Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.
Ukraine
HEALTHCARE &
PHARMACEUTICAL
INDUSTRIES
OVERVIEW
2015
Page 2
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
About the Ove...
Page 3
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
This Overview...
Page 4
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
OLENA LEPESHY...
Page 5
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
CONTENTS:page...
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
Page 6
Ukraine: Heal...
HEALTHCARE
INDUSTRY
OVERVIEW
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Oppor...
Page 8
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
MAIN CHARACTE...
Page 9
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
resources. Lv...
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
Page 10
Ukraine: Hea...
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
«Ukraine, Zhytomyr O...
Page 12
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
INDUSTRY SUM...
Page 13
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
Moreover, al...
Page 14
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
LEADING LOCA...
Page 15
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
REGULATORY
E...
Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities
Page 16
Ukraine: Hea...
Ukraine
HEALTHCARE &
PHARMACEUTICAL
INDUSTRIES
OVERVIEW
2015
Ukraine: Healthcare and Pharmaceutical Industries Overview 20...
Upcoming SlideShare
Loading in …5
×

2015 11 04_healthcare and pharma industries overview 2015

358 views

Published on

2015 11 04_healthcare and pharma industries overview 2015

Published in: Healthcare
  • Be the first to comment

  • Be the first to like this

2015 11 04_healthcare and pharma industries overview 2015

  1. 1. Ukraine HEALTHCARE & PHARMACEUTICAL INDUSTRIES OVERVIEW 2015
  2. 2. Page 2 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities About the Overview The Overview is intented to uncover investment opportunities and market attractiveness of the Ukrainian Healthcare and Pharmaceutical Industries for a wide range of stakeholders. The Overview offers a helicopter view of Healthcare and Pharmaceutical business environment in Ukraine with respect to current internal country’s economic and business perspectives, risks and undercurrents. The Overview was developed by two local industry consultancies: MedExpert (www.medexpertua.com) and UPharma Consulting (www.upharma-c.com) - authors of the Overview. The Overview includes industry specific and market information, as well as data from the opened sources, expert views, public statistical and regulatory information. Authors MedExpert [www.medexpertua.com] MedExpert is a specialized company in Ukraine that provides consulting services to hospitals and implements various hospital information systems. UPharma Consulting [www.upharma-c.com] UPharma Consulting is a consulting company, operating in the healthcare and pharma sectors. Our clients - pharmaceutical companies, pharmacy chains, distributors, investment funds, banks, and other stakeholders in the healthcare sector. Ukraine HEALTHCARE & PHARMACEUTICAL INDUSTRIES OVERVIEW 2015
  3. 3. Page 3 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities This Overview contains forward-looking statements. Forward- looking statements are statements that are not historical facts. These statements include projections and estimates and their underlying assumptions, statements regarding plans, objectives, intentions and expectations with respect to future investments, events, market capacity, services, consumption and potential, and statements regarding future performance. Forward-looking statements are generally identified by the words «expects», «anticipates», «believes», «intends», «estimates», «plans» and similar expressions. Although Authors of the current Overview believe that the expectations reflected in such forward-looking statements are reasonable, investors and other parties concerned are cautioned that forward-looking information and statements are subject to various risks and uncertainties, many of which are difficult to predict and generally beyond the control of Authors of the current Overview, that could cause actual results and developments to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include among other things, the uncertainties inherent in healthcare and pharmaceutical market capacities, future markets potential, including marketing data, regulatory changes by regulatory authorities, such as the Ministry of Health of Ukraine or the Cabinet of Ministers of Ukraine or State Administration of Ukraine on Medicinal Products, regarding whether and when to approve any drug, device or biological application as well as their decisions regarding labeling and other matters that could affect the availability or commercial potential of such product candidates. Authors of the current Overview do not undertake any obligation to update or revise any forward-looking information or statements. Forward Looking Statements
  4. 4. Page 4 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities OLENA LEPESHYNA CEO OF MEDEXPERT Dear colleagues, 2014 and 2015 were difficult years for Ukraine. How- ever, the problems that we encountered did not kill us, but only made us stronger. In the summer of 2015 we felt that the economical downturn is fin- ished and our country has started slow recovery from the crisis. Specializing for more than 10 years in the health care market of Ukraine MedExpert company has observed the increased activity of new projects of clinics and hospitals of various kinds in Ukraine. In- vestors are starting to prepare for launching new and interesting projects. Almost all spheres of the health care market in Ukraine are open for new players, so the only prob- lem is finding money for the investments. In our opinion, we will see a lot of new projects realized in Ukraine in 2016-2020. Please, do not hesitate to refer to MedExpert com- pany with any questions regarding the health care market in Ukraine. JONAS TRYGGVASON CHAIRMAN OF BOARD, UPHARMA CONSULTING Dear friends and partners, Ukraine has entered tough and dramatic turbulence zone during its not so long modern history. Every cog of its economic and social mechanisms is ex- periencing extremely high loads, shaking and test- ing their strength. And today it is obvious that its hopelessly outdated and unreliable components are not only destroying everything that the country has achieved, but are also destroying its future. Vital reforms are lanched, macroeconomic situation is stabilized, fiscal and monetary policies are under- going the process of renovation and revitalization. However, the speed of changes is not fast enough, and still, there is a desperate resistance on the part of the oligarchic structures and bureaucratic no- menclatures. Nevertheless, recently updated Doing Business In- dex 2016 by the World Bank Group spotted Ukraine jumped up by 13 positions: from 96th in 2015 edi- tion to the 83rd position in 2016 edition, having out- stripped China and approached Saudi Arabia. Ukrainian pharmaceutical market is a vital and dy- namic sector of the country’s economy. There is an enormous investment potential and growth gap comparing to bordering CEE and CIS countries. UPharma Consulting stands side by side with all market stakeholders as a trusted advisor on a wide spectre of the professional marketing, management, human resources and M&A consulting.
