Instead of affordable medicines, there is a UAH 8 billion hole in the budget. Expert criticizes new rules for regulating the pharmaceutical market

The introduction of state regulation of drug prices, which provides for strict restrictions on margins, could result in billions of dollars in losses for the budget and pose a threat of a shortage of medicines. This was stated by economic blogger Serhiy Lyamets, according to UNN.

According to his estimates, due to the innovations, including the 8% markup limit for distributors and the abolition of marketing agreements between manufacturers and pharmacy chains, the budget will lose at least UAH 7.7-8 billion in tax revenues annually.

According to my sources, we are talking about at least UAH 7.7 billion a year in so-called underpaid taxes. Where do these figures come from? Let's see. Only the five largest retail pharmacy chains paid more than UAH 4.5 billion in taxes in 2024. Moreover, the payment of taxes by pharmacy chains is growing every year. In 2024, it was 20% compared to 2023. In total, according to my sources, all retail drug chains paid UAH 7.6 billion in taxes in 2024. And wholesalers paid even more. The reason is very clear: the market has once again increased. Thus, in 2024, the turnover of the pharmacy market probably exceeded UAH 200 billion. Given these figures, we could assume that in 2025 the amount of tax revenues could be even higher. But they won't

According to him, both the retail and wholesale pharmaceutical sectors will lose.

“The traditional large profit will be replaced by a limited markup on medicines, and the 20% VAT will also be replaced by a 7% rate. This means that both the amount from which taxes are paid and the tax percentage itself will decrease. Multiply the aforementioned restrictions by UAH 200 billion and you will get a significant reduction in tax revenues,” Lyamets said.

In addition, manufacturers and importers always invest in marketing services to promote their products in retail. However, due to the CMU Resolution , these investments have been banned, meaning that 20% VAT tax will not be paid on them either. According to the expert, tax revenues from retail trade will decrease by 70%, which in absolute terms equals approximately UAH 5.3 billion per year.

Wholesale trade has also received a “work order” from the Cabinet of Ministers to meet the 8% markup. In fact, their margins will be reduced by a quarter and limited by quotas, which will result in a UAH 2.4 billion reduction in tax revenues. In total, the projected tax losses in retail and wholesale trade will amount to almost UAH 7.7 billion per year. Manufacturers will suffer smaller losses from the innovations, but their tax revenues will decrease due to lower selling prices. According to some estimates, it will be about 2%. This will be reflected in minus UAH 60-70 million in income tax. We add this amount as well. It turns out that total budget losses in 2025 will amount to about UAH 8 billion

In addition, the abolition of marketing agreements that previously provided discounts on medicines will create risks of bankruptcies among pharmacy chains, staff reductions, and a general decline in the drug assortment.

The expert warns that restrictions on competition will inevitably lead to a shortage of drugs and further increase in the price of medicines.

Any administrative interference in the market ends up in higher prices. As a result of market contraction, the market is usually concentrated in the hands of the largest players. Concentration means increased market power. This leads to price increases in one way or another. In our case, it will eventually result in higher prices for medicines

At the same time, Lyamets reminded that the abolition of marketing agreements contradicts European practice, where such agreements are a standard retail tool. Mr. Lyamets believes that instead of administrative bans, a mechanism for price regulation should have been developed in cooperation with market participants.

Recall

The Verkhovna Rada passed in the second reading the draft law No. 11493 on the regulation of the pharmaceutical market. In particular, one of the provisions is the establishment of a margin of 8% for distributors and representative offices of foreign pharmaceutical companies.

The European Business Association urged the President of Ukraine to veto the draft law passed by the parliament due to concerns that the innovations could negatively affect the health of patients.

In addition, the government, pursuant to the NSDC decision, approved a resolution to regulate the markup on medicines.

Add

Health Minister Viktor Lyashko has not ruled out a possible reduction in the range of medicines in pharmacies after the law comes into force, which could affect the availability of medicines for Ukrainians.