Drug supply in the former Soviet Union was highly centralized with specialized production plants scattered across the whole territory. Many products were also produced by manufacturers in eastern European countries, in accordance with trading agreements within the Council for Mutual Economic Assistance (COMECON). The pharmaceutical market was thus dominated by cheap medicines mainly of domestic and eastern European origin. Modern drugs from the West were practically inaccessible. After the breakup of the Soviet Union the pharmaceutical sector in Ukraine faced immense difficulties due to the breakdown of established trading links. The country was left with a small domestic pharmaceutical sector whose range of products was very limited and of substandard quality, leading to an acute shortage of drugs. In 1991, the domestic industry met only 20% of the market's needs. The resulting vacuum began to fill rapidly with imported drugs of sometimes rather dubious quality and relevant state agencies, manufacturers or licensing bodies were not prepared to address these problems adequately.
However, with the introduction of market-based mechanisms the pharmaceutical sector has undergone substantial changes, with privatization of manufacturing and retailing. At present, there are 180 domestic drug manufacturers, 90% of which are private enterprises. Only manufacturers recognized as strategically important for the county's economy and security have remained in state ownership. Some companies have established drug manufacturing in compliance with GMP requirements (Darnitsa, Borshchagovsk Chemical and Pharmaceutical Factory, Styrolpharm). The range of domestically manufactured drugs comprises more than 1500 chemical entities and their cost is on average 20%-60% lower than that of foreign analogues. In 2001, the market share of domestic drugs approached 50%. There are now about 100 large wholesale companies and 460 smaller distribution companies.
The majority of pharmacies have now also been privatized. Over a period of 10 years the number of pharmacies has grown almost three-fold to 39 facilities per 10 000 population. In 2001, the pharmacy network comprised about 19 000 pharmacies, pharmacy retail outlets and kiosks, of which 18% were private and 52% in collective ownership; less than one third belonged to the state or community, with the last model largely confined to rural areas. As a result of these changes, the supply of drugs in Ukraine has become sufficient at least in terms of overall availability. However, with the changes in the pharmaceutical sector, prices have risen sharply, leading to unaffordability of high quality, safe drugs and medical devices. Up to one third of households in Ukraine were unable to obtain necessary health care in 2000, largely because of the high costs of drugs.
A series of interventions have now been implemented to regulate the pharmaceutical sector. With the 1996 law "On Pharmaceuticals", foundations were laid for state policies on the development, registration, production and quality control of drugs manufactured in Ukraine. The State Department on the Control of Quality, Safety and Production of Medicines and Medical Devices is responsible for the management and control of quality, safety and production of drugs, biomaterials, medical equipment and medical devices; for ensuring state control of exports, imports, wholesale and retail distribution; and for developing and implementing state policies on the manufacture and distribution of drugs.
Additional regulatory committees and agencies have been established at the Ministry of Health, including the Pharmacological Expert Centre, the Pharmacopoeia Committee, the Committee on Immunobiological Preparations and the Committee on the Control of Traffic of Narcotic and Psychotropic Medicines. The National Pharmacopoeia has been issued and special agencies have been set up for quality control of pharmaceuticals: the Good Manufacturing Practice Inspection and the State Inspection for Drug Quality Control, which is responsible for quality control at the distribution stage. A further important component of state regulation in the pharmaceutical sector is licensing, which is the responsibility of the State Department on the Control of Quality, Safety and Production of Medicines and Medical Devices. In addition, since 1998 pharmacies are subject to mandatory state accreditation.
Until recently, the system of distributing pharmaceuticals in Ukraine was only loosely regulated. However, with the law "On Procurement of Goods, Operations and Services on State Funds", passed in 2000, public health facilities and institutions are now required to purchase pharmaceuticals through tender procedures. There are also certain centralized procedures in which the Ministry of Health purchases pharmaceuticals primarily for patients with specific diseases (tuberculosis, diabetes, malignant neoplasms) which, in 2001, ensured savings of 12.3% of resources allocated for this purpose.
In 2001, the government approved a national list of essential pharmaceuticals and medical devices. This positive list has been developed according to the ATC (anatomic-therapeutic-chemical) classification based on international non-proprietary names and includes 741 efficient and safe pharmaceuticals for treatment of the most common conditions.
The list forms a basis for a basic medical entitlement package and, by virtue of an order by the Ministry of Health, is to be used for arranging tender procurement, for state purchases to support targeted programmes and for state support of the domestic pharmaceutical industry. In addition, the National list is intended to: be the basis of a formal definition of drugs available at health facilities; establish unified standards for the provision of health care; maintain state registration of wholesale prices and monitor prices of domestic and imported pharmaceuticals and medical.
Alongside the national list three special lists have also been approved: the list of domestic and imported pharmaceuticals and medical devices whose prices are subject to state regulation (600 pharmaceuticals from 9 pharmacological groups), the list of domestic and imported pharmaceuticals that may be purchased by public health facilities using state/local budget (1500 domestic and 800 imported), and the list of mandatory pharmaceuticals for the pharmacy network (418 names: 300 domestic and 118 imported). Technically, these three lists were developed before the positive list, so there is some duplication. There are now plans to merge all lists into one to simplify the system.
