Ukrainian pharmaceutical industry: comprehensive view. In search of the best recovery formula.
At the beginning of this year, the Ukrainian pharmaceutical community enthusiastically discussed the news that, according to IQVIA analytical company, Ukraine has once again returned to the pharmerging markets segment, which is very attractive to international investors. However, February 24 changed all plans. Survival came first. The fifth month of the full-scale war unleashed by the Russian Federation in Ukraine is currently underway. Now we can already assess how the pharmaceutical industry «stood the blow» and think about recovery, based on Ukraine’s new status as a candidate for EU membership. The work of the XIII International Conference SALES FORCE EFFECTIVENESS 2022, which was held on June 30, 2022 in Kyiv, started from the discussion of these issues. The event was hosted by Proxima Research International.
Volodymyr Ignatov, Executive Director of AIPM Ukraine, and Iryna Bondarchuk, Head of Corporate Information Department of Proxima Research International, editor-in-chief of PHARMACY Weekly were among the Conference moderators. The conference was opened by Evhen Kunda, CEO of Proxima Research International. As the speaker noted, this year we are forced to work and make decisions taking into account the factor that influenced and continues to influence the pharmaceutical industry not only in Ukraine, but also throughout the world, transforming approaches to providing the population with medicines. This factor is war.
The Law (draft law No. 7313), which allows the refusal of marketing authorization in Ukraine of medicinal products produced in Russia or Belarus caused a great resonance in pharmaceutical community. (Ed. note: Law of Ukraine dated 05/22/2022 No. 2271-IX on restrictions on the circulation of medicines, the production of which is located in Russia or Belarus, came into effect on June 8). Many questions arise regarding the extent to which this law will affect the market, as well as how much the overall volume of drug consumption will decrease under the war conditions. Experts who professionally measure the market call quite specific figures. If to look further forward, it should be said that it is not a question of any decline by half.
Public-private partnership in the realities of war
Oleksandr Komarida, First Deputy Minister of Health of Ukraine, told how effectively the chain of medical supply from the manufacturer to the pharmacy worked. The speaker noted that all market operators tried to do their best to provide the population with medical supplies. At the beginning of the full-scale war, there were huge queues for pharmacies that continued to work. Often, people were unable to purchase certain medicines due to disruptions in supply chains. Pharmacies were the target of criticism from the public. It is worth noting that in the first days of the war, when domestic manufacturers had not yet resumed production, goods were still being shipped from warehouses. If not to pharmacies, then to the hospital network. Representative offices of foreign companies did the same.
«I was in constant contact with the heads of many companies and representative offices, all of them were ready to provide and provided assistance with medicinal products. At the end of June, it can be stated that despite the challenges of the end of February and the beginning of March, the provision of medicines to patients in both the pharmacy and hospital sectors is at a sufficiently high level. At the beginning of the war, we could only dream of such a level. I want to thank everyone involved in this process. You have done a very important thing,»
O. Komarida said.
The speaker also commented on the law on restricting the circulation of drugs, the production of which is located in Russia or Belarus.
«This is really a structural change, for which the ministry is often criticized. However, during the development of the law, we talked about the fact that we would set as clearly as possible the criteria for the selection of drugs that will fall under its influence. Because we conduct an additional large number of consultations with the market, these criteria are not yet available. Nevertheless, I expect that soon this issue will be solved,
the speaker said.
Of course, the Ministry, the Verkhovna Rada of Ukraine or other relevant bodies have no desire to limit Ukrainian patients’ access to medicines. For the patient, the changes should be minimal. Actually, the purpose of this law is to encourage international pharmaceutical companies to curtail production processes in the territory of the aggressor country and the country — vassal of the aggressor.»
The speaker emphasized that the ban will not apply to a whole range of medicines that are vitally necessary. The restrictions will remain in effect until the end of the three-month period following the termination or cancellation of martial law.
«We expect that pharmaceutical companies, especially European and American ones, will provide the same support that the governments and peoples of their countries provide to Ukraine,»
the speaker said.
He thanked the pharmaceutical companies for the charitable and other assistance provided to Ukraine, but noted that in the current situation this is not enough. It should be understood that taxes paid in the Russian Federation are converted into weapons.
O. Komarida also noted that a recovery plan for Ukraine is currently being prepared, in which much attention is paid to the healthcare system and the pharmaceutical sector as a part of it.
The pharmaceutical market behaviour in the conditions of war
The beginning of a full-scale war affected the behaviour of the population, macroeconomic indicators, and consumption volumes in the drug market, as noted Serhiy Ishchenko, CPO Proxima Research International.
