AUGUST / SEPTEMBER 2015
upharmacia UKRAINIAN PHARMACEUTICAL MARKET MONTHLY:
MACROECONOMIC ENVIRONMENT MARKET & COMPANIES NEWS REGULATORY UPDATES HEALTHCARE NEWS
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.
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MACROECONOMIC ENVIRONMENT Table: Key macroeconomic indicators in Ukraine (Jan-Sept 2015)
Jan
Feb
Mar
Apr
2015 May
Jun
Jul
Aug
Sep
MACROECONOMIC INDICATORS Q1 17.353
GDP (bn USD) GDP growth, % y-o-y
Export of goods (bn USD) Export growth, % y-o-y
Import of goods (bn USD) Import growth, % y-o-y
Industrial production sales (bn USD)
2.98 -32%
3.01 -34%
6.01
Industrial production growth, % y-o-y
Retail turnover of enterprises (bn USD) Retail turnover growth, % y-o-y
Unemployment rate Average salary (USD)
Q2 20.795
-51%
-41%
1.97 -50%
2.99 -37%
2.86 -41%
4.56 -54%
2.72 -63%
Q3
-35%
3.45 -32%
3.17 -35%
5.51 -45%
4.47 -56%
3.07 -39%
2.86 -38%
5.91 -33%
6.24 -45%
2.94 -41%
2.63 -46%
5.65 -38%
8.71 -39%
3.09 -30%
2.76 -37%
5.79 -35%
10.41 -39%
3.15 -34%
2.98 -34%
5.71 -33%
12.10 -41%
3.09 -22%
3.88 -2%
5.42 -23%
14.05 -34%
3.35 -22%
3.24 -30%
5.72 -20%
15.81 -35%
2.0
2.0
1.9
1.8
1.8
1.7
1.6
1.6
1.5
218
148
166
176
193
202
202
194
199
24.5 27.8
23.3 25.3
22.7 24.5
20.9 23.3
21.2 23.8
21.8 23.9
21.6 24.0
21.8 24.5
12.05
13.37
13.46
13.00
15.36
13.85
9.01
13.79
OFFICIAL CURRENCY EXCHANGE RATE UAH/USD UAH/EUR
15.8 18.5
PHARMACEUTI CAL INDUSTRY INDICATORS Export of pharma products (mio USD) Pharma Export growth, % y-o-y
Import of pharma products (mio USD) Pharma Import growth, % y-o-y
11.79 -1%
90.2 -49%
Pharma retail sales, values (mio USD)
239.8
Pharma retail trade, volumes (mio units)
132.4
Retail sales in values growth, % y-o-y
Retail sales in volumes growth, % y-o-y
WACP, USD WACP growth, % y-o-y
-41% -21%
1.95 -21%
-42%
114.5 -47%
177.0 -54%
143.9 -15%
1.81 -22%
-50%
103.3 -67%
197.6 -47%
141.5 -21%
1.24 -40%
-44%
103.7 -36%
180.0 -40%
122.6 -20%
1.41 -27%
-39%
84.2 -60%
193.0 -28%
124.5 -11%
1.47 -23%
-39%
115.0 -44%
177.7 -29%
118.4 -9%
1.52 -21%
-6%
106.5 -47%
172.6 -32%
119.5 -10%
1.48 -23%
-54%
93.3 -47%
177.1 -24%
122.5 -8%
1.45 -18%
-47%
121.1 -31%
193.2 -28%
126.7 -11%
1.52 -19%
CPI of Ukraine Pharma products CPI
128.5
134.5
145.8
160.9
158.4
157.5
155.3
152.8
151.9
149.2
155.5
170.3
164.7
159.5
153.5
151.8
149.4
145.8
Local companies share, values, %
38.7
38.5
39.6
40.7
41.5
41.7
41.8
41.4
41.4
Local companies share, volumes, %
74.9
75.2
77.1
77.6
77.6
77.9
78.4
78.2
76.5
Description of the indicators: Macroeconomic Indicators
Pharmaceutical Industry Indicators
GDP (Gross Domestic Product) is an aggregate measure of production equal to the sum of the gross values added of all resident, institutional units engaged in production (plus any taxes, and minus any subsidies, on products not included in the value of their outputs) calculated in current prices. Converted from UAH to USD in accordance with an average official NBU exchange rate in the corresponding period. Hereinafter: excluding the temporarily occupied territory of the Autonomous Republic of Crimea and City of Sevastopol, as well as the part of zone of the antiterrorist operation. Source: State Statistics Service of Ukraine.