  5. 5. Page 5 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities CONTENTS:page I. Ukrainian Economy Overview 1. Economy in Brief................................................................................................................................ 6 2. Macroeconomic Summary 2014-2015................................................................................. 6 II. Healthcare Industry Overview 1. Main Characteristics of the Ukrainian Market of HealthCareServices....................................................................................................................... 8 2. Rating of Investment Attractiveness of Ukrainian Regions................................ 8 3. Short History of Reforms in the Ukrainian Health Care...................................... 9 4. The Largest Investment Deals in the Ukrainian Health Care................................... 10 III. Pharmaceutical Industry Overview 1. Pharmaceutical market trends in Ukraine........................................................................... 12 a. Industrysummary.......................................................................................................................... 12 b. Retail market.................................................................................................................................. 12 c. Segments and top products................................................................................................. 13 2. Investment Opportunities: Leading local pharmaceutical manufacturers......................................................... 14 3. RegulatoryEnvironment................................................................................................................ 15 IV. Contact Information 16 a. UPharma Consulting b. MedExpert
  6. 6. Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities Page 6 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities ECONOMY IN BRIEF Ukraine is considered a lower middle-in- come country. Following independence and the transition to a market economy, Ukraine was challenged by a deep economic crisis, with industrial output and gross domestic product (GDP) more than halving during the 1990s (Åslund, 2005). In the early 2000s, the country imple- mented some economic reforms and GDP growth increased to 12.1% in 2004 (World Bank, 2014b). Populist socioeconomic pol- icies, combined with attempts to reverse the results of privatization, drastically low- ered economic growth from 12.1% in 2004 to 2.7% in 2005 (World Bank, 2014b). GDP stabilized somewhat in 2006 and 2007, but this did not reflect an improvement in in- dustrial output; it was primarily due to price increases for energy and bank loans, which caused the price of goods and services to spike. The 2008 global economic crisis se- verely affected the already weak Ukrainian economy and annual GDP growth fell to −14.8% in 2009, while inflation reached 28% (World Bank, 2014b). Following assistance from the IMF and the WB in late 2008, the economy stabi- lized but remained weak and by the end of 2012 Ukraine was back in recession due to a poor harvest and lower than expected demand for steel, which is a key Ukrainian export (World Bank, 2013). In 2012, GDP growth fell to 0.2%, while inflation almost halved from 14.4% in 2011 to 7.9% in 2012. The economy had been in recession since mid-2012; the inconsistent policies of the previous government had led to large ex- ternal and fiscal imbalances; the deteri- orating regulatory and “doing business” environments and pervasive corruption depressed investor activity and led to for- eign investors fleeing the country; and the banking sector had accumulated large ex- posures to lending related to politically ex- posed persons and was vulnerable to out- flows (EBRD, Transition Report 2014). Today, Ukraine has been living through enormous turbulence since the end of 2013. Social unrest, which started in Kiev at the end of 2013, led to an overturn of the Ya- nukovych government. New presidential elections took place at the end of May. In 2014, relations between Russia and Ukraine became complicated, with a new gas sup- ply dispute, the events in Crimea and an escalation in fighting in Ukraine’s Donbas region. The new government committed itself to broad structural reforms to rebalance the economy, in the context of unprecedent- ed security challenges. Ukraine signed an Association Agreement (AA), including a Deep and Comprehensive Free Trade Area (DCFTA), with the European Union (EU), secured a new International Monetary Fund (IMF) program and initiated structur- al changes in the energy and banking sec- tors. Many other challenges in the public fi- nance, financial and real sectors lie ahead. Macroeconomic adjustment has been sharp. The hryvnia depreciated by around 40% after the National Bank of Ukraine (NBU) was forced to abandon the currency peg in Feb 2014. The economic contraction has been profound, aggravated by severe damage to industrial capacity and infra- structure in the east, and significant disrup- tions in trade with Russia. MACROECONOMIC SUMMARY 2014-2015 The acute political crisis, which started to- wards the end of 2013, took place at a time when Ukraine’s economy was facing sig- nificant challenges. As the crisis unfolded and pressure on international reserves in- creased, the NBU abandoned the currency peg in early Feb 2014, allowing the hryvnia to depreciate by around 40% between Feb and Sept 2014, fueling inflation, affecting domestic demand and weakening pub- lic and private sector balance sheets. Banks suffered large retail deposit outflows of nearly 25% (adjusted for currency depre- ciation) in the first 9Ms 2014 and curbed lending. In addition, 26 small and medi- um-sized banks were declared insolvent as of mid-Oct. To prevent the fiscal deficit running out of control, the government embarked on a fiscal austerity program and hiked energy tariffs for households and industry. In Apr 2014, Ukraine secured a 24-month Stand- By Arrangement (SBA) with the IMF. The program (approx. $17.1 bn) aims to stabilize and rebalance the economy. The economic outlook is highly uncertain. GDP is currently forecast to contract by 3% in 2015. Domestic demand is likely to re- main weak due to the efforts at fiscal con- solidation, deteriorated real incomes and banking sector deleveraging. The situation in the east of Ukraine remains the biggest source of uncertainty. On the upside, sta- bilization in the east of the country may pave the way for industrial and infrastruc- tural rehabilitation and for a general recov- ery in confidence. Exports may get a boost from trade liberalization with the Europe- an Union and from the hryvnia deprecia- tion. Prospects for recovery in the medium to long term will hinge on the government’s ability to implement structural reforms and attract foreign direct investment (EBRD, Transition Report 2014). On Oct 1st Ukraine released balance-of-pay- ments data for Aug ‘15. Exports are rising and the country is running both current-ac- count and budget surpluses. The reserves of the National Bank of Ukraine (NBU) are rising, and the finance ministry has a record $2.2 billion in its Treasury account. Pretty impressive. The NBU reckons that by the 4Q of this year, the Ukrainian economy will be grow- ing again. In USD terms the economy has more than halved in size over the last year or so (The Economist, Oct 2015). UKRAINIAN ECONOMY OVERVIEW Despite the recent problems Ukraine is showing signs of the recovery start. The government is making various moves, some of which receive appreciation from the EU and US officials. Although not ideal and not fast, Ukraine has started the process of reforming various sectors. The situation with occupied territories has stabilized and the conflict seems to be frozen. Despite all problems brought by the conflict in the Eastern it encourages Ukrainian government to bring fast and efficient reforms. Ukraine has a lot of potential in well educated human resources and we expec the economic growth to start soon.
