Ukraine Pharmaceuticals and Healthcare Report Q1 2009

Summary

As Ukraine slips deeper into political confrontation and a deep recession begins to be felt, BMI is forced once again to downgrade its forecasts for the country's pharmaceutical market. The weakening hyrvnia will translate into a big hit on US dollar market value in 2009. Our updated forecast for 2008 to 2013 sees a US dollar compound annual growth rate (CAGR) of just 1.93% and a local currency rate of 13.09% - a far cry from the 20%-plus US dollar growth rates seen between 2005 and 2007. BMI assumes a sharp but brief recession with the economy returning to a modest 2.3% growth rate in 2010.

Ukraine is in bad shape by any measure and one of the worst affected victims of the global downturn.

How quickly it can pull itself out the current tailspin of surging unemployment, bank crisis and political confrontation will determine whether the gains of the last few years - including the development of a modern pharmacy retail network, a small but growing market for innovative medicines and ambitious plans for developing a workable healthcare and medicines insurance system - can be recovered.

The current economic crisis, the devalued currency and the government's extended and populist campaign against rising pharmaceutical prices is putting huge pressures on manufacturers, distributors and retailers. In January, the head of the Ukrainian Antimonopoly Committee threatened to levy fines equivalent to 10% of company annual earnings for 'unjustified' price hikes on medicines. In February, the government pushed ahead on attempts to institute tighter price controls, as well as abolishing the State Service for Medicines and Articles for Medical Use (DSS) - the state certification body - after the Constitutional Court ruled against President Viktor Yushchenko's previous annulment of the relevant government decrees. The move brings back tough price controls and further muddies the regulatory environment. A new raft of emergency measures looks likely as the economic situation deteriorates.

At the same time, local manufacturers describe an 'offensive' being launched against their industry, which they believe is being made a scapegoat for the failure of Prime Minister Yulia Tymoshenko to enact some of the ambitious health-sector reforms it promised when it came into office at the beginning of last year. . The administration of the city of Kyiv showed the dire state of the public healthcare sector when it passed a decree establishing tariffs for medical services - a move immediately challenged by the central government but also one that simply acknowledges that most ostensibly 'free' services in fact require under the table payments. The crisis is also filtering through the supply chain to large producers.

In February, the head of Gedeon Richter said the company had paid around US$4mn to suppliers in Ukraine and Russia to help them manage the fall in value of the currencies in both countries. Local producers now have an opportunity to regain some market share, but they lack access to credit and investment funds due to the banking crisis.

Contents

• Executive Summary
• SWOT Analysis
• Ukraine Pharmaceutical And Healthcare Industry SWOT
• Ukraine Political SWOT
• Ukraine Economic SWOT
• Ukraine Business Environment SWOT
• Pharmaceutical Business Environment Rating
• Limits To Potential Returns
• Risk to Realisation Of Returns
• Ukraine - Market Summary
• Regulatory Regime
• Intellectual Property Issues
• Pricing and Reimbursement Issues
• Other Market Entry Barriers
• Industry Developments
• Medical Devices
• Industry Forecast Scenario
• Overall Market Forecast
• Key Growth Factors - Industry
• Key Growth Factors - Macroeconomic
• Growth To Slow Considerably in 2009
• OTC Market Forecast
• Prescription Market Forecast
• Generics Market Forecast
• Export/Import Forecasts
• Other Healthcare Data Forecasts
• Competitive Landscape
• Manufacturing Sector
• Wholesale
• Retail
• Company Monitors
• Arterium
• Gedeon Richter
• Krka
• Lek (Novartis/Sandoz)
• Country Snapshot: Ukraine Demographic Data
• Section 1: Population
• Section 2: Education And Healthcare
• Section 3: Labour Market And Spending Power
• BMI Forecast Modelling
• How We Generate Our Pharmaceutical Industry Forecasts
• Pharmaceutical Business Environment Ratings Methodology
• Ratings Overview
• Weighting
• Sources
• List of Tables
  • Table: Central And Eastern Europe Pharmaceutical Business Environment Rankings
  • Table: Ukraine's Drug Market Indicators
  • Table: Ukraine - Economic Activity
  • Table: OTC Market Indicators (US$mn unless otherwise stated)
  • Table: Prescription Drug Market Indicators, 2006-2013 (US$mn unless otherwise stated)
  • Table: Generic And Patented Drugs Market Indicators
  • Table: Import/Export Forecasts (US$mn)
  • Table: Healthcare Data
  • Table: Pharmacies And Pharmacy Market Ratios
  • Table: Demographic Indicators, 2005-2030
  • Table: Rural/Urban Breakdown, 2005-2030
  • Table: Education, 2002-2005
  • Table: Vital Statistics, 2005-2030
  • Table: Employment Indicators, 2001-2006
  • Table: Consumer Expenditure, 2000-2012 (US$)
  • Table: Average Annual Wages, 2000-2012
  • Table: Pharmaceutical Business Environment Indicators
  • Table: Weighting Of Components