Conference on the Regulation of Pharmaceutical Business Was Held in Kyiv

Summary conference “PHARMBUSINESS: 2016 CONCLUSIONS – 2017 ANTICIPATIONS”, hosted for the fifth time by Legal Alliance Company, was held in Kyiv on February 2.

In the course of the event, the representatives of pharmaceutical business have summarized the results of the previous year, discussed accomplished and expected regulatory amendments in the sector, and shared the anticipations concerning the development of the market in 2017.

The event was attended by over 100 representatives of pharmaceutical companies, professional associations, media and governmental agencies that regulate the industry.

According to the participants, the Conference over the years of its existence has become not only a tool for obtaining high-quality analytics and regulatory forecasts concerning pharmaceutical market, but also has established itself as the platform for free and fair discussion with the colleagues on the market and the representatives of regulatory agencies.

This year the Conference started with the review of the situation on the pharmaceutical market, presented by the director of the company “SMD” Iryna Gorlova, who familiarize the participants of the event with the key results of the functioning of the pharmaceutical market of Ukraine in 2016 in figures.

The report presented data on the market dynamics, that in 2016 in dollar terms showed a drop of 11 %. Speaker noted that to date 86 % of all medicine procurements are funded by the consumer. Hospitals hold only 6 % of medicines procurement in different sales channels. Talking about dynamics of retail market segment in 2016, Iryna Gorlova emphasized that in packages downward trends are demonstrated in all the segments except the goods for patient care. In hryvna terms the most dynamic growth occurred in the segment of dietary supplements and prescription medicines. At the same time non-prescription medicines demonstrated lower dynamics in comparison to prescription group. Besides, there was also marked high rate of growth of domestic companies in comparison with foreign. Taking about the segment of tender purchases, Ms. Gorlova reported that the total volume of all the medical products purchases, including centralized purchasing, procurement of donor organizations, tender purchases, prethreshold purchases by regional authorities and hospitals, amounted to 6.4 billion UAH for the period of 11 months of 2016. In 2016 the most significant growth rate was demonstrated by the segment of centralized purchasing as well as a segment of direct tenders of the hospitals (+ 21 % in 2016).

The first session of the event was traditionally devoted to the regulation of pharmaceutical business and was moderated by the partner of Legal Alliance Company Dmytro Aleshko, who spoke on the key regulatory changes, that challenged the market in 2016, in particular the Regulation of the Cabinet of Ministers of Ukraine “On state regulation of prices for medicines” and “On introduction of reimbursement of the costs of the medicines” as well as new National List if Medicines.

Then Mr. Aleshko turned the floor over to Oksana Lebega, Senior Technical Advisor on pharmacovigilance and efficient use of medicines in frame of the USAID/SIAPS project, who in her presentation elaborated on the National List as well as on prospects and possible threats for business that can be caused by its implementation in 2017. The question of introduction of the National List was also addressed in the speech of Elena Matveeva, director of Pharmacovigilance department of state-owned enterprise “State expert center of the Ministry of Health of Ukraine”, Deputy Head of the Expert Committee on the selection and use of Essential Medicines. In her speech Ms. Matveeva has tried to allay concerns expressed by the representatives of business, talking about the positive experience of the introduction of the National Lists in such European countries as Hungary, Slovenia, Czech Republic, Latvia. Natalya Sergienko, executive director of the Health Committee of the European Business Association, in her turn, raised the most crucial issues for the international pharmaceutical companies operating in Ukraine – both Ukrainian and foreign – in particular, the introduction of effective mechanisms for reference pricing and reimbursement. Ms. Sergienko expressed the hope for successful resolution of these issues within the time period remaining until April,1 2017 and also stressed that the authorities should actively work together with the representatives of pharmaceutical community in order to avoid the risk of depletion of medicines and treatment interruption of critical groups of patients, that became precursors of the postponement of the date of the beginning of the state price regulation. Representatives of two leading professional organizations of the pharmaceutical business – Vladimir Ignatov, Executive director of the Association of the representatives of international pharmaceutical manufacturers AIPM Ukraine, Head of the representational office IPSEN Pharma in Ukraine and Moldova, and Vladimir Redko, Executive director of the Association of manufacturers of innovative medicines APRAD, talked about the unanswered questions left to the market by the previous year. In particular, they mentioned the reform of the state procurement system and state regulation of prices for medicines. That particular subject opened vigorous debate in the hall followed by questions and answers session.

