regulatory reform on the pharmaceutical market of ukraine preliminary draft research paper...
TRANSCRIPT
Regulatory reform on the pharmaceutical market of
UkrainePreliminary draft research paper
Analytical Center“New social and economic policy”
September 2015
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• The main purpose of the regulatory system for pharmaceutical market is to ensure safety, quality and efficacy of medicines, manufactured and sold to the final consumer.
• To do this, the state establishes the forms and procedures for quality control of medicines during the process of production and sales, and establishes qualifications framework for entities engaged in the production and sales of drugs.
• Simultaneously state regulation affect the physical availability of drugs, setting rules for drug procurement for public funds, implementing rules for drug selling in the wholesale and retail and creating incentives to expand the range of medicines (first of all innovative ones).
• The pharmaceutical regulatory system significantly affects the economic availability of medicines for the end consumer. It includes direct and indirect forms of price control mechanisms of drug cost reimbursement.
• Although government regulation of the pharmaceutical market is not the only factor in ensuring physical and economic access to medicines, it is quite crucial.
• An effective system of regulation of the pharmaceutical market should provide economic and physical availability of safe, quality and effective medicines for patients by minimizing the regulatory costs for both the state and business.
Effective regulation of the pharmaceutical market
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The process of regulation of the pharmaceutical market
The purpose of this study is:To provide analysis of regulation of the pharmaceutical market of Ukraine in terms of production and circulation of drugs and its influence on the physical and economic affordability of medicines for the public, and also make recommendations for improvement of current situation.The study consists of an analytical report and results of a survey of 30 businesses that operate on the pharmaceutical market of Ukraine.Today we offer to discuss the previous version of the Analytical Report.WE ARE AIMED TO ENHANCE THE EVALUATIONS AND RECOMMENDATIONS BEING BASED ON THE RESULTS OF THE DISCUSSION
The report consists of 7 chapters:Chapter 1. Economic Review of pharmaceutical marketChapter 2. The pre-registration procedureChapter 3. The registration procedureChapter 4. Business licensingChapter 5. Post-registration control of quality and drug circulationChapter 6. Regulatory institutions on pharmaceutical marketChapter 7. Economic regulation of the pharmaceutical marketThe national regulation of the pharmaceutical market has undergone many changes during the recent years in the direction of harmonization of Ukrainian legislation with EU law and implementation of international standards ... ..........but it is still complicated, not transparent and ineffective.The main problems: • the slow and poor implementation of regulations,• institutional weakness of regulators;• weak public Mechanisms to assess the effectiveness of regulators.
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The purpose and tools of the study
Ukraine is considerably inferior to European countries in terms of the number of registered medicines• There are about 12 thousand drugs registered in Ukraine, compared to 15 thousand in Poland (the number of
trade licenses) and more than 100 thousand in Germany.• The level of annual registration decreased by 37.3% in 2009-2014 in Ukraine.
The dominant drugs are those of foreign origin - 70% (8663).Dominated medicines are generics In physical terms, the original products accounts for 12% of the market and 33% in terms of value.Production of drugs in Ukraine is not very concentrated.
Top 5 of largest companies account for about third part of all domestic production of medicines.Production is mainly low-tech
Only 25% of companies are licensed to manufacture sterile drugs (namely modern generics). Ukrainian pharmaceutical products are poorly exported
The share of pharmaceutical products accounts for 0,47% in aggregate export, 80% of which is exported to CIS countries.There is few FDI in the domestic pharmaceutical sector
Unlike the Russian largest pharmaceutical manufacturers half of which already have foreign investors, in Ukraine the only one producer has FDI .Low competition among wholesale distributors.
