Healthcare in Ukraine: Re-booting
Lana SINICHKINA
Partner, Arzinger
Svitlana MALYNOVSKA
Attorney-at-law, Senior Associate, Arzinger
PROfile
Arzinger
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Arzinger is an independent law firm headquartered in Kiev and having its regional offices in Western and Southern Ukraine. For over 10 years, Arzinger has been among the legal business leaders providing high-quality legal support to clients throughout Ukraine. The firm’s numerous clients include top representatives of international and local business.
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Arzinger employs highly qualified professionals with vast hands-on experience in a wide range of legal matters, deep knowledge and understanding of the local market, international education and background. The firm has a team of over 70 seasoned legal professionals led by 7 partners. All of them are acknowledged among leading experts on the Ukrainian legal market and are recognized by reputable international and local rankings. As a result, Arzinger can offer extensive legal assistance to effectively support a variety of complex and challenging transactions, including cross-border matters.
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The latest changes on the political stage, particularly in the healthcare sector, have shaped a new direction for healthcare system reform in Ukraine. The necessity to carry out a complete re-load of the entire system is conditioned first of all by the current state of Ukrainian healthcare: high morbidity, mortality and disability rates which facilitated the demographic crisis in Ukraine — the population has fallen by 7 million people in the last 20 years.
Therefore, complex healthcare reform is expected to be implemented in Ukraine. In general, the healthcare reform will affect the following areas: financing of healthcare system (effective use of budget costs; reformation of public procurement of pharmaceutical products, providing more independence to budget healthcare institutions in the disposal of their finances); de-regulation in most spheres; re-orientation to patient-centralized system; reforming of higher education and professional training in healthcare, etc.
In this article we will outline its main features and will focus our attention on reforms, particularly in the pharmaceutical sector.
Anticipated Developments in Pharmaceutical Regulation of Ukraine
Public Procurement of Medicinal Products
Due to the fact that public procurement procedures of the most essential medicinal products have been mostly disrupted within the last few years, the first and most urgent reform stated in the agenda of the Ministry of Health of Ukraine is reforming public procurement of medicinal products. The problems which impeded public procurement within the last few years appeared in procrastination of procurement procedures and the high prices of procured medicinal products, which are conditioned mostly by corruption factors. Moreover, due to the above reasons, many companies, including subsidiaries of big pharma companies, were rather reluctant to participate in public tenders that also eliminated competition on public procurement market of Ukraine, as the same companies always won the tenders.
Reform of this sphere is connected not only with introduction of transparent mechanisms, deregulation of procurement procedures, but also requires introduction of significant changes in the process of public order formation, full-scale introduction of evidence-based medicine principles, standards system in healthcare, etc.
As public procurement of medicinal products is an urgent need and it is already clear that the current centralized procedure of public procurements is ineffective and implies risks of limiting a patient’s access to essential medicinal products, disturbing competition on the market, a need to introduce amendments to the existing mechanism of public procurements has emerged. Moreover, the Association Agreement between EU and Ukraine provides for an institutional reform and the creation of an efficient public procurement system based on the principles governing public procurement in the EU and the terms and definitions set out in EU Directives.
This reform is planned to be implemented in several stages. The first stage, which is also clearly stipulated in the Coalition agreement of the Parliament of Ukraine of the VIII calling (Coalition Agreement), and the Activities Program of the Cabinet of Ministers of Ukraine, would be public procurement of the restricted list of essential medicinal products through international organizations rendering such services to governments (such as WHO, UNICEF). To enable such procurements it is necessary to amend the existing laws and by-laws (in particular, Public Procurement Act of Ukraine of 10 April 2014, Medicinal Products Act of Ukraine of 4 April 1996, others). This stage is considered as an interim measure that can help Ukraine to ensure procurement of the medicines of high quality and to remove the worst corrupted phase — a compilation of the competitive bidding documentation.
The second stage is reforming the public procurement system of medicinal products and other medical stuff in general: amending the Public Procurement Act as well as by-laws of the Ministry of Health of Ukraine in such a way as to eliminate all gaps providing for corruption possibilities. For example, introduction of digital procurement procedures; building up a list of products to be procured based on, inter alia, WHO standards, etc. The reform of the whole public procurement system will enable procuring essential medicines in Ukraine based on transparent rules without the necessity to engage international procuring organizations.
At the third stage a gradual movement from centralized procurement to decentralization is foreseen, which would require amending of existing legal framework as well?
Deregulation
One of the main features of the pharmaceutical market in Ukraine,, which also provides a lot of space for corruption, is its overregulation. Ukraine, ranked No.96 in the Doing Business index (as of 2014), has set a priority to deregulate the business environment and gain a position in the top-50 of the index. Moreover, improving the business environment, administrative and regulatory framework for both Ukrainian and EU businesses operating in Ukraine and in the EU, simplification and rationalization of regulations and regulatory practice is stipulated by the EU-Ukraine Association Agreement.
Such deregulation plans are expected to cover, inter alia, the following measures regarding business environment:
— Introduction of the regulatory model based on the EU-Ukraine Association Agreement principles.
— Dropping the number of regulatory authorities from 56 to 28, as well as number of regulatory functions from 1032 to 680, followed by further approximation of number and functions of the regulatory agencies with European standards.
— Adopting the new wording of the On Licensing of Certain Types of Commercial Activities Act, etc.
Moreover, clear deregulation plans are established specifically for the pharmaceutical industry. As set by the Coalition agreement and the Draft of the Health System Reform Strategy for Ukraine 2015-2025 developed by the Strategic Advisory Group under the Ministry of Health of Ukraine, it is expected that the deregulation reform will involve the following steps:
1) Simplification of marketing authorization for medicinal products based on mutual recognition principle with regard to medicinal products marketed in jurisdictions with stringent regulatory requirements, such as the EU, USA, Canada, Australia, Japan.
2) Abolition of excessively burdensome procedures and requirements for manufacturing, importation, wholesale and retail trade activities while ensuring strict responsibility for failure to comply with set requirements.
3) Introduction of the mutual recognition principle in the licensees' inspections mechanism.
4) Introduction of the specific-based approach to the regulatory requirements for licensees depending on the nature of the products subject to regulation.
5) Abolition or simplification and streamlining of the processes within the prices’ regulation for medicinal products and medical devices.
6) Review of the list of medicinal products and medical devices that may be purchased for public funds in order to decrease its scope (based on the WHO Essential medicines list).
7) Other measures to implement the general deregulation strategy.
The above-mentioned initiatives are expected to reduce corruption risks in the healthcare sector, enhance effectiveness of spending public funds, as well as to improve the regulatory environment of Ukraine, open patients’ access to the most effective, safe and high-quality medicinal products and medical devices by enabling easier market entry for new manufacturers and wholesalers and, at the same time, encouraging competition on the pharmaceutical market of Ukraine.