BMI View: Ukraine's pharmaceutical market will continue to experience inflationary dynamics in 2015, as the impact of the country's economic instability and the Ukrainian hryvnia's depreciation contribute to drug price inflation. We expect market share will further shift towards domestic pharmaceutical companies as the price of imported medicines makes them increasingly unaffordable to consumers. As a result, Ukraine's attractiveness to multinational drugmakers will decline significantly in the short-term.
Headline Expenditure Projections
Pharmaceuticals: UAH40.24bn (USD3.35bn) in 2014 to UAH46.84bn (USD1.95bn) in 2015; +16.4% in local currency terms and -41.8% in US dollar terms. Forecast unchanged from Q315.
Healthcare: UAH114.62bn (USD9.54bn) in 2014 to UAH122.08bn (USD5.09bn) in 2015; +6.5% in local currency terms and -46.7% in US dollar terms. Forecast unchanged from Q315.
In Q415, Ukraine is ranked as the 19th most attractive market in the Central and Eastern Europe region (scoring 37.4 out of 100). Ukraine's score has collapsed over the previous quarter due to the perilous condition of the country's economy, the depreciation of the local currency against the dollar and the bleak short-term outlook.
Key Trends & Developments
In Q215, Ukrainian pharmacy sales grew by 23.1% y-o-y to UAH9.99bn (USD 543mn). Sales volumes of pharmaceuticals continued to decline, falling 8.7% y-o-y in Q215 to 238mn packages.
In August 2015, health minister Alexander Kvitashvili announced that the Ministry of Health would work with a range of international organisations for the procurement of medicines in 2015, such as the United Nations Development Programme, United Nations Children's Fund and the WHO. Procurement worth UAH1.5bn (USD70.5mn) would be made through such organisations in 2015.
According to the UN Special Envoy for AIDS, some 8000 patients in Eastern Ukraine were facing a shortage of anti-retroviral drugs due to conflict in the region.
In July 2015, Ukraine's deputy health minister Victor Shafranska discussed potential amendments to Ukraine's law 'On Public Private Partnerships' during a meeting with industry representatives.
In July 2015, Ukraine's government approved amendments to a pilot project that will introduce price regulations by the state for insulin. The pilot project will be implemented from December 2015.
In June 2015, Ukrainian pharmaceutical manufacturer Biofarm opened a USD40mn drug production facility in Bila Tserkva.
According to a survey performed in June 2015 by Q&Q Research, 62% of Ukrainians have started to purchase locally manufactured drugs as they could no longer afford imported products.
In June 2015, Ukrainian authorities planned to abandon procurement of vaccines made in Russia, and that vaccines would instead be procured from Central Asian countries.
BMI Economic View
Ukraine's economy is near total collapse, holding on only by virtue of occasional capital injections from the West, which have stabilised the hrvynia from further slippage. Nevertheless, the fall in the exchange rate has already sowed the seeds of destruction within the banking sector, which is beginning to implode from the strain, while inflation spirals out of control.
BMI Political View
The outbreak of fresh violence in Eastern Ukraine is unlikely to lead to an immediate increase in the scope of Western sanctions on Russia, although it supports our view that a repeal of sanctions on Russia over the next six months is unlikely.