The price of a pill: to whom, for what and how much the patient pays

28 September 12:50

In Ukraine, the pharmaceutical market demonstrates a huge imbalance in profitability between manufacturers, distributors and pharmacy chains. This was stated by Anatoliy Amelin, executive director and co-founder of the Ukrainian Institute for the Future think tank, on Facebook,"Komersant Ukrainian" reports .

According to him, the profitability of manufacturers is moderate.

“The average profitability of Ukrainian pharmaceutical manufacturers is 8.8%.

If you look at the top 5 companies in detail:

Farmak: revenue of UAH 10.78 billion, net profit of UAH 1.62 billion – profitability of 15.0%

Darnitsa: revenue 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 expert listed.

Instead, intermediaries accumulate the largest profits. “Distributors are the most profitable link in the chain. More than 90% of the Ukrainian pharmaceutical market is controlled by two players – BaDM and Optima-Pharm, LTD,” Amelin emphasized.

Financial indicators show the dominance of these companies.

“In 2023, BaDM’s revenue amounted to UAH 57.6 billion, and Optima-Pharm’s – UAH 56.7 billion. The revenues of both companies increased 6 times,” he said.

At the same time, the margin of distributors’ business is growing rapidly.

“They have increased their average margins from 4.5% in 2021 to 12% in 2024 – a 2.7-fold increase in just 3 years. This was made possible by high capital turnover, economies of scale, and monopoly position in the market,” the analyst explained.

Pharmacy chains remain the least profitable segment.

“The profitability of the pharmacy business in Ukraine is only 0.7%, with a third of companies operating at a loss. The average retail margin in the pharmacy market is 27.2%, but this is only the gross margin, not the net profit,” Amelin emphasized.

Specific calculation

“If you look at how the margin is distributed on a product sold in a pharmacy for UAH 100, the picture looks like this:

The consumer pays UAH 100.

The pharmacy receives 22 UAH. Of these: operating expenses ~ 13 UAH, marketing income ~ 1 UAH, purchase price ~ 6 UAH. The pharmacy’s net profit is about 2 UAH (9% margin).

The distributor receives 6 UAH. His purchase price is ~4 UAH, his profit is ~2 UAH (33% margin).

The manufacturer receives UAH 72. Of this amount, materials (API, packaging) cost ~58 UAH, production costs ~7 UAH, net profit ~7 UAH (10% margin).”

Summarizing, the expert stated:

“The main beneficiaries of the conflict (in the pharmaceutical market – ed.) are monopoly distributors. They get the highest margins with minimal risks and investments, controlling the bottleneck in the supply chain.”

Conflict in the pharmaceutical market

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.

On 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.

Since then, public battles between manufacturers, pharmacies and distributors have been going on. And all this has already led to significant economic losses, Amelin emphasizes.