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LEGAL ALLIANCE, founded in 1995, is today one of the leading Ukrainian law firms specializing in legal support to pharmaceutical companies doing business in Ukraine and CIS countries.

OUR CLIENTS represent the following industries: pharmaceuticals, medical devices, consumer goods, medicine, cosmetics, para-pharmaceuticals, chemistry, biotechnology, agriculture and food products.

LEADING ASSOCIATIONS — AIPM Ukraine, APRaD as well as the EBA Healthcare Committee have chosen Legal Alliance as their legal advisor.

Introduction of reference pricing for medicines from the National List: what to expect from July 1st?

No. 17/18 (1188/1189) May 13th, 2019 р.

As we know, from July 1st, 2019 is it planned to introduce reference pricing for some medicines from the National List of Essential Medicines (hereinafter – the National List) in Ukraine. In connection with this Legal Alliance Company held the workshop “Reference Pricing for Medicines from the National List of Essential Medicines: what to expect?”. Dmytro Aleshko, partner, Natalia Spivak, senior associate, and Oleksandr Topachevskyi, member of the Expert Committee for Selection and Use of Essential Medicines, advisor at the World Bank, took part in the event.

Dmytro Aleshko stated that prerequisite for introduction of the new price regulation was, first of all, increased budget expenditures on medicines from the National List according to the research conducted by one of international projects which provides technical aid to the Ministry of Health of Ukraine:

  • For first six months of 2018 prices for 30 INN of medicines out of 60, which most often take part in tender procurement, increased by 24%;
  • Price in pharmacies for 21 INN out of 60 medicines most procured for budget funds is lower than price at public procurement;
  • Analysis of price level in hospital segment for 60 INN in Ukraine and the reference countries demonstrated that prices for INN in Ukraine for 63.2% are lower and for 36.8% are higher;
  • Declaration of ex-factory prices proved to be ineffective mechanism of price regulation.

Second, according to Recommendations of the Antimonopoly Committee of Ukraine “On Measures Aimed at Developing Competition and Preventing Violation of Legislation on Protection of Economic Competition” No. 43-рк as of December 13th, 2018, it is recommended:

  • To introduce reference pricing for the most needed medicines in order to increase their accessibility and gradually introduce reference pricing for all medicines sold in Ukraine with open registers of their prices;
  • In order to develop efficient competition on the market of medicines included to the National List and procured for budget funds, it is necessary to expand the list of medicines for which reference pricing was introduced;
  • Gradual transition from the existing system of state regulation of prices for the necessary medicines (by setting maximum ex-factory and retail mark-ups) and introduction of the reimbursement system.

The Law of Ukraine “On Prices and Pricing” sets the following ways of state price regulation:

1) setting the following as mandatory for use by commercial entities:

  • Fixed prices;
  • Maximum prices;
  • Maximum ex-factory and retail mark-up;
  • Amounts of surcharges and discounts (discount coefficients);

2) introduction of the procedure for declaring price and/or registration of price

Currently regulatory acts are being developed to introduce the reference pricing mechanism. On April 3rd, 2019 Resolution of the Cabinet of Ministers “On Reference Pricing for Some Medicines Procured for Budget Funds” was adopted, however its text has not been published, since it was adopted by voting and the Ministry of Health was ordered to refine its text. Further, the Ministry of Health on April 9th, 2019 put for public discussion draft order of the Ministry of Health “On Some Issues of Reference Pricing for Medicines Included to the National List of Essential Medicines Procured for Budget Funds”. Draft order of the Ministry of Health “On Approving the List of Medicines Included to the National List and on Which Maximum Ex-Factory Prices are Set” is now being elaborated and will be put for public discussion in the near future.

So, what should be expected from July 1st, 2019 according to the resolution of the Cabinet of Ministers?

The list of reference countries remains same as it was for the drugs included to the program “Available Medicines”. They are Poland, Slovakia, Czech Republic, Latvia and Hungary. The list of medicines subject to reference pricing (hereinafterthe List) will be formed from the medicines included to the National List and will be approved by order of the Ministry of Health. Maximum ex-factory prices will be set by the Ministry of Health and published in the corresponding Price Register (hereinafter – the Register). Medical facilities will be able to procure medicines from the list if their price does not exceed maximum one (inclusive of mark-ups and taxes). Manufacturers will not have to declare prices for medicines included to the List. The developed model of reference pricing will not apply to procurements through international organizations, program “Available Medicines” and insulin products (at least till January 1st, 2020).

It should be mentioned that maximum ex-factory prices specified in the Register will apply only to medicines procured for budget funds and will not concern retail market.

Going on, Natalia Spivak stated that draft resolution of the Cabinet of Ministers of Ukraine from July 1st also prescribes introduction of regressive scale of maximum retail mark-ups based on the procurement price inclusive of taxes, which should not exceed the following amounts:

  • Procurement price up to UAH 100 — mark-up up to 25%;
  • From UAH 100 to UAH 500 (inclusive) — up to 20%;
  • From UAH 500 to UAH 1,000 (inclusive) — up to 15%;
  • More than UAH 1,000 — up to 10%.

Such mark-ups will apply to medicines included to the National List, which are sold in retail. For medicines procured for budget funds mark-ups remain unchanged – 10% wholesale and 10% retail.

With respect to draft order of the Ministry of Health “On Some Issues of Reference Pricing for Medicines Included to the National List of Essential Medicines and Procured for Budget Funds” the speaker mentioned, that it will approve the Procedure for Formation of the List of Medicines Included to the National List and on Which Maximum Ex-Factory Prices and Set, and the Procedure for Calculating Maximum Ex-Factory Prices for them.

The draft order clearly determines criteria of medicines covered by reference pricing. Therefore, prices for medicines which meet all of the following criteria will be subject to referencing:

  • Included to the National List;
  • State expenditures on procurement for last 12 months are more than UAH 5 million;
  • Price in Ukraine in higher than in the reference countries.

The mechanism of calculating maximum ex-factory prices is carried based on INN, dosage forms and doses in terms of a dosage form unit.

Reference prices will be determined given identical pharmaceutical characteristics of medicines (INN, dosage form, dose, number of medicine units in a package). In case there are no identical pharmaceutical characteristics of medicines in the reference countries, reference price will be determined based on pharmaceutical equivalence (based on INN, molar amount of active substance in the same dosage form and way of administration). If there are no data on the medicine in all reference countries, referencing will not be carried.

Calculation of reference prices will be carried in the national currency excluding mark-ups and VAT at the official rate of the NBU as of the date of price setting.

Monitoring of prices for medicines and their affordability of the population in the healthcare facilities fully or partly funded from the state and local budgets will be carried by the Ministry of Health quarterly. If needed, the Ministry of Health will have the right to review the list of medicines to which reference pricing applies to include and exclude drugs to/from it.

The Ministry of Health will update the Register of Maximum Ex-Factory Prices for Medicines Procured for Budget Funds annually before 10th working day of January. Extraordinary review of the Register is permitted: in case the Ministry of Health approves the updated List; in case of change in the official exchange rate of UAH to USD set by the NBU by more than 5% a month, or 10% a quarter (update takes place exclusively upon application of owner or the registration certificate).

It is also important that according to the Law of Ukraine “On Public Procurement” reference pricing will not apply to procurement procedures which started before the corresponding order of the Ministry of Health became effective.

Oleksandr Topachevskyi spoke more in detail on the mechanism of reference price calculating. Referencing process consists of the following stages:

  • Medicines to which reference pricing mechanism can apply (based on the above criteria) are determined;
  • Reference price is calculated;
  • Reference price is compared to Ukrainian price “from manufacturer” (calculated based on ProZorro data excluding maximum wholesale mark-up and VAT (-17%));
  • Determination and publication of final List of INN for which maximum prices will be set.

Referencing of medicines takes place as follows:

1) find analogous medicines in databases of the reference countries and calculate price for a dosage form unit (one vial/tablet);

2) find medicines having identical pharmaceutical characteristics (same dose effectiveness, same dosage form (weight of active substance in a tablet/vial), same number of dosage form units in a secondary package);

3) in case there are no medicines in a reference country with identical pharmaceutical characteristics, calculation of prices in the reference country is carried based on weight of active substance in a package (given pharmaceutical equivalence);

4) calculate reference price as median of three lowest prices in the reference countries and multiply it by correction factor 0.8 (correction factor has been introduced since Ukraine is less solvent compared to the reference countries). Such method of correction based on income level is recommended by the WHO in case countries of reference basket have significantly higher level of income than the country for which maximum prices are calculated;

5) calculate price from manufacturer (price in ProZorro – 17%) and compare in with the reference one.

Example of reference price calculation for enoxaparin sodium drugs has demonstrated that prices in Ukraine are averagely 30% higher than the calculated reference prices.

Finally, the speaker presented indicative list of INN to which, as expected, reference prices can apply:

  • diazepam;
  • enoxaparin sodium;
  • imipenem + cilastatin;
  • Sevoflurane;
  • nadroparin;
  • tranexamic acid;
  • tacrolimus;
  • risperidone;
  • valproic acid;
  • morphine;
  • fentanyl;
  • propofol;
  • docetaxel;
  • omeprazole;
  • vancomycin;
  • hydroxyethyl starch;
  • bendumustin;
  • carboplatin;
  • amphotericin B;
  • piperacillin + tazobactam;
  • calcium folinate;
  • cyclophosphamide;
  • fluorouracil;
  • gemcitabine

Summarizing the above, Natalia Spivak stressed that along with introduction of reference pricing mechanism, increased accessibility for the population of medicines, price for which in Ukraine is higher than in the reference countries, is expected. Furthermore, in future gradual expansion of the list of medicines to which reference pricing applies is predicted. Besides, introduction of this mechanism will enable the government to control rational use of budget funds during tender procurement of medicines.

Press-service of weekly “Pharmacy”

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