We entered 2022 with an expectation of gross domestic product (GDP) growth of 3.6%, and currently the economy shrinking by a third is considered the most optimistic scenario. According to World Bank estimates, this year Ukraine’s GDP may decrease by 45%, and 20% of the population may be below the poverty line (below the threshold of $5.50 per day) (before the war, this figure was less than 2%). Inflationary pressure will also increase. According to the estimates of the National Bank of Ukraine, by the end of the year, consumer prices may increase by over 20%. Total losses of the Ukrainian economy because of the war, according to the estimates of the Ministry of Economy of Ukraine and the Kyiv School of Economics range from 564 to 600 billion dollars. It includes both direct (damage to infrastructure) and indirect losses (decrease in GDP, cessation of investments, outflow of labour, additional costs for defence and social support, etc.).
The market of medicinal products of Ukraine (retail and hospital) in the cumulative total for 4 months of 2022 showed an increase of 1% in monetary terms due to significant growth in January and February. In natural terms, we have a decline of 6%.
The collapse of the volume of retail consumption of medicines in May reached -24% in monetary terms and -33% in kind, but compared to other sectors of the economy, this is far from the worst result. According to PrivatBank statistics, sectors such as tourism (transactions in this industry decreased by 88% in May 2022 compared to May 2021), construction (–47%), information services (–43%), industry and mining (–34%) suffered the biggest losses.
The weekly retail consumption behaviour of medicines in June shows a plateau. In the daily behaviour, a slight but slowing down of the rate of decline is already noticeable, which gives hope for the beginning of the recovery process. Everything will depend on a number of factors.
3 main factors influence the retail market of medicines: population, pharmacies and territories. According to the UN, over 8 million people have left Ukraine since the beginning of the full-scale war. On the other hand, about 3 million crossed the border in the opposite direction. Undoubtedly, some Ukrainians who went abroad may not return. September 1, the beginning of the school year, will be an important marker. Reduction in the number of people, as well as a decrease in the income of the population will have a significant impact on the volume of the pharmaceutical market. As for pharmacies, there are currently 16,400 pharmacies in Ukraine, which is 78% of the pre-war level. The most difficult situation is in the areas that are (or were) zones of active hostilities. Accordingly, in these regions, the consumption volume of medicinal products has also decreased significantly. Since 2014, 125,000 square kilometres of Ukrainian land, or 21% of the country’s territory, have been under temporary occupation. For the Ukrainian pharmaceutical market, this is approximately a loss of potential annual drug consumption amounting to 37 billion UAH. It is important to note that inflation in the pharmacy market of medicinal products is about 20% (which correlates with the general indicator for the country). For comparison, during the 2014–2015 crisis, the inflation rate on the pharmaceutical market soared to 70–80%.
The speaker also considered changes in the structure of consumption. The main trends indicate an increase in sales of prescription medicinal products, as well as an increase in the share of domestic medicinal products.
Panic moods among the population in the first days of the war, which led to an increased demand for medicines during this period, led to a sharp reduction in the stock in pharmacies from 30-35 to 14 days. Currently, when consumption volumes have not yet returned to the pre-war level, there is an overstock on the market: the volume has increased to 42 days’ stock.
A notable shortage was recorded for certain items of medicinal products. However, the logistics were fixed quite quickly, and the volume of consumption was restored. Undoubtedly, in conditions where a disruption in logistics can cause a shortage, it is very important for the Sales Force team to monitor not only the sales volume, but also the stock, as well as the availability of the product in each individual pharmacy.
The structure of consumption in terms of groups of ATC classification of the second level has also undergone changes. In particular, the consumption of medicinal products for the treatment of patients with cardiovascular diseases and diabetes increased.
In the distribution segment, problems with logistics, personnel and warehouses under conditions of a full-scale war led to an escalation of the competitive battle between the two market leaders. Pharmacy chains were affected by the war in different ways. The networks that suffered the most were those that lost a large part of pharmacy points in consequence of hostilities.
The speaker did not ignore the e-commerce segment, which was actively developing until 2022. As you know, in March the booking function was disabled both in the pharmacies themselves and on the aggregator sites. However, already in April, the possibility of booking was resumed, which gave an impetus to the beginning of the gradual recovery of e-commerce.
Commenting on the law on restricting the circulation of medicinal products, the production of which is located in Russia or Belarus, S. Ishchenko noted that its impact on the market itself might be minimal. After all, even if the medicinal product forfeit its marketing authorisation, the consumer will most likely be able to switch to an analogue.
«According to our estimates, potentially from the implementation of this law, taking into account the possibility of generic substitution, the market itself may lose up to 6% in monetary terms and 2% in kind,»
the speaker noted.
However, it should be borne in mind that the law contains ambiguous wording with wide possibilities of interpretation, and the criteria for determining the medicinal products that will be subject to restrictions have not yet been approved.
