Country Report: Ukraine - Pharmaceutical Executive

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Country Report: Ukraine

Pharmaceutical Executive


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Undeniably, most foreign pharmaceutical companies have had a rough time succeeding in Ukraine, firstly because of the cut-throat competition that local players present, but more importantly because the country's regulatory and legal environment can be as unpredictable as a night at the bingo. Yuriy Savko, executive director of the Association of Pharmaceutical Research and Development (APRaD), explains that his association was created "to ensure that there was a transparent and trustworthy regulatory policy of the pharmaceutical sector. In Ukraine, regulations change constantly and at a very fast pace, which is why we need to be certain that all of these processes are transparent and involve all relevant stakeholders."

It is true that over the last couple of years the pharmaceutical sector has seen more changes to its regulation than in the previous decade, including for manufacturing standards, price registration, customs clearance, and advertising restrictions. Some perceive this as Ukraine's attempt to protect its national industry, similar to what Russia has done for itself. TEVA Ukraine's general manager, Alexandra Sologub, claims that "the government tends to protect the interests of national pharmaceutical producers. Of course it's a normal practice in any country, but by doing so, the policies that are the most beneficial for patients should be developed, not simply obstructing the activities of foreign companies. In addition to this, there are constant changes of staff at the Ministry of Health, including the ministers themselves. Under such conditions there can be no continuity for the country's healthcare and pharmaceutical sectors, and this is one of the reasons why we see such low health indicators in Ukraine. Sure, there have been some steps forward, but they only represent pockets of development scattered throughout the system. In an ideal world we are all hoping that reforms take place, but realistically, I believe it will still take a few years before the authorities realize what they need to do and make it a priority on their agenda."

However, others interpret the volatility in regulation as a positive sign that the sector has now become a priority for the government and that finally healthcare will be attended to by raising standards to Westerns European levels. Eugene Zaika, Nycomed Ukraine's general manager, contends that Ukraine's "regulatory environment is very much aligned with the European one. For many years we have had no severe problems related to regulatory approval and we are always in line with the nine-month registration term. As a matter of fact, the Ukrainian registration process is double the speed of that in Russia, where it takes close to two years and local clinical studies are needed for approval." With a focus on cardiology and neurology, Nycomed has achieved stunning growth in Ukraine and only expects greater results now that it is preparing to introduce Takeda's complementary portfolio over the coming years and is considering localizing production of some products.

Russian-born Marina Simashova, general director of US-based Unipharm, believes that "although the challenges are similar to the ones Russia coped with, Ukraine has its own approach to seeking solutions. The regulatory mechanisms that the Ukrainian government is working on are not mere copy-paste activities—Ukraine has its own way of doing business." With the best-selling multivitamin product in Ukraine and Russia, it is clear that Unipharm has learned to weather the adverse conditions of the Ukrainian market since it began its operations in 2001, even through the financial crisis of 2008, when a handful of pharmaceutical companies went bankrupt. "In these markets, challenges arise suddenly and frequently, and working in the pharmaceutical industry is like simultaneous chess: it requires managers to think about many possible challenges in advance," adds Simashova. Furthermore, "Unipharm tries to contribute to Ukrainian healthcare reform through its experience in working in the American pharmaceutical industry. It is not possible to avoid all mistakes, and making mistakes is even important in the learning process, but we can certainly caution authorities about specific mistakes and offer an overview through our experience."

Roche Ukraine's general manager, Ala Ciobanu, furthers this notion by stating that "we cannot implement the standard marketing models that are used in other countries, because the regulatory and legal environment in Ukraine is rather specific and is constantly evolving. So we have to undertake special efforts to adapt to these conditions on a routine basis." Over the last two years, Roche has restructured its local portfolio to focus on innovative products and diagnostics in anticipation that, as average income rises, Ukrainians will increasingly demand the most modern and effective treatments over standard generic alternatives. "It was obvious that a copy-paste strategy borrowed from Western markets wouldn't have worked in Ukraine so we have been developing our own methods in driving business here to ensure that our products are favored by the market. Because our products establish high medical standards of treatment, they are difficult to introduce to the market, especially because all targeted drugs require profound diagnostics undertaken beforehand to ensure that the product would work. The efficient use of our innovative products also requires the high level of education from the side of doctors who prescribe the medicine," explains Ciobanu.

Even though Roche undertook a renewal of its portfolio for strategic reasons, other companies have had to take more drastic measures to simply survive the ups and downs of the market. General manager of UK-based Mili Healthcare, Marina Sapozhnikova, tells of her company's struggle to overcome the crisis of 2008. "Due to the crisis we were forced to adjust the objectives laid out in our 5-year plan because many of the distributors in the country had serious difficulties throughout the crisis, which created a very unstable environment for us. Out of five major distributors two of them went bankrupt, and overall distributors were not able to make purchases of great volumes because of the uncertain financial environment. This also forced us to lower our costs and limit our spending, including by decreasing the number of staff. Starting in 2010, Mili Healthcare began to reshape its portfolio by adding new products and restructuring the company's operations according to new business units. Due to these drastic changes we are set to grow considerably for the coming years because we believe that the company is now prepared for such an expansion. In 2012 we will be looking to develop our financial performance and increase our market share with our revamped portfolio." Even further, Sapozhnikova expects to place her company within the top 20 in three years' time and would also like to replicate her strategies in Ukraine in other CIS markets, including Russia. "I understand that these are very ambitious targets, but we have already been successful in the past with our strategies and expertise of the market, and therefore we are sure that we can perform above the average market growth," she concludes.

The downside to adapting and testing new strategies is the risk that a new approach to business will fail. Surprisingly, this was the experience that Janssen lived in Ukraine when the company diverged from its global practices to implement a unique local strategy a few years back. Charged with jumpstarting the company's local operations, Vyacheslav Derbizh, Janssen's recently appointed general manager in Ukraine speaks of the need to revert back to a strategy closer to the company's global approach. "Over the past two years, Janssen had unfortunately been losing market positioning in Ukraine. As a matter of fact, Janssen almost shut down its business here. This is unacceptable, considering Janssen is a part of the No. 1 healthcare company in the world (Johnson&Johnson). Therefore, since I took the job we have only set one aim, which is to be No. 1 in Ukraine! In order to do so, we have short-, middle-, and long-term goals. Concerning our short-term goals, we are focused on building an organization and building a strong business. The middle-term aim is to become No. 1, and long-term is also to be No. 1 by building long-term relationships with the government, key stakeholders, and doctor associations. When looking at the market as a whole, one of the most important aims for the top international pharmaceutical companies is to establish a transparent and compliant environment and this is one of Janssen's goals as well." Indeed it has been up to the pharmaceutical companies to drive this sort of change in Ukraine, and overall the sentiment is that the whole sector is cleaning up and raising standards to provide better results, not only in business, but for Ukrainian patients as well.


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