According to Dmytro Aleshko, “The time of the conference coincided with the major changes in the regulation of prices for medicines, which were initiated by the Cabinet of Ministers of Ukraine. Participants of the conference had an opportunity to become aware of the possible scenario of the development of situation from April, 1. In addition, representatives of the leading professional associations formulated their position on this issue”.

The focus of the second session of the Conference under the title “Pharmaceutical business: questions left for the lawyers” was concentrated on three legal directions that are crucial for pharmaceutical companies: anti-corruption legislation, taxation as well as key aspects of antitrust and competition law, that have become particularly relevant in 2016 due to the AMC policy regarding pharmaceutical companies.

Moderator of the session – partner of Legal Alliance Company Oleksii Bezhevets – opened the session with the report on emerging issues in the taxation of pharmaceutical representative offices. The report comprised practical information concerning taxation nuances of pharmaceutical business – e.g. at what moment of business conduct arises the need to pay taxes and new relevant issue – BEPS (Base Erosion and Profit Shifting). Upon that Oleksii Bezhevets turned the floor over to Senior associate of Legal Alliance Company Lidiya Sanzharovskaya. In her presentation Ms. Sanzharovskaya summarized the most relevant issues of compliance such as funding of participation of doctors in the events, giving them gifts and souvenirs, sponsorship and charity, as well as particularities of the marketing cooperation of pharmaceutical representative offices with the health institutions. The session was summarized by the Associated partner of Legal Alliance Company Andrii Gorbatenko, who mentioned in his presentation that year 2016 in the pharmaceutical market was full of events, related to the functioning of Antimonopoly Committee of Ukraine. In particular, several cases regarding medicines distribution agreements have been completed and the recommendations to the Ministry of Health of Ukraine were submitted. Besides, Antimonopoly Committee of Ukraine provided drilldown report regarding its vision of the situation on the pharmaceutical market of Ukraine. “Analysis of the decisions and actions of the Antimonopoly Committee of Ukraine in 2016 leads to several conclusions. First of all it should be noted that there is a visible progress in the approaches of this state authority to the assessment of the situation on the market. Besides, it should not be left unmentioned that Antimonopoly Committee of Ukraine (ACU) demonstrates real openness to the dialogue with the actors on the market. However, decisions that have been taken by ACU in 2016 heightened tensions in this sphere. In particular, the market suffers from the lack of recommendations from ACU that would create safe harbor for the actors on the market. For the moment the phrase “approaches and practices of ACU” remains to sound too enigmatic and mysterious. We sincerely hope that our efforts in 2017 will help to progress in this direction” – summarized Mr. Gorbatenko.

Giving comments to his session, Oleksii Bezhevets mentioned: ”In the course of the session three very important and relevant for the market issues were examined. First of all, we have raised the issues of development of pharmaceutical companies in the light of new trends in the sphere of taxation. In particular, it is referred to the transfer pricing and business schemes that are used by majority of foreign pharmaceutical companies in Ukraine. We are talking about relationships between the parent company and it representative office or subsidiary company in Ukraine. In many cases such relationships are subject to careful revision and analysis in order to avoid negative implications in the sphere of taxation. Secondly, we once again brought to notice of the pharmaceutical companies the necessity of compliance with all the requirements in the sphere of anti – corruption legislation and compliance, as well as summarized once again the approaches that are used by successful pharmaceutical companies in the market in the sphere of promotion and interactions with healthcare professionals”. And finally, in the third part of the session Andrii Gorbatenko elaborated on the approaches of Antimonopoly Committee of Ukraine to the distribution agreements. ”This is very sensitive issue. Our Company has successful practices in solution of the questions that arise in relation to such agreements. We believe that we have outlined the patterns that companies should apply in 2017”.

