Prices for medicines are an issue that concerns every Ukrainian. It has become especially acute again after the discussion of the scandalous amendments to the draft law No. 11493. UNN is launching a series of publications to understand how prices for medicines are formed in Ukraine and who has the greatest influence on them.
It is worth noting that, according to international analysts Proxima Research International, the manufacturing plant affects 71.8% of the cost of a medicinal product, while the pharmacy and distributor - 22.3% and 5.9%, respectively.
The role of manufacturers, distributors and pharmacies
The first step in price formation is for the manufacturer to set the wholesale price.
The price of the plant includes:
● Cost of raw materials and packaging;
● Production costs;
● Salaries of employees, medical representatives;
● Fixed costs (depreciation, utilities, advertising);
● Logistics to the manufacturer's warehouse.
In Ukraine, prices for certain medicines are regulated by the state, especially if they are procured with budget funds. Manufacturers have the right to set their own prices, but for some categories of drugs there are strict restrictions to ensure their affordability for of the population.
For example, for medicines included in the National List of Essential Medicines, in case of their procurement for budgetary funds, the maximum retail markup is up to 10%. In the retail market, the markup is differentiated and amounts to 25-50% depending on the cost of the drug's packaging.
However, according to UNN's interlocutors in the pharmaceutical market, manufacturers often ignore this rule and add to the cost of the drug the margin they consider necessary. Sometimes it reaches more than 500%.
Distributors purchase medicines from manufacturers and add their own markup, but it is usually fixed and amounts to about 6-7%. This cost includes storage of goods, transportation, administrative costs, profit, etc.
Pharmacies, in turn, set their own margin when selling to the end consumer. For example, pharmacy chains include the cost of renting premises, employee salaries, taxes, and earnings in their margins. The margin of pharmacies usually does not exceed 22%. At the same time, according to the law, the margin on medicines included in the National List cannot exceed 15%.
Public opinion
According to polls conducted by journalists of UNN, most Ukrainians believe that the basic price of medicines is formed by manufacturers, and they are the source of the increase in the cost of drugs. Some survey participants expressed the opinion that control over drug prices in Ukraine is insufficient. Manufacturers are actually free to set prices, which makes the final cost for consumers often too high.
So, as we can see, it is the manufacturer that has the greatest influence on price formation, because setting the base price for a drug determines how much the consumer will ultimately pay.