On 9 November 2016, the CMU approved regulations "On the State Regulation of Prices for Pharmaceuticals" No. 862 (the "Pricing Regulation") (text in Ukrainian is available here) and "On the Introduction of the Reimbursement of Prices for Pharmaceuticals" No. 863 (the "Reimbursement Regulation") (text in Ukrainian is available here).
The Pricing Regulation provides for the introduction of reference pricing and a limitation of the maximum mark-ups for certain pharmaceuticals used for treating the following types of diseases: (i) cardiovascular diseases, (ii) type II diabetes and (iii) asthma as of 1 January 2017.
It does not apply to any medical devices.
The Pricing Regulation applies to the following types of pharmaceutical products:
(i) products that are registered in Ukraine, included into the National Essential Medicines List, and the cost of which is reimbursed within outpatient treatment of persons suffering from the following types of diseases: cardiovascular diseases, type II diabetes and asthma; and
(ii) products included into the list of INNs, the prices for which are subject to reimbursement.
In the absence of clarifications from the Ministry of Health of Ukraine (the "MOH") or pending adoption of the implementing regulations, there is no clarity regarding the scope of the definition of the both types of products. Both of the abovementioned categories are likely to include products approved by the Reimbursement Resolution (which is analyzed below).
The list of reference countries used for the purpose of calculating reference prices of pharmaceuticals includes Poland, Slovakia, Czech Republic, Latvia and Hungary. It is narrower than the list that was effective until 7 July 2015 when the reference pricing was abolished. Previously, the list included the following countries: Bulgaria, Moldova, Poland, Slovakia, Czech Republic, Latvia, Hungary and Serbia, Bulgaria, Moldova and Serbia have been excluded.
Calculation of reference prices
The Pricing Regulation sets out that maximum wholesale prices of pharmaceuticals should not exceed the reference prices. Based on the Pricing Regulation, the procedure for calculating reference prices should be developed by the MOH. The deadline for such approval has not been established. Considering that the state regulation of prices is being introduced on January 2017, the MOH should promptly approve the necessary procedures in order to prevent the cessation of sales of respective products as of 1 January 2017.
Maximum mark-ups and cancellation of state price regulation in the retail market
The Pricing Regulation sets out maximum mark-ups for products covered by the Pricing Regulation, if such products are procured by healthcare organizations partly or wholly financed by state or local budgets, except for procurement by specialized procurement organizations.
The Pricing Regulation declared the CMU Resolution "On Measures to Stabilize Prices for Pharmaceuticals and Medical Devices" No. 955 dated 17 October 2008 ("Resolution No. 955") invalid. Resolution No. 955 established the maximum retail and wholesale mark-ups for both retail and the public procurement market. Considering this cancellation of Resolution No. 955, and the establishment of maximum retail mark-ups only for products sold on the public procurement market, state price regulation for retail market was abolished.
The Pricing Regulation sets out the maximum wholesale mark-up up to 5% and the maximum retail mark-up up to 15%. The Pricing Regulation does not specify the basis for calculating the maximum mark-ups. Based on the Pricing Regulation, these details should be set out in the implementing act to be adopted by the MOH (which has not yet been adopted as of the date hereof).
Issues regarding the public procurement of pharmaceuticals
The Pricing Regulation sets out that healthcare organizations partly or wholly financed by state or local budgets can procure products covered by this regulation. Thus, it remains unclear if healthcare organizations will be prohibited from procuring other products.
Moreover, CMU Resolution "Issues of Declaring Wholesale Prices for Pharmaceuticals and Medical Devices" No. 240 dated 2 July 2014 was not declared invalid. This resolution sets out the procedure for declaring wholesale prices and maximum mark-ups for pharmaceuticals procured by healthcare organizations partly of wholly financed by state or local budgets, which differ from the ones stipulated in the Pricing Regulation.
Thus, the Pricing Regulation’s inconsistency, and a lack of clarity regarding its scope and provisions related to public procurement of pharmaceuticals, may create hurdles in relation to certain products’ turnovers, unless the CMU amends the respective regulation and/or the MOH issues an official clarification of the Pricing Regulation.
The Reimbursement Regulation provides for the introduction of reimbursement of and limitation of maximum mark-ups for the following types of the pharmaceuticals as of 1 April 2017: (i) roducts that are registered in Ukraine, included into the National Essential Medicines List, and the cost of which is reimbursed within outpatient treatment of persons suffering from the following types of diseases: cardiovascular diseases, type II diabetes and asthma; and
(ii) roducts included into the list of INNs, the prices for which are subject to reimbursement (as detailed in the annex to the Reimbursement Regulation).