Third, conclusive session of the Conference “Opportunities Vs risks: forecasts from the opinion leaders” was held in the format of panel discussion of opinion leaders of pharmaceutical market. The moderators were partner of Legal Alliance Company Illya Kostin and Executive director of AIPM Ukraine, Head of the representative office of IPSEN Pharma in Ukraine and Moldova Vladimir Ignatov. Among the experts of the session were only representatives of operating business: Eugeniy Zaika, Regional Director of Acino Group (Switzerland) in CIS, General Director of Pharma Start Ltd., Georgiy Viktorov, Head of the Committee of Healthcare of the European Business Association, Anatoliy Revin, President of AIPM Ukraine, and Stanislav Kornev, Vice-president of AIPM Ukraine.

The session began with the presentation by the moderators of the results of the survey held among the managers of pharmaceutical market that was conducted shortly before the Conference. The predominant majority of the respondents were represented by the foreign companies or their representative offices (subsidiary companies), which do not have localization of production on the territory of Ukraine.

Among the key problems of the current situation of Ukrainian pharmaceutical market were highlighted the state of the economy, low solvency of the customers and the imperfection of the legislative regulation of the industry.

The main factors that are expected to affect pharmaceutical market in 2017 were named the changing of the pricing model for the medicines, introduction of the reimbursement and the transition to a new National List of Essential Medicines.

With regard to the above mentioned, the majority of respondents said that in the first instance the improvement of state regulation is needed in the sphere of public procurement and pricing for medicines. This opinion is shared by more than 66 % of the respondents. Along with this sector, palpable imperfection in regulation is marked in the sphere of taxation and intellectual property protection in pharmaceutical business.

Taking into consideration dynamic normative regulation in the industry, the experts were careful while making forecasts, agreed on the point that reforms in the sphere of insurance medicine could become long-anticipated solution and the window of new opportunities both for medical institutions and pharmaceutical companies.

Illya Kostin summed up the expectations on the pharmaceutical market in the coming year: “Unfortunately, the future, both immediate and distant, is now devoid of optimistic forecasts. The managers of pharmaceutical businesses cannot get out of touch with reality, where huge role is played by the instable state of the economy. Legal uncertainty, poor quality of regulations, populism, unwillingness to consider opinions of the representatives of pharmaceutical business – professionals, the people who had given decades to this profession, – are the factors that determine today`s situation and climate in the market. In the next three years we expect in Ukraine the extinction of the branded generics and we will see their transformation to the ordinary generics. Reimbursement will increase in the amount as well as number of ICD codes. However, exit from the market of the number of companies due to the sharp decrease of purchasing power and in consequence of perception of the foreign companies by the state exclusively in the contexts of cheapening of their products, is inevitable. The issue of quality, unfortunately, will become secondary. Today this is already evidenced by the numerous debates regarding to notorious 21 INN as well as strategy of introduction of the National List of Essential Medicines. The pharmaceutical industry can develop only through investment activity, which, unfortunately, is almost reduced to zero. Very few actors, who are facing extra risk, nowadays are ready to invest money and to make profit in this industry. Besides, pharmacologist stated their expectations concerning the reforms in the sphere of medicine, as pharmaceuticals industry is in fact auxiliary in relation to medicine”.

The participants were pleased with the atmosphere of lively discussion during the Conference, as well as with significance of the issues addressed within the event. Arranging such major event at high level, Legal Alliance Company demonstrates not only high quality of professional expertise, but also ability to anticipate market developments, correctly determining the needs of the pharmaceutical business.

Summarizing the results of the Conference, we would like to express a special gratitude to the companies, organizations and media who extended their informational support to the event: Association of international pharmaceutical manufacturers AIPM Ukraine, Association of manufacturers of innovative medicines APRAD, Association “Operators of the market of medical devices”, European Business Association, SMD, Brandberg, PharmaGate, MultiPrint, YouControl, Agency of medical marketing, Twiga and MedInform, Health Media, Ukrmedsert, LavConsult, Annual competition of pharmaceutical industry professionals “Panacea”, Healthcare Creative Forum, Depharm portal, magazine Pharmacist Practice, Pharmaceutical Industry and Modern Pharmacy as well as exclusive media-partner of the Conference – periodical “Yuridicheskaya Gazeta”.

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Published on the materials of Legal Alliance Company