  7. 7. HEALTHCARE INDUSTRY OVERVIEW Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities «View from the Smotrych mountain, East Carpathian Mountains, Ukraine» | Berezovskyi Oleksii (С) flic.kr/p/zxjxzh | All rights reserved
  8. 8. Page 8 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities MAIN CHARACTERISTICS OF THE UKRAINIAN MARKET OF HEALTH CARE SERVICES 1. Structure of the Ukrainian health care providers have changed a lot among pri- vate medical centers and had no changes is the public sector but the whole market structure changes very slowly. There are about 13 thousand medical cen- ters financed by the Ukrainian budget, more than 3.5 thousand of private medi- cal centers and about 1.5 thousand of pri- vate doctors. Now the most developed segments of private sector of the Ukrainian healthcare are: • Laboratory • Pediatric center • Hospital that contains policlinic and surgical direction • Polyclinic for adult • Diagnostic center • Maternity hospital (there is one func- tioning private maternity hospital to- day but there some projects more) 2. The level of trust to the private sector of the Ukrainian health care sector rises every year and shows up to 70% of trust to private medical laboratories in some regions. The trust rate to medical non-laboratory services is lower and depends of the re- gion’s characteristics and the rate of gov- ernment medical centers’ monopoly. In Ukraine we have huge differences in the participants’ structure of the region- al medical services market. Some regions have a lot of state and private medical centers, some regions have a few pri- vate medical centers and in some regions there is a lack of medical centers or a lack of medical quality. Private medical centers are more trusted in big cities such as Kyiv, Odessa, Lviv, Dni- propetrovsk than in small towns or non- rich regions such as Zhytomyr, Vinnitsa, Mykolaiv and other where state medical centers are more trusted nowadays. 3. Total income of the Ukrainian market of medical services in 2014 was more than UAH 27 bn (USD 2.3 bn, Table 1). One third of the income of private med- ical centers belongs to the six biggest medical companies, two of which are lab- oratories (Figure 1). 4. Patients in Ukraine became more de- manding than 10 years before. The first survey that estimated the level of trust to the private and public sectors of the Ukrainian healthcare was held in 2007 by MedExpert. After 2007 we did more than 20 surveys and their results show us the level of trust to the private sector is high enough but the level of trust to the government medical centers hasn’t changed for many years and is quite high today. In most cases this love to the state medical centers has nothing common with medical quality or quality of service. The cause of such sympathy is just ab- sence of alternatives. Now we can say that there are some gen- eral rules for Ukraine according to this theme: • The bigger the city is the more de- manding patients are. • Low level of competition between government and private sector de- crease the rate of patients’ expecta- tions. • Patients are getting used to the fact that high quality health care service should be paid for, not just received for free from the government. RATING OF INVESTMENT ATTRACTIVENESS OF UKRAINIAN REGIONS Kyiv International Institute of Sociology and the Institute of Economic Research and Policy Consulting ranked Ukrainian regions by investment attractiveness in 2013. The composite index of investment attrac- tiveness of regions and cities with special status is an integrated index, which in- cludes the hard and soft factors. The hard factors include natural and human re- sources, innovation potential, geographi- cal location, household income, infrastruc- ture development, etc. Soft factors include the business climate, property rights, gov- ernment transparency, corruption, etc. Each of regions has their index, which is based on marks of experts. The first sam- ple consisted of 83 respondents from 27 regions, including Kyiv and Sevastopol. Experts represented three main groups in region: (1) business association or agen- cy, which are specialized in attracting of investments, (2) government and (3) con- sulting companies. The second sample – managers (CEO) of companies that in- vested over the past ten years – was in- terviewed by questionnaire in the form of personal interviews. Respondents rep- resented all 27 regions of Ukraine (24 re- gions, Crimea, Kyiv and Sevastopol). They are specialized in industry and in non-in- dustrial sectors. MedExpert Company used this data for map creation. At this map we also marked (by yellow) cities, which was identified by sociological group “Rating” with Inter- national Republican Institute as the best cities for life in Ukraine. In this study res- idents of Ukrainian cities evaluated qual- ity of services, the work of local authori- ties and others factors, that determine the quality of life. Lviv (1,601) and Ivano-Frankivs’k (1,478) regions are the leaders of the rating be- cause they are better dispose of available Source:MedExpert