Export of pharma products is an export of goods related to the group “Pharmaceutical products” under the Ukrainian Classification of Goods for Foreign Economic Activities. Initially calculated in USD. Source: State Statistics Service of Ukraine.
Export of goods is a sale of goods by Ukrainian subjects of foreign economic activities to foreign subjects of foreign economic activities (including non-cash payment) with or without exportation of these goods through the customs border of Ukraine, including the re-export of goods. Initially calculated in USD. Source: State Statistics Service of Ukraine. Import of goods is a purchase (including non-cash payment) of goods by Ukrainian subjects of foreign economic activities in foreign subjects of economic activities with or without the importation of these goods into the territory of Ukraine, including the purchase of goods for domestic consumption by establishments and organizations of Ukraine located abroad. Initially calculated in USD. Source: State Statistics Service of Ukraine. Industrial production sales is the value of industrial goods, which are actually shipped in the period, as indicated in documents decorated as the basis for calculating with the buyer (customer), regardless of income payments for them. Converted from UAH to USD in accordance with an average official NBU exchange rate in the corresponding period. Source: State Statistics Service of Ukraine. Retail turnover of enterprises is the value of consumer goods sold via retail trade and restaurants to the population by all operating enterprises. It also includes direct retail sales by industrial, transport and other non-trade enterprises. In addition, retail turnover includes retail sales of food products to departments, organizations and enterprises to provide meals to the people they serve (at sanatoria, children’s care institutions, hospitals, etc.). Reflected in current prices. Converted from UAH to USD in accordance with an average official NBU exchange rate in the corresponding period. Source: State Statistics Service of Ukraine.
Import of pharma products is an import of goods related to the group “Pharmaceutical products” under the Ukrainian Classification of Goods for Foreign Economic Activities. Initially calculated in USD. Source: State Statistics Service of Ukraine. Pharma retail sales are retail sales of different product categories of “pharmacy basket” (drugs, medical devices, cosmetics and food supplements) in values and volumes. Converted from UAH to USD in accordance with an average official NBU exchange rate in the corresponding period. Source: Morion. WACP (Weighted average cost of a pack) is a ratio of pharma retail sales in values to pharma retail sales in volumes. CPI (Consumer price index) is an indicator of changes at the time of prices and tariffs for commodities and services being purchased by the population for unproductive consumption calculated to corresponding month of previous year. Source: State Statistics Service of Ukraine. Pharma products CPI is a Consumer price index of “Pharmaceutical products, medical products, appliances and equipment” group calculated to corresponding month of previous year. Source: State Statistics Service of Ukraine. Local companies share is the share (percent) of sales related to Ukrainian companies in overall pharma retail sales in values and volumes. Source: Morion
Unemployment rate is a ratio (percent) of the unemployed registered at the State Employment Service to the average annual population of working age. Source: State Statistics Service of Ukraine. Average salary is an average value of remuneration in cash and in kind paid to employees for time worked or work done. Converted from UAH to USD in accordance with an average official NBU exchange rate in the corresponding period. Source: State Statistics Service of Ukraine. Official currency exchange rate is the rate established by the National Bank of Ukraine under which Ukrainian national currency – UAH (Ukrainian hryvnia) will be exchanged for foreign currency (USD or EUR). Calculated as average value in the corresponding period. Source: National Bank of Ukraine.
