Abstract
Ukraine’s pharmaceutical market will not recover its 2008 US dollar
value until 2013 according to BMI’s
current forecast, as the country
weathers the effects of currency devaluation and its worst recession in
over a decade during 2009. With Ukraine enduring a perfect storm of the global
financial crisis and the
fallout of domestic political infighting and
policy paralysis, 2009 will be particularly tough for foreign
pharmaceutical manufacturers. Indeed, the US dollar value of the market is
expected to tumble by 38.2%.
We still see slight growth over the forecast
period, with a 0.89% average compound annual growth rate
(CAGR), with
total market value expected to reach US$2.857bn by the end of the forecast
period, roughly
where the market stood on the eve of the current
crisis.
However, the current forecast relies on certain relatively
optimistic assumptions, namely that the hyrvnia
has largely completed its
depreciation against the US dollar and euro and has established a new floor
of
between UAH 8 and 9 for 2009. It is hoped that the disbursement of a
second tranche of International
Monetary Fund (IMF) aid will help stave
off a graver crisis and collapse of the country’s tottering
financial system. That said, the country’s economy will be the worst
performing in the world in 2009,
with BMI forecasting a wrenching 14.7%
decline in GDP in 2009. The Rada (parliament), government
and presidential
administration are tending to the crisis, yet infighting continues to stymie a
decisive
response to the crisis, with new clashes over the prospects of
early presidential elections in October.
The healthcare and pharmaceutical
industry are meanwhile in a state approaching chaos. Margin caps on
wholesale and retail prices – vetoed last year by President Viktor
Yuschenko but restored by a February
Supreme Court decision – came
into effect in April. New rules also call for local producers to use
domestically produced, active pharmaceutical ingredients (APIs) within one
year – an apparent (and
evidently self-destructive) move against
contract manufacturing. One rare bit of good news was the
promulgation of
legislation mandating Good Manufacturing Practice (GMP) compliance for
producers
obtaining or renewing licenses – a move which if enforced
should see the gradual but inexorable move to
full compliance.
In all,
the present situation is chaotic and the government’s instincts appear
populist and short-term. A
March symposium on the introduction of a new
health insurance system – an election pledge of Prime
Minister Yulia
Tymoshenko’s party – appears wildly optimistic under current
circumstances. Notably, the
Prime Minister has called for the creation of
‘two or three’ large domestic pharmaceutical companies and
she
said in April that the government was in negotiations with foreign governments
and companies to
establish new plants in Ukraine with the long-term aim of
import substitution. It is undoubtedly necessary
– but for the near
term, protectionism and price controls will be the norm, to the detriment of
the
marketplace.
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