Manufacturers, distributors or pharmacies: who shapes the prices of medicines in Ukraine?

Medicine prices are an issue that worries every Ukrainian. It rose again especially acutely after the discussion of the scandalous amendments to draft law No. 11493. UNN begins a series of publications to understand how drug prices are formed in Ukraine and who has the greatest influence on them.

It is worth noting that, according to the assessment of international analysts Proxima Research International, the manufacturing plant affects 71.8% of the cost of the medicine, and the pharmacy and distributor – 22.3% and 5.9%, respectively.

The role of manufacturers, distributors and pharmacies

The first stage in the formation of the price is the manufacturer’s establishment of the wholesale price.

In its price, the plant includes:

● Cost of raw materials and packaging;

● Production costs;

● Wages of employees, medical representatives;

● Fixed costs (depreciation, utilities, advertising);

● Logistics to the manufacturer.

In Ukraine, the prices of certain medicines are regulated by the state, especially if they are purchased with budget funds. Manufacturers have the right to set their prices, but for some categories of drugs there are strict restrictions that ensure their availability to the public.

So, for drugs that are included in the National List of Essential Medicines, in the case of their purchase with budget funds, the maximum retail surcharge corresponds to the amount of up to 10%. At the same time, in the retail market, the markup is differentiated and amounts to 25-50% depending on the cost of the drug packaging.

However, as the interlocutors note UNN in the pharmaceutical market, manufacturers often ignore this rule and add to the cost of the drug the markup they deem necessary. Sometimes it reaches more than 500%.

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Distributors purchase drugs from manufacturers and add their markup, but usually it is fixed and amounts to about 6-7%. This cost includes: storage of goods, transportation, administrative costs, profit, etc.

Pharmacies, in turn, set their own margin when selling to the end consumer. Thus, in the amount of the markup, pharmacy chains include the costs of renting premises, wages of employees, taxes and earnings. Pharmacy margins usually do not exceed 22%. At the same time, the markup on drugs included in the National List, according to the law, cannot be more than 15%.

Public opinion

As shown by polls conducted by journalists UNNthe majority of Ukrainians believe that the base price for drugs is formed by manufacturers, and they are the source of the increase in the cost of drugs. Some survey participants expressed the opinion that control over the prices of medicines in Ukraine is insufficient. Manufacturers actually have the freedom to set prices, making the final cost to consumers often inflated.

So, as you can see, it is the manufacturer that has the greatest influence on the formation of the price, because setting the base price for the drug determines how much the consumer will pay in the end.