  9. 9. Page 9 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities resources. Lviv took the first place in all soft factors: experts highly evaluated the business climate and cooperation with lo- cal authorities in Lviv. Also there are high indexes in Odes- sa (1,459) and Vinnytsya (1,428) regions: factors “infrastructure development” and “business climate” have become more de- veloped. Also Vinnytsya was determined as the best city for life in Ukraine. Rating is based on the data of 2012 and 2013th years and does not consider the occupation of the Crimea and the part of eastern Ukraine. SHORT HISTORY OF REFORMS IN THE UKRAINIAN HEALTH CARE After the collapse of the Soviet Union Ukraine has started various attempts for conducting reforms in all fields, including health care. Although the complex reform has not been completed due to lots of changes in Ukrainian politics there have been several achievements in the reform- ing Ukrainian health care since 1991. 1992: creation of the sickness funds Sickness funds became analogues of the insurance that can cover, mostly, medi- cine expenses of the patients. Very small amount of people in Ukraine are still cov- ered by hundreds of very small sickness funds. 1996: start of changes in the Ukrainian health care system First of all, the Constitution of Ukraine was adopted. 49 article of it guaranteed the right of Ukrainians to receive free medical services in all state-owned hospitals. Second, the government have issued the list of medical services that can be charged by the state-owned hospitals. Third, voluntary health insurance was le- galized. Finally, Ukraine has joined to the world system of health indicators that allowed to better compare world data with the Ukrainian data. 1998: cancellation of the official payments for the medical services The idea of introducing official payments for medical services was not implement- ed in reality. The crisis of 1998 and preparation for the Presidential elections the following year led to the cancellation of official payments. Such a decision has been made based on the Constitutional Court of Ukraine de- cision. It declared that almost all services declared as suitable for official payments in 1996 are important. Hence, according to the Constitution of Ukraine, it is not le- gal to charge the patients for them. 2000: hospital charity funds acceptance So, nine years after the Soviet Union col- lapse there were no significant reforms in the health care system of Ukraine. State financing was limited, health insurance system was not developed, private health care has just started to develop. The only thing that could be called a re- form or just a small step forward was the government decision about rules of the hospital charity funds. The decision ac- tually legalized unofficial payments into charity donations. It helped a lot, since the hospitals received additional and legal source of financing. At the same time un- official payments stayed, because charity funds have certain limitations. 2002: First Complex Program “Health of the Nation” for 2002-2011 Program has become the first complex program of the health care system devel- oping over the next several years. WHO took part in in its preparation. It described the main directions of the system im- provement and approved responsible or- gans for the steps implementation (minis- tries, local government etc). 2012: launch of the test health care reform The previous reform lasted for 10 years, but there was no analysis of the reform achievements and failures. Without pub- lishing any analysis the government de- clared the start of a new reform. The test reform was launched since 1st January 2012 in Vinnytsia, Dnipropetrovsk, Donetsk counties and Kyiv. The reform has put am- bitious goals: • Decrease infant death rate by 10%; • Decrease maternal death rate by 10%; • Decrease neonatal (before 1 week of life) death rate;
  10. 10. Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities Page 10 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities • Increase of the number of working-age population. 2015: START OF NEW REFORMS Currently there are very ambiguous plans regarding health care reforms in Ukraine. President Poroshenko promised reforms in various fields in Ukraine, including health care. As of August 2015 there have been 2 major achievements: 1. A lot of talks about health care re- forming have been starting. Although talking does not automatically leads to effective reforms, the general interest has been raised and a lot of conscious businessmen and officials started to think about the ways Ukrainian health care can go. 2. The corruption schemes in the gov- ernment health care have been lim- ited a lot. The tenders become open and part of the government purchas- es is currently being passed to inde- pendent funds. Probably, this days the problem of the government is not in corruption, but in lack of funds and lack of efficient methods of their us- age. Considering all discussions that is going on regarding health care reforms in Ukraine we can make certain forecast for the near- est future: 1. It is very likely that several state- owned hospitals will be selected for test privatization. Ukraine is not likely to follow Georgia that made all hos- pitals available for purchase by inves- tors. Probably, the preparation for the privatization will continue for at least 1 year and then at least 2-3 years will be needed to evaluate its effect. 2. Private hospitals in Ukraine will con- tinue to expand there capacities and open new branches. Very likely that all new projects will be rather limited in size – not more than 6K-7K m2 and not more than 60 inpatient beds. 3. The simplest way to boost health care industry in Ukraine is to encourage health care insurance. There is a high likelihood that the officials will final- ly create a law in order to encourage people to buy insurance. This will give more opportunities for private and state-owned sector to develop. 