Boston, MA -- (ReleaseWire) -- 08/11/2012 -- BMI View: Ukraine remains one of Central and Eastern Europe's promising pharmaceutical markets, but its chronic lack of economic and political stability remains a critical impediment to fulfilling this potential. The country's economy remains vulnerable to contagion from the European Union (EU)'s economic crisis as indicated by slowing economic growth in Q112. Continued lack of investment in the healthcare system translates into a pharmaceutical market driven by out-of-pocket purchasing and hence the market remains exposed to the country's volatile economy and currency. Despite these major challenges, the market retains outsize promise due to the country's favourable geographic position between the EU and the Commonwealth of Independent State (CIS), large population and pent-up demand for modern treatments.
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Headline Expenditure Projections
- Pharmaceuticals: UAH26.75bn (US$3.35bn) in 2011 to UAH29.00 (US$3.54bn) in 2012; up 8.4% in local currency terms and 5.6% in US dollar terms. Forecast downgraded slightly from Q212 due to updated macroeconomic forecasts.
- Healthcare: UAH83.51bn (US$10.46bn) in 2011 to UAH93.57bn (US$11.41bn) in 2012; up 12.0% in local currency terms and 9.1% in US dollar terms. Forecast upgraded slightly due to updated 2011 data.
- Medical devices: UAH6.62bn (US$828mn) in 2011 to UAH7.24bn in 2012; up 9.5% in local currency terms and 6.6% in US dollar terms. Forecast virtually unchanged from Q212.
Ukraine ranks 13th in BMI's Risk/Reward Ratings (RRRs) this quarter, down one place although its overall score remains unchanged. Ukraine continues to rank ahead of other CIS states, with the exception of Russia, due primarily to its market size and proximity to the EU. However, it continues to trail most other Central and Eastern European (CEE) markets due to continued political and economic instability as well as poor corruption indicators.
Key Trends & Developments
- in March, authorities announced that a working group had been established to come up with a plan for a transition to the reference price system and, separately, determine how Ukraine could implement procedures for partial reimbursement to cover the costs of medicines. According to sources in the Ministry of Health and local media the head of the State Drug Service, Alexey Soloviev, is heading the group, which is charged with making non-binding recommendations. In April, the prime minister called for a '20 to 50% reduction' in the price of medicines and for increased domestic production. It appears the government believes a mix of price cuts through reference pricing and import substitution can achieve radical reducations in price, although BMI remains sceptical that the Ukrainian government is capable of stimulating domestic production sufficiently to achieve its aims.
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