UKRAINIAN PHARMACEUTICAL MARKET MONTHLY: SEPTEMBER/AUGUST 2015
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Source: ukrstat.gov.ua
Source: ukrstat.gov.ua; NBU
Source: ukrstat.gov.ua; NBU
Source: apteka.ua
KEY ECONOMIC EVENTS » » » » » » » » » » » »
The military conflict in the east of Ukraine is still among the crucial domestic factors affecting the economic situation in the country. A relative freezing of the conflict is among the main factors behind a gradual recovery of economic activity since Q3 2015. On Sept 16, 2015, in its report “Second Programmatic Financial Sector Development Policy Loan”, The World Bank has made a forecast predicting Ukraine’s real GDP to fall by 12 percent with inflation of 50.8 percent as of late 2015. In comparison, previous forecast (made in April) predicted 7.5% decline. Now the Bank projects 1% real GDP growth in 2016. The World Bank’s Second Programmatic Financial Sector Development Policy Loan has provided $0.5 bn loan to support Ukrainian authorities on strengthening banking and financial sector. On Sept 16, the NBU reached an agreement with Sveriges Riskbank (Sweden) on a $500 mio swap. The sixmonth agreement is aimed at confidence strengthening in the economic reform program in Ukraine. Due to the deals indicated above, the gross international reserves of Ukraine rose 1.2% to $12.8 bn in Sept. Industrial sales in Aug slowed down by 5.9% PPG and by 22.8% y-o-y. However, some industrial sectors showed a renewal as in Jul the decline was 32.7% y-o-y. In Sept, the industrial sales increased by 5.3% PPG, while in compresence to the same period of the previous year, the decline was 19.9%. The output of such fields like metals production and mining has shown a slight improvement (+3.0% and +3.2% y-o-y, respectively). The NBU projects the general government fiscal deficit at 3% of GDP (6.3% of GDP including Naftogaz) in 2015. At the same time, a rather sizable NBU profit transfer to the budget of about 3.3% of GDP (UAH 61.8 bn) should soften budget constraints this year. As of 1HY2015, the external debt of Ukraine was $127 bn or 122.8% of GDP. The new loans from the IMF and other Western partners were the key sources of Ukraine’s capital inflow in 1HY2015. Ukraine’s 2016 budget plan sets an exchange rate at UAH 24.1/USD, Finance Minister Natalie Jaresko stated on Sept 8. The Finance Ministry is also planning the 2016 general budget deficit at 3.7% of GDP. On Aug 24, the government reached an agreement with its main external creditors to restructure about $18 bn of its external public debt issued in Eurobonds. This agreement should provide stability to the foreign exchange markets. At a regular monetary policy decision-making meeting on Sept 24, 2015 the Board of the NBU decided to cut the NBU discount rate from 27% to 22%. The National Bank of Ukraine expects a surplus in the overall balance of payments together with the IMF tranches will allow increasing Ukraine’s gross international reserves to $18.0 bn as of the end of 2015.
UKRAINIAN PHARMACEUTICAL MARKET MONTHLY: SEPTEMBER/AUGUST 2015
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MARKET & COMPANIES NEWS Bayer Ukraine has appointed new Chief and financial director
Valenta Farm will liquidate its Ukraininan subsidary
On Aug 4, 2015, Bayer has appointed Jens Behrens as a new Chief and financial director of Bayer Company in Ukraine. Mr. Behrens has replaced Christoph Henze at this position, who by his turn had taken the position of financial director of Central America and the Caribbean division of Bayer Corporation. Jens Behrens have been working in Bayer for more than 30 years; he has an experience of working in regions like China, Hong Kong, Taiwan, Japan, Europe and the USA. His previous position was a Head of corporate support service of Bayer HealthCare business group in China. “I am very happy that got an opportunity to lead the Bayer Company in Ukraine. It is an honor and great responsibility to work in the country that is on the verge of real changes,” Mr. Behrens said. “In Bayer, we are confident that future changes will open more opportunities for people and business. I see my prior task in strengthening long-term and trustful cooperation with all customers and partners of Bayer in Ukraine, and to do this I am ready to use my global experience and knowledge gained during my career”. Bayer started its activity in Ukraine in 1992 and currently Ukrainian company of Bayer has a stuff amounting more than 500 employees.