4. State-owned hospitals are likely to in- crease their independence. There is practically no faith that they will be- come completely independent over the next several years, but we expect certain moves in this direction. This would be an important move to en- courage competition in Ukrainian health care. THE LARGEST INVESTMENT DEALS IN THE UKRAINIAN HEALTH CARE There is a rather short history of large in- vestment deals in the Ukrainian health care. The general public did not notice when Medicover entered Ukraine in 2007 by buy- ing Synevo (chain of laboratories), because the chain was rather small. Only by invest- ing significant amounts of money, Synevo became the largest player on the lab ser- vices market in Ukraine. Isida deal in 2011 brought a lot of attention. $40-$50 mln was considered to be a large amount for a maternity hospital and multi- pliers exceeded all expectations. Dobrobut chain of clinics was the last signif- icant deal, costing new owner $17 mio. THE MOST PROMISING AREAS FOR INVESTMENT IN UKRAINIAN HEALTH CARE Most investors coming to Ukraine are fall- ing into 2 traps: 1. Some of them expect a lot from the privatization. This should not be the case, as it can take some time to wait and the hospitals that might be pri- vatized in the nearest future are likely to be in a very poor condition. So, by purchasing an old hospital the new in- vestor might spend quite a lot of time and resources for making its renova- tion. 2. Other investors are seeking for exist- ing private hospitals to purchase. The problem here is that there are rather few private hospitals that might be in- teresting for investors and even less would agree with selling. We see the solution in creating new private hospitals in Ukraine. This way the process can be much faster and the financial returns will occur faster. Considering Ukrainian laws, it is very complicated to build a hos- pital from scratch. The management of a new hospital will need to spend at least 1 year doing all paper work for building a new hospital. However, it is much easier to purchase an existing building and to make its renovation. This requires just 1-2 months of paperwork before the reconstruction. Geographically, we recommend to consider large and the most developed cities, such as Kyiv, Lviv and Odessa. As for the health care fields for a new hos- pital we recommend to invest in: 1. Pediatrics. The field is extremely need- ed and the least occupied. Despite any cri- sis parents are ready to pay for their kid’s treatment. Currently, there are no special- ized large pediatrics hospital in Ukraine, but the pediatrics departments in multi-hospital are extremely full of patients. 2. Obstetrics. The demand for high qual- ity obstetrics services in Ukraine is not sat- isfied. The conditions in the state-owned hospitals are deteriorating and there is only one private maternity hospital in Kyiv. Con- sidering how important are obstetric ser- vices and that giving birth to a child is a very special event for women, we see a lot of investment opportunities in this field. 3. Hospice care and geriatrics. These two fields are almost absent in Ukraine. However, considering the improvements in the health care hospice care and geriat- rics will be needed more. The state-owned hospitals mostly do not have such depart- ments or they are very poorly equipped. At the same time there is an increasing num- ber of people willing to pay for such ser- vices.
  11. 11. Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities «Ukraine, Zhytomyr Oblast» | Ani Melikyan (С) | flic.kr/p/wyTUPY | All rights reserved PHARMACEUTICAL INDUSTRY OVERVIEW
  12. 12. Page 12 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities INDUSTRY SUMMARY Pharmaceutical industry is traditionally one of the key industry sectors in the economy of Ukraine. It covers production of phar- maceuticals and medical devices, whole- sale and retail trade, specialized storage and distribution through developed sales network. It is one of the most dynamic and profitable industries. Commodity supply chain of the pharma- ceutical industry in the country includes foreign companies (imported products), local manufacturers, wholesalers/distrib- utors of pharma related products, public and private hospitals, and the retail seg- ment. All of the segments have different levels of consolidation, margin levels and other peculiarities. There are no vertical in- tegrated companies within the industry. Ukraine has strong local manufacturers which were incorporated into private en- terprises after the fall of the Soviet Union in 1991 on the base of local manufactur- ing capacities, which were concentrated in Ukraine. Overall economy and industry de- velopment did not encourage local man- ufacturers to rebuild their strategies and product portfolios enough to establish sus- tainable advantage on the market. There were very low R&D expenditures among them in 90-00s. Thus, by the end of 2009 the total share of local drugs sold on the market was at 25% in values, and 66% in volumes. It means that local manufaturers marketed very cheap and old products. Nevertheless, local manufacturers have significantly built their muscles within last years and started promoting their products aggressively. This strategy has already yld- eded fruits: as of 7M2015 they have boost- ed their sales up to 37% of the total share in values (vs. 25% in 2009). Wholesale or distribution segment of the supply chain is the most consolidated seg- ment, where TOP-5 distributors control about 89% of the market in values (YTD July 2015; Proxima Research). The largest pharma distributors are “BaDM”, “Opti- ma-Pharm”, “Venta”, “FRAM CO”, “Pharm- planeta”. Retail segment consists of about 20 000 points of retail sales (Fig 1), which include traditional pharmacies and pharmacy units, smaller retail establisments with less tech- nical requirements regarding their size, lo- cation and interior design