The head of the association “Pharmaceutical Manufacturers of Ukraine” tried to explain the pharmaceutical paradox of Ukrainian drugs becoming more expensive than foreign ones

In the last three years, Ukrainians have faced a significant increase in prices for medicines, especially those produced in Ukraine. Paradoxically, even in the face of rising import logistics costs due to Russia’s full-scale invasion of Ukraine, foreign analogues are in many cases cheaper. For example, in six months, the cost of the Ukrainian drug “Darfen” increased by 25%, while “Nurofen forte” from the British Reckitt Benckiser rose in price by 15% and costs less than the domestic analogue. Manufacturers justify this phenomenon by the rising cost of raw materials, electricity and logistics. UNN managed to talk to Petro Bagriy, head of the Association “Manufacturers of Medicines of Ukraine”, about the situation with prices on the Ukrainian pharmaceutical market during a press conference in Kyiv.

Why have Ukrainian medicines risen in price the most? More than foreign analogues, although the cost of production in Ukraine should have been lower? For example, “Darfen” has risen in price by 25% from October last year to March this year. “Nurofen forte” from Reckitt Benckiser in the same dosage has become 15% more expensive. And the same with other medicines?

It’s hard for me to talk about a specific drug, because anything can happen. It could be because the raw material has risen in price, for example. Logistics may have changed. During the war, I want to say that on average, logistics for abroad (foreign manufacturers – ed.) has increased fourfold, which is significant.

Well, for example, the cost of electricity could have risen. We know what is happening with electricity today, abroad, thank God, there is no war, and they have a different, more stable situation there, so I think that this (smaller increase in drug prices – ed.) may have been related to this.

And the second question, a huge influence on today’s price formation is exerted by pharmacy chains and the fight for shelves in them. And in order to get there, one or another manufacturer is forced to raise the price and pay for this shelf, and you and I pay for it. And, in fact, this whole story today with the change in regulation in the market is to some extent dictated by the fact that we say: let’s stop this constant race and fight for a shelf in the pharmacy chain and the development of an unnecessary number of pharmacies in the Ukrainian market.

* It is worth noting that only over-the-counter drugs and dietary supplements are displayed on pharmacy shelves, and there are no prescription drugs on display. At the same time, the share of prescription drugs in sales is higher than that of over-the-counter drugs. Manufacturers often try to justify inflated prices by claiming that they pay pharmacies for advertising their drugs, which is not true. It should not be forgotten that 72% of the cost of drugs is laid down by the manufacturer, and the distributor’s and pharmacy’s mark-up is added to the price.

In addition, marketing experts say that the cost of renting a counter is always much lower than the cost of television advertising, which domestic pharmaceutical manufacturers do not skimp on.

Foreign manufacturers, for their part, have additional costs for transport and warehouse logistics, which Ukrainian manufacturers do not have. In addition, some foreign manufacturers, such as Stada (Germany), Sanofi (France), Recordati (Italy) manufacture drugs at Ukrainian sites, and for them, as for the rest, electricity has also become more expensive. However, their prices have not increased by 120%, as happened, for example, with prices for products of the “Darnitsa” plant.

You know that there are three times more pharmacies per capita in Ukraine today than in Germany. As a citizen of the state, I am not sure that I need three pharmacies in one building. This is absolutely unproductive – we spend money and, most importantly, you and I pay for the existence of these pharmacies.

It seems to me that these funds could be spent more effectively in terms of the development of our state and its economy. These factors probably have a greater impact on the rise in prices than abroad. But prices are not rising… because there (abroad – ed.) there is one pharmacy per three thousand people. And the price in it is clearly regulated. And the state is watching over it. We advocate the same approach.

Let’s define the criteria, set them and do everything. Clearly, transparently. Especially when our patient pays money, he buys (medicines – ed.) in the pharmacy at his own expense. He wants to get a fair price. And that’s fair.

*It should be noted that there is a critical shortage of pharmacies in rural areas, as well as in front-line areas. 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 pharmacy points. For example, there are no pharmacies at all in the settlements of Vinnytsia region:

• Vinnytsia district – 15 settlements;

• Haisynskyi – 21 settlements;

• Tulchynskyi – 17 settlements;

• Mohyliv-Podilskyi – 24 settlements;

• Zhmerynskyi – 8 settlements.

Volyn region:

• Kamin-Kashyrska UTC – 43 settlements;

• Soshychne UTC – 11 settlements.

Khmelnytskyi region:

• Zhvanetska village council – 21 settlements;

• Orynynska village council – 17 settlements;

• Slobido-Kulchiiyevetska village council – 20 settlements;

• Staroushytska settlement council – 12 settlements;

• Kytaigorodska village council – 13 settlements;

• Novoushytska settlement council – 58 settlements.

Ivano-Frankivsk region

• Ivano-Frankivsk district – 276 settlements;

• Kaluskyi district – 133 settlements;

• Kolomyiskyi – 153 settlements;

• Kosivskyi – 25 settlements;

• Nadvirnyanskyi – 38 settlements.

The claim about three pharmacies per house is also quite controversial. If, for example, it is a densely populated area or a 22-story building with 4-5 entrances, then the presence of several pharmacies seems justified to improve the accessibility of medicines.

According to Proxima Research analysts, some Ukrainian manufacturers have raised drug prices by about 120% in three years. How can such an increase be explained?