On Aug 6, 2015, the Board of directors of Russian pharmaceutical company “Valenta Farm” decided to liquidate its subsidiary in Ukraine. The former Head of Ukrainian subsidiary, Elena Babich had been appointed as person responsible for its liquidation, started on Sept 1, 2015. LLC “Valenta Farm” is a Russian pharmaceutical company, which was founded in 1997. The company is engaged in development, production and market launch of Rx and OTS drugs of the following therapeutic areas: psychoneurology, urology, gastroenterology, immunology, virology and antibacterial therapy. Actovegin’s “drug” status was confirmed On Sept 14, 2015, “Takeda Ukraine” received the confirmation from the MoH of Ukraine regarding recognition of “Actovegin” (metabolism stimulating preparation) as a drug. Previously in Jun 2015, the Security Service of Ukraine had doubts on efficiency of “Actovegin”, suspecting “Takeda Ukraine” in collusion with the State expert center of the MoH of Ukraine for the purpose of registration of “Actovegin”, being in State authority’s opinion a biologically active additive, as a drug. The Japanese subsidiary were refuting suspicions, stating that its bestselling drug has been registered as an Rx drug in Ukraine for 26 years; likewise, it was also registered in 21
countries worldwide. After appealing to the President of Ukraine, Prime minister of Ukraine and other authorized persons, asking to clarify the situation, “Takeda Ukraine” achieved the confirmation on “Actovegin’s” drug status and validity of its registration procedures. Supervisiory Board and Audit Commission of “Galychfarm” are to be reelected
On Sept 18, 2015, the shareholders of Lviv-based pharmaceutical company “Galychfarm” made a decision to re-elect the Supervisory Board and the Audit Commission of the company at the extraordinary meeting, appointed at Oct 27, 2015. “Galychfarm” is a Ukrainian leading producer specializing on production of herbal-chemical substances based on the extraction of herbal raw materials. The company together with “Kievmedpreparat” is a part of Arterium Corporation, controlled by “Finances and Credit” financial group. The decision of “Galychfarm’s” shareholders may be related to the bankruptcy of “Finances and Credit” approved by the NBU on Sept 17, 2015. To date, it is unclear what will happen to the non-core assets of Konstantin Zhevago – the main beneficiary of “Finances and Credit”. According the NBU Head, the non-core assets, which include Zhevago’s pharmaceutical business, could be pledged or sold.
UKRAINIAN PHARMACEUTICAL MARKET MONTHLY: SEPTEMBER/AUGUST 2015
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Swiss “Acino Pharma” acquired Ukrainian “Pharma Start”
On Oct 1, 2015, Swiss pharmaceutical company “Acino Pharma” finished the acquisition of the 10th biggest Ukrainian pharm-producer (25th at Ukrainian pharma market) “Pharma Start”. The acquisition was held under the “Acino’s” development strategy at the emerging markets, which will allow the company to increase its turnover for more than three times – from € 300 mio to € 1 bn – during five years. “Acino” has acquired 100% of “Pharma Start” assets. The amount of the transaction is undisclosed. The acquisition will allow “Acino” to produce drugs with the use of advanced technologies at affordable prices. At time, “Acino’s” four products for the treatment of cardiovascular diseases are at different stages of obtaining permits to enter the Ukrainian market. The company also plans to bring a transdermal patch “Rivastigmine” for the treatment of Alzheimer’s disease to Ukrainian market. At the first stage, the products will be manufactured under the “Acino Pharma Start” brand. In two years, the company plans to move to “Acino” brand. “The international pharm industry is still looking at Ukrainian market very carefully,” the CEO of “Acino Pharma” Jostein Davidsen said. “The bright future will not come immediately, but we believe in it, that is why we acquired the company from Ukraine. I believe that the investments will return in Ukraine. And what do we do now will be a signal for foreign investors”. “Pharma Start’s” portfolio consists of 35 drugs, specializing on CNS, cardio and OTC
segments. The company covers the whole supply chain process from the development, production and registration to distribution, marketing and sales. The company’s Kyiv-based plant, capable to produce about 7 mio packs per year, comply with EU GMP-standards. “Pharma Start’s” stuff consists of 426 employees with 200 permanent medical representatives. The company supply its production through the range of big wholesale distributors.
created in the parliament of Ukraine. “Biofarma” is the largest Ukrainian enterprise on donor blood processing and the production of drugs of its components, with the market share of over 2.8% at the Ukrainian pharmaceutical market. The hallmark of “Biofarma” are preparations obtained by the use of modern methods of biotechnology – geneticengineering.