specifics. Retail segment is the least consolidated in the industry: TOP-100 pharmacy chains control about 63% of the total sales in val- ues (YTD July 2015). For example, this in- dicator for 2013 FY was at 58% (Proxima Research). The total market (hospital and retails sales) is predominantly an out-of-pocket market with about 87% of the total market share in values and 89% in volumes paid by the patient/final consumer from his pocket (re- tail). The hospital segment is very insignificant (about 13% in values) and unstable due to lack of public finances and absence of effi- cient reforms in provision of pharmaceuti- cal and health care in the country. RETAIL MARKET Recent crisis provoked severe microeco- nomic conditions and drastic downward shift of purchasing power of the popula- tion that caused tremendous changes in the pharmaceutical industry. It affected all segments: manufacturing, wholesale, retail and hospital purchases. As it was mentioned above, this segment has the lowest level of consolidation, but it is increasing. There are TOP-20 larg- est pharmacy chains, which control about 34%. The largest are “Apteka-Magnolia“, “Sirius-95“, “Pharmastore“, “Med-Service“. The retail segment is hugely saturated by imported products: by the end of 2013 about 67% of all the drugs sold through the retail segment in values were imported. Any volatility of the local currency affects pricing in the retail segment essentially. The majority of all sales in the retail chan- nel comes from drugs (Fig 3) which make about 85% of the channel in values. Such division of sales through categories changed slightly from 2009, when sales of drugs were at about 82% in values. During 2011-2013 the retail segment was developing with a constant double-dig- it dynamics in USD and UAH and insignif- icant growth rate in volumes. Compound annual growth rate (CAGR) in USD for the mentioned period was 10%, and 2% in vol- umes. However, since 2014 the game has changed: Crimea was annexed and military conflict on the East of Ukraine escalated to menacing proportions. In 2015, the segment experiences dras- tic changes: the segment is growing in the local currency, but decreasing in USD/ EUR and in units, Ukraine has already lost certain territories and consumers which caused a redistribution of the largest re- tail players’ market shares, there is shift of consumers consuption to cheaper prod- ucts and overall decrease of consump- tion in physical terms, all retailers faced the problem of current assests deficit and settlements with distributors issues: delays in defferals of payments and decrease of credit limits. UKRAINIAN PHARMACEUTICAL INDUSTRY OVERVIEW Source:apteka.ua Source:UPharmaConsulting Source:apteka.ua
  13. 13. Page 13 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities Moreover, all the challenges mentioned above provoked reduction in nomencla- ture of products in POSs and their assort- ments as well. According to apteka.ua, the total retail turnover in 2014 FY has lost about 4% of the market in values on the east of Ukraine due to the recent military crisis. SEGMENTS & TOP PRODUCTS According to Proxima Research, results of 2014 full year showed that the distribution of sales shares between ATC-1 classes re- mained unchanged. The largest share in values is controlled by “A - Alimentary tract and metabolism“ (17%), “C - Cardiovascular system“ (12%), “R - Respiratory system“, “N - Nervous system“ (11%) and “M - Muscu- loskeletal system“. This distribution did not change significantly in recent years. Rx medicines in the local market by the end of 2014 prevailed in values with about 56% of the compound sales. Moreover, their share raised through years: from 54% in 2010 to 56% in 2014. However, in physi- cal terms the market is dominated by OTC products, which accumulated about 64% of total yearly retail sales by the end of 2014. As we mentioned above, there was significant devaluation of the local currency as the result of the recent crisis in the country. This affected the import of medicinalproducts, which have become substantially more expensive. However, such changes have opened horizons for local manufacturers in gaining larger market shares in the local market. According to apteka.ua, local producers have already reached about 40% of the market in values in 1HY 2015 (vs. 37% in 2014 FY and 35% in 2013 FY, refer to Fig 4). Price volatility and decreased purchasing power of the population caused changes among best selling products on the market (Table 1). The most selling brand for many years here is Actovegin® (Takeda), while others are quite volatile. For example, Car- diomagnyl® (Takeda) and Essentiale® (Sa- nofi) have lost their shares in 1HY 2015 sub- stantially compared to the same periods of 2014 and 2013 years. Ukrainian maket is experiencing the same world trend regarding marketing status of pharmaceuticals: share of Gx products has been increasing in the market. Since 2013 it rose from 38% to 42.2% in 1HY 2015 in values. Share of original (innovative) med- icines decreased within the same period from 18.8% to 17.2%. Average cost of a Gx pack in Ukraine is about $1.8 whilst original drugs cost four times more: about $7 per pack (1HY 2015; apteka.ua). Source:apteka.ua Source:apteka.ua Table 1. Top-20 bestselling brands at the Ukrainian Pharmaceutical Market (retail only; apteka. ua)
