There will be more cheaper drugs in pharmacies. But will the consumer feel the changes
17 March 09:42
The list of medicines for which prices have been reduced is to be supplemented with about 250 more names. This was announced by Petro Bahriy, President of the Association of Pharmaceutical Manufacturers of Ukraine, during a conversation with journalists at the Media Center Ukraine, "Komersant Ukrainian" reports.
He reminded that since March 1, manufacturers have already reduced the cost of 101 items of medicines by 30%, and also reassessed the balances of distributors and pharmacies so that the changes could become a reality immediately.
Mr. Bagriy explained that the prices were reduced first of all for the most popular medicines that everyone uses every day, i.e., according to him, “the list was determined by the market” and the work on reducing drug prices continues.
“We are now working on the next 200-250 items of medicines that will be reduced in price. Some will be reduced by 30%, some by 40%, some by 20%. This is already determined by the market situation,” said Petro Bahriy.
What determines the price of medicines?
Many factors affect the price of medicines, says Petro Bahriy.
“These include money, the war, logistics, the cost of raw materials, which depends on currency fluctuations, energy, the need to ensure the stable operation of the enterprise in terms of energy supply, huge investments to build our own facilities to have access to energy. All of this ultimately adds up to a price,” said the president of the association.
As explained on the air of Ukrainian Radio by Doctor of Pharmacy, Professor Kostyantyn Kosyachenko, the cost of both domestic and imported medicines is significantly affected by the inflation factor. Unfortunately, almost all medicines are made from foreign substances. The price in dollar terms is growing, and 65-70% of the cost of any medicine is the cost of the substance.
“70% of the price is the substance, 30% is overhead. This is the wholesale price. Then distributors are involved in the process and mark up 8-10%. Pharmacy chains, despite declaring that they mark up less than 20%, could not survive with such a markup. Therefore, marketing agreements are used to sell more expensive drugs while cheaper domestic counterparts are available. And here the Antimonopoly Committee should get involved and monitor prices,” says Kostiantyn Kosyachenko.
Petro Bahriy agrees that marketing agreements significantly affect the price of medicines.
Price and marketing agreements
Marketing agreements between the so-called pharmacy chains and drug manufacturers provide financial incentives (bonuses, rewards) for pharmacies from manufacturers for promoting certain drugs.
As Petro Bahriy explains, “since drug manufacturers produce the same products, they compete for a shelf in a pharmacy and have to pay to get on that shelf, which leads to a price increase.”
This situation also threatens to cause drugs to be chosen not for their effectiveness or necessity, but for the benefit of the pharmacy, and consumers risk getting an unnecessary or more expensive drug. Moreover, competition among manufacturers is becoming unequal: priority is given to those who can offer higher marketing bonuses.
Since March 1, marketing payments paid by manufacturers to pharmacies for promoting their products have been banned.
“In fact,” says Petro Bahriy, “this whole story with the change in market regulation is to some extent dictated by the fact that we say: let’s stop this constant race and struggle for a shelf in the pharmacy chain and the development of an unnecessary number of pharmacies in the Ukrainian market.
Who operates in the pharmaceutical market
Today, there are 118 licenses for the production of medicines on the Ukrainian market. This figure was given at the briefing by the President of the Association of Manufacturers of Medicines of Ukraine, and according to him, “competition in this segment is extremely high.”
“As for distribution, there are more than 350 licenses for wholesale activities in Ukraine, but in reality, two distributors own 80% of the market,” Petro Bahriy continued.
There are also five largest pharmacy chains in Ukraine.
“They own 80-85% of the market, and there is competition there as well, because they are completely different networks, each of which has its own market policy,” explained Mr. Bagriy.
The President of the Association of Pharmaceutical Manufacturers of Ukraine also noted that the price reduction could lead to losses among pharmaceutical companies.
“These are huge losses for the factories. darnitsa will lose UAH 1 billion in revenue due to the price reduction. This may affect the investment policy, salary payments, and layoffs,” says Bahriy.
However, he assured that the reduction in prices for the most commonly used drugs will not lead to an increase in prices for rarer drugs, as all medicines are now under the control of the regulator.
As a reminder, on February 12, 2024, the National Security and Defense Council of Ukraine adopted a decision “On Additional Measures to Ensure the Availability of Medicines for Ukrainians”. It was put into effect by a Decree of the President of Ukraine and contained a clear step-by-step plan to reduce and stabilize prices for medicines.
To implement the NSDC decision, the government
– regulated markups on medicines,
– banned the practice of marketing payments,
– resumed inspections by the State Service of Ukraine for Food Safety and Consumer Protection to control prices in pharmacy chains.
It was also agreed that starting from March 1, 2025, prices in pharmacies for certain groups of medicines will be reduced by an average of 30%.
By the way, Kyiv is actively checking how pharmacies have reduced drug prices. Since the beginning of March, the Kyiv Main Department of the State Service of Ukraine on Food Safety and Consumer Protection has already conducted 297 monitoring activities on drug prices in pharmacies.