Top 5 of largest companies cover 88% of market.The gradual increase in the concentration of retail market
The share of the largest 100 pharmacies increased from 56% in 2011 to 63% in 2014, there is a hidden monopolization of the market when one owner creates several legally separated pharmacy chains.Galloping inflation and currency depreciation reduced the availability of medicines in 2014-2015 :Significant growth of prices for medicines + reduction in real incomesBy 2014, the physical volume of drug consumption by population decreased by 12.3%, shrinking continued in the first half of 2015, when drug consumption reduced for additional 9.4%. 5
Economic Review of the pharmaceutical market
Pre-registration procedures: preclinical studies
Number of preclinical studies (PS) is very low in Ukraine• There are just7 registered original drugs that have passed preclinical studies in Ukraine• Only about 10 institutions provide services for pre-clinical studies of medicinal products• There is only one laboratory that is certified by GLP standard (interdepartmental laboratory of
pre-clinical study of medicinal products of Ministry of Health and Medical Science of Ukraine)
Changes in the organization of preclinical studies in Ukraine• Since 2009. the process of conducting preclinical studies in Ukraine is converging with
international standards• In 2010, the Ministry of Health of Ukraine approved new order which allowed to conduct pre-
clinical studies of medicinal products by research institutions irrespective to forms of their ownership
• In 2011, it is permitted by the Law to import a limited number of unregistered drugs by companies that are licensed to manufacture drugs, or academic institutions involved in the development of medicines.
Regulatory problems• the slow pace of laboratories’ development that confirmed the standard of GLP. State funds
for these purposes are short, while private agents prefer to invest in such projects outside Ukraine.
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Pre-registration procedures: preclinical studies
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The image of Ukraine as a responsible participant of the global market of clinical studies has deteriorated The number of clinical tests in 2013-2014 stays almost on the same level: 233-269 per year. To compare, Poland in 2013 conducted 407 tests, the cost of which was equal to 200 mil EUR. In Ukraine, the number of multi-center clinical tests even decreased (from 213 in 2012 to 188 in 2014 and to 50 in the first half 2015). Changes in the organization of clinical tests in Ukraine• Starting from 2009 the process of approximation of Ukrainian regulations with European standards began. The
requirements and principles of good clinical practice (GCP) were introduced. • The ethical issues concerned to clinical tests were improved, i.e. the restrictions on conducting clinical tests
involving minors were imposed, the basic requirements for the protection of study subjects were approved, particularly issues related to providing the information to patients
• The adoption in 2014 preferential VAT rate (7%) for drugs and equipment used in clinical tests created a favorable investment climate in the clinical studies
Regulatory problems• The disadvantage of procedures for the applicant: the necessity for direct cooperation with the regulatory
authority (Ministry of Health of Ukraine) and expert institution (State Expert Center MoH, DEC) as separate links.• The lack of efficiency and transparency in examination process. (a) Scientific advisory council as an advisory body
of DEC is not responsible for its actions, so the risk of "dragging" unreasonable recommendations and corruption occurs. (b) There is no free access to the information regarding the materials that are under the expertise
• Monopoly of DEC in providing clinical tests leads to queues and violation of terms of examination• The flaw of the contractual relationship between a customer and a body executing clinical studies. Particularly,
instead of single agreement a client has to make agreements with three bodies, there is a lack of researchers‘ professional liability insurance in Ukraine as well as the lack of methodology for determining the cost of services of health-care settings.
Pre-registration procedures (recomendations)
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Recommendations1. To implement the principle of "single window" in accordance with the
European practice: the applicant applies and receives comments and decisions through the "single window", not communicating with the experts involved in examination process
2. Implement the electronic document circulation between regulators and market actors, as well as between different regulatory bodies.
3. Сlose down the advisory bodies - Scientific expert and Scientific-Technical Council of the Centre. Implement personally responsibility for the results of the expert examination in accordance with European practices
4. Create a national register of clinical tests of medicines with open access to information (including the date of application and names of government officers who are dealing with the application)
5. Outwork the methodology for determining the cost of services of health-care institutions related to conducting clinical tests and approve this methodology by the Order of Ministry of Health.
6. Develop a regulatory basis for functioning of the national bodies that provide certification for compliance with GLP and GCP
Changes in the system of the state registration of medicinal products• Confession of the conformity of all drugs that are circulating and registered in Ukraine with GMP
requirements.• Introducing the general procedure for registration of medicines and medical immuno-biological preparations• Implementation of permanent re-registration.• Simplifying the registration procedures for certain groups of drugs.
Regulatory problems
• The rule of permanent re-registration is not working in the absence of regulations. However, even the first re-registration is unnecessary for drugs that are in circulation more than for 10 years.