  14. 14. Page 14 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities LEADING LOCAL PHARMA MANUFACTURERS FARMAK JOINT STOCK COMPANY web: farmak.ua | HQ location: Kiev, Ukraine Sales (2014*): UAH 1.7 bn (~$ 146 mio) Market Share (2014*): 4.9% Employees (2014, average): 2 116 Products focus: Alimentary, Respiratory, Sen- sory, Cardiology, Dermatology etc. Farmak is a local pharmaceutical company, op- erating on the basis of the plant, which was established in 1925. It is engaged in manufac- turing finished medicines and pharmaceutical substances The company exports its products to various countries, including countries in CIS, as well as to Germany, Austria, Poland, Bulgaria, Latvia, Lithuania, Estonia, the United States, Viet- nam, the Philippines, and Egypt. DARNITSA PRIVATE JOINT STOCK COMPANY web: darnitsa.ua | HQ location: Kiev, Ukraine Sales (2014*): UAH 1.3 bn (~$ 110 mio) Market Share (2014*): 3.7% Employees (2014, average): 851 Products focus: Pain, Dermatology, Respirato- ry, Neurology, Alimentary, Cardiology Darnitsa - is one of the largest local manufac- turers of medical products in Ukraine, which oc- cupies a leading position in the domestic phar- maceutical market. It has capacities that allow to produce more than 400 million of vials, 4 billion of tablets, 30 million of sterile vials of antibiotics and more than 30 million of tubes of soft medic- inal forms, including annual production capacity of the site drops of 35 million of vials per year. ARTERIUM CORPORATION web: arterium.ua | HQ location: Kiev, Ukraine Sales (2014*): UAH 1.1 bn (~$ 97 mio) Market Share (2014*): 3.3% Employees (2014, average): 2 070 Products focus: Neurology, Antibacterials, Ali- mentary, Cardiology, Dermatology, Veterinary etc. The Arterium Corporation consists of two Ukrainian pharmaceutical manufacturers - PJSC “Kyivmedpreparat”, the oldest manufacturer of antibacterial drugs, located in Kiev and “Halych- pharm”, located in Lviv. On March 2, 2005 these two merged into one: Arterium Corporation. To- day Arterium’s products are marketed in 11 CIS countries. There are representative offices in Uz- bekistan, Belarus and Kazakhstan as well. ZDOROVIE LIMITED LIABILITY COMPANY web: zt.com.ua | HQ location: Kharkiv, Ukraine Sales (2014*): UAH 0.9 bn (~$ 76 mio) Market Share (2014*): 2.6% Employees (2014, average): 1 300 Products focus: Respiratory, Cardiology, Oph- talmology, Neurology, Antibacterials, Antifun- gals etc. Zdorovie Group is in the TOP-5 of the largest manufactures of medicinal products in Ukraine. Its production capacities allow to produce 45 mio ampoules and 1.612 mio capsules, 65 mio packs of tablets, 10.2 mio bags with powder, 18 mio packs of granules, 12.4 mio packs of cap- sules, 2 mio balloons of aerosols and balloons / vials of spreys, 4.5 mio units of finished products of soft dosage forms (ointments, creams, gels), 8,3 mn units of finished products of liquid dos- age forms (syrups, drops, infusions, solutions, suspensions, emulsions, elixirs) per year. KIEV VITAMIN FACTORY JOINT STOCK COMPANY web: vitamin.com.ua | HQ location: Kiev, Ukraine Sales (2014*): UAH 0.6 bn (~$ 51 mio) Market Share (2014*): 1.8% Employees (2014, average): 817 Products focus: Vitamins, Alimentary tract, Cardiology, Neurology etc. Kyiv Vitamin Plant operates as a manufacturer of vitamin supplements and pharmaceutical prod- ucts. There are more than 130 medical prepa- rations and 10 dietary supplements in the com- pany’s portfolio. It has 7 representative offices outside Ukraine. KUSUM PHARM LIMITED LIABILITY COMPANY web: kusumpharm.com | HQ location: New Delhi, India | Manufacturing site in Ukraine: Sumy; RO in Ukraine: Kiev Sales (2014*): UAH 0.5 bn (~$ 47 mio) Market Share (2014*): 1.6% Employees (2014, average): n.a. Products focus: Cardiology, Pediatrics, Gastro- enterology, Endocrinology etc. Kusum Pharm LLC is a modern enterprise for manufacturing of dosed non-sterile oral solids and non-sterile liquids for oral use. Construc- tion of the plant began in 2005 with purchas- ing of unfinished building in Sumy. In August of 2009 pharmaceutical plant Kusum Pharm was started-up. YURIA- PHARM JOINT STOCK COMPANY web: vitamin.com.ua | HQ location: Kiev, Ukraine Sales (2014*): UAH 0.5 bn (~$ 46 mio) Market Share (2014*): 1.6% Employees (2014, average): ~800 Products focus: Blood and blood forming or- gans, Endocrinology, Rheumatology, Anaesthesia and Emergency Medicine, Dermatology etc. The company is the leader manufacturer of solutions for infusion in Ukraine and CIS coun- tries. It supplies medical facilities with more than 100 items of blood and plasma substi- tute solutions, original infusion drugs, antibi- otics, fungicidal drugs, syrups, antiseptics, par- enteral feeding preparations, anti-tuberculosis drugs, syringes, I.V. sets. In 2011 the company has complited WHO-GMP certification. Yuria- Pharm produces a number of preparations (Rx & Gx), which are not produces in CIS countries - Reosorbilact® , Sorbilact® , Decasan® , Horo- sten® etc. BCPP PUBLIC JOINT STOCK COMPANY web: bcpp.com.ua | HQ location: Kiev, Ukraine Sales (2014*): UAH 0.54 bn (~$ 45 mio) Market Share (2014*): 1.6% Employees (2014, average): 816 Products focus: Cardiology, Antiinfectives, Neurology, Alimentary tract etc. Borshchahivskiy Chemical Pharmaceutical Plant is (BCPP) one of the leading generic pharma- ceutical medicines company in Ukraine. Over one third of products are innovative and original drugs developed by an experience R&D team. BCPP also works as a contract manufacturer; all facilities and operating procedures are in com- pliance with EU GMP. Notes: - *Company data (smida.gov.ua); - employees numbers are given as a yearly average; - companies’ sales in USD are calculated based on the data by Proxima Research and an yearly average currency exchange rate, provided by the National Bank of Ukraine; - market shares are sourced from Proxima Research events pre- sentations; - companies’ descriptions were taken from opened sources.