The Reimbursement Regulation sets out the maximum wholesale mark-up up to 5% and the maximum retail mark-up up to 15%. Similar to Regulation No. 862, the basis for calculating the maximum mark-ups should be set out in the implementing act to be adopted by the MOH. The procedure for calculating the reimbursement price is also to be detailed in the implementing bylaw of the MOH. None of the abovementioned implementing bylaws has been adopted as of the date hereof.
Similar to the Reimbursement Regulation, there is a lack of clarity in the definitions used in the Reimbursement Regulation and, respectively, there is no clarity regarding its scope. Furthermore, there is no clarity regarding the MOH’s approaches for calculating the reimbursement price.
On 7 October 2016, the MOH approved Order No. 1050 on the Procedure for Selection of Medicines for Inclusion into the Essential Medicines List (the "Procedure"). The Procedure sets out the steps, which should be followed in order to select the essential medicines. The current Essential Medicines List (the "List") was approved by CMU Order No. 333 "On Certain Issues of State Price Regulation for Pharmaceuticals and Medical Devices", dated 25 March 2009. The MOH intends to adopt the new version of the List, but no procedure for development of the List existed until recently.
According to the Procedure, the List should include effective and safe medicines of high quality, required for the provision of medical aid to the population in healthcare facilities regardless of the ownership form. The Procedure provides the following steps, which should be followed in order to select the essential medicines:
The Procedure sets out the timelines for the above steps to be taken by the Committee, but no timeline for the MOH’s approval of the List has been established.
The Procedure also provides for an annual review of the List based on: (i) the updated list of priority diseases; (ii) the current version of the WHO Model List of Essential Medicines; (iii) industry standards; and (iv) applications for inclusion or deletion of a pharmaceutical submitted by individuals and business entities.
On 23 November 2016, the MOH published a new version of the List developed by the Committee (text in Ukrainian is available here). No information regarding the MOH’s official approval of the List is currently available.
On 21 November 2016, the MOH adopted the Register of Wholesale Prices for Insulin Preparations (Order of MOH "On the Approval of the Register of Wholesale (Reimbursement) Prices for Insulin Preparations" No. 2264 (the "Order") (text in Ukrainian is available here)).
The Order was adopted based on and for the purpose of implementing the CMU Resolution "Issues of Implementing State Control of Prices for Insulin Preparations" No. 73 dated 5 March 2014 (the "Resolution"). The Resolution stipulated launch of the pilot project on state price regulation and reimbursement for insulin preparations as of 1 April 2016. The pilot project provides for the establishment of maximum permitted wholesale and retail prices for the relevant pharmaceuticals based on the reference prices. The pilot project has not been implemented in practice due to the absence of the necessary implementing acts. After approval of the Order, the only remaining act required for project implementation is the register of patients requiring insulin therapy.
In November, the territorial body of the State Service of Ukraine on Safety of Food Products and Consumer Protection (the "SSFP") in the Mykolaiv region fined three pharmacies for infringing the legislation on pricing for pharmaceuticals. The pharmacies violated requirements on the maximum mark-ups for pharmaceutical products procured by healthcare organizations that are party or wholly funded by state or local budgets. While the maximum allowed mark-up for such pharmaceuticals is 10%, the pharmacies applied mark-ups ranging from 10.1% to 204.1%. The overall amount of the fines was over UAH 110,000 (approximately USD 4,230).
This case demonstrates that the SSPF, empowered to audit compliance with Ukraine’s pricing legislation, has started to exercise its respective authorities. The SSPF was created through the merger of the former State Service on Consumer Protection, the State Price Inspection, the State Veterinary and Phytosanitary Service, the State Sanitary and Epidemiological Service.
On 3 November 2016, Ukraine’s Parliament adopted the Law of Ukraine "On Special Aspects of Conducting State Surveillance (Control) Measures in the Area of Business Activity" (the "Law") (text in Ukrainian is available here). The Law is currently pending signature by the President. The Law will become effective on the following day upon its signature and official publication.
The Law established a moratorium on scheduled inspections of business entities until 31 December 2017. Apart from that, the Law established a limited list of grounds on the basis of which an unscheduled inspection can be conducted by a state supervision authority, which includes the following:
The Law does not apply to inspections of a number of state authorities, including, but not limited to, the State Service of Ukraine on Safety of Food Products and Consumer Protection, the State Fiscal Service of Ukraine, the State Financial Inspection of Ukraine and the Antimonopoly Committee of Ukraine.
The State Fiscal Service of Ukraine and the State Financial Inspection of Ukraine may inspect business entities whose turnover for the preceding calendar year does not exceed UAH 20,000,000 only pursuant to the CMU’s approval, a court decision or as set out in the Code of Criminal Procedure of Ukraine.
As noted in the previous edition of our Newsletter, in September 2016, the Antimonopoly Committee of Ukraine (the “AMCU”) fined several major participants of the pharmaceutical market for anticompetitive concerted actions. Investigations with respect to other pharmaceutical companies are still ongoing and final AMCU decisions in those cases are expected soon.
On 25 October 2016, the Antimonopoly Committee of Ukraine (the "AMCU") approved a report that summarizes the results of the AMCU’s investigation into the pharmaceutical market conducted from 2014 to the first half of 2016 (the “Report”). This report was published by the AMCU on 22 November 2016 (text in Ukrainian is available here). The Report contains a comprehensive analysis of the AMCU's view of the Ukrainian pharmaceutical market, including, inter alia, the analysis of: (i) the importers’ activities on the market, (ii) the influence of domestic & foreign manufacturers, importers and distributors on price formation, and (iii) the regional markets’ retail trade with pharmaceuticals.
During the investigation into the importer's activities on the market, the AMCU studied the arrangements of distribution and supply of pharmaceuticals in Ukraine, various other arrangements existing between the market participants, and peculiarities of price formation (including from the perspective of the discounts provided by manufacturers and importers to distributors).
As the result of the investigation into the influence of domestic and foreign manufacturers, importers and distributors on price formation, the AMCU summarized in the Report the main factors that, in the authority’s view, may objectively influence prices for pharmaceuticals (e.g., currency exchange rates, inflation, changes in tax system, etc.).
The Report also contains the results of an investigation conducted regarding the relations existing between distributors/importers/domestic manufacturers and pharmacies. The AMCU found that most pharmacies provide distributors/importers and domestic manufacturers of pharmaceuticals with various marketing services, which, according to the AMCU, may potentially result in elimination or distortion of competition in the Ukrainian pharmaceutical market. In addition, the AMCU found signs of a monopoly (dominant position) on most of the studied regional markets of services related to retail of pharmaceuticals.
The Report also contains particular proposals to other state authorities and to market participants, aimed at strengthening competition in the Ukrainian pharmaceutical market. These proposals were described in the previous edition of our Newsletter.
On 17 November 2016, the MOH published the Draft National Drug Policy for the period until 2025 (the "Draft Policy") (text in Ukrainian is available here).
The Draft Policy is a strategic document setting out government measures in healthcare for the period between 2017 and 2025. The Draft Policy includes, among other things, the following planned activities:
Certain measures suggested in the Draft Policy may potentially pose risks for the innovative pharmaceuticals industry, such as optimization of compulsory licensing (the Draft Policy does not specify any details regarding the intended scope of optimization), limitation of data exclusivity in public interest (no details regarding this measure are available either), introduction of the Bolar principle, elimination of patent linkage, introducing parallel importation, etc. The Draft Policy is currently under public discussion and is subject to further amendment.
On 2 November 2016, Ukraine’s Parliament approved, in first reading, the draft law amending the Law of Ukraine "On Pharmaceuticals" (the "Draft Law") (text in Ukrainian available here). The Draft Law provides for exclusion of preclinical studies and clinical trial results from the list of information subject to state protection from disclosure and unfair commercial use. The MOH should ensure public access to this information. The only exception in the Draft Law is for "information of a commercial confidential nature that is subject to state protection".
Although the claimed aim of the Draft Law is to enhance transparency, eliminate corruption and ensure reliability of the data on effectiveness and safety of pharmaceuticals, the Draft Law contains certain deficiencies, including it lacks clarity regarding data to be published. It also uses terms which are not defined in Ukraine’s legislation, specifically, "information of a commercial confidential nature" (in Ukrainian - "інформація комерційного конфіденційного характеру"). In contrast, Ukraine’s legislation defines commercial secret (in Ukrainian - "комерційна таємниця") and "confidential information" (in Ukrainian - "конфіденційна інформація").
We will keep you updated on the status of the Draft Law in the upcoming issues of our Newsletter.
In addition to the developments above, on 30 November 2016, the Cabinet of Ministers of Ukraine (the "CMU") approved a number of regulations fundamentally affecting the healthcare industry, including, among others:
Once the texts of the approved acts are published, we will provide their overview in the upcoming issues of our Newsletter.