• The simplified procedures of medicinal products’ registration are not conducted due to lack of regulations.• Instead of a "single window“, applicants have to apply to the Ministry of Health, DEC and to the State
Administration of Ukraine on Medical Products (SAUMP) for GMP confirmation.• Non-transparency of institutional participants preparing the materials for making decision on registration:a) DEC has a monopoly position on expertise in drug registration; b) Expert and technical councils of DEC provide recommendations on registration issues without taking
responsibility for their decisions;• Low levels of intellectual property protection;• The current registration procedure of API substances and products in bulk sets unequal preconditions for
foreign and domestic producers of drugs;• There is no procedure of cancelation of registration certificates for medicinal products.
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Registration procedures (1)
Recommendations1. Adopt the regulations for simplified registration and perpetual re-registration. 2. For those drugs that are in circulation for more than 10 years and have a "spotless"
reputation foresee a formal re-registration. 3. Implement the principle of "single window" in accordance with the European
practice.4. Provide electronic documents submission for registration materials in electronic
form.5. Cancel the necessity of conformity assessment to requirements of Good
Manufacturing Practice for medicines produced in Ukraine by member states of the PIC / S.
6. Сlose down the advisory bodies - Scientific expert and Scientific-Technical Council of the Centre. Establish an institution of independent experts following the example of European countries and the US, where the registration authority is a guarantor of the expert’s work.
7. Cancel the compulsory registration procedure for APIs and products in bulk.8. Protect intellectual property issues by implying responsibility for data registration
dossier confidence violation.9. Implement making some minor changes to the registration documents on the
application principle (decision is taken “by default").
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Registration procedures (2)
Licensing covers production and import of medicines, as well as wholesale and retail sale of medicines.
Changes in the licensing system• Approaching European standards: State Administration of Ukraine on Medical Products (SAUMP)
became a full member of the international system Pharmaceutical Inspection Cooperation (PIC / S)• introduction of GMP requirements and regular updating of national requirements with regard to
changes in European standards• Some changes had controversial nature: (a) import licensing was an example of "pseudo
harmonization with the EU" (not eliminated the intermediaries and not reduced the prices for medicines) (b) the introduction and abolition of import licensing of an active pharmaceutical ingredient (API); (c) implementation of the Law on Licensing from 02.03.2015 (the licensing authority is still not established).
Regulatory problems• Burdensome procedure for verification of the certification of GMP (extra documents, double
confirmation the certificate by SAUMP in the case when the production is in the EU and is certified by European authority or is on the territory of a Member State PIC / S; termination the activities of international companies based on the territory of Ukraine in case of their certificate expiration or getting into the situation of GMP gap period)
• The establishment of the State Service for Medicines and Drug Control is not completed.• The new license conditions with accordance to the new law are not adopted.
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Licensing of economic activity (1)
Recommendations1. Complete the establishment of the regulatory body represented by the State Service on
Drug Control with clear and transparent features.2. Adopt the new license conditions with an exhaustive list of requirements for business.3. Cancel import licensing of drugs for businesses originated from countries with strict
regulatory system (EU member states and members of the PIC / S).4. Set the automatic extension of the Conclusion on GMP for the entire period of
renovation of the original certificate. This will reduce the document circulation for both sides, increase the efficiency and facilitate the whole process of Conclusion accepting.
5. Imply the mechanism of the foreign producers’ GMP certificates recognition by Ukraine for those countries which are members of PIC / S, abolishing the procedure of issuing the confirmation of GMR certificate by SAUMP.
6. Consider the possibility of issuing sale permits for the certain types of OTC drugs that do not require special storage and delivery conditions and are the subject of the sufficient demand from the population to institutions beside the pharmacies.
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Licensing of economic activity (2)
Changes in the post-registration control • Ukraine's accession to the PIC / S in 2011 and cancelation of laboratory control for medicines that are imported to
Ukraine and are made by the companies situated on the territory of Member States PIC / S.• In 2011, the criminal liability for falsification of medicines was introduced. In the same year Ukraine joined
MEDICRIME Convention and ratified it in 2012, being first among the member states that signed the Convention.• Ratification of the European Pharmacopoeia that is a guarantee of implementing the stringent standards of quality
of medicines in Ukraine in accordance with its requirements.Regulatory problems• Pace of implementation of international standards in the field of control is very slowly. Up to date, no one agreement
on mutual recognition of GMP certificates between Ukraine and the members of the PIC / S has been signed.• Non-transparent quality control procedures of import of drugs cause delays and increase the regulatory burden for
business. The duration of the procedure increases on the stage of laboratory analysis.• The lack of state liability for damages caused by their activities and practice of unmotivated withdrawal of significant
amounts of drugs during the checking cause additional losses for business• There is no effective mechanism for appealing against the actions of inspectors. Although the law claims such a
possibility, the distrust of the judicial system and long duration of the legal process restrain business from usage of this tool.
