European risks for the Ukrainian pharmaceutical market

Author : Hlib Zahoriy

Source : 112 Ukraine

Why FTA with the EU would bring more benefits to European producers of drugs, rather than to Ukrainian companies
17:53, 12 February 2016

Read the original text on Forbes.

For the first 11 months of 2015 Ukraine imported from the EU pharmaceutical products worth $ 883 million, or over 70% of total shipments. In the opposite direction of the domestic pharmaceutical manufacturers sold only $ 6.9 million, while the bulk of their exports totaling $ 139 million are still accounted for the CIS countries.

The reasons for such a significant imbalance is not only that Europeans use better technologies. Even the most high-quality developments of Ukrainian pharmacists can be difficult to enter the EU market due to local regulatory features.

On the current situation of the pharmaceutical market of Ukraine and future consequences of asymmetric trade opening borders for medicinal drugs spoke the owner of pharmaceutical company "Darnytsia", MP Hlib Zahoriy.

Idyllic idea of ​​a free trade area with Europe persist even against the background of an extremely weak figures. The reason for the failure of the idea is restrictions imposed by the EU and Ukraine's slowness in making important strategic decisions.

In fact, Europeans have nothing to be blamed of. They are prepared and they protect their interests. And we really have a lot to learn from them. Ukraine is taking some de jure specific solutions into practice, but it is not implementing them. A striking example is the scope of the patent. The development of new drugs requires huge investments, and therefore the issue of intellectual property protection is the key here.

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Legislative regulation of this sphere in Ukraine looks like civilized. Our country has signed a number of core international conventions on intellectual property, including the Paris Convention for the Protection of Industrial Property. Also, there are agreements containing the basic principles of the participation of countries in the World Trade Organization (GATT, GATS and the Agreement on trade-related aspects of Intellectual Property Rights), and treaties that oblige the parties to the establishment and proper action of the mechanism of protection of patent rights.

However, the practical implementation of these regulations in Ukraine and the EU is different. There are regulatory framework deficiencies and no one hurries up to remove them: the judicial practice is not coherent, no adequate measures to protect the patent rights of pharmaceutical products. The most important thing is that the patent legislation of Ukraine does not take into account progress in the development of production, the emergence of new ways to promote products, the formation of the global market, including pharmaceutical products.

All this affects the position of Ukrainian producers, their ability to grow and the desire to invest in the creation of new medicines. Against this background, it is particularly acute disparities between Western and domestic companies. Multinational giants are investing in the development and high-tech processes are not in Ukraine, our country is considered only as a market.

Today, 65% of the funds (estimated by the company "Business-Credit", in 2015 the volume of retail pharmaceutical market amounted to 34.7 billion hryvnia -. Forbes), which Ukrainians spent on medicines, go to the accounts of multinational corporations. Moreover, these companies are completely free, but the domestic producers on the EU market there is almost impossible.

Related: Three Ukrainian companies banned to export honey to EU

The key players of the pharmaceutical market of Ukraine are currently not interested to change the rules of the game, and is not configured to promote further harmonization of the sphere of circulation of medicines in accordance with the European legislation. The problems associated with the gradual introduction in Ukraine of the European model of licensing and inspection of imported drugs.

Now most of the importers of medicines are not ready to take responsibility for the importation and trafficking in Ukraine imported drugs, as required by European legislation. Their position is formed by individual representatives of relevant industrial associations and is based solely on lobbying, getting windfall profits from importing medicines and retaining well-established corrupt schemes.

For example, the outdated practice of lobbying the state quality control on importation of imported drugs into the territory of Ukraine, which includes the risks of corruption, state registration of medicines by the Ministry of Health of Ukraine and the State Enterprise "State Expert Center" and others.

As a consequence, we have the following main problems of the Ukrainian pharmaceutical market:

  • opaque pricing (extremely high price for imported medicines and medical devices);
  • imperfect and opaque procedures for admission to the market (state registration) of medicinal products and medical devices;
  • constant talk about the need for "a mythical deregulation" and sabotage the further harmonization of the legislation of Ukraine in the field of drugs with the relevant European legislation;
  • importers lobbying their interests, obtaining profits from the import of medicines and the preservation of established corruption schemes;
  • problems with quality and safety of drugs and medical products, the presence of falsification, etc.

Last year, the implementation process was actually stopped by the European pharmaceutical legislation into the national one. The rules that were supposed to come into force, protect both the patient and the manufacturer. On the one hand, they guarantee the availability of quality, safe and effective drugs, and on the other, equal rules for domestic and foreign companies.

Among other things, unification of administrative procedures and adequate access to the market system were expected. The importance of this step is that it would allow Ukraine in the framework of the Association Agreement with the EU to sign an agreement on mutual recognition of the results of the inspection of production and quality control of drugs.

To date, this agreement acts unilaterally. That is, just like in a football match without a goalkeeper, Ukraine actually removes regulatory barriers to foreign companies, while the European countries are not doing the same for our producers.

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As a result, 117 licensed companies, namely as pharmaceutical manufacturers in Ukraine, cannot get on the European Union markets. That would mean an extension to the country's economy, it is not necessary to explain, this means more jobs for Ukrainians, the development of national science and increase contributions to the budgets of all levels.

As for the domestic market, the game goes on too favorable rules for the foreign business. There would be no support of the domestic manufacturer, and the idea of ​​import substitution is not even considered.

It is literally a threat to national security, we are talking about the health of citizens. And the argument that Ukraine is simply no analogues Western products, does not work.

To date, the domestic pharmaceutical industry is capable of manufacturing all popular drugs for which there are no legal restrictions. States are required only to perform control tasks, because now every manufacturer builds its own strategy and create a portfolio of products.

To be a full-fledged player on the international market, Ukraine, being in difficult economic conditions, should set at least temporarily barriers to foreign producers and agree with them transparent pricing system. Europe is not waiting for us in its market, so the countermeasures would allow to equalize the rights of domestic and international companies and to support domestic producers. The state must become a reliable goalkeeper that protects its business and its citizens.

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