Recently state regulators have been showing keen interest in the pharmaceutical market of Ukraine, which is a signal that the market will become more regulated, especially by bodies that for various reasons used to pay no particular attention to it, e.g. the Antimonopoly Committee of Ukraine (AMCU). With that in mind, Arzinger Law Office in cooperation with the Ukrainian Medical Club and under support of “Yurydychna Gazeta” held the round table discussion “Pharmaceutical Market: Legislation Novelties and Prospects for 2012” on January 24, 2012 in the press centre of Interfax-Ukraine. Representatives of international and domestic pharmaceutical companies and public associations summed up the year 2011 and discussed the prospects for 2012.

Among the speakers were high profiled experts in pharmaceutics, namely Oleksandr Kropyvny, Head of the State Department of Regulation of Wholesale and Retail Trade of Medicines, State Administration of Ukraine on Medicinal Products (the State Service); Valeriy Stetsiv, Honoured pharmacy worker; Timur Bondaryev, Managing Partner at Arzinger Law Office, Attorney-at-law, Head of the firm’s healthcare and pharmaceutical practice; Oleksandr Dyakulych, Associate at Arzinger; Svitlana Postrygan, Senior Associate at Arzinger; Ivan Soroka, President of the Ukrainian Medical Club, Chairman of the organizