Reference pricing and reimbursement of pharmaceuticals

Delayed implementation and expected recast of the reference pricing for pharmaceuticals

Following the introduction of the new regulatory framework on reference pricing and reimbursement of pharmaceuticals at the end of 2017 (please see November 2016 and January 2017 Newsletters), the Cabinet of Ministers of Ukraine (the "CMU") and the Ministry of Health of Ukraine (the "MOH") have been facing strong criticism from the pharmaceutical market participants and the healthcare practitioners' community. The main concern expressed by the industry is related to setting maximum wholesale prices for pharmaceuticals with 21 INNs listed in CMU Regulation "On the Introduction of the Reimbursement of Prices for Pharmaceuticals" No. 863  dated 9 November 2016 in the amount of the minimum price of the respective pharmaceutical in the reference countries (ie, Poland, Slovakia, Czech Republic, Latvia and Hungary) and irrespective of their reimbursement status (ie,  irrespective of whether they are subject to reimbursement or bought by patients in retail at their own expense). As the result, the new regulations have not only set the price floor for the pharmaceuticals with 21 INNs at the level of the cheapest pharmaceutical in the reference countries but also prohibited sale of such pharmaceuticals at prices exceeding the established maximum prices. Market participants are taking the view that such unprecedented price-cutting measures for non-reimbursable pharmaceuticals are economically unfeasible and could disrupt the respective product supplies to the Ukrainian market. 

Following a number of discussions with the pharmaceutical industry, on 1 February 2017, the CMU postponed implementation of CMU Regulation No. 862 "On the State Regulation of Prices for Pharmaceuticals" until 1 April 2017. Please refer to our legal alert for more details.

On 23 February 2017, the MOH published on its website three drafts aimed at amending the adopted CMU and MOH regulations on reference pricing and reimbursement (specifically, the draft CMU Regulation "On Ensuring Availability of Pharmaceuticals", the draft MOH Orders "On Amending the Procedure for Calculating the Maximum Wholesale Prices for Pharmaceuticals based on Reference Prices" and "On Approving the Form of Register of Pharmaceuticals Subject to Reimbursement", collectively ‒ the “Drafts”). The Drafts provide for the recast of the regulatory framework for reference pricing and reimbursement by addressing the concerns raised by the industry. Specifically, the most important changes stipulated by the Drafts include:

  • abolishing the maximum wholesale prices for pharmaceuticals that are not included in the reimbursement system and/or not procured with public funds;
  • whether to include a pharmaceutical in the reimbursement system will be the voluntary decision of the marketing authorization holder. The procedure for including the pharmaceutical in the reimbursement system will involve the marketing authorization holder submitting an application, as detailed in the respective draft MOH Order;
  • establishing the maximum wholesale and retail mark-ups for pharmaceuticals included in the list of INNs approved by the Reimbursement Regulation, ie, 21 INNs of pharmaceuticals for treatment of cardiovascular diseases, type II diabetes and asthma. Such mark-ups should apply to all pharmaceuticals included in the abovementioned regulation, irrespective of their inclusion in the reimbursement system and/or their procurement with public funds. The maximum wholesale mark-up should not exceed 5% of the wholesale price (including taxes), and the maximum retail mark-up for these pharmaceuticals should not exceed 15% of the purchase price (including taxes); and
  • the maximum wholesale price for the pharmaceuticals included in the reimbursement system or procured with public funds should be calculated based on the median of the prices for the respective pharmaceuticals in the reference countries (the list of reference countries remains unchanged).

In addition, on 31 January 2017, the MOH published draft amendments to the Licensing Conditions for Conducting Business Activities on Manufacturing, Wholesale and Retail Trade in Pharmaceuticals, Import of Pharmaceuticals (save for active pharmaceutical ingredients) approved by Regulation No. 929 of CMU dated 30 November 2016 (the "Licensing Conditions"). Pursuant to the draft amendments, wholesalers and/or retailers should ensure that pharmaceuticals falling within the scope of reimbursement are available in pharmacies. Upon approval of the draft, the availability of the abovementioned pharmaceuticals in the pharmacies will be inspected by the State Service of Ukraine on Pharmaceuticals and Control of Narcotics. Failure to meet this requirement will be treated as a violation of the Licensing Conditions and will have negative implications for the wholesalers'/retailers' license. Please refer to our recent legal alert for more details regarding the new Licensing Conditions. The published drafts are currently undergoing public discussion and should be approved before 1 April 2017 to avoid impediments in the supply of pharmaceuticals listed in the Reimbursement Regulation.

