Ukrainian pharmacology and investment potential
Over the past few years, companies have increased their spendings for research and development. The total expenditure accounted for €741.6 trillion in 2016 according to the European Commission. That is 6% more than in 2015, not to mention that such a growth in spendings is on a six-year streak now.
Much of these investments are made by companies involved in IT, telecoms, automotive, and biotech (including pharmacology). It is peculiar that biotech companies spent up to 15% of their net sales for R&D in 2015. Moreover, we see that the added value generated by pharmaceutical industry is being redistributed towards developing countries. That is, investments in the development of medicines are growing faster than in developed countries, which is a positive signal for Ukraine.
Ukrainian pharma trends
The production of pharmaceuticals in Ukraine is one of the most developed among post-Soviet countries. In total, we have 115 pharmaceutical companies. Among them are subsidiaries of world-known companies such as UCB Pharma GmbH, Novartis, Johnson & Johnson and local players: Farmak, Darnitsa, Ecofarm, Arterium, etc. Their products are shipped to 80 countries worldwide.
That said, many companies have own patents. These patent holders are: Darnitsa (According to the Ukrainian Institute of Intellectual Property (Ukrpatent), the company has 60 patents, of which 25 are active), Farmak (62 and 20, respectively), Borshchahivskiy CPP (49 and 19), Lekhim (8 and 5), Biopharma (4 and 2). Even though these figures seem rather low, especially when compared to developed countries, they prove that researching activities are a going concern in Ukraine and that the country has specialists to conduct those.
One has to admit, however, that the range of medicines produced in Ukraine is confined to either generic medicines (i.e. analogs to the world-famous and certified pharmaceuticals) or traditional remedies (herbal medicinal products that use no new technologies). Innovative developments are generally not conducted in our country. They require huge financial investments, which domestic producers simply have not. On the other hand, limited progress in innovative developments suggests that there is low competition in Ukraine now with an abundance of free niches. That is rather a strong reason for foreign companies to enter the market but there are challenges here: weak economic development inside the country and low consumption of medicinal products. As far as the consumption rate is concerned, Ukraine ranks among the lowest in Europe. However, the statistic data show gradual changes in the situation.
According to the Infographic Atlas “Ukrainian Pharmaceutical Industry”, the size of pharmaceutical products sold in Ukraine increased by 20% last year, up to ₴70 billion. In kind, the growth accounted for 7% – up to 1.224 billion packs. At the same time, the retail sales increased by 7% and hospital purchases grew by 10%. The authors of the study indicate that this trend is going to continue.
The “patent cliff” may also have a positive effect on Ukrainian pharmacology. A patent cliff is a period covering 2013 to 2016, in which many patents expired. Many Ukrainian companies used this excellent opportunity to produce own generics and win new niches both on the domestic and global markets. With the opportunity, however, came the problems.
Generic drugs: exposure to risks
Even though generics are just a copy of an original product, their production is not cheap. The cost of bioequivalence study alone to assess the biological equivalence of a generic preparation and the original drug can vary from ₴2 to ₴4 million. Most Ukrainian companies will not handle such costs on their own.
To that note, few producers possess the technical equipment required to produce generic drugs. A non-compliance with the international production standards is another problem. Which, to be fair, domestic producers are trying to solve according to the Infographic Atlas “Ukrainian Pharmaceutical Industry”.
All things considered, Ukraine has an obvious potential for a fast-paced development in the pharmacological industry. The current global trends and the patent cliff continue to improve the investment appeal of the sector.
At the same time, the pharmacology market faces serious challenges that, for the most part, stem out of economic lag and low investment activity in Ukraine. Finding solution to those is at the core of success and a true driver of the economic development of the state.
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