At the end, the speaker voiced the forecast for the development of the retail market of medicines in the national currency. According to the optimistic scenario, the current year may end with an indicator of -16% and -28% — according to the pessimistic scenario. According to the results of 2023, by optimistic forecast, the market may show an increase of 16% compared to 2022, and according to the pessimistic forecast, a decline of about 3%. Everything will depend on the intensity and duration of the hostilities, as well as on how quickly we will win.
Impact of events in Ukraine on the healthcare system of Eastern Europe
Michal Pilkiewicz, General Manager of IQVIA in Ukraine, the Baltic and Adriatic countries, outlined the impact of events in Ukraine on the healthcare system in Eastern Europe.
The speaker named the main political priorities that significantly affect the European landscape. This is, in particular, the digitalization of the healthcare system, including the implementation of backbone systems, patient registries, patient level information and data from the Patient Level Costing Systems (PLICS) or genomics and biobanking. Patient access to innovative medicinal products and elimination of product shortages are also among the main priorities of the EU. A notable trend is the increasing importance of environmental, social, and corporate governance (ESG). ESG is increasingly on the agenda of key stakeholders. In addition, the most important priorities, the importance of which has only increased in the current situation, include the improvement of security in supply chains.
Ukraine, as a candidate for the EU, now has a lot of work to do. Candidate status was obtained with unprecedented speed, but how quickly will Ukraine overcome the path to full membership? In total, 7 countries currently have candidate status (along with Ukraine and Moldova). Turkey has been in this status for the longest time (since 1995).
«I hope that the EU will be more flexible and that you will learn all the lessons to join the European family as soon as possible. I see that you have the potential to do it,
— M. Pilkiewicz noted,
Europe will look completely different, in particular through Ukraine. Europe also plans to speed up its reforms. It seems to me that in the long run this will be quite a positive process for the entire EU.»
If we look ahead to 2030, the healthcare sector will be under the influence of digital technologies, and innovations will be the main growth drivers of the pharmaceutical market. The boundaries between devices, diagnostics, and treatments are blurring, potentially revolutionizing data generation. Special applications and technologies support and complement innovative drugs. Major technology platforms are enabling innovations that directly reach patients, blurring the lines between prevention and treatment. The development of advanced therapy technologies — RNA, cell, genetic engineering — will require new competencies, technologies and cooperation between different countries. Our future looks technological.
The digital maturity of healthcare systems is an important factor, but different countries are developing at different rates.
«I am watching carefully how Ukraine is digitalizing as a country. The digital maturity of the Ukrainian healthcare system is already at a high enough level, and the situation is likely to improve. The IQVIA Company is ready to consultatively help the authorities of Ukraine with the transfer of know-how and technologies,»
the speaker said.
The war in Ukraine caused new challenges for the security systems of Eastern European countries. It is a sharp increase in demand due to the influx of refugees, the suspension of a part of clinical research, rising costs, additional pressure on healthcare systems, etc. Countries actively helping Ukraine have stepped out of their comfort zone, are trying to adapt to current challenges and help Ukrainian refugees get proper access to the healthcare system and medicines.
IQVIA was also concerned about how to help Ukraine. In particular, in cooperation with Proxima Research International, a service was created that helps refugees and doctors find a local analogue of prescription products that the patient took in Ukraine — Script Translator (ukrainemedlist.solutions.iqvia.com). In addition, a service for searching for medicinal products by brand or international non-proprietary name throughout Europe — Product Finder (ukrainemedlist.solutions.iqvia.com/prodsearch) can be useful. IQVIA will also provide a free medical documentation translation service as part of a partnership with the Exfluency platform for Ukrainian refugees in need of urgent treatment.
Investing impossible to save — where does a global player has to put a comma?
As in 2020, and even more so in 2022, we are faced with uncertainty. Permanence of changes remains the only constant. We know there will be new challenges ahead, but we do not know what form they will take. Therefore, a system is needed that will help to move forward and even succeed in this situation of great uncertainty. As Charles Darwin said, it is not the strongest or the smartest that survives, but the one that adapts best to change.
«We do not live any longer in a world where we know exactly what will happen tomorrow. Therefore, you cannot rely on traditional management designed for established working practices. We have to rely on agility,»
Paul Simms, chief executive officer of Impatient Health said
You need to forget about the long and painstaking planning of something that may not work out in the end. You should be like a startup. Step lightly, gradually, feel your way, at any moment be ready to correct it or step back a little to get back on the right path. Don’t be afraid to act differently, not the way you’ve been used to.»
The speaker proposed a number of complex rules that should help if you are doing something new.
Make mistakes. Intentionally. Be experimental. Mike Rea, Executive Director on innovation of IDEA Pharma, says the target product profile kills innovation; the goal is to be iterative, not to be right; one should not look for proofs of concept, but look for proofs of concepts himself.
Responsibility is more important than talent. Accountability defines the right processes, which creates a culture of learning. This learning attracts smart people.