There is currently no system of state price regulation for most popular and vital drugs. The main direct mechanism of state price regulation consists of establishing maximum retail surcharges for pharmaceuticals and medical devices, which was delegated to the regional administrative bodies by government decree in 1996. The decentralized regulation has, however, resulted in substantial regional differences in retail prices for pharmaceuticals, ranging between 10% and 50% of cost. A more indirect method of price regulation is the introduction of certain tax privileges. For example, since 1997 sales of pharmaceuticals and medical devices registered in Ukraine were exempt from VAT. The introduction of VAT on drugs seems to be unlikely at present; however, the possibility is still being discussed. Only recently (2001-2002) have the parliament and government started to become more active in this field and have proposed a number of initiatives aimed at strengthening state regulation of prices of pharmaceuticals and medical devices. Concern about arbitrariness in the pricing policy has caused the Ministry of Health jointly with the Ministry of Finance and the Ministry of Economy to develop more systematic approaches towards price regulation in the pharmaceutical sector.
Thus, 2001 saw the introduction of maximum retail surcharges at the national level on pharmaceuticals and medical devices whose prices are subject to state regulation, with the following limits: 35% of the manufacturer's wholesale price (customs cost) distributed through the pharmacy network, and 10% for products that are purchased by public health facilities on funds allocated from the budget.
At present, state regulation covers 16% of the pharmaceuticals registered in Ukraine. The regional governments have retained the right to set retail surcharges within these limits. As a result of the increased central regulation the regional variability in retail prices fell. The average level of retail surcharges for the most commonly used pharmaceuticals declined from 40% to 23% and prices of pharmaceuticals manufactured in Ukraine fell by 0.2%-0.6%. At the same time, the introduction of maximum retail surcharges had a considerable negative impact on community-owned pharmacies that service public health facilities and cater to those population groups that are exempted from co-payments.
Their profitability fell by more than one third, with many facing the imminent threat of bankruptcy.
It is difficult to assess the overall consumption of pharmaceuticals in Ukraine. Indirect evidence may be obtained from data on expenditures of the population on pharmaceuticals and medical devices purchased in pharmacies, which account for over 80% of the expenditures. Corresponding data from the State Statistics Committee indicate that expenditures increased more the 9.5 times between 1995 and 2001. Average per capita consumption of pharmaceuticals in 2001 was close to US $12. Although these data do not take account of spending on medicines acquired through unofficial channels, they do point to a rather rapid increase in pharmaceutical consumption in Ukraine.
As much of the purchase of pharmaceuticals is done by both outpatients and inpatients, the scope for influencing prescribing patterns is rather limited, and further hampered by the liberalization of the pharmacy dispensing procedures. A list of prescription-only drugs has been developed by the Ministry of Health, but most of them can be bought over the counter, with alarming consequences for the spread of antibiotic resistance. Instead, the decisive factor impacting on prescribing patterns is the pharmaceutical industry, which pursues aggressive marketing policies, proactively advertising pharmaceuticals in the mass media (advertising for prescription-only drugs is banned in Ukraine), organizing workshops for physicians and various forms of compensation for doctors who prescribe their products. As a result, there is a high level of over-prescribing among physicians, who often prescribe expensive pharmaceuticals instead of less expensive analogues and, in certain cases, disregard rational drug therapy.
The only exceptions are patients who are exempted from co-payments or who pay reduced prices for pharmaceuticals. Here, doctors prescribe generic drugs from the National Essential Drugs List, which the patient then obtains from the residential community pharmacy. However, this route is frequently blocked as only 9% (rural areas: 5%) of the need for corresponding pharmaceuticals is satisfied.
In summary, although certain progress has been achieved in state regulation of the pharmaceutical sector, provision to the population remains a pressing problem due to lack of sufficient funds for the health care system in general and the procurement of pharmaceuticals in particular as well as limited economic solvency of the population and a lack of efficient mechanisms for rational drug use. To improve this situation plans are under way to:
The health system in Ukraine also faces serious problems regarding the acquisition of technology and the maintenance of existing equipment. A recent review of medical equipment in health facilities pointed out that much of the more complex equipment was purchased before 1992. A number of facilities are still using devices manufactured in the 1970s. More than 50% of the equipment is considered technically outdated. However, in recent years the country has become increasingly active in developing and implementing policies aimed at improving the quality and efficiency of health care through increased provision of medical equipment and reducing its dependence on imported equipment. Despite the economic difficulties the country is facing, a comprehensive programme for the development of the medical industry (1997-2003) was approved in 1996.
The programme has revitalized the domestic medical high-technology industry, mobilizing the production of a range of modern equipment and technology such as radiology, anesthetic, electrocardiography and ultrasound machinery. The Ministry of Health has also been developing ways to overhaul the failing technical infrastructure in health facilities. These have now been translated into actual plans for technical refurbishment by the oblast health administrations for.
 | From the HiT (Healthcare Systems in Transition) of Ukraine (2004) [pdf, 839KB] | |
