Pharmaceutical industry of Ukraine covers production of pharmaceuticals and medical purpose articles, wholesale and retail trade, specialized storage and distribution through developed sales network (drugstores, drugstore points, etc). In developed countries, pharmaceutical business is one of the most dynamic and profitable industries. At the same time, it is a special market segment regulated by the state powers and controlled by insurance medicine. Over the last few years, pharmacy business has been integrating with medical services.
Pharmaceutical industry also has a notable place in the Ukrainian economy, as it is an important segment of the national market with heavy influence on national and defense security of the state and is distinctive for high knowledge intensity and developed cooperation. The industry shows stable growth over the last five years. Growth makes less than 20% annually in monetary terms. If it was considered a great achievement to be close to market volume of USD 1 bn in 2002-2003, then the market exceeded USD 2 bn in 2007.
Ukraine’s pharmaceutical industry produces some 1,400 medicines out of 3,000 articles sold in Ukraine. Pharmaceutical companies of Ukraine manufacture medicines in almost every form (solid, liquid, powder, etc). The main groups are cardiovascular medicines, analgesics, vitamins, respiratory and endocrine system treatment drugs, gastroenteric medicines, and antibiotics.
Pharmaceutical substances in Ukraine are produced by 49 registered entrepreneurs. The structure of the produced substances includes 76 articles of synthetic origin and 82 – of natural origin. Domestic-made substances account for only 30% of gross volume, and the rest are imported from China, Germany, India, Russia, and the USA.
Today pharmaceutical market of Ukraine displays drugs of more than 300 producers from non-CIS countries, CIS, and Baltic States, as well as 160 domestic producers, which include 22 enterprises involved in pharmaceutical production since the Soviet Union times.
Ukrainian pharmaceutical companies attempt to diversify the range of output in order to satisfy customers’ demand – each year they improve quality and the range of products. One of the main determinants of pharmaceutical market development is general growth of purchase capacity of population. Yet, it is not the only reason. According to experts’ data, the market is tracing the tendency of expanding share of more expensive and, as a rule, more effective drugs – due to narrowing segment of classical inexpensive articles. There are also subjective reasons for the trend: like in other consumption areas, the buyer follows the fashion, and often people only pay for new packaging and brand.
Today many Ukrainian companies are refocusing from generic production to creation of their own brands in order to expand market share and increase customer loyalty.
The group of domestic leaders in pharmaceutical production (monthly output exceeding UAH 5.1 mn ~ USD 1 mn) includes Darnitsa CJSC Pharmaceutical Company, Arterium Corporation (KievMedPreparat LLC and GalichPharm LLC), Zdorovye LLC Pharmaceutical Company, Borschagovskiy Chemical and Pharmaceutical Plant CJSC, as well as Farmak OJSC.
Each of these giants of pharmaceutical industry holds around 10% of the market of domestic pharmaceuticals. These are followed by the group of more than thirty companies, each occupying from 1% to few percent in the market. The group includes Indar JSC, Kiev Vitamin Plant JSC, StirolBioPharm JSC, and other. The third group includes over a hundred enterprises manufacturing only 1-2 drugs, which are the simplest in production and the cheapest: iodine, Solutio Virdis nitentis spirituosa (brilliant green), and peroxide hydrogen.
Ukraine’s pharmaceutical market has been growing by approximately 20% for the last few years. Today the market of registered medicines features 34% of Ukrainian-made articles, the rest being of foreign origin. In terms of financial value, around 70% of the market belongs to foreign medicines. However, the situation is opposite if estimated in the volume of packages: Ukrainian pharmaceuticals hold a 70% share in the market.
Experts forecast that in the next few years the segment of medicines with the value from USD 3 to USD 5 will develop at higher tempos, while consumption of drugs, which cost up to USD 1, will greatly contract. Meanwhile, cheap medicines will still be demanded by a particular group of population.
Besides, so-called hospital consumption of medicines (by state hospitals) will show consumption of cheaper drugs in the short run.
Today hospital purchases account for some 16% of Ukraine’s pharmaceutical market, and another 12% of the market is direct state procurement. The remaining portion is drugstore retail commerce. In this category, as research shows, 55% of sold drugs are prescribed drugs, and the remaining 45% are sold without prescription.
Today nearly a quarter of medicines consumed by Ukraine is manufactured by domestic companies, and the rest are imported.
Current situation on Ukraine’s pharmaceutical market is a powerful incentive for restructuring of the industry, facilitating of competition, and transferring to technical requirements of the European Union. As a result, the Ukrainian market may see some contraction of the number of pharmaceutical enterprises. Those enterprises, which successfully pass restructuring and withstand tight competition, will be able to compete on international markets.
Forming of the national system of medical insurance will also improve and structure current market of pharmaceutical industry. Besides, it will consolidate producers of pharmaceuticals, as well as wholesale and retail sectors in the medium term.
The main macroeconomic goal of the following years, which Ukrainian drug companies set for themselves, is growing collaboration between Ukrainian manufacturers and producers of similar products in the European Union. Cooperation may take place in the forms of joint ventures, alliances, common marketing and product promotion, and transfer of no-prescription medicines to Ukraine. The key motivation for such a move is not penetration into the Ukrainian market, but export to markets of Western, Central, and Eastern Europe.
Export motivation of transnational corporations while launching production in Ukraine will preserve scientific basis, which should be restructured according to new market tendencies.
Keeping of the scientific basis, creating of developed and specialized determinants of the state’s competitive advantage, and driving of foreign investments into pharmaceutical industry’s development – all of these lay a long-term foundation for competitive advantage, contribute to refocusing of Ukrainian exports from transition economy markets to Western, Eastern, and Central European states, and help strengthen competitiveness of Ukrainian enterprises. Besides, harmonization of key technical requirements with requirements of the European Union will help protect Ukrainian pharmaceutical producers from competing with low-quality medicines.
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