Public procurement & reimbursement

More pharmaceuticals may be eligible for public procurement in 2018 due to the awaited extension of the National Essential Medicines List

On 17 November 2017, the Ministry of Health of Ukraine (the “MOH”) published a draft of the revised National Essential Medicines List (the “NEML”). The draft NEML includes more than 60 new pharmaceuticals which are suggested for inclusion in the NEML based on the following lists:

  • the Model List of Essential Medicines of the World Health Organization
  • a list of pharmaceuticals procured using budget funds, including those procured by specialized procurement agencies (Crown Agents, United Nations Development Program and UNICEF)
  • healthcare industry standards (clinical protocols and formularies).

Market participants are expecting approval of these amendments by the Cabinet of Ministers (the “CMU”) by the end of 2017. From 1 January 2018, budget healthcare organizations will be entitled to procure primarily NEML-listed pharmaceuticals. Only after full demand of NEML-listed pharmaceuticals is satisfied will budget healthcare organizations be entitled to procure non-NEML pharmaceuticals.

As reported in our October newsletter, the NEML should be revised annually. From 1 January 2018, non-NEML pharmaceuticals may be included in the following NEML versions based on companies’ or individuals’ submissions.

The Ministry of Health suggests extending the reimbursement program

On 15 November 2017, the MOH published a draft regulation of the CMU (the “Draft”) providing for extension of the reimbursement program. The Draft provides that the reimbursement program should cover 12 more INNs of pharmaceuticals used for treatment of anemia during pregnancy, depression, and chronic stomach and duodenum diseases. Currently, the reimbursement program covers pharmaceuticals with 21 INNs used for treatment of cardiovascular diseases, type II diabetes and asthma. In addition, the Draft provides for the possibility of a company applying for reimbursement to decrease the price of its pharmaceutical if it exceeds the reimbursement price established by the MOH, thus making only a partial reimbursement of its cost possible. The company may only be entitled to file a submission with a decreased price if the difference between the reimbursement price and the company’s price is not more than 5% of the reimbursement price. The Draft also stipulates that pharmacies should be entitled to sell reimbursable pharmaceuticals purchased before semi-annual revision of the register of reimbursable pharmaceuticals for prices effective before such revision. This provision is aimed at preventing financial losses of pharmacies selling the available stock of reimbursable pharmaceuticals, which may occur due to the MOH’s revision of reimbursement prices. If adopted, the Draft should increase the number of therapeutic areas in which patients may receive reimbursable pharmaceuticals.

Obtaining pharmaceuticals at no charge or on a co-payment basis may be simplified

On 6 November 2017, the MOH published a draft order aimed at changing the rules for obtaining pharmaceuticals at no charge or on a co-payment basis through pharmacies under regulation of the CMU No. 1303 “On Organizing Free and Preferential Access to Pharmaceuticals upon Physician’s Prescriptions in Case of Outpatient Treatment of Certain Population Groups and for Certain Categories of Diseases” dated 17 August 1998 (the “Regulation”). The Regulation sets out a separate framework for obtaining pharmaceuticals free of charge or on a co-payment basis at pharmacies for certain categories of patients suffering from diseases listed in the Regulation (oncological, psychiatric diseases, etc.).

Based on the current wording of the Regulation, from 1 January 2018, obtaining pharmaceuticals at no charge or on a co-payment basis through pharmacies will only be applicable to NEML-listed pharmaceuticals. Previously, patients could receive pharmaceuticals listed in CMU Resolution No. 1071 “On the Procedure for Procurement of Pharmaceuticals by Healthcare Institutions Financed by the Budget,” dated 5 September 1996, for free or on a co-payment basis. CMU Resolution No. 1071 was abolished in 2017. As many pharmaceuticals listed in CMU Resolution No. 1071 were not included in the NEML, from 1 January 2018, patients’ access to such pharmaceuticals may be jeopardized. To prevent any interruption of patients’ treatment with such pharmaceuticals, the draft changes provide for the possibility of patients to obtain registered medicines not included in the NEML at no charge or on a co-payment basis, if they are included into the healthcare industry standards (clinical protocols, formularies). 

Registration of pharmaceuticals Pharmaceuticals registered in USA, Switzerland, Japan, Australia, Canada or the EU may benefit from the simplified registration procedure

The procedure for simplified registration of pharmaceuticals registered in the USA, Switzerland, Japan, Australia, Canada or the EU (under the centralized procedure) has been amended to encourage companies launching new products on the Ukrainian market. On 24 November 2017, MOH Order No. 1202 dated 2 October 2017 became effective. It amended MOH Order No. 1245 “On Reviewing the Registration Materials for Pharmaceuticals Submitted for the State Registration (Re-Registration), and Materials for Variation of the Registration Materials During the Validity of the State Registration Certificate for Pharmaceuticals Registered by the Competent Authorities of the United States of America, Switzerland, Japan, Australia, Canada, Pharmaceuticals Registered under the Centralized Procedure by the Competent Authority of the European Union” dated 17 November 2016. This order provides for a simplified and expedited procedure to register pharmaceuticals that were registered in the abovementioned countries.

The changes stipulated in Order No. 1202 include the following:

  • possibility for Ukraine’s State Expert Center of the Ministry of Health to request additional documents or information during the review of submitted materials
  • clarifications regarding the following issues:
    • the entity that should be indicated as the manufacturer of the pharmaceutical during the registration (re-registration) and variations
    • the entity that should be indicated as the manufacturer on the product package
    • product packages of the pharmaceutical that may be submitted for state registration under the simplified procedure
    • the title of the pharmaceutical that may be submitted for state registration under the simplified procedure
    • permissible variations in the title of the manufacturer indicated in the application for state registration compared to the title of the manufacturer in the reference country, which should not result in registration denial
    • the language of documents to be submitted by the applicant.

The simplified registration procedure was introduced in November 2016, but was not used by companies for registering new pharmaceuticals due to the lack of regulation on a number of procedural issues. Following wide public discussion, the MOH has adopted necessary amendments.  

Healthcare system reform Healthcare system reform is moving forward  

As reported in our October newsletter, on 19 October 2017, the Parliament of Ukraine adopted the first law in the package of laws required to launch the long-awaited medical reform (draft Law No. 6327 “On State Financial Guarantees of Medical Services for Population”). The reform will recast the framework for providing and financing medical services, pharmaceuticals and medical devices in Ukraine. On 17 November 2017, the draft law was signed by the Head of the Parliament. Thus, the remaining steps required for the law to become effective are signing by the President of Ukraine and publication in the official gazette. Furthermore, on 15 November 2017, the CMU approved a step plan on implementing the Concept of Reforming Healthcare Reform for the Period Until 2020. The step plan provides for the following actions:

  • creation of the National Health Service — within one month upon approval of draft Law No. 6327
  • development of bylaws required for changing the basis of payment for medical services (requirements to medical services providers, template agreement with a service provider, methodology of calculating the cost of medical service, etc.) — within the fourth quarter of 2017
  • launch of the eHealth system: approval of the MOH order on testing the system, introduction of e-prescriptions within the reimbursement program, etc. (within the fourth quarter of 2017); registration of healthcare facilities on the primary care level, patients and medical professionals in the system (within one month upon approval the MOH order on testing the system)
  • use of the eHealth system in healthcare facilities — within 2018
  • approval of documents required for selecting a physician, approval of the Procedure for Providing Primary Medical Care (within the fourth quarter of 2017)
  • implementation of the Methodology for Calculating the Cost of Medical Service (the first quarter of 2018)
  • approval of electronic instrument for defining the reimbursement price of pharmaceuticals based on an electronic reverse auction etc.

Finally, on 14 November 2017, the Parliament adopted draft law No. 7117 “On Enhancing Affordability and Quality of Medical Services in Rural Areas” aimed at enhancing the technical infrastructure and financial capabilities of healthcare institutions in rural areas. The final text of the adopted law has not been published yet. The remaining draft law in the package of laws required to launch the healthcare reform is draft law No. 6604 “On Amending the Budget Code of Ukraine regarding Ensuring State Financial Guarantees of Providing Medical Services and Pharmaceuticals.” It provides for changes to the budget legislation that will ensure that the National Health Service can administer state budget funds. The Parliament of Ukraine adopted this draft law in the first reading on 19 October 2017. Thus, its final approval is pending. We will inform you about the adopted laws in more detail once their official texts have been published.

Competition law

Typical requirements for vertical concerted actions of business entities

The official text of the Typical Requirements to Vertical Concerted Actions of Business Entities (the “Vertical Guidelines”) approved by the AMCU on 12 October 2017 has recently become available. The document will become effective upon its publication in the official gazette. The Vertical Guidelines set out which concerted actions are permissible and do not require clearance from the AMCU. A preliminary approval of the AMCU may be required for a number of vertical arrangements (including those related to payment of discounts, bonuses and other incentives) before their implementation, including in the following cases: where the parties to such arrangements have 30% market share or more, or where such arrangements are considered as hardcore restrictions (such as price fixing or limiting the territory of sales or list of customers), or where the arrangements provide for non-compete obligations effective for five years or more. etc. The Vertical Guidelines are expected to have a significant influence on arrangements between pharmaceutical companies, distributors and pharmacy chains. We recommend that companies review their existing arrangements with distributors and pharmacy chains in light of the adopted Vertical Guidelines and take them into account before entering into any new arrangements.

One more case on the pharmaceutical market ends with major fines

On 14 November 2017, the Antimonopoly Committee of Ukraine (the “AMCU”) fined a major innovative pharmaceutical company and two of its distributors in Ukraine in the amount of UAH 69,547,194 (approximately USD 2,565,000), UAH 28,788,116 (approximately USD 1,062,000) and UAH 40,759,068 (approximately USD 1,503,000), respectively, for alleged anticompetitive concerted actions. The AMCU stated that the company’s discounts system and terms of products’ supply may restrict competition by impeding market access to cheaper alternatives. Additionally, the AMCU stated that agreements between the company and its distributors allow for increasing prices of pharmaceuticals sold on the public procurement market. Given the AMCU’s scrutiny on the pharmaceutical market and the major fines imposed on pharmaceutical companies (see our newsletter for September-October 2016), companies should be very careful when drafting distribution agreements and should consider adopting policies on interaction with distributors, including incentives for distributors.

Compliance

Webinar invitation — Navigating trade sanctions in an increasingly complex and uncertain world

On 12 December 2017, Baker McKenzie is hosting the first Global Compliance News webinar. The topic of the webinar is the rapidly changing sanctions environment. Today, economic and trade sanctions are being routinely used by nation states to achieve their foreign policy objectives. Join our market-leading trade compliance team to find out how your company may be affected by the recent developments in the sanctions arena. To find out more, please follow this link.

Second EU Study on Corruption in the Healthcare Sector released: What you should do to avoid falling into the corruption trap

On 7 October 2017, the EU Commission published its updated study on corruption in the EU healthcare sector. Companies in the healthcare industry should rethink their policies and procedures based on the results of this Europe-wide study. To find out more, please follow this link.