Anatoliy Amelin: Ordinary Ukrainians are losing because of the war on the country’s pharmaceutical market
27 September 21:39
OPINION
For several months now, Ukraine has been witnessing public showdowns between pharmaceutical manufacturers and monopolists – wholesalers and pharmacy chains.
Anatoliy Amelin, executive director and co-founder of the Ukrainian Institute for the Future think tank, wrote about this on his Facebook page, "Komersant Ukrainian" reports.
According to him, the fight is, of course, for money. On whose side the margin will remain.
We quote Anatoly Amelin without alterations:
“First and foremost, Ukrainians, especially pensioners and the least well-off segments of our society, will suffer. In addition, the needs of our army and the wounded are also in question.
In the midst of a full-scale war, the Ukrainian pharmaceutical market has slipped into a violent conflict that has led to a halt in the production of vital medicines, mass layoffs and rising drug prices.
This is a conflict between Darnitsa, once the second largest drug manufacturer in Ukraine, and the country’s five largest pharmacy chains, where corporate (monetary) interests are placed above the needs of patients in wartime.
The root of the conflict lies in the changes in the regulation of the pharmaceutical market initiated by the government to reduce drug prices.
on February 12, 2025, President Volodymyr Zelenskyy enacted the decision of the National Security and Defense Council on additional measures to ensure the availability of medicines, which provided for a 30% reduction in prices for the top 100 drugs and a ban on marketing payments between manufacturers and pharmacies.
However, even before these measures formally came into force, Darnitsa raised the prices of its drugs by 120% at the end of 2024, which became a catalyst for the conflict.
Starting from March 1, 2025, the five largest pharmacy chains – ANC, Podorozhnyk, Pharmacy 9-1-1, Wish You Well and Dobroho dnia – drastically reduced purchases of Darnitsa’s products, controlling about 70% of the retail pharmaceutical market.
One of the largest drug manufacturers, present on the market for more than 90 years and producing drugs of 180 brands, has found itself in the center of the crisis.
In 2024, Darnitsa’s share in the pharmaceutical market was 15% in terms of sales and about 5% in monetary terms.
Since March 2025, these figures have fallen to 10% and 3%, respectively
The company under the leadership of CEO Andrii Obrizan has taken an aggressive position, accusing pharmacy chains of creating an “artificial deficit” and filed a complaint with the Antimonopoly Committee against five pharmacy chains and two distributors
The five largest pharmacy chains, while formally advocating for the availability of medicines, used their market power to dictate conditions to manufacturers.
Following the government’s request, the pharmacy chains removed the markups, but were also forced to revise their procurement policies.
The volume of purchases of more expensive drugs from Darnitsa has decreased in favor of analogues from other Ukrainian manufacturers,” explained Taras Kolyada, CEO of the Podorozhnyk chain.
The two largest distributors, BaDM and Optima-Pharm, which control 85-90% of the wholesale pharmaceutical market, are at the center of the scandal.
on July 31, 2025, the AMCU fined them a record UAH 4.8 billion for price fixing
The investigation showed that the companies agreed to set identical prices for popular drugs in 2020-2023 without transparent justification
The consequences for the pharmaceutical company were devastating.
“Darnitsa stopped production twice in 2025 – for 3 weeks in March and for 6 weeks in June-August, for a total of 9 weeks
The company laid off 11% of its staff – more than 1,000 employees, paying only two-thirds of their salaries during the shutdowns.
In June 2025, the plant lost 30% of its sales compared to 2024, and by August, the decline reached 50%
As a result, the pharmaceutical company dropped from second to fourth place among the largest drug manufacturers in Ukraine.
Pharmacy chains also suffered losses from the abolition of marketing payments.
Over the past 15 years, marketing services have become almost the main source of income for pharmacies, and the cost of these services could reach 30% of the final cost of a drug. Without this income, the chains were forced to revise their business models and optimize their product mix.
The situation was especially critical for chronically ill patients.
The shortage of 180 Darnitsa’s medicines, including medicines for cardiovascular diseases, posed a direct threat to the lives of thousands of people in the country where cardiovascular diseases cause two-thirds of all deaths.
