2014-01-03 12:27:40 - Recently published research from Business Monitor International, "Ukraine Pharmaceuticals & Healthcare Report Q1 2014", is now available at Fast Market Research
Ukraine remains a promising yet risky pharmaceutical market investment prospect. For example, in addition to persistent political issues, the country has also been unable to roll out public health insurance, which has been discussed for years. Indeed, the draft law 'On Mandatory State Social Health Insurance' was published on the Ministry of Health's website for public debate only as recently as November 2013, though it had previously been suggested that the rollout of the healthcare insurance system would start in early 2015. Nevertheless, we hold a positive outlook on the Ukrainian pharmaceutical market over the long term, as we believe that the eventual rollout of national health insurance coverage and reimbursement of medicines in the medium term will spur growth.
Report Details at
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Headline Expenditure Projections
* Pharmaceuticals: UAH31.84bn (US$3.94bn) in 2012 to UAH34.05bn (US$3.70bn) in 2013; +7.0% in local currency terms and -6.0% in US dollar terms. Local currency forecast significantly lower in relation to previous quarter, on account of macroeconomic factors.
* Healthcare: UAH103.60bn (US$12.82bn) in 2012 to UAH109.23bn (US$11.87bn) in 2013; +5.4% in local currency terms and -7.4% in US dollar terms. Forecasts unchanged in relation to the previous quarter.
Risk/Reward Ratings: Ukraine is seen as one of the least promising longer-term pharmaceutical markets within 20 Central and Eastern Europe (CEE) countries surveyed in our Risk/Reward Ratings (RRRs). While volume demand is expected to continue growing in the coming years, the country's operating environment remains extremely unfavourable.
Key Trends & Developments
* In October 2013, Alba Ukraine won a health ministry tender for the procurement of drugs used to treat chronic hepatitis in children and adolescents. The company also plans to apply for the tender of ribavirin and peginterferon (in various doses) for a cash consideration of US$919,000 (excluding value added tax). The ministry plans to use the proceeds generated from the tenders to purchase the ELISA test systems for studies on serum TORCH-infections and other infections, as well as sexually transmitted diseases
* In the same month, the Verkhovna Rada of Ukraine approved the draft law on amendments in the country's tax code, which would cut down the value-added tax on the supply of active pharmaceutical ingredients to improve the availability and affordability of medicines in government healthcare facilities. The draft law would also expand the possibilities for healthcare and better access to medicines prescribed by doctors and healthcare institutions.
* In September 2013, biomedical company BITEC Limited reported plans to build five pharmaceutical plants, research centres and laboratories in Ukraine's Odessa region. The main objective of the project is to address the healthcare needs of the people of southern Ukraine by introducing new technologies in the field of biomedicine and biotechnology. The project will see the construction of a factory to produce blood plasma, a plant for the production of insulin, a facility to manufacture radiological agents, a plant for the production of medical equipment, and a factory to produce medicines. Construction of the first phase of the project, which is expected to create 2,500 new jobs, is scheduled to begin by the end of 2013 or early 2014.
BMI Economic View: Ukraine appears to be giving the strongest indications yet that it is prepared to acquiesce to the International Monetary Fund (IMF)'s demands in order to secure the necessary financing to see it through the likely Russian retaliation if Kiev signs the European Union (EU)'s Association Agreement at the end of November 2013. Despite this, we see several major stumbling blocks and caution that even if this hasty deal goes ahead, it is unlikely to herald a turning point in Ukraine's political deterioration.
BMI Political View: Even without a possible disruption of trade with Russia over the EU Association Agreement, Ukraine's economy is on an unsustainable path that will see international reserves eroded down to just US$19bn by the end of 2013 by our forecasts, which - combined with the current account dynamics -point towards a balance of payments crisis in the near-future, and a forced devaluation of the hryvnia. However, we remain extremely sceptical that President Viktor Yanukovych has any desire to implement the structural and institutional reforms that Brussels desires, as this would entail ending the system of patronage around which the political executive is built.
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