GROOMING A NEW LANDSCAPE
Ukraine's sheer size and low health indicators are testimony to a vast untapped potential that must be capitalized upon in
the near future. As general manager of Sanofi Ukraine, the leading foreign pharmaceutical company in the country, Jean-Paul
Scheuer goes as far as claiming that "Ukraine is more European than we think, and I do not think there is another European
country with such great potential. A country like Poland, with a similar population and background, has already reached a
certain level of development and a certain saturation of the market. For the next year, the Ukrainian economy is expected
to grow 5%, which is considered low. France would only dream of that percentage." Nycomed's Zaika asserts that "despite the
fact that we have lost 20 years due to lack of government focus on the healthcare sector, there is still hope that the next
government will decide on a good direction for the country. We need drastic reforms though, and at some point in the future,
Ukraine will become a real European economy. Once that happens, those companies that are established here will benefit greatly."
Indeed the country's accession to PIC/S in January 2011 was a bold step forward to regularize its pharmaceutical practices
with global standards. Solovyov, of the SAUMP, affirms that "this clearly demonstrates the confidence of the international
community in the system of state quality control of medicinal products in our country, and the Ukrainian ability to build
and maintain this system according to world standards."
Already there is a trend of foreign pharmaceutical companies deepening their presence in Ukraine beyond just commercializing
their products. This is clear from the wave of representative offices being turned into limited liability companies, the handful
of marketing and manufacturing collaborations that have emerged between local producers and foreign companies, as well as
the interest in M&A opportunities to buy out some of the local players. Perhaps the most obvious example of such collaboration
is that of Ukrainian manufacturer Farmak, the No. 1 company in the market in terms of value, with its end-stage production
of Lilly's recombinant insulin product. "In 2004 we began building the modern facilities that would package this product,
and the idea of the partnership was that it would deepen over time until it reached a full transfer of technology to Farmak
from Lilly. This is why we invested great amounts of money into the installing the most modern and highest quality equipment
under European standards," asserts Oleg Syarkevych, business development manager at Farmak.
In the words of Vladimir Sayenko, managing partner of Sayenko Kharenko, the leading Ukrainian law firm that widely advises
the pharmaceutical sector: "There is definitely a trend for the local industry to 'clean up' in order to be more attractive.
Moreover, we have seen the legal framework being gradually improved to attract foreign investors. Yet the major country risks
remain the same: inconsistent application of the laws by various regulators, corrupt judiciary, and weak enforcement. However,
these risks pay off with the much higher yields on investment than elsewhere in the developed economies."
The possibility of acquiring or partnering with a local producer is even being considered by mid-sized regional players, such
as Turkish flagship Nobel Pharma. Cem Demirci, general director of Nobel Ilac Ukraine, speaks about the prospect of forging
a partnership with a Ukrainian manufacturer: "We are always discussing this with our headquarters because a country with a
population of 46 million inhabitants definitely has great opportunities. Of course the government will always favor local
production which is why it is essential for us to consider such partnerships for the future, when Ukraine will have a stable
political and economic system." Nobel already has vast experience in the CIS region, having established the first GMP-certified
plant in Kazakhstan and another manufacturing site in Uzbekistan. "I think that Ukraine is the market with the most perspectives
within the CIS region. Indeed, there are a lot of marketing restrictions in markets such as Russia, Belarus, and Kazakhstan,
whereas Ukraine is very liberal on this. But I still believe that Ukraine needs some time," concludes Demirci.
The call for reforms almost unanimously involves a push for the government to implement a reimbursement system that would
benefit both the pharmaceutical industry and Ukrainian patients. It has been 15 years since Ukrainian authorities have been
debating the issue of reimbursement, yet nothing had been done until 2011, when finally four pilot projects were executed
in different regions of the country, as part of a plan that would bring reimbursement by 2014. Granted that these projects
are mostly geared towards restructuring healthcare institutions in their respective regions, they are nevertheless the initial
step to gauge how efficiently reforms can be carried out and what their true benefits may be. In terms of economic growth
for the pharmaceutical market, the benefits of a reimbursement scheme are more than evident with estimates that the value
of the market would double after such a move. "I think that a reimbursement system will be implemented in three years, and
this is of course crucial for the improvement of the lives of the patients and to create even more opportunities. Indeed,
this is necessary and inevitable," argues Demirci.