Biofarma is suspected in unfair competition
Ukrainian activists suspect the 7th biggest Ukrainian pharma-producer “Biofarma” in attempts to monopolize the national blood market. The reasons for such suspensions was registration of the Draft Decision by Zhytomyr Regional Council aiming to terminate the activity of “Zhytomyr region blood center” and to transform it to the commercial enterprise. The Draft Decision followed the public statements of “Biofarma” regarding the intention to invest about UAH 40 mio in “Zhytomyr region blood center”. “In a similar way “Biofarma” privatized blood service center in Sumy,” the representatives of the Center for Combating Corruption said. “It seems that “Biofarma” wants to monopolize the whole blood market in Ukraine, as it is a single Ukrainian company able to reserve this blood and make drugs of it”. The activists of civil organization “Association of young donors” want to delay the consideration of the Draft Decision regarding “Zhytomyr region blood center” before the approval of the Law “On the national system of blood service”, the group for the development of which is already
UKRAINIAN PHARMACEUTICAL MARKET MONTHLY: SEPTEMBER/AUGUST 2015
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REGULATORY UPDATES On Sept 28, 2015, in the Verkhovna Rada of Ukraine the Draft Law of Ukraine 3180 “On amendments to the subparagraph 193.1 of the paragraph 193 of the Tax Code of Ukraine (on creating favorable conditions for improving the provision of health care institutions and citizens with affordable drugs)” developed by the MoH of Ukraine was registered. The Draft Law is developed to eliminate the legal conflicts that occurred in practice and leads to increased costs for the purchase of drugs by citizens and increasing budget expenditures for the purchase of drugs made in pharmacies. The adoption of this Draft Law will expand opportunities for provision of health facilities and poor inhabitants with affordable medicines produced according to the recipes of doctors and by order of medical institutions. -On Aug 26, 2015 the Resolution of the Cabinet of Ministers of Ukraine #609 “On approval of the list of licensing authorities and recognition of some Resolutions of the Cabinet of Ministers of Ukraine as invalid” entered into force. The Resolution assumes that since its validation date the functions of the licensing of economic activities of drug manufacturing, drugs importing, wholesale and retail sale of drugs, is conducted by the State Administration of Ukraine on medical products and drug control. However, the new Administration is not formed yet, and its management is not administered, so it have not actually started its functioning. -On Sept 4, 2015, the State
Regulatory Service provided the Clarifications (# 6528/0/2015), stating that before the State Administration of Ukraine on medical products and drug control is created, the licensing on the activities indicated, amendments to the licenses, their renewal and verification of compliance with license conditions is carried by the State Administration of Ukraine on medical products. The Resolution #609 applies only to the licensing activity and does not affect the state quality control of drugs. The new mechanism also obliges the MoH of Ukraine to automatically review and update the price of imported products in the Register of wholesale selling prices of drugs and medical products, in case if the official Ukrainian Hryvnya exchange rate to foreign currencies (dollar or euro, depending on the contract’s currency and, relatively, the declaration currency) is changed by more than 5% during the current month. In this case, the MoH have to renew the prices until the 10th day of the following calendar month through increase or decrease of prices in the Register. -On Sept 21, 2015, the MoH of Ukraine presented the Draft Order “On amendments to the list of products that can be bought and sold by pharmacies and their subdivisions”. As the explanatory note states that, the Draft Order is developed in order to expand the assortment of goods available for purchase in pharmacies. The proposed edition of the list includes 20 items, which is seven more than the current edition stipulates. Particularly, the list is enlarged with the following products: instruments and tools
for oral care, skin, nails, hair; items and means for aromatherapy (aromatic lamps, oils, sticks, candles); various means to combat bad habits; laboratory ware, etc. In addition, the new version the old list is supplemented with new products; in particular, the position of the functional foods is supplemented with products for diabetic nutrition, biologically active additives and others. The document also provides that pharmaceutical institutions and their structural units carry the purchase and sale of these goods on the condition of maintenance of the selected area for storage. -On Sept 25, 2015, the Verkhovna Rada of Ukraine registered the Draft Law “On amendments to article 15 of the Law of Ukraine “On drugs” (on improvement of the legislation regulating the powers of state control body over the quality of drugs)”. The Draft Law provides that production and sale of drugs should now be terminated only by a court decision. These amendments are made to predict legal conflict leading to exceeding of the competence of the officials of the central executive body that implement the state policy in the field of quality and safety of drugs. -Please, familiarize yourself with KPMG bulletings on Ukrainian pharmaseutical sphere for additional information about regulatory updates.