• The “Entry-Quality” control at pharmacies (which doesn`t exsists in Europe) does not affect the quality of drugs.• "Duplicate" regulatory control increases regulatory tax for business. The control of compliance with license
conditions is often carried out separately from quality control, although both types of control perform the same experts.
• Financing of the supervisory bodies is not fully consistent with their functions. As a result, business is forced to buy the necessary materials and pay for "services" of the State Administration of Ukraine on Medical Products (SAUMP) laboratories.
• The lack of the effective mechanism of monitoring the effectiveness of quality control of medicines. There is no available and reliable statistics on drug quality problems, such as statistics on counterfeit drugs detected.
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Post-registration quality control and control of turnover of drugs (1)
Recommendations1. Introduce the indicator reflecting bilateral agreements signed with the governments of the
PIC / S member states on the mutual recognition of certificates of GMP. This indicator will serve as one of the criteria of quality of work of public authorities regulating the pharmaceutical market.
2. Improve the criteria of referral of drugs for laboratory analysis. The list of these criteria should be clear, unambiguous and comprehensive.
3. Identify the mechanism and procedure of financial liability for supervisory bodies in case of abuse of authority
4. Implement the European practice of “control purchases”. This practice considers the governmental purchases based on the general conditions and confiscation of the drugs in the case of non-compliance only.
5. Replace the system of quality inspection of pharmacies by the GPP quality management system.
6. To audit the supervisory authority and define its functions being based on the results.7. Establish the effective mechanism of public monitoring of the effectiveness of the quality
control of drugs. Provide public access to the data concerning counterfeit medicines.8. Consider outsourcing of expertise of drugs to certified laboratories on the basis of
transparent tariffs for regulated services.9. Consider the implementation of the project of labeling of prescription drugs that enter the
market of Ukraine, in order to facilitate the detection of counterfeit medicines and the fight against corruption.
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Post-registration quality control and control of turnover of drugs (2)
Changes in the organization of the national institutional framework in Ukraine• Attempt not only to concentrate regulatory and licensing functions in one agency, but also to establish effective control over
the prices of medicines. As a result of the administrative reform in 2011, State Drug Inspectorate was reorganized into the State Service, and in 2014 it was decided to combine it with State Service on drug control and create a single State Service on medicines and drug control (practical implementation of this is currently in progress).
• Permanent conversions negatively affected the regulatory environment, as each merger / association / dissociation destabilized the normal activities of regulators for approximately 6-9 months.
• The multiple model consisting of three elements is implemented in Ukraine , these elements are: Ministry of Health of Ukraine, State Administration of Ukraine on Medical Products (SAUMP), State Expert Center of Ministry of Health of Ukraine .
Regulatory problems• There is no clear delineation of responsibilities. All three three elements of the regulatory framework participate in shaping
public policy in the pharmaceutical field (Ministry of Health of Ukraine, State Administration of Ukraine on Medical Products (SAUMP), State Expert Center of Ministry of Health of Ukraine ); functions of inspection are performed simultaneously by two institutions (State Administration of Ukraine on Medical Products (SAUMP), State Expert Center of Ministry of Health of Ukraine); registration of medicines is divided between the two bodies (Ministry of Health and SAUMP).
• Within the regulatory framework, there is a conflict of interest and unreasonable distribution of functions that leads to corruption risks. For example, the obligation of the State Expert Center of Ministry of Health of Ukraine to host administrative buildings of MOH makes the ground for corruption and suggests the incentives for ministers to maintain their power.
• The “single window “ is a pure formality. There is no electronic exchange of information between government bodies. During the process of state registration of medicinal products ,the dossier on examination provides DEC while the Ministry of Health approves it. At the same time, the applicant should receive a confirmation of GMP certification from SAUMP as it must be attached to application. There is a rule that the applicant can provide a letter of guarantee that the GMP certificate will be given while the examination of dossier is taking place.
• The limited range of expert institutions (DEC, GMP Center, Ukrainian Medical Center of Certification) combined with their limited financial capacity creates the problem of queues and lack of transparency, as well as corruption risks.
