New regulations are changing the pharmaceutical market: how many pharmacies will close due to the new rules?

From March 1, new rules for regulating the pharmaceutical market came into force in Ukraine. One of the key changes was the restriction on markups on all medicines, as well as a complete ban on marketing agreements between pharmacies and manufacturers. These measures were intended to reduce the cost of medicines and increase their availability for Ukrainians, but in practice they have already led to the opposite effect – the closure of pharmacies across the country and the rise in price of a number of drugs.

Already, large chains are announcing a forced reduction in their presence in the market, and small pharmacies are on the verge of survival, UNN writes.

The first wave of pharmacy closuresOne of the first to announce the reduction in the number of its pharmacies was the largest chain in Ukraine – “Podorozhnyk”. According to its CEO Taras Kolyada, since the beginning of the year, the company has already closed 9 pharmacies in various regions, including in the village of Vinkivtsi in the Ivano-Frankivsk region. It is planned to close another 5 pharmacies in the spring, including points in the front-line Kharkiv. 

“For us, these closures are due to economic expediency, and it is always a pity, but first of all it harms the end consumer. After all, the more pharmacies, the higher the competition between them – in price, quality of service, assortment. It is important that customers have a choice of where to buy a particular drug, and that it can be done quickly, literally near home or work. In a situation where we risk facing a shortage of necessary medicines in pharmacies and they will have to be ordered in advance, perhaps from other settlements, first of all, it is a threat to the health of hundreds of thousands of Ukrainians who live along the 3,000-kilometer front line and in remote settlements”, – explained Taras Kolyada.

“Pharmacy 9-1-1” also announced the forced closure of 4 pharmacies. By the end of the quarter, the company plans to suspend operations of another 37 pharmacies in Kyiv and other regions of Ukraine. 

“We are forced to take such a step due to the restrictions imposed by the new regulation”, – the company’s press service explained.

The “Pharmacy of Good Day” network noted that they are planning to close 7 of their establishments in connection with the new rules of operation.

At the same time, the CEO of the ANC pharmacy chain, Mykola Shcherbyna, said in a comment to UNN that large chains will try to hold on until the last, subsidizing the activities of loss-making pharmacies at the expense of other points and investing shareholders’ money in it.

“According to our calculations, in the new model, pharmacies with a turnover of up to UAH 800,000 are unprofitable. That is why these changes will primarily negatively affect small businesses and pharmacies in small settlements and villages, where revenue has always been significantly lower than in large cities (the average turnover of a rural pharmacy is UAH 500–600,000)”, – he noted.

Small pharmacies are under threatDue to the government’s innovation, small pharmacies may disappear altogether. According to Olena Prudnikova, the owner of two pharmacies in the Kyiv region and the head of the NGO “All-Ukrainian Association of Mykolaiv Pharmaceutical Association “Farmrada”, small pharmacies are already experiencing serious pressure.

During the full-scale war, since 2023, out of 4,000 pharmacies of individual entrepreneurs, only 1,200 have remained. That is, if urgent measures are not taken to increase the markup in the pharmacy to at least 35%, then these last 1,200 in rural areas will all close

Prudnikova added that 72% of the price of medicines depends on the manufacturer, and not on pharmacies, so limiting their markup only worsens the situation for small businesses.

It should be noted that even if we put aside the war and front-line territories, where pharmacists work in conditions of constant danger, and look at the regions that are remote from the combat zones, it becomes clear that there are not enough pharmacies. For example, there are no pharmacies at all:

•  in 85 settlements of Vinnytsia region;
• in 54 settlements of Volyn region;
• in 141 settlements of Khmelnytsky region;
• in 625 settlements of Ivano-Frankivsk region.

Why are pharmacies closing?Experts in the pharmaceutical market explain that several reasons led to the closure of pharmacies:

•  ban on marketing agreements between the manufacturer and the pharmacy. They were an important mechanism for supporting the pharmacy infrastructure (allowed to cover operating costs, expand the range of medicines, conduct social initiatives and staff training), and patients could receive discounts on a number of medicines, which made them more accessible;

• restriction on markups on medicines. The introduced restrictions reduced the profitability of small pharmacy businesses;

• shortage of certain drugs and rising prices of drugs that are not included in the so-called TOP 100 list. Due to the new regulatory system, some drugs, including imported ones, may disappear from the market, and pharmacies cannot work with empty shelves.

Whether the government will revise its policy on regulating the pharmaceutical market is an open question. But it is already clear that without changes, Ukrainians risk losing access to pharmacies in many settlements.