I explained it. The reason is the change in the dollar exchange rate, the destroyed part (of production – ed.). The dollar has risen, if I’m not mistaken, by 42% during this time, that’s the first thing. Logistics, rising energy prices, significant ones for pharmaceuticals. Pharmaceuticals today buy electricity at the highest prices, as a rule, what is sold to us from abroad. In order to have reliable access. And the fight for shelf space in pharmacy chains.

*It is worth noting that Ukrainian manufacturers do not deliver medicines to pharmacies, they are delivered by distributors. Therefore, they bear the logistics costs. At the same time, pharmaceutical market players point out that there are no changes in the price of imported medicines under foreign exchange contracts.

Why, after the ban on marketing bonuses from the manufacturer to pharmacies, did prices decrease only for certain drugs, and the rest of the money, it turns out, the factories simply kept for themselves in the form of additional profit?

Now prices have decreased by 30% for the top 100 drugs. I want to draw attention to the fact that this is the top 100 drugs and 30%. And if the top 100 drugs, then this is the lion’s share of the company’s turnover. That is, there is a significant decrease there. I gave the example that for Farmak it is almost a billion hryvnias a year. And further work on reducing continues.

There will be more drugs. Our manufacturers do not have super-profits today. Do not forget that they need to develop, invest, and bring new Ukrainian-made drugs to the market.

And if we analyze that in packages we have 68%, and in money only 32%. And imported drugs, respectively, 32% in packages and 68% in money. That is, they are much more expensive. And we, as conscious citizens, must do everything to ensure that our own pharmaceuticals work and produce cheaper medicines here in Ukraine. Because the cost of one average vial or package of Ukrainian-made drugs is four times cheaper than that of imported ones. And we are interested in having our own industry.

*According to the Economic правда, the decrease in prices for drugs included in the Top 100 in March occurred by an average of 25%. However, before that, manufacturers systematically raised drug prices, starting in October last year, with the peak of the rise in prices occurring in January. In general, during this period, Ukrainian-made drugs rose in price by 30%. After the new regulation came into force, drugs from the Top 100 list became 25% cheaper, while prices for the rest either remained at the January level or continued to rise.

Can reference pricing be considered as a tool to squeeze imported drugs out of the Ukrainian market?

In what way, explain, if today we take a molecule from eight countries of the European Union or neighboring countries, and take the weighted average price and want it to be the same in our market, how do we squeeze it out? We take their price there. They sell at such prices there. Why can’t they sell at such prices in Ukraine? It’s logical, it seems to me. Therefore, I do not see that this is any discrimination against anyone, whether domestic or imported market.

* It should be noted that the member states of the European Union have a well-developed reimbursement program, and therefore the local population buys medicines at a significant discount. The difference in price is compensated by the state.

Are you aware of any criminal proceedings regarding fraud with budget funds of “Darnitsa”, “Farmak”, “Arterium”? If so, are you following the investigations? What schemes are being investigated?

I don’t know anything. I know that there are some… It’s no secret. A week ago there was temporary access to documents (searches – ed.). Law enforcement agencies are dealing with this. As far as I know, there is no evidence that companies were involved in this.

*On February 28, the police conducted searches at four pharmaceutical companies in Kyiv, including “Darnitsa”, “Farmak” and “Arterium”. The investigative actions were carried out within the framework of criminal proceedings regarding public procurement.

Can keeping prices for raw materials be considered part of a scheme to withdraw money from pharmaceutical plants abroad?

Look, if someone has (evidence – ed.) today, and someone thinks that this is some kind of scheme, then it’s not up to me. We have law enforcement agencies.

Pass on to those who asked you these questions, let them take a pencil, a pen and write a statement, if they are conscious citizens and want their people to live well and well, let them write and report it. I don’t know about such things.

I know that our pharmaceuticals work in an absolutely competitive field, pay huge taxes. Today we are an industry that accounts for 1.5% of the gross national product in production, and we are in fourth place in the country in terms of tax payments. We pay more taxes than farmers, the agricultural sector is the leader of our Ukrainian market.

These accusations are simply unfounded and worthless.

*For the sake of objectivity, it should be emphasized that tax revenues from the agricultural sector have indeed decreased during the full-scale war. This is due to the fact that a large number of arable land, especially in the South of our country, has not yet been demined.

Let’s add

President Volodymyr Zelenskyy said in February that it is necessary to make a decision to reduce drug prices.

The pharmacy business supported the President’s statement and the public union “Pharmacy Professional Association of Ukraine” sent a Declaration of Cooperation to reduce the cost of medicines to the Ministry of Health of Ukraine, which has already been signed by a number of large pharmacy chains.

It stipulates the following obligations of all market participants:

• national manufacturers of medicines reduce the selling prices for their products by a certain percentage compared to the prices as of January 1, 2025;
• distributors proportionally reduce wholesale prices to the manufacturer, which will affect the entire logistics network;
• pharmacies, for their part, reduce retail prices for medicines, ensuring that the end consumer has a real reduction in the cost of drugs, i.e. apply a discount to their markup proportional to the manufacturer.

However, Zelenskyy later said that drug prices in Ukraine are absolutely inadequate and announced a meeting of the National Security and Defense Council to reduce prices. Already on February 12, following the meeting, Zelenskyy announced that there is a way to reduce the price of the top 100 medicines by 30% from March 1 – the most important medicines for Ukrainians.

On February 13, the President enacted the NSDC decision to reduce the cost of 100 medicines by 30%. Other drugs should become cheaper by 20%.