Learning is the most important component (even more important than income or engagement). Avoid «vanity» metrics. Focus on profit not revenue, loyalty (return), not traffic, etc.
Do not focus on the average consumer. A classification of buyers based on their attitudes toward new products distinguishes between enthusiasts (innovators), visionaries (early supporters), pragmatists (early majority), conservatives (late majority), and sceptics (laggards). If you are creating something new, rely on enthusiasts and visionaries.
Do not listen when customers say what they want. The consumer certainly knows what he wants, but only in the short run. However, he is not aware of the closest opportunities. The most successful innovative businessmen (such as Steve Jobs and Elon Musk) themselves set the pace and direction of world development with their ideas.
Learn fast with a Minimal Viable Product (MVP). The MVP product is used to test ideas with minimal resource expenditure, which is more in line with the agile management requirements. Let the market decide whether the idea/project is successful.
What is the best formula for the industry recovery?
It is necessary to think about the restoration of the pharmaceutical industry now. According to Volodymyr Ignatov, Executive Director of AIPM Ukraine, when considering this issue, two things should be kept in mind.
- First, Ukraine has officially become a candidate for EU membership. There is a lot of work ahead, because with the new status, the state received a number of requirements in terms of carrying out reforms in order to become a full member of the European community in the future. The healthcare system in general and the pharmaceutical sector in particular will also be viewed through the prism of these reforms.
«We are already being evaluated. It is not a question of harmonization some time in the future. This is already a matter of harmonization now,»
the speaker said.
- Second, when working on regulatory documents and the vision of the healthcare system, you need to look not at what the EU has today, but what they are working on for tomorrow. Otherwise, we will inevitably fall behind, instead of being in parity. This is where digital technologies and digital transformation should come in useful.
The American Chamber of Commerce in Ukraine and the European Business Association (EBA) worked hard to harmonize Ukrainian legislation with European legislation. A lot has been done in recent years. In particular, the evaluation of medical technologies has been introduced, digitization processes have been launched, and certain changes have taken place in regulations. However, a lot of work is still ahead.
«Our future steps should be primarily related to the new status of Ukraine. The success of our harmonization will depend on how quickly we move, how we implement certain processes. Of course, we cannot do without mistakes, but we must have the ability to correct them. We have to work for the future and look at the changes that are planned in the EU,»
said Maryna Buchma, Director of Government Affairs of Teva Ukraine, co-chair of the Healthcare Committee of the American Chamber of Commerce in Ukraine.
She also noted that even in the most difficult times, the pharmaceutical market continued to work. Processes that slowed down for objective reasons were quickly restored.
«This shows that the pharmaceutical industry has the same agility. We can quickly learn to work according to the new rules, without clinging to the «normality» that existed before February 24,»
the speaker commented.
«In addition to realizing that we are moving towards the European community, it is also necessary to realize what place the pharmaceutical industry of Ukraine should occupy within the framework of the common EU market,»
noted Dmytro Lurie, manager of the EBA Health Committee.
We could answer this question if we understood our place in the Pharmaceutical Strategy for Europe (PSE). This would provide direction for the development of the domestic pharmaceutical industry, as well as investment attractiveness.»
According to the speaker, one of the tasks for the near future should be the holding of appropriate consultations and negotiations.
In addition, in the opinion of the speaker, it is necessary to move away from the practice of a large number of transitional stages.
«We need to build a European system in Ukraine immediately,»
the speaker noted.
The signing of the Agreement on Conformity Assessment and Acceptance of industrial Goods (ACAA) for medical devices and mutual recognition of Good Manufacturing Practice (GMP) certificates for medicinal products are currently considered the highest priorities.
Digitization is an important direction of our country’s development. Ukraine has already shown that it can outpace many countries in this area. The healthcare sector should become one of the priorities in further digitalization.
Yevhenia Piddubna, Head of the Healthcare Committee of the Union of Ukrainian Entrepreneurs, Director of Corporate Communications of Farmak, focused on the prospects for the development of the Ukrainian pharmaceutical industry, which are reflected in the plan to restore Ukraine in terms of the healthcare system. The goals for the pharmaceutical industry are based on the draft strategy for the development of the healthcare system until 2030. These goals include, in particular, further harmonization with European legislation, encouragement of investments in the development of local production of medicines and the development in Ukraine of new technologies, clinical research, digitalization, etc..
«Despite the tragic events, we continue to move in the right direction and do not deviate from those strategic tasks that we set before the war,»
— the speaker said.
«As a Ukrainian manufacturer, we, of course, are interested in seeing ourselves as part of the integrated supply and production chains of medicines with the European Union,»
the speaker added.
Y. Piddubna also emphasized that after receiving the candidate status, a large amount of investment usually comes to the country and makes the huge take-off towards development. Let us wish this for our country and the pharmaceutical industry!