• Financing of governmental agencies involved in the regulation of the pharmaceutical market is not consistent with their functions.
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Institutional framework of regulatory system of drugs turnover (1)
Recommendations1. Optimize the functions, responsibility and principles of interactions
between the central executive bodies being based on the “two bodies” model (one defines the policy and second controls).
2. Consider partial decentralization of regulatory functions by delegating to the professional NGOs (e.g. the procedure of pharmacists’ certification) or local authorities (i.e. licensing the retail sales of medicines).
3. Provide funding the bodies governing pharmaceutical market according to their approved functions.
4. Introduce the exhausting list of criteria for additional examinations.5. Enhance responsibility of all components of the institutional
framework for violation of the terms of regulatory approvals (including partial transfer of the procedures to “application principle”).
6. Perform de-monopolization of the expert functions, create a database and ranking of independent experts to whom applicants could apply for the examination of documents for registration
7. Ensure the practical realization of the "single window“ principle.16
Institutional framework of regulatory system of drugs turnover (2)
Changes in the economic regulation of the pharmaceutical market of Ukraine were very inconsistent and often canceled.• In 2011, the registration of wholesale prices for medicines and medical products that are purchased
through the budget was introduced . In 2012, this procedure was canceled and replaced by a declaration.
• In 2014, the necessity of rationale prices for medicines and medical products purchased for the budget funds was imposed. Because of the imperfection of the mechanism of choice of reference countries and other disadvantages, as well as numerous complaints from business this mechanism was canceled.
• In 2011, the mandatory minimum-required list of drugs that must be in pharmacies was introduced. In 2015, this mechanism was proposed to be canceled as outdated and inefficient.
• In 2014, taxation of import and supply of medicines and medical products at the 7% rate was one of the steps to harmonize Ukrainian legislation with European standards. Due to the fact that the relevant changes in national regulations were late, for a long time the taxation remained at 20% rate.
• Imposing the additional 5% import duty in 2015. This step increased the cost of foreign drugs for the population of Ukraine. Since the introduction of this law led to significant criticism from the WTO, it is planned to abolish it from January 1, 2016.
• During 2012 - 2014 the pilot project of reimbursement of the cost of medicines for hypertension was implemented. The average cost of drugs dropped by 12%, more than 2 million patients benefited from it. In early 2015 a pilot project of reimbursement was stopped by the government.
• In 2015, the possibility of attracting specialized organizations for implementing centralized governmental procurement of drugs and medical products was adopted by Law. The procedure of the state registration of medicines was simplified, as well as value added tax and additional import duty were exempted for such organizations. But the mechanism of centralized procurement via international organizations is still not working.
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Economic regulation of the pharmaceutical market (1)
Regulatory problems
• The abolition of reference prices significantly reduced the importance of the price declaration mechanism in controlling prices of the producer.
• Many regulations (3 decisions of the Cabinet) regulate the same issue, namely purchasing drugs for the budget funds.
• The same approach is used in regulating the prices of original drugs as well as generics. As a result, generic drugs may cost more than the original.
• The same approach is used in regulating the prices of original drugs as well as generics. This prevent innovative drugs from entering the market.
• Customs authorities may overestimate the customs value of drugs through the exclusive right to decide on the classification of goods. Misclassification of medication from a drug to medical good increases its price by a quarter.
• Applying the 20% VAT on the drugs sold with an expired registration certificate before reaching the expiration date, indicated on the package by the manufacturer, additionally increases the price of drugs.
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Economic regulation of the pharmaceutical market (2)
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Recommendations
• Restore the mechanism for determining the boundary of wholesale prices of medicines through mechanism of international comparison (referencing).
• Adopt uniform rules for regulation of prices for medicines which are purchased for the budget funds.
• Establish a limit price for the generic drugs as a certain fixed percentage of the declared value of the original drug.
• While selling the drugs with expired registration certificate has before their expiration date, apply the 7% VAT rate.
• Restore projects of reimbursement the cost of certain drugs (primarily – medications for hypertension, diabetes and strokes). Extend the mechanism of reference prices to all drugs covered by the reimbursement program.
• Eliminate the possibility of customs authorities to manipulate with the different rates of VAT on medicines.
• Cancel the additional import tax for drugs and medical products.• Avoid further increasing of VAT imposed on drugs.
Economic regulation of the pharmaceutical market (3)