  15. 15. Page 15 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities REGULATORY ENVIRONMENT Overview The production and circulation of pharma- ceuticals and medical devices in Ukraine is subject to strict control. The statutory framework for the regulation of pharma- ceutical products and medical devices in Ukraine is complex and comprises a net- work of specific laws and regulations. The Law of Ukraine On Pharmaceuticals (the “Pharmaceuticals Law”), dated 4 April 1996 is the principal legislative act setting forth the basic requirements for the develop- ment, registration, production, quality con- trol and distribution of pharmaceuticals in Ukraine. The specific regulatory authority for phar- maceuticals and medical devices is the Ministry of Health of Ukraine (the “MOH”) and a number of governmental agen- cies empowered by it. The pharma sec- tor is also administered and regulat- ed by the Cabinet of Ministers of Ukraine (the “CMU”), the State Administration of Ukraine on Pharmaceutical Products (the “State Service for Pharmaceuticals”), the activities of which are directed and coordi- nated by the CMU through the MOH, the State Expert Center of the MOH (the “State Expert Center”), the State Service on Con- trol of Narcotics, the Anti-Monopoly Com- mittee of Ukraine, and a number of other state agencies. Registration Pharmaceuticals may be used in Ukraine only after their official state registration by the MOH (i.e., marketing authorization). The above rule exempts from the man- datory registration regime those pharma- ceuticals that are prepared in pharmacies in accordance with medical prescriptions for individual patients or in accordance with orders placed by healthcare institu- tions, provided that such pharmaceuticals are prepared from active and auxiliary sub- stances allowed for use in Ukraine. Official state registration involves a three-step pro- cedure consisting of pre-clinical research, clinical trials, and the filing of an applica- tion in the form of a “registration dossier” for the registration with the MOH. Data Exclusivity If an original pharma product is registered in Ukraine for the first time through the procedure of submission of the full dos- sier, then the state registration of anoth- er pharmaceutical with the same active substance(s) is possible no earlier than five years from the date of the registration of the original product, unless the second ap- plicant has submitted its independently de- veloped full dossier for an original product or has received the right to refer to or use the data from the first applicant’s dossier. The data exclusivity period applies sole- ly if the application for state registration in Ukraine was submitted within two years from the date of the first ever registration of the original pharmaceuticals product in any country in the world. The five-year data exclusivity period may be extended to six years. The intellectual property rights of the own- er of the original pharmaceutical will be recognized (and protected from the ge- nerics manufacturers under IP, adminis- trative and criminal laws) only if it has ob- tained a patent in Ukraine or has a patent that is valid in Ukraine. Pre-Clinical Research Pre-clinical research is mandatory for all pharmaceutical products, except those eli- gible for simplified registration. The results of the pre-clinical research are submitted to the MOH, which decides whether clinical trials of a pharmaceutical product may be permitted. Clinical Trials Under the Pharmaceuticals Law, a pharma- ceutical product may be admitted for clin- ical trials if its pre-clinical research showed positive results, and the expected bene- fits of using the pharmaceutical significant- ly outweigh the risks of side effects. Clinical trials are conducted by specialized medical institutions determined by the MOH. Reg- istration Application The state registration of a pharma prod- uct requires the filing of an application with the MOH according to the provisions of the Pharmaceuticals Law, further detailed in Resolution No. 376 of the CMU “On the Approval of the Procedure for the State Registration (Re-Registration) of a Pharma- ceutical Product and the Fees for the State Registration (Re-Registration) of a Pharma- ceutical Product” (the Registration Resolu- tion) dated 26 May 2005. Pharmaceuticals are registered by the MOH on the basis of an examination of the “registration dos- sier” and quality control by the State Ex- pert Center. Manufacturing of Pharmaceuticals Pharmaceutical products may not be man- ufactured without a license for the man- ufacture of pharmaceuticals issued by the State Service for Pharmaceuticals. The in- dustrial manufacture of pharmaceuticals must be carried out in compliance with the GMP requirements, including those for the bulk manufacture of pharmaceu- ticals. Compliance with GMP has been a pre-condition to obtaining a license to manufacture pharmaceutical products in Ukraine since 2011. The Manufacture and Sales Licensing Conditions also contain further specific and detailed requirements applicable to the manufacture of pharma- ceuticals. Wholesale and Retail Sales Under the Pharmaceuticals Law, pharma- ceuticals may be sold in Ukraine either pursuant to a doctor’s prescription or over- the-counter, that is, without a prescription. The lists of the various categories of pre- scription pharmaceuticals and the rules for issuing prescriptions are approved by the MOH. The current regulations provide that prescriptions should be made using the INN, rather than a brand name, apart from biosimilars or pharmaceuticals for which an INN is not available. Wholesale and retail sales of pharmaceuti- cal products are subject to licensing, save for the sale by manufacturers of pharma- ceuticals of their own production which is done on the basis of their manufacturing license. The State Service for Pharmaceu- ticals issues the license after examining the application documents within a maximum period of ten business days, provided that the applicant has complied with all of the licensing conditions. The wholesale distribution of pharmaceuti- cals must be carried in compliance with the effective good distribution practices (GDP) and storage practices, which are harmon- ised with EU legislation. Import and Export of Pharmaceuti- cals Only pharmaceuticals registered in Ukraine may be imported into Ukraine, subject to the receipt by an importer of an import li- cense and the availability of a quality certif- icate issued by the manufacturer for every series of a pharmaceutical (batch release). The procedure for quality control of im- ported pharmaceuticals is established by Resolution of the CMU No. 902, dated 14 September 2005, as amended. In particu- lar, a quality certificate (certificate of anal- ysis) is required (batch release), in addition to the confirmation of compliance of the manufacturer with the GMP requirements issued by the State Service for Pharmaceu- ticals. Promotion The only type of promotion of pharmaceu- ticals and medical devices that is current- ly specifically regulated by Ukrainian law is “advertising”. Ukrainian legislation contains few provisions that specifically regulate practices (other than simple advertising) aimed at the promotion or marketing of pharmaceuticals and medical devices. Source: Conducting Business in Ukraine 2015, Baker & McKenzie [link]
  16. 16. Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities Page 16 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities UPharma Consulting 21st Marshal Tymoshenko str., building 7, office 5 Kiev, 04212 Ukraine +380 (98) 224 9864 +380 (97) 953 6814 upharma-c.com mailbox@upharma-c.com CONTACT INFORMATION MedExpert 19 A, Maksyma Kryvonosa street, 03037, Kyiv, Ukraine Tel. +38(044)581-11-33 Fax +38(044)581-11-34 medexpertua.com info@medexpert.com.ua
  17. 17. Ukraine HEALTHCARE & PHARMACEUTICAL INDUSTRIES OVERVIEW 2015 Ukraine: Healthcare and Pharmaceutical Industries Overview 2015 | Investment and Market Opportunities

×