Manufacturers have not reduced drug prices, even though they no longer pay pharmacies for marketing - MP

The introduction of new regulations has created a collapse in the pharmaceutical market of Ukraine. Despite the ban on marketing agreements between pharmacies and manufacturers, which, in fact, freed factories from the need to pay interest to retail, prices for medicines have not only not decreased - they continue to rise rapidly. This was stated in an exclusive comment to UNN by Yuriy Zaslavsky, a member of the Verkhovna Rada of Ukraine Committee on National Health, Medical Care and Medical Insurance.

According to the MP, Ukrainian pharmaceutical manufacturers claim that they were forced to pay pharmacy chains 40-60% of the cost of the drug under marketing agreements. The factories claim that this affected the selling prices of medicines, so patients were forced to buy them at a higher price.

For example, during 2024, manufacturers raised prices by 2-2.5 times, explaining this by allegedly high costs of promoting their products.

After the introduction of new regulation of the pharmaceutical market from March 1, marketing agreements between manufacturers and pharmacies were banned. But, according to Yuriy Zaslavsky, instead of reducing the selling prices by 40-60%, freed from marketing, manufacturers did not take such a step. 

If we take it fairly, then after the ban on marketing, manufacturers no longer need to pay these 60%. They should have lowered their prices. Even if this marketing was banned for two months, then you, please, subtract this added value that you invest in the cost of medicines for two months. But they, of course, did not do this

Instead, pharmacies, deprived of income in the form of marketing agreements, are forced to cover their expenses on their own.

When a pharmacy has rented premises, has staff, utilities and so on - these are its expenses. The markup that pharmacies put, 10-12% on prescription vital drugs to attract patients, is not enough. They increased the markup automatically, because they cannot count on marketing, which previously covered these discounts. Accordingly, prices have risen. But if manufacturers' prices fell, if manufacturers treated this fairly, then prices would, of course, fall

As an example, the MP said that he recently bought an enzyme drug, which cost UAH 200 in January, and now its cost is already UAH 250. 

Paradoxically, it is the manufacturers who actively form the narrative about "sky-high" pharmacy markups of up to 100-150%, trying to shift the blame to retail. At the same time, the fact that the average pharmacy assortment is up to 5 thousand items is ignored, and profitability can vary significantly depending on the position, the MP noted.

In addition, the drug market in Ukraine is mainly generics. There are no expensive innovations. Therefore, talking about the high profitability of the entire range is a manipulation, Zaslavsky believes.

In addition, he drew attention to the fact that due to the loss of marketing agreements, revenues to the state budget will decrease, because pharmacies previously paid taxes for such revenues. Moreover, the MP does not rule out that a complete ban on marketing will lead to the emergence of shadow schemes.

Marketing is a whole science. And today, not to use marketing measures to promote a particular drug, I am now talking not about prescription drugs, but about over-the-counter drugs, I do not see any sense in this. To arrange state regulation? As far as I remember, where the state begins to interfere, chaos begins there

It is worth noting that the state does not currently regulate the selling prices of drug manufacturers, but only limits the markups of distributors and pharmacies. This is despite the fact that, according to research, 72% of the drug price is formed by the manufacturer. 

According to the MP, the solution is to return marketing agreements with transparent taxation and, at the same time, a balanced approach to regulating the activities of pharmacy chains, distributors and manufacturers - as is the case in Europe.

It is worth clarifying that in European countries, marketing agreements for over-the-counter medicines between manufacturers and pharmacies are not regulated, that is, states do not interfere  in the economic relations of companies. And the marketing of prescription drugs is prohibited in European countries. 

Now there may be five pharmacies on one Kyiv street. But this is not a monopoly - this is competition. And the consumer chooses where to go. If one chain does not take the goods, another will take them. That's not the point

It should be noted that developed countries stimulate competition, including in the pharmaceutical market. The relevant authorities there only track cases of manipulation and collusion to monopolize the market. In Ukraine, by the way, this is done by the Antimonopoly Committee.

Let us remind

According to the State Tax Service, Ukrainian pharmaceutical manufacturers in 2024 paid the least taxes in the industry, which raises questions about possible shadow schemes and injustice in the fiscal burden. Thus, legal entities and individual entrepreneurs engaged in retail trade of medicines in pharmacies, in 2024 paid about 5.4 billion hryvnias of taxes to the budget. Distributors in the same year brought more than 9.7 billion hryvnias to the state budget. Manufacturers, on the other hand, only a little more than 4.5 billion hryvnias.

According to economist Oleh Hetman, such a market model, where manufacturers pay the least taxes, looks strange and may indicate the use of tax evasion schemes.

According to the Opendatabot service, in 2024, the income of only the three largest factories amounted to almost 23 billion hryvnias, in particular, the income of "Darnitsa" amounted to more than 6.8 billion hryvnias, "Farmaku" - 10.7 billion hryvnias, and "Arteriumu" - 5.2 billion hryvnias.

Let's add

At the end of February, law enforcement officers searched the "Darnitsa", "Farmak" and "Arterium" pharmaceutical plants in Kyiv. The name of the fourth enterprise, where investigative actions also took place, has not yet been officially disclosed.

The Kyiv City Prosecutor's Office informed UNN that it concerns the possible appropriation of state and budget funds by officials of pharmaceutical manufacturers who, according to the investigation, entered into a criminal conspiracy with representatives of one of the distributors in the western regions of Ukraine. According to the case materials, officials established an illegal mechanism for selling medicines at inflated prices to state and communal medical institutions, which later made it possible to seize funds and legalize them.

As a result of actions that qualify as abuse of office and money laundering, the budget suffered losses in the amount of UAH 3.15 million. Five people in this case have already been notified of suspicion of legalization (laundering) of proceeds of crime.