The representatives of pharmaceutical associations have asked the president not to sign the law “On a Prices and Tariff Rise Moratorium for Medicines and Medical Supplies,” passed by the Verkhovna Rada on October 20. Otherwise the country will develop a pharmaceutical black market for low-quality products, they say. Experts, in their turn, maintain that the prices should be reduced via a comprehensive complex of measures.
Our readers will remember that, under the above law, prices for domestic and imported medicines are to be cut to the July 2008 level. They will again be deregulated after the official subsistence wage is updated, pensions are raised to its level, and arrears in salaries and scholarships and allowances for students are paid off.
Today, over 70 percent of all medicines on our market have been imported, while about 90 percent contain imported ingredients, says Mykhailo Pasiechnyk, President of Ukrainian Pharmaceutical Professional Association. According to him, the price of any imported medicines in Ukraine directly depends on the official US dollar rate. Pasiechnyk explains the rise in prices for medical supplies with the considerable exchange rate fluctuations that had been rocking the country’s market for several consecutive months. “It turns out that a pharmaceutical company imports medicines at an actual exchange rate of 8 hryvnias, but is supposed to sell them according to the old rate of 4.65 hryvnias, which was established in July 2008, that is, below cost. The price for medicines should be reduced by at least 70 percent. Yet how can this be done if the maximum profitability in wholesale trade is 12 percent of the cost, while it is 25 percent in retail trade?”
Representatives of pharmaceutical associations believe that if the moratorium becomes effective, many companies will simply withdraw from the legal market. “No international company is going to sell the medicines at the exchange rate of 5 hryvnias, while the actual rate is 8. Black market will flourish, as was the case with Belarus. Medicines will be smuggled in from Russia, Poland, and other countries,” says Petro Bahrii, President of Ukraine’s Pharmaceutical Producers Association, offering his forecast to The Day.
However, there are no reasons to seriously believe that the market can come to a standstill. On the one hand, there are domestic companies that have a certain safety margin, as the prices for their products have not risen as dramatically as for the imported medicines. On the other, before the presidential elections the authorities will certainly not allow any popular unrest caused by the shortages of supply in the pharmaceutical market.
However, it is indeed essential to examine each party’s arguments in this conflict. No pharmaceutical company will agree to operate at a loss on a competitive market aggravated by crisis conditions. At the same time, one can observe a confusing picture: there are striking disparities in the prices for medicines produced by one and the same company when sold via different drugstore chains. A question naturally arises: What do customers pay for, differences in the exchange rates or profiteering?
According to Oleksandr Bilovol, first deputy of Ukraine’s Minister of Public Health and Chief Sanitary Inspector, the bill will allow “our people to buy medicines at affordable prices.”
Valerii Muntiyan, Ph.D., Professor of Economics, and associate member of the National Academy of Sciences, partly shares his colleague’s opinion. He holds that today the prices for medicines are really exorbitant and should be reduced. But this ought to be done not via imposing a moratorium. Instead, comprehensive measures need to be taken to ensure the growth of the domestic pharmaceutical industry and do away with price speculations.
Ukraine may use international practices in this sphere, creating a state register of prices for medicines and supplies. The representatives of pharmaceutical companies told The Day that this idea had already been tried before the moratorium was imposed. The mechanism is as follows: in case of import or production of medicines, the producer submits a declaration of prices to a relevant state body. With this on hand, it is very easy to check if the producers proceed from the fixed figures during the year and if the drugstores overcharge in order to increase profit margins.