» »
KPMG Pharma Bulleting. Issue No. 47. August 2015. KPMG Pharma Bulleting. Issue No. 48. September 2015.
UKRAINIAN PHARMACEUTICAL MARKET MONTHLY: SEPTEMBER/AUGUST 2015
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HEALTHCARE NEWS The implementation of the registry for the patients, requiring insulin therapy is considered by the MOH The MoH of Ukraine proposes to adopt regulations on the registry of patients, which require insulin therapy. The register is to provide a single patient record, reliable accounting of the insulin preparations, the cost of which is subject to state reimbursement, the creation of an effective system of reimbursement of the cost of drug to patients, collection and analysis of reliable statistical information about the patients and their provision with insulin. Ukrainian healthcare reform is setbacked On Sept 16, The Healthcare Committee of the Verkhovna Rada of Ukraine rejected the Draft Law of Ukraine, designed to begin the reformation of the healthcare industry in Ukraine. The Draft Law, aiming to convert healthcare facilities of Ukraine into autonomous state and municipal enterprises free to manage their own budget, has been discussed three times since Jul. Consequently, the MoH Minister, Alexander Kvitashvili blamed the Committee’s Head for sabotaging the healthcare reform. Pharmaceutical importers are to lose their benefits The Ministry of Finance of Ukraine proposes to deprive pharmaceutical companies’ benefits for VAT payment for one year. The corresponding provision is contained in the Draft Tax Code presented at National Council reform on Sept 3. If the Draft Code is approved, the pharmaceutical companies will pay 20% VAT instead of 7% for importation of drugs into the customs territory of Ukraine.
The MOH is to spend UAH 2.5 bn for drugs procurement The MoH of Ukraine is planning to spend UAH 2.5 bn ($115.6 mio) for drugs procurement through international organizations. The main contractors are going to be UNICEF and “Crown Agents”. International organisations provided Ukraine with polio vaccines for children vaccination The MoH of Ukraine received 3.7 mio doses of the oral polio vaccines and 1.1 mio doses of inactivated polio vaccines produced by Sanofi Pasteur (France) as a part of humanitarian assistance from UNICEF. These preparations will allow the vaccination of more than 3 million children across Ukraine to combat polio outbreak in the country. The MOH is willing to create insulin reimbursement system in Ukraine
patients and medical products for laboratory support for HIV amounting to about $10.4 mio. The application provided the purchase of 18000 annual courses of treatment that will ensure the continuation of treatment and additional coverage of antiretroviral therapy. The issues of drugs advertising will be discussed by the working group The MoH of Ukraine insists on strengthening control of drug advertising. The working group developed to discuss the issues of drug advertising in Ukraine want to use the international experience in this field to improve related Ukrainian legislation. The main goal of the group is to develop a mechanism that protects the consumer of promotional products and drugs from misleading information, but at the same time takes into account the interests of the pharmaceutical industry.
The MoH of Ukraine approved the working group on development of a system of insulin reimbursement. The group is aiming at development of regulatory acts required to start in 2016 a pilot project for execution of the Resolution of the MOH “The issue of a pilot project to introduce state regulation of prices for insulin” dated March 5, 2014. On September 14, the Draft Order on the registry of patients that require insulin therapy was presented by the MOH. Ukraine is willing to purchase drugs under PERFAR Under the U.S. President’s Emergency Plan for AIDS Relief (PEPFAR) Ukraine approved the application for the purchase of drugs for HIV-infected
UKRAINIAN PHARMACEUTICAL MARKET MONTHLY: SEPTEMBER/AUGUST 2015