Recent developments

In March 2017, the Cabinet of Ministers of Ukraine (the CMU) and the Ministry of Health of Ukraine (the MOH) have adopted a number of bylaws representing a major overhaul of the regulatory framework for pricing and the reimbursement of pharmaceuticals. On 1 April 2017, reimbursement was launched with respect to 21 INNs of pharmaceuticals for treating cardiovascular diseases, type II diabetes and asthma (21 INNs). As a result, previously enacted severe price-cutting regulations for the retail market have been abolished and a more balanced approach to calculating the maximum prices for pharmaceuticals on the public procurement and reimbursement market has been introduced.

In addition, the CMU approved a new version of the National Essential Medicines List (the NEML) and new rules for public procurement of pharmaceuticals. As of 1 July 2017, pharmaceuticals not included in the NEML will no longer be entitled for public procurement, subject to certain exceptions as described below.

Implications for companies

Reference pricing and reimbursement

Participation in the reimbursement program is voluntary. Companies willing to participate in this program should apply to the MOH for inclusion of their products in the register of reimbursable pharmaceuticals (the Reimbursement Register).

Public procurement

The new NEML is effective as of 25 March 2017. Companies selling products excluded from the NEML to the public procurement market should consider applying to the MOH for inclusion hereto pursuant to the establishment procedure. Starting from 1 July 2017, only pharmaceuticals included in the NEML will be purchased by state/municipal funds, with a limited number of exceptions.

What the regulations say

Reference pricing and reimbursement

On 17 March 2017, the CMU approved Regulation No. 152 "On Ensuring the Affordability of Pharmaceuticals," followed by the adoption of MOH Order No. 299 "On Approval of Changes to the Procedure for Calculation of the Maximum Wholesale Prices for Pharmaceuticals based on Reference Prices" dated 21 March 2017 and a number of other related bylaws. All bylaws became effective as of the date hereof.

The bylaws were adopted to eliminate deficiencies in Regulation No. 862 "On State Regulation of Prices for Pharmaceuticals" dated 9 November 2016 and to approve the outstanding regulations for launching the reference pricing and reimbursement system as of 1 April 2017.

The key changes include the following:

  • Abolishing maximum wholesale prices for 21 INNs that are sold on the retail market and are not procured and/or reimbursed with budget funds;
  • Voluntary basis for including a pharmaceutical in the reimbursement system. The decision on inclusion is made by the MOH on the basis of an application filed by the marketing authorization holder or its representative together with the underlying documentation;
  • Introducing the obligation to declare wholesale prices for pharmaceuticals subject to reimbursement;
  • The maximum mark-ups for 21 INNs, irrespective of their reimbursement/public procurement status, are as follows: wholesale — up to 10% of the declared wholesale price; retail — up to 15% of the purchase price;
  • A pharmaceutical can be included in the Reimbursement Register if its price does not exceed the maximum wholesale price;
  • The maximum wholesale price is calculated as a median of the prices for the respective pharmaceuticals in the reference countries (Poland, Slovakia, Latvia, Hungary and Czech Republic), based on the daily defined dose established by the World Health Organization (the WHO);
  • The reimbursement amount is calculated based on the internal reference pricing, i.e., the reimbursement amount should be equal to the lowest price of the pharmaceutical with the same INN in the Reimbursement Register. If the price of the reimbursable product in the pharmacy is higher than the reimbursement amount, the difference should be covered by patient co-payment.

Public procurement

On 16 March 2017, the CMU approved Regulation No. 180 (Regulation No. 180), providing for the recast of the regulatory framework for public procurement of pharmaceuticals. Specifically, Regulation No. 180 enacted a new version of the NEML, which is based on the respective WHO list. The NEML became effective on 25 March 2017. It has been criticized by the pharmaceutical industry and medical community for excluding many pharmaceuticals which are currently produced by the state (e.g. most of innovative, orphan and other pharmaceuticals) and including pharmaceuticals that are no longer used or that have never been used in medical practice in Ukraine.

The NEML may be supplemented with additional products based on a decision from the MOH if the marketing authorization holder submits an application and the relevant documentation concerning the comparable effectiveness, safety and economic suitability of the pharmaceutical. The Expert Committee on Selection and Use of Essential Medicines accepts applications until 1 July 2017.

In addition, the following changes introduced by Regulation No. 180 will become effective on 1 July 2017:

  • Cancelation of CMU Regulation "On the Procedure for Procurement of Pharmaceuticals by Healthcare Institutions Financed by the Budget" No. 1071 dated 5 September 1996 (Regulation No. 1071), which established the list of pharmaceuticals eligible for procurement with state or municipal budget funds.
  • Prohibition for healthcare institutions financed with state or municipal budget funds to procure pharmaceuticals not included in the NEML, subject to the following exceptions: ◦pharmaceuticals not included in the NEML may only be procured when the full demand for pharmaceuticals listed in the NEML is satisfied. The scope of such demand should be determined in accordance with a procedure yet to be approved by the MOH (which should be approved within three months, eg, by 25 July 2017). In addition, within such procurement, preference should be given to pharmaceuticals included in the clinical protocols and other healthcare standards.
    • requirements of Regulation No.180 do not apply to procurement of pharmaceuticals conducted by the specialized procurement agencies (effective until 31 March 2019); and
    • requirements of Regulation No.180 do not apply to the pilot project on insulin reimbursement until 1 January 2019.

Considering the possible delays with the MOH adopting the outstanding procedure on the scope of demand of procurement of pharmaceuticals included in the NEML, there is a risk that starting from 1 July 2017, procurement outside the scope of the NEML may be impossible until the MOH approves such procedure. Given the major reduction of the list of pharmaceuticals included into the NEML compared to Regulation No. 1071, market participants are deeply concerned by the risk of interrupted access to treatment of many patients, which is currently procured by the state.

Conclusion

These changes provide for the recast of the regulatory framework for pricing, reimbursement and public procurement of pharmaceuticals. Companies should consider applying for inclusion of their pharmaceuticals in the Reimbursement Register if they wish to participate in the reimbursement program. Furthermore, companies should consider applying for inclusion of their non-NEML pharmaceuticals in the NEML if they wish to sell them on the public procurement market. Companies should also take into account the new rules for public procurement of pharmaceuticals as of 1 July 2017 when planning marketing and supply activities in Ukraine.