Bitter pill

Ukraine may lose its pharmaceutical industry as a result of crowd-pleasing political decisions, President Viktor Yushchenko said recently. In his opinion, adding a moral, psychological, and political bias to the debate on the production and sales of medicines may throw this industry back for a decade. This is why the guarantor of the Constitution refused to sign the law on reducing prices for medicine to the 2008 level and sent this document back to the Verkhovna Rada.

The condition of national pharmaceutical companies leaves much to be desired in any case. The price hike in the heat of the most recent flu outbreak clearly showed all the “effectiveness” and “transparency” of the current pharmaceutical market in Ukraine. Searching for those guilty of the price mayhem is now a favorite occupation of all, except perhaps for fire fighters. All other governmental inspectors have been rushed to the battlefield. But even after finding the guilty and punishing them with much-publicized but negligible fines, the state will not solve the problem of medicine price hikes in the future. The populace will feel the pressure on their wallets as long as the cost of most medicines remains dependent on imports and the hard-currency factor. This is the reason why we must boost our own pharmaceutical output.

According to the Antimonopoly Committee of Ukraine, out of the 18,000 registered medical items only 5,500 are manufactured in this country. “In terms of quantity (the number of packages — Author), Ukrainian-made items account for about 70 percent of all the medicines being sold on the domestic market. But in terms of money, foreign-made medicines account for more than 70 percent,” Oleksandr Partyshev, sales manager of the Arterium corporation, told The Day.

Mykola Polishchuk, ex-Minister of Public Health, notes that national producers are losing their market not because of making substandard medicines but due to a tough stance of foreign companies which carry on aggressive advertising and distribution campaigns. “Foreign producers also have ample resources to influence the medical staff of different levels, most often the medical upper crust, such as professors, institutes, large clinics, and leading specialists,” he said to The Day. “Accordingly, they are imposing their conditions on the market today.”

National pharmaceutical companies will feel better on their own market if the state helps them. Restoring state-run drugstores, controlling prices, increasing mandatory purchases of vital medicines for hospitals, and compensating the cost of some medicaments to the populace are just some of the things the state should do. Yet Ukraine is not exactly bursting to support its producer.

Meanwhile, the emergence of a powerful pharmaceutical industry is needed not only to stabilize prices for medicines. The manufacture of proprietary brands will add stability to the economy (as the rights to reproduce and export such medicines can be sold for hard currency) and international prestige to Ukraine. Still, can the Ukrainian pharmaceutical factories boast of any medical novelties?

According to Viktor Pushkariov, regional director of Orion Corporation for Eastern Europe, Ukraine is rich in good ideas but the resources for implementing them are not the best, to put it mildly. To develop their own brands, Ukrainian manufacturers need at least to establish mutual ties with national research centers and international industries in order to be able to not just develop drugs but also put them on the world market. Besides, this kind of triangle will help redistribute production risks and find money to develop new medications.

On his part, Polishchuk believes that Ukrainian pharmaceutical factories are manufacturing copies of worldwide brands — the so-called generics. Chemically, a generic consists of the main active substance found in the brand-name product plus other components. The curing effect of such a drug practically equals its “original.” However, all companies cannot produce these medicines: one must first buy a license at a handsome price or wait until the brand protection patent expires.

“Our company’s portfolio has four original medicaments in the field of cardiology, neurology, and urology, which bring in a fifth of all sale profits. These medicaments began to be developed back in the Soviet era,” says Partyshev, focusing on the innovative successes that Arterium has already achieved.

On the whole, the experts interviewed by The Day named several barriers to the development of innovative products in pharmacology. The first is prohibitive expenses. “According to the European Medicine Agency, it costs 500 million euros to develop one original medication. And this can be more than the cost of one medium-size pharmaceutical facility in Europe. Why? The reason is that very high demands are set for the product’s effectiveness profile and safety,” says Pushkariov.

The second factor is the long payback period of an invention. “Patent protection (a period when only the inventor company can sell this medicine — Author) is usually valid for 15 years. It takes several years to develop a new molecule. Therefore, one can get the first registration, after the completion of clinical tests in Europe, in the fifth or sixth year of the molecule’s life. So there are nine years left for this investment to pay back,” Pushkariov says.

Finally, Ukraine practically does not produce raw materials for the pharmaceutical industry. Partyshev says there are several reasons for this. Firstly, the production process may further pollute the environment and violate Ukrainian ecological standards. Secondly, this is a fairly capital-intensive process that requires considerable financial investments, which our potential partners are not in a position to make today. To crown it all, the current price of the raw materials produced in India, Korea, and China (which meet all international standards) remains very competitive, so there is no economic incentive to launch this kind of production in Ukraine. However, in the opinion of Arteruim’s sales manager, it is possible to set up such facilities in the future, when the worldly-acclaimed pharmaceutical giants begin to extend their operations to include the Ukrainian market. “But this will not happen in a year or two because this requires a macroeconomic and political balance and stability in this country,” he adds.