|Pharmaceutical Market Overview|
|Healthcare System Overview|
Ukraine is a middle-income country located in Eastern Europe. It is situated at the intersection of important trade routes connecting Russia to the east and the EU countries such as Poland, Romania, Hungary, Slovakia to the west. This makes the country an important transit partner. Moreover, Ukraine has access to the Black Sea and the Azov Sea which allows it to conduct sea trade with such countries as Turkey, Bulgaria, Romania, Georgia, and others. Ukraine is the largest European country by the territory after Russia and the 7th country in Europe by population (41.9 million people as on 01.03.2020, according to the official data).
Ukraine is a unitary republic with a parliamentary-presidential form of government. Ukrainian politics has been categorized as “over-centralized” which is seen as both a legacy of the Soviet system and caused by a fear of separatism. Corruption in Ukraine is rampant, and widely cited, at home and abroad, as a defining characteristic of Ukrainian society, politics, and government.
Since 2014, Ukraine has been experiencing deteriorated relations with Russia due to the annexation of Crimea by the Russian government and the war conflict in the eastern region (Donbass) provoked by Russia-backed armed separatists. Due to the described events, 7% of Ukraine's territory is currently under occupation.
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In 2019, Ukraine had only the 22nd economy in Europe with GDP amounting to USD 154.9 bn. At the same time, Ukraine had the least effective economy in Europe after Moldova as its GDP per capita reached only USD 3,592 vs the average value in Europe of USD 26,887.
Being a part of the Soviet Union, the Ukrainian Republic had the most powerful economy among the other member-states after the Russian Republic. The main branches of specialization were heavy industry (machine building, metallurgy, chemical industry, fuel industry), power industry, and agriculture. After the USSR collapse, having a great inheritance and a well-educated labor force, Ukraine was considered as the most prospective country among other former members of the Eastern Bloc.
However, the 1990s were the period of severe economic depression, which considerably complicated the country’s further development. Moreover, the unfair privatization process lay the foundations of the oligarch-oriented economy. Delaying of economic reforms led to hyperinflation and industrial drop, neglect of the social and production spheres, as well as the rapid growth of external debt. In 1999, Ukraine’s GDP decreased by 40% as compared to 1990.
The gradual economic growth of the Ukrainian economy started in the 2000s as a result of the increased demand for production of ferrous metallurgy on the world markets and intensification of the transit of Russian energy resources to Europe. Nevertheless, further economic development was hurdled after the country had been stroked by major crises in 2008-2009 and 2014-2015. High external debt, state budget deficit, foreign trade deficit are the main issues that do not allow the economy to grow by more than 3.5% annually. Moreover, the Ukrainian economy will have to resolve the problems of its high monopolization, low modernization, and poor business climate in order to be able to unfold its potential.
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Ukraine inherited a good technical base of the pharmaceutical industry from the USSR. The Soviet government located many pharma plants on the territory of Ukraine for strategic purposes. It was assumed that in the case of war pharmaceuticals would be shortly delivered to the western forefront. However, Ukrainian plants were mainly producing the finished forms of drugs, while the production of auxiliary substances and raw materials was carried out in other republics.
After the USSR collapsed, the Ukrainian pharmaceutical industry suffered due to a sharp shortage of raw materials and an 85% depreciation of the fixed capital. Nevertheless, in the late-90’s, the pharmaceutical sector had become the most profitable among the other industries.
The pharmaceutical market of Ukraine entered a stable phase of its development in the mid-2000s. The number of retail pharmacy points of sale (PoS) increased to 22 ths. Local companies started modernizing their facilities to comply with the international GMP standards. Strong local players like Farmak, Arterium Corporation, and Darnitsa took the leading positions on the market in the late 2000s.
Since 2009, the Ukrainian pharmaceutical market had been growing by about 13% in values and 3% in volumes annually. New challenges emerged as a result of the consequences of the war conflict and the loss of occupied territories – Crimea and parts of Donetsk and Luhansk regions which jointly provided about 21% of the total retail pharmaceutical market in values in the pre-crisis year. The fall of the purchasing power of the population increased the demand for cheaper drugs. All market participants suffered losses during the crisis period, especially foreign companies – some of them had to leave the market.
The market showed the first signs of the recovering only in mid-2016. In 2017, it showed considerable growth dynamics (15.6% in values and 6.5% in volumes), but the level of 2013 was still far. In 2018 and 2019, the growth in values was even more notable, but the growth in volumes slowed down.
Since the large part of pharma sales are covered by the population out-of-pocket, the retail segment possesses almost 90% of the total market. Although the reimbursement program was launched in 2017, it is unable to cover sufficient needs as its budget remains relatively small. Rx medicines excel in the retail segment in monetary terms, while OTC preparations have a higher share in packs.
Drugs are the main category of pharma products in both retail and hospital segments. In recent years, food supplements have been increasing their share among the other categories in the retail segment mainly due to increased demand for cheaper analogs of conventional medicines. The average prices of cosmetics sold through pharmacies were the highest in 2017 and 2018, but in 2019 medicines were the most expensive category of pharma products with the weighted average price of USD 3.08.
Since Soviet times, the Ukrainian healthcare system wasn’t notably improved or updated. This led to the deterioration of healthcare facilities, the lack of funds, and their ineffective use. Since state funding covers only basic expenses of hospitals and payment of extremely low salaries to the personnel, bribery has become a widespread issue in the healthcare sphere.
The intentions to start a healthcare reform emerged in 2009 and 2014, but the proposals failed to make progress. The new agenda of the gradual reformation of the healthcare system of Ukraine was adopted in October 2016 by the acting Healthcare Minister Ulana Suprun. The year after, the Ukrainian parliament adopted the Draft Law “On State Financial Guarantees for the Provision of Medical Services and Drugs” that was aimed to launch the medical reform since 2018.
The ideology of the medical reform is that healthcare services are financed on a contractual basis. On March 30, 2018, the government established the National Health Service of Ukraine (NHSU) - a national insurer - the main task of which is to implement the basic principle of the reform, which is “money follows the patient”. Since April 2020, healthcare institutions receive money for specific services provided to specific patients according to the established tariffs. The NHSU also runs the abovementioned reimbursement program.
However, the main obstacle to the implementation of reform is the weak economic development of Ukraine, which forbids the government to solve the problem of the underfunding of the healthcare sphere. In 2019, the state healthcare budget still didn’t exceed 2.5% of the country’s GDP.
Low wages and hard-working environment are the main reasons for the overall lack of medical personnel in Ukraine. Qualified physicians prefer working in private facilities or choose to migrate. The number of nursing staff is also decreasing over the years.
The health care needs of the Ukrainians today mostly relate to non-communicable diseases (NCDs), which require behavioral changes and health promotion. Health outcomes in Ukraine today are poor. Life expectancy at birth in Ukraine is 71.7 years, more than 10 years less than the EU average. The adult mortality rate is significantly higher than the average for Europe, especially for men the mortality rate is 65% higher.
NCDs are the main cause of morbidity and mortality: cardiovascular diseases and cancer accounted for 79.9% of all deaths in 2018. Over 25% of the adult population, 18 to 65 years of age, has a chronic disease or condition; around 7% have multiple (three or more) chronic diseases or conditions. In addition, Ukraine has the highest HIV and tuberculosis prevalence in Europe.