, the Ministry of Health of Ukraine)
Ukraine came through some significant shifts in its political environment in 2019. At the presidential elections in April 2019, famous comedian and actor Volodymyr Zelensky won an unexpected victory against acting President Petro Poroshenko gaining unprecedented support of 73% of voters. Immediately after his inauguration, Mr. Zelensky dissolved the parliament and called for snap elections. On July 21, newly created by Zelensky’s team "Servant of the People" party won the parliamentary elections, yielding 60% of the seats in the parliament, and formed a government.
The new government, which took office in August 2019, has committed to an ambitious and wide-ranging reform agenda. However, in March 2020, President Zelensky stated he wanted to reshuffle the Cabinet’s, explaining it by the Gov’s insufficient achievements and efforts. On 4 March 2020, the new government headed by former head of Ivano-Frankivsk Regional Administration and ex-Minister of Regional Development Denys Shmyhal was formed. The new Prime Minister called his priorities the fight against the spread of coronavirus in Ukraine, as well as mitigating the effects of the global economic crisis caused by the new virus.
The government expects to get at least USD 5 bn from the IMF to fund the budget deficit in 2020. To obtain the IMF’s funding, the Ukrainian side will have to fulfill a number of conditions, including the adoption of bills that are not supported by all sectors of society and have many opponents even within the parliamentary coalition. In February-March, the parliament spent 11 session days reviewing 4,018 amendments to a highly opposed bill on launching the farmland market in Ukraine. The bill was finally approved on March 31. Another IMF-required banking law drew over 16,000 amendments. If the MP’s don’t find an approach to speed up the bill's approval, its review might take over 5 months. Consequently, if IMF support is delayed by six months, the government will face critical liquidity issues.
The GDP of Ukraine grew by 2.5% in the 1Q 2019 compared to 3.3% in 1Q 2018. But, in 2Q 2019, it showed an entirely unexpected 4.6% growth, which was mostly due to advancement in private consumption, which swelled 11.8% y-o-y. Foreign portfolio inflows have increased significantly. Investors have been attracted by restored macroeconomic stability and sound central bank policies, along with favorable conditions on international financial markets.
Ukraine’s 3Q 2019 real GDP grew 4.2% y-o-y, slowing down from the previous quarter mainly due to the weak performance of the industry. The industrial production index was 100.0 in 9M 2019 as the main industries showed negative returns in the last months. Continued in the 4Q slowdown in industrial output together with the weak result of the agricultural sector led to that the real GDP grew by only 1.5% YoY. As a result, the economy showed a 3.2% YoY growth in 2019, slowing from 3.3% YoY in 2018. In 2019, industrial output decreased 1.8% YoY (vs 1.6% growth in 2018).
In April, the parliament updated the State Budget for 2020, increasing the budget deficit from 2.1% to 7.5% of GDP. The document anticipates a 3.9% decrease of the UKR economy in 2020, while the predicted UAH/USD exchange rate is set at 29.5. The Gov. expects the CPI to grow to 11.6% by the end of 2020.
According to the World Bank’s April forecast, the economy of Ukraine will decrease by 3.5% YoY in 2020 but will grow by 3.0% and 4.0% in 2021 and 2022, respectively. At the same time, the IMF’s forecast towards prospects of the Ukrainian economy was much less optimistic. According to its World Economic Outlook published on Apr 14, the Fund predicts a 7.4% fall of the Ukrainian economy in 2020, with its further 3.6% recovery in 2021.
Dashboard. Ukraine's Real GDP and GDP growth rates + UAH/EUR/USD (avg) rates (Sources: National Bank of Ukraine, forecast by World Bank)
The prospects for the Ukrainian economy in 2020 will directly depend on the ability of the authorities to stop the spread of coronavirus infection, as well as on attracting financial assistance from international organizations, primarily the IMF.
The Ukrainian pharma market consists of two sales segments:
Dashboard. Shares of Retail and Hospital Segments in the Total Pharma Market (medicines only), VALUES and VOLUMES (Sources: UPharma Consulting, apteka.ua)
Almost 90% of sales come from the retail segment, whose share has grown from 86.2% in 2013 to 90.9% in 9M 2019. The retail segment is predominantly of local origin in volumes and foreign – in values.
Sales in the retail segment are generated through pharmacies and pharmacy units only. As on 01.01.2019, there were 16.5 ths pharmacies and 4.2 ths pharmacy units.
There are 115 local companies which are engaged in (have licenses) the manufacturing of pharmaceutical products in the country.
A significant trend has formed in recent years of an insignificant, but stable increase in the share of UKR producers in values after 2014-2016. Consumers shifted to much cheaper products of local origin. During several years of such dynamics, local manufacturers managed to increase their capacities significantly and reorient their portfolios to more modern and expensive products.
In 2019, 8 of 15 leading companies on the market by sales in values were of Ukrainian origin. The first three leading companies are Ukrainian companies. Farmak has been a leader of the Ukrainian pharmaceutical market over the last 8 years. In 2019, the company grew its sales in USD by 25.5% YoY. The hospital segment was also headed by a Ukrainian company Yuria-Pharm, obtining more than 10% market share.
Dashboard. Regional distribution of pharma sales in Ukraine, VALUES (retail segment) (Sources: UPharma Consulting, apteka.ua)
The regional structure of pharma consumption has notably reshuffled in the last six years. Due to the war conflict in Donetsk and Luhansk regions, the market shares of these regions notably decreased from 14.6% in 2013 to 3.9% in 2018. Before 2014, the share of the Autonomous Republic of Crimea in the total market was more than 6%, but due to the annexation of the peninsula Ukrainian entities stopped operating there and its share is set to zero since then.
At the same time, the shares of the Central and Western regions during the last 6 years notably increased. The market share of Kyiv city grew from 11% in 2013 to 14.5% in 2019. The aggregated share of Western regions increased from 18.1% in 2013 to 22.3% in 2019 - Lviv region showed the highest surplus in its market share (+1.5 p.p. 2019 vs 2013). Kharkiv region showed the highest increase in its market share vs 2013 after Kyiv city - its share grew by 2.6 p.p.