Public procurement of pharmaceuticals

The new procedure for revising the National Essential Medicines List may hamper public procurement of pharmaceuticals

Recent changes to a number of bylaws on revising the National Essential Medicines List (the “NEML”) create risks for continuous public procurement of pharmaceuticals because they have set vague timelines for granting the NEML status to pharmaceuticals based on companies’ or individuals’ submissions. Consequently, there is a risk that certain pharmaceuticals will not be included in the NEML in 2018. NEML-listing is crucial for companies selling their pharmaceuticals to budget healthcare organizations, as starting from 1 January 2018, these 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. The changes were introduced by order of the Ministry of Health of Ukraine (the “MOH”) No. 885 dated 1 August 2017 (the “Order”) and include the following:  

  1. By 1 November 2017, the Expert Committee On Selection and Use of Essential Medicines (the “Committee”) should revise the current version of the NEML based on the Model List of Essential Medicines of the World Health Organization, the list of pharmaceuticals procured with budget funds, including those procured by specialized procurement agencies (Crown Agents, United Nations Development Program and UNICEF) and healthcare industry standards (clinical protocols and formularies). The Order does not provide for revision of the NEML based on companies’ submissions on inclusion in the NEML, which means that the Committee may only start adopting decisions upon reviewing these submissions in 2018.
  2. The Committee should further submit the draft revisions to the NEML to the MOH, which will then submit them to the Cabinet of Ministers of Ukraine (the “CMU”). The Order does not establish any timelines/procedures for pre-approval of such revisions by the MOH or for their final approval by the CMU.
  3. Starting from 1 January 2018, the Committee will revise the then-current NEML by 1 July based on a review of the submissions for inclusion filed by companies or individuals in the order of arrival. The timelines for reviewing submissions were revised; previously, the Committee was obliged to review each submission within two months and review all received submissions by 1 June of the current year. The Order abolished previously established timelines and from now on, the Committee must review each submission within 180 calendar days. Given this revision of timelines, there is a risk that the Committee will not be able to review all the received submissions and adopt decisions on recommending or rejecting NEML-listing by 1 June. Therefore, a pharmaceutical’s NEML-listing in the then-current year may be jeopardized.
  4. The Committee is granted a right to initiate extraordinary inclusion of a pharmaceutical in the NEML based on morbidity and mortality rates, clinical protocols, formularies and/or the list of pharmaceuticals procured with budget funds, but the procedure for initiating and implementing such changes has not been established.
  5. A positive change introduced by the Order includes simplification of completing the submission form for pharmaceuticals included in the most recent Model List of Essential Medicines of the World Health Organization. For these pharmaceuticals, presenting data on comparative effectiveness and safety is not required.

Despite this positive change, the Order in general may hamper continuous public procurement of non-NEML pharmaceuticals as it sets out unclear timelines for including pharmaceuticals in the NEML. Given the extension of deadlines for reviewing received submissions for inclusion into the NEML and a fixed deadline for the Committee to submit proposals on NEML revision, the companies planning to file their submissions should consider expediting the preparation and filing process. Amended list of pharmaceuticals to be procured by specialized procurement agencies using the state budget funds for 2016  

The CMU has introduced changes to the list of pharmaceuticals and medical devices procured by specialized procurement agencies (Crown Agents, United Nations Development Program and UNICEF) with the state budget funds for 2016. The changes were introduced by CMU Resolution No. 780 dated 27 September 2017 “On Amending the Regulation of the Cabinet of Ministers of Ukraine dated 23 August 2017 No. 557.” The resolution provides for a new form, dosage, strength and quantity of certain pharmaceuticals and medical devices procured by specialized procurement agencies.

To see the full list of changes, please follow this link.

Healthcare system reform Launch of the healthcare system reform increases importance of NEML-listing

The Parliament of Ukraine has recently adopted the first law in the package of laws required to launch the long-awaited medical reform, which has been discussed for many years in Ukraine. The reform will recast the framework for providing and financing medical services, pharmaceuticals and medical devices in Ukraine. On 19 October 2017, the Parliament of Ukraine adopted draft Law No. 6327 “On State Financial Guarantees of Medical Services for Population.” The final text of the law has not been published yet, but the key provisions of the law include the following:  

  • Creating the centralized healthcare procurement agency (the “Agency”)
  • Paying for medical services to patients based on agreements between healthcare organizations and the Agency
  • Introducing a patient’s right to choose his/her doctor
  • “Money follows the patient” principle: payments to healthcare organizations for services provided will be based on unified tariffs
  • Setting out the list of medical services, medical devices and pharmaceuticals to be financed from the state budget funds under a specific budget program and provided to patients free of charge (the “Program”). Medical services, medical devices and pharmaceuticals outside the Program may be financed under other state budget programs, with funds from local budgets, medical insurance, or using other allowed sources of financing
  • The Program will be adopted annually as part of the state budget
  • Only NEML-listed pharmaceuticals will be financed from budget funds

To become effective, the law must be signed by the Head of the Parliament and the President of Ukraine and published in the official gazette. On 20 October 2017, three deputies registered a draft resolution on abolishment of a vote on this draft law. Therefore, before submitting the draft law for signing by the Head of the Parliament and the President of Ukraine, the parliament should consider the draft resolution on abolishment of voting results. Thus, the timeline of the draft law becoming effective remains unclear. Parliament also adopted another two draft laws in the first reading, which are part of the healthcare reform, specifically:

  • No. 6604 “On Amending the Budget Code of Ukraine regarding Ensuring State Financial Guarantees of Providing Medical Services and Pharmaceuticals” regarding changes to the budget legislation that will ensure that the Agency can administer state budget funds
  • No. 7117 “On Enhancing Affordability and Quality of Medical Services in Rural Areas” aimed at enhancing technical infrastructure and financial capabilities of healthcare institutions in rural areas

We will inform you about these laws in greater detail once the official text of the Law “On State Financial Guarantees of Medical Services for Population” is published.

Competition law

Typical requirements to vertical concerted actions on supply and use of goods

On 23 October 2017, the Antimonopoly Committee of Ukraine approved Typical Requirements to Vertical Concerted Actions on Supply and Use of Goods. The final text of the document has not been published yet.  These requirements set out which concerted actions are permissible and do not require clearance of the Antimonopoly Committee of Ukraine. It is expected that these requirements will have a significant influence on arrangements between pharmaceutical companies and distributors/pharmacies. We will provide you with more details on this development once the official text of the document is published.

Medical devices New draft law introducing licensing of medical devices 

The Parliament of Ukraine has registered draft law No. 7182 dated 6 October 2017 on introducing licensing of manufacturing, import, wholesale and retail trade in medical devices. Based on the explanatory note to the draft law, it is aimed at preventing turnover of falsified or substandard medical devices, strengthening liability of business entities involved in turnover of medical devices in Ukraine and harmonizing Ukrainian legislation with international and EU legislation. However, EU legislation does not oblige business entities to receive a license before placing a medical device on the market. Therefore, adopting the draft law would not foster harmonization of Ukrainian legislation with EU legislation. Furthermore, the explanatory note does not present any evidence on the amount of falsified or substandard medical devices in Ukraine, which could support the idea of introducing licensing. We will monitor the status of the draft law and will inform you about important developments in our next newsletters.

Anti-corruption law Methodical Recommendations on the Preparation and Implementation of Anti-Corruption Programs

On 22 September 2017, the Ukrainian National Agency on Corruption Prevention by Decision No. 734 approved the Methodical Recommendations on the Preparation and Implementation of Anti-Corruption Programs. The recommendations provide practical advice to companies on the preparation and implementation of an anti-corruption program, conducting an assessment of corruption risks, carrying out internal investigations and taking general anti-corruption measures. To find out more about this development, please follow this link.

Taxation Ukraine’s tax treaties with the UK and Turkey to be amended

In October 2017, Ukraine signed protocols amending the tax treaties with the UK and Turkey. To find out more about these developments, please follow this link.