Market in freeze: how government intervention in marketing almost stopped the pharmaceutical industry

State intervention in marketing relations between pharmacies and drug manufacturers has led to an actual freeze in the pharmaceutical market. Instead of the expected decrease in drug prices, they have increased. Retail representatives in other industries note in comments to UNN that market players should regulate business relations themselves, and the state should only create transparent rules for the market.

The economy can be successful when business works, and the state ensures transparent rules for its functioning. But, unfortunately, not all businesses in Ukraine can currently function normally, and this is not related to the full-scale Russian invasion, which has already hit entrepreneurs.

Due to attempts to “restore order” in the pharmaceutical industry, which should have led to lower drug prices for the population, the market has been frozen for more than three months. Currently, this topic is so hot that, among other things, it has become a subject of discussion within the RAU Expo 2025. The UNN correspondent at the event asked retail representatives in other industries what they think about attempts to regulate marketing in the pharmaceutical market.

Retail assessmentIt is worth noting that marketing agreements are a standard practice in all industries where there are retailers and manufacturers. Retail representatives claim that marketing is an internal matter of business, and it is this autonomy that allows the market to develop.

The state should think about creating equal conditions for entrepreneurs and about discipline in tax payments. This is its indisputable role. But the relationship between businesses is a zone of commercial decisions. Deferrals, marketing payments, terms — all this is decided between the parties based on agreements. State intervention here only harms 

OKKO Vice President of Marketing Vasyl Dmytriv holds a similar opinion. According to him, the state works best when it does not interfere. 

And this situation (interference in the work of the pharmaceutical market – ed.) is a clear example of when it should not interfere. These are purely business relations that are regulated by negotiations. There are markets where they work without marketing contracts, and there are markets where they are the basis of sales. It all depends on the agreements, not on the resolutions 

The Association of Retailers of Ukraine believes that the state should not prohibit business from resolving everything through negotiations.

You cannot confuse the fight against the shadows and the regulation of contractual relations. There are many formats of work in retail — from marketing to flexible financial conditions. The main thing is not to prohibit business from negotiating. The state should be a balance, not a brake 

What preceded the freezing of the pharmaceutical market?At the end of last year, manufacturers, who form 72% of the cost of each drug, inflated the cost of their drugs in some cases by 120%. This situation could not go unnoticed in the Office of the President. Therefore, the Head of State Volodymyr Zelenskyy instructed to sort out the situation and reduce prices.

After that, the Cabinet of Ministers of Ukraine, on the initiative of the Ministry of Health, adopted a resolution prohibiting pharmacies from concluding marketing agreements with manufacturers from March 1, and also increased the maximum allowed markups for pharmacies and distributors.

This decision was preceded by an active media campaign launched by large pharmaceutical manufacturers and supported by Serhiy Kuzminykh, a member of the Verkhovna Rada Committee on National Health. In their statements, they claimed that manufacturers are forced to pay pharmacies up to 60% for getting the drug on the shelf. At the same time, the voice of pharmacy chains that marketing agreements give them the opportunity to give discounts to patients was ignored by the government. But for the sake of fairness, it is worth noting that a working group headed by Deputy Head of the Presidential Office Iryna Vereshchuk includes representatives of the market, representatives of the Ministry of Health and members of the relevant parliamentary committee. They are developing new regulations for marketing in the pharmaceutical market.

What’s the bottom line?While the working group is looking for a marketing regulation option that would satisfy all market players, manufacturers, distributors and pharmacies, the industry is stalling. This has already been felt by all participants in the process, and most importantly, patients. Ukrainians complain that drug prices have not fallen in the last three months, but have instead risen. This is also confirmed by analysis of price offers on the market.

The fact that the ban on marketing did not affect the reduction of drug prices is confirmed by the Ministry of Health itself. Although the question arises here, if manufacturers pay pharmacies up to 60% for marketing, why didn’t they reduce their selling prices after its ban? The answer is obvious – pharmaceutical giants do not want to lose super profits.

At the same time, the main initiator of the changes, the one who started the whole mess, – the “Darnitsa” plant – also began to complain about the negative consequences of state intervention in the market. According to Forbes Ukraine, the company in an official appeal to Iryna Vereshchuk reported a drop in sales. And of course, “Darnitsa” believes that this is a conspiracy and revenge for lobbying the ban on marketing.

However, as Taras Kolyada, CEO of the Podorozhnyk pharmacy chain, explained, the reason for the drop in sales of Darnitsa drugs is simple – due to the new regulations, it is not profitable for pharmacies to purchase large batches of goods in advance.

From March 1, we followed the state’s recommendations — to give the buyer access to cheaper analogues. It was this, not “squeezing out”, that affected Darnitsa’s sales. Because if there is an equivalent drug at a lower price, people choose it themselves. It’s simple. Previously, we kept the remains of Darnitsa drugs for 90–130 days. This was economically justified under marketing contracts. Now — no. Without bonuses and incentives, keeping such volumes is simply unprofitable. We do not refuse to cooperate with the brand, but we build it on equal terms — as with other manufacturers

He stressed that the market needs transparent rules, not reform for the sake of monopolization.

Therefore, as the practice of the pharmaceutical industry shows, state intervention and attempts to regulate relations between business play against the state and Ukrainians themselves, as well as against business.

Summing up, we can state that yes, the state has its role in regulating the market, but its task is to create conditions for fair competition, fight the “shadow” economy, stimulate market development, but not interfere in business relations. Attempts to manage economic relations at the level of resolutions are a step into the past that nullifies the very principle of the market as a space for free choice, innovation and flexible solutions. The state should be an arbitrator, not a player.