New register of reference prices for insulin preparations

On 14 February 2017, the MOH approved a new version of the Register of Reference (Reimbursement) Prices for Insulin Preparations. The approved version of the register contains more trade names of insulin preparations than the previous one (please refer to our January 2017 Newsletter for more details regarding the previous version of this register). As noted in our November 2016 Newsletter, this register is required to enact CMU Resolution No. 73 "Issues of Implementing State Control of Prices for Insulin Preparations" dated 5 March 2014, which provides for the launch of a pilot project on state price regulation and reimbursement for insulin preparations as of 1 April 2016. The pilot project has not been implemented in practice due to the absence of the necessary implementing acts. Currently, the only remaining act required for implementation of the project is the register of patients requiring insulin therapy.                                                                                                                     > Back to Top

Changes in the state regulation of prices for medical devices  

The rules for state regulation of prices for medical devices that are procured with state or municipal budget funds were amended by CMU Regulation No. 43 dated 25 January 2017 ("Regulation No. 43"). The main changes are the following:

  1. Declaring changes of wholesale prices for medical devices that are procured with state or municipal funds was abolished. From now on, this procedure is only obligatory for pharmaceuticals procured with state or municipal funds (except for pharmaceuticals procured by specialized procurement agencies, eg, UNICEF, UNDP and Crown Agents).
  2. The basis for calculating the maximum wholesale mark-ups for the abovementioned medical devices was changed. Specifically, the maximum wholesale mark-up should be calculated based on the wholesale price (rather than the declared wholesale price, as was the case previously).

Neither the amounts of maximum wholesale and retail mark-ups nor the basis for calculating the maximum retail mark-up have been changed. In particular, the maximum wholesale mark-ups are up to 10%, including taxes and levies, and the maximum retail mark-ups are up to 10% including taxes. The basis for calculating the maximum retail mark-ups is the purchase price.

Therefore, as of the effective date of Regulation No. 43, ie, 9 February 2017, business entities participating in public procurement tenders are no longer obliged to declare changes of wholesale prices for medical devices. Furthermore, tender participants should consider the amendments to the maximum wholesale mark-ups calculation rules.                                                                                                                   

Draft strategy on implementing the state pharmaceuticals policy for 2017-2025

On 3 February 2017, the MOH published the draft Regulation of CMU "On Approval of the State Strategy on Implementing the State Policy on Providing the Population with Pharmaceuticals for the Period of 2017 - 2025" (the "Draft Regulation"). The Draft Regulation provides for an action plan that includes:

  • enhancing the state regulation of pricing for pharmaceuticals procured with state or municipal budget funds;
  • reducing the current VAT rate for pharmaceuticals;
  • allowing off-label use in exceptional circumstances;
  • introducing mandatory medical insurance;
  • introducing a centralized public procurement system compliant with the Good Procurement System;
  • introducing the Good Storage, Good Pharmacy, Good Promotional, Good Regulatory Practices;
  • introducing the batch release system by the licensee's authorized person; and
  • automatic acknowledgement of GMP certificates issued by the regulatory authorities participating in PICS.

Some of the proposed measures may have a negative impact on innovative pharmaceuticals' turnover in Ukraine, such as:

  • establishing additional terms for the patentability of objects containing pharmaceuticals;
  • optimizing the compulsory licensing of objects containing pharmaceuticals (no details regarding the specific measures to be taken are available);
  • introducing the "Bolar principle" into Ukrainian legislation (allowing for the submission of an application for the state registration of a generic pharmaceutical before the expiry of the patent for the reference pharmaceutical);
  • abolishing the verification of the pharmaceuticals' patent status during the state registration procedure;
  • introducing parallel importation of pharmaceuticals; and
  • introducing the possibility of limiting the data exclusivity of pharmaceuticals for social purposes (no details regarding this measure are available either).

Upon its approval, the regulation is expected to become a basis for changing the current legislation on turnover of pharmaceuticals. The Draft Regulation is currently undergoing public discussion.