Why did one of the giants of the domestic pharmaceutical industry, "Darnytsia," fall into its own trap? The history of the issue

The pharmaceutical market has been in a fever for several months now. But in the last few weeks, the tension has escalated – one of Ukraine's major pharmaceutical manufacturers, "Darnytsia," announced that it is experiencing a crisis and blamed pharmacies for its troubles, claiming that they are trying to almost destroy "Darnytsia."

Profit and ambitions

Darnytsia finished the first year of the full-scale war with a net profit of UAH 554 million, which was a rather good indicator. The following year, 2023, became a kind of peak in profitability – net profit reached almost UAH 1.4 billion. Probably, against the backdrop of such success (partially due to the increase in ex-factory prices for products), Darnytsia decided to enter the retail field – and in May 2024, announced that it would launch a network of one-minute clinics – a pharmacy combined with a general practitioner's office. These "pharmacy-clinics" were planned to sell not only Darnytsia's drugs but also those of other manufacturers. It was expected that investments in opening one such establishment would range from $100,000 to $120,000.

Did this initiative really mark the beginning of a war with pharmacies and a market redistribution? Not necessarily, but it outlined certain intentions of the manufacturer: it wants to play in the pharmacy field and gain its place there. At the same time, by the way, experts estimated Darnytsia's potential at the level of being able to open 1000 such one-minute clinics. Quite a lot, you must agree.

It is noteworthy that almost at the same time, discussions began about the need to introduce new regulations in the pharmaceutical market. And Darnytsia, represented by the Director of the Board of Directors of the pharmaceutical company Kateryna Zahoriy, more clearly outlined her vision of the situation: the company had previously not been interested in the prices of their drugs for the end consumer and, in general, what happened to those drugs after they were shipped from the factory, but now they became interested, and it became clear... there are too many pharmacies.

Doesn't this sound strange given that Darnytsia itself was planning to open pharmacies? Or did it turn out that competition in the market was too high, and the field needed to be cleared? Subsequent events around the market suggest certain answers to these questions.

Pharmacies – from strategic partner to enemy?

"Pharmacies for a manufacturer like Darnytsia are a strategic partner," Kateryna Zahoriy stated in the same interview. And soon after, she described how exactly this strategic partner should work and, by her own admission, actually conveyed her vision to the President back in December 2024. The essence of her vision was to limit markups, eliminate marketing agreements, which significantly affected (as it turned out later) not the reduction of drug costs for the consumer, but the profitability of pharmacies and the potential increase in their accessibility.

Yes, when new regulations for the pharmaceutical market came into effect in March 2025, their impact turned out to be unequivocally negative – the profitability of pharmacies significantly decreased, they were forced to abandon some social projects, such as, for example, mobile pharmacies in frontline territories, the state lost part of its tax revenues, and the patient never saw the expected price reduction, except for a number of not the most expensive drugs from the so-called "TOP-100" list from the Ministry of Health, which in reality turned out to be a list from manufacturers. By the way, this list was presented by manufacturers, including Darnytsia, as a great compromise and concession on their part.

Ultimately, even the Ministry of Health confirmed that the cancellation of marketing agreements, which Darnytsia so strongly opposed, did not affect the reduction in drug costs. What was presented as a panacea for high prices and a salvation for the market turned out to be an impetus for market imbalance.

The crisis for "Darnytsia" came unexpectedly, although it was predictable

"Don't predict risks, but be able to deal with them," Kateryna Zahoriy said in one of her interviews.

These words are almost prophetic. As it turned out, the new market regulation, implemented not without the participation of Darnytsia itself, also brought certain "inconveniences" for the manufacturer. And this is not about the concession, which consisted in reducing the cost of the "TOP-100," but about the obligation of pharmacies to have and offer the patient the cheapest analogue by active substance. And what "no one expected" happened – sales of drugs produced by Darnytsia began to fall. A completely obvious thing – price competition played against the manufacturer, whose, by the way, mostly generic drugs, turned out to be more expensive in many positions than domestic analogues, and sometimes even foreign analogues. Even the manufacturer's pride – the branded "Tsitramon-Darnytsia" turned out to be more expensive than the analogous one produced by "Lubnyfarm." Here it should be added that in the final cost of the drug, up to 74% is the manufacturer's price, and the manufacturer's actual cost price for some positions is... 15%, while the manufacturer's margin can reach up to 85%. And these data were announced by none other than Kateryna Zahoriy, as a representative of "Darnytsia."

"If there are, for example, 34 types of diclofenac on the market, then, of course, the pharmacy chain will choose the cheapest one," explained Petro Bahriy, president of the "Manufacturers of Medicines of Ukraine" association.

As they say, "nothing personal – just business." But "Darnytsia," in a manner that seems to be becoming traditional, accused pharmacies of sabotaging the manufacturer's products. This caused surprise not only among the pharmacies themselves but also in the market as a whole.

"It's business, nothing personal. 'Darnytsia' has always been more expensive, and most likely, pharmacies switched to cheaper suppliers. This is if we are talking about mass medicines. If 'Darnytsia' has some exclusive, rare medicines, then they are definitely taken for sale – where else to get them?" – explains the situation Oleksandr Ivanenko, former head of the Kharkiv pharmacy base of the state company "Liky Ukrainy."

The objectivity of such negative changes for the manufacturer is also confirmed by the change in consumer sentiment among Ukrainians, who are increasingly saving on medicines.

But the process launched by the beginning of regulatory changes can no longer be stopped, and besides – it is quite difficult to admit one's mistakes... probably that is why "Darnytsia" appealed to the Antimonopoly Committee, accusing pharmacies of virtually a cartel conspiracy against it, due to which, allegedly, the manufacturer was forced to suspend production three times. By the way, according to our information, "Darnytsia" is the only domestic manufacturer that took such an unprecedented step after the new market regulation came into force, which may indicate that other pharmaceutical companies are adapting more easily to the new rules of the game and price competition.

However, information about the suspension of Darnytsia's production, if examined more closely, can lead to reflection. Judge for yourself: new regulatory rules came into effect on March 1, 2025, and already in March, Darnytsia suspends production. Allegedly, pharmacies do not want to sell Darnytsia's drugs, they accumulate in warehouses... At the same time, in March, the plant did not work for three whole weeks, meaning it worked for only one week. And the new rules for the pharmaceutical market had just been launched, and the warehouses were already overflowing. So, perhaps there were already many drugs in the warehouses before that? Or is the production stoppage related to something else? Perhaps to a criminal proceeding, within which, among other things, representatives of Darnytsia are suspected of illegally providing discounts on medicines sold with budget funds to a number of distributors (thanks to this, distributors' profit ranges from 25% to 70%, which exceeds the legally defined maximum markup of 10% – and this concerns state funds)? Or, perhaps, to a sharp decrease in net profit from UAH 1.3 billion in 2023 to UAH 377 million in 2024? It is interesting that the company's revenue almost did not change – it remained at the level of UAH 7 billion. And here another logical question arises – what did the manufacturer, whose main portfolio consists of generic drugs that do not require excessive investment for creation, invest most of its revenue in? In debt repayment? Production modernization? Or, perhaps, in an attempt to open its own pharmacy chain?