The conflict has revealed deep structural problems in the Ukrainian pharmaceutical market.
ukrainians pay 88% of the cost of medicines out of pocket, while the state covers only 12% through social programs.
Economic losses include:
– Loss of jobs (over 1000 layoffs at Darnitsa alone)
– Reduced tax revenues from falling sales
– Risks to exports (the company operates in 20 countries)
– Threat to the country’s medicinal security in wartime
Government intervention proved to be ineffective.
The Ministry of Health recognized that the ban on marketing payments did not lead to the desired price reduction, as factory prices, which account for more than 70% of the final cost, remained outside of state control
The AMCU, despite record fines of UAH 4.8 billion to distributors, failed to break their duopoly
The investigation of Darnitsa’s complaint against pharmacy chains continues without any visible results.
Experts characterize the situation as a systemic crisis.
WHO representatives note that one in five Ukrainians has problems with access to essential medicines, and one in three in the areas of occupation and active conflict.
Former MP Oleksandr Chernenko notes that the top 5 pharmacy chains control 64% of the total retail turnover and own 41% of all pharmacy outlets in the country, which creates risks of monopolization at the retail level.
I decided to dig deeper and look at the sales math. Who keeps the biggest piece of the pharmaceutical market profit pie
According to the financial statements for 2024:
The total revenue of the largest Ukrainian pharmaceutical companies in 2024 amounted to 42.65 billion hryvnias. The total net profit of the companies exceeded UAH 3.74 billion.
A detailed analysis of the profitability of the top 5 pharmaceutical manufacturers:
– Farmak: revenue of UAH 10.78 billion, net profit of UAH 1.62 billion – profitability of 15.0%
– Darnitsa: revenues of UAH 6.88 billion, net profit of UAH 679 million – profitability of 9.9%
– YURIYA-PHARM: revenue of UAH 5.74 billion, net profit of UAH 752 million – profitability of 13.1%
– Arterium: revenue of UAH 5.23 billion
– Kyiv Vitamin Plant: revenue of UAH 4.94 billion
The average profitability of Ukrainian pharmaceutical manufacturers is 8.8%
Distributors are the most profitable link in the chain
Oligopolistic market structure
– More than 90% of the Ukrainian pharmaceutical market is controlled by two distributors – BaDM and Optima-Pharm, LTD.
Financial performance of distributors:
– BaDM in 2023 – UAH 57.6 billion in revenue
– Optima-Pharm in 2023 – UAH 56.7 billion in revenue
Revenues of these companies increased 6 times
Increase in margins
– Distributors increased their average margins from 4.5% in 2021 to 12% in 2024 – a 2.7-fold increase in just 3 years.
Advantages of the distribution model:
– High capital turnover
– Economies of scale
– Monopoly position in the market
Pharmacy chains are the least profitable participants
Critically low profitability
– The profitability of the pharmacy business in Ukraine is only 0.7%, and one third of companies operating in this market are unprofitable.
The average retail margin in the Ukrainian pharmacy market was 27.2%, but this is the gross margin, not the net profit.
The real economy of a pharmacy:
– Gross margin: 22-27%
– Net profit: 0.7% (industry average)
If you look at how the margin is distributed on a product sold in a pharmacy for UAH 100:
1. Consumer pays 100 UAH
2. Pharmacy receives: 22 UAH
– Operating expenses: ~13 UAH
– Marketing income: ~1 UAH
– Purchase price: ~6 UAH
Pharmacy profit: ~2 UAH (9% margin)
3. Distributor receives: 6 UAH
– Purchase price: ~4 UAH
– DISTRIBUTOR’S PROFIT: ~2 UAH (33% margin)
4. The manufacturer receives: 72 UAH
– Materials (API, packaging): ~58 UAH
– Production costs: ~7 UAH
– PROFIT OF THE MANUFACTURER: ~7 UAH (10% margin)
In my opinion, the main beneficiaries of the conflict are monopoly distributors, who receive the highest margins with minimal risks and investments, controlling the bottleneck in the supply chain.
The losers in the end are the citizens of Ukraine, who will face a shortage of goods, while others will face an increase in their costs for the purchase of pharmaceutical products.”
