Pharmaceutical market Views

“The success of the pharmaceutical business in Ukraine depends directly on the welfare of the population”

Pavlo Kharchyk

How business protects its interests, uniting the efforts of other companies, explained the president of the «Operators of medical products market» Association Pavlo Kharchyk in his interview

The idea to create an Association that would unite the majority of companies, selling the medical products arose 5 years ago, according to Pavlo Kharchyk`s words. There were enough reasons for that but the main goal was to defend the business interests not individually, but with the team. The unity is the main mission of the Association. In particular, it has already proved its ability to lobby and protect the interests of medical products operators. “We  improve the business climate in the country and our role is undoubtedly increasing,” – assured the president of the Association Pavlo Kharchyk. In the interview he talked about the most important achievements in the activities of his organization, focusing on the tools, operated by the Association.

: Pavlo, please tell us the reasons, which forced you and your colleagues to create the «Operators of medical products market» Association?

P. Kharchyk: Till 2012 government bodies had not paid any attention to the market of medical products. Moreover, there was practically no apparent legal differentiation between te market of medicines and some medical products? Everything changed in the middle of 2012, when some events took place, and as a result the situation was changed radically. In particular, Ukrainian officials changed the pricing legislation that concerned our segment – restrictions on the mark-up on many medical products. It has become a catalyst for the unification of market participants and the consolidation of common efforts.

In September 2012 we organized the first Ukrainian forum of medical product market operators to discuss further actions and develop a single position. This forum became the platform for the creation of the Association, which includes manufacturers, distributors, importers, service / consulting companies that contribute to the legalization of medical products, as well as pharmacies.

Our main goal is unchanged –

Protection of the interests of market operators, the construction of civilized and ethical rules of making business in Ukraine, adaptation of local legislation to the European one

With the help of united team, we nevertheless managed to persuade the government that the restrictions of mark-up cannot withstand any enterprise without disastrous consequences, both for the market and for the end user – a patient with his doctor. In order to defend our interests and achieve our goal, we needed to have tough endurance, perseverance and two years of time.

: It is not that easy to defend your interests, negotiating with the state. What methods do you use to protect the interests of the medical products market?

P. Kharchyk: During the five years of the Association’s activity, we used only legitimate and generally accepted mechanisms of influence. For this purpose, representatives of the administration and members of the Association participate in special or ad hoc working groups, public councils in key branches of the central executive body. We also hold a dialogue directly with them through correspondence and drafting regulations, involving the office of the business ombudsman and, of course, the media, by the results of studies of a particular issue. We often publish articles, study public opinion, and then conduct a questionnaire among the market participants. We stand in many sectorial public events; we prepare the M-test for some draft acts.

It is not a secret that

Today, the human capacity and their mobility is not so good. For example, the last important issue for the market was the introduction of restrictions on mark-up on the medical equipment, as I already mentioned. Today, maximum 10% of the mark-up is considered for the medical equipment. It is almost impossible for the medical equipment

Because the cost includes also transportation, installation, and insurance, as well as training the engineers, and other things.

And all that should be included in maximum 10 %. Many companies simply refuse to work with this market and even change the business area. When this measure was introduced, we set up a working group and identified our follow-up actions to resolve the situation on the basis of the Association. At the same time, we involved the Council of Business Ombudsmen, the Ministry of Economic Development and Trade, the Ministry of Health, as well as all the international companies of this market. Additionally, we met other associations in order to join the forces in this area and move further together. Today, unfortunately, all the main work has been given to the Ministry of Health, which, on the instructions of the Government, should determine the appropriateness of such changes, and support our initiative and nominate further as the main developer of the resolution.

: How has the market of medical products conquered the crisis from 2014 to 2016?

P. Kharchyk: Unlike the drug market, it is a little easier for us to experience the economic crises. If we talk about the average cost of packaging, then it (cost of packaging) costs much less than the drug itself. But if today the market of medicines began to grow in packages, then we are on the contrary fall of about 0,1%. At the same time, in UAH we see an increase of about 15-16%.

: It is said that due to the crisis, domestic pharmaceutical business was able to improve its position in the market, and import companies have lost a lot because of the exchange rate movements. Do these changes also affect your segment?

P. Kharchyk: In 2012-2013, the market for medical products was the only market which money was imported in, and in some cases there were more imported products than domestic production. But from the middle of 2017, the situation has changed. National production in the cases is already prevalent over imports: 54% of the market share is Ukrainian companies, while 46% are western ones. At the same time, imports continue to lead if we talk about money. It is worth to note that our market is wider than the market of pharmaceuticals, because medical products do not require licensing of sales, imports, etc. There are more entities which sell the medical products, than those, who sell the medicines. Thus, medicines are sold only in pharmacies, and for mediums there are no such restrictions. Nevertheless, our segment is on average about 10 times less than the drug market, and is estimated at about $ 300 million.

: Have you recently experienced a reorientation in consumer`s requirements?

P. Kharchyk: After the crisis, the consumer started to prefer more expensive medical products, which, in his opinion, should be more effective. It means that people learn to count money and make choices in favor of quality rather than than prices. Accordingly, the population becomes more educated in medicine, pharmaceuticals, everyone reads, compares. If a person has the choice and opportunity to buy a more expensive product, he will do it. This is an indicator of crisis processes in the country, which proves that the success of the pharmaceutical business in Ukraine directly depends on the welfare of the population.

: In your opinion, is the attitude of foreign companies towards Ukrainian business changing? Are they more willing to cooperate with Ukrainian businessmen?

P. Kharchyk: Every sophisticated person, reading the news about Ukraine, must be afraid to invest in this country. If we talk about the business partnership, then these fears are immediately reflected in the terms of the contract. When the war in Ukraine has started, none of the foreign partners could not delay the payment. Because they understood that anything could happen in the country, and they could never return their money. Today, the situation in Ukraine is stable “frozen”. I can say that foreign partners with a great optimism look at our country, there are already the first steps of confidence, but the fears still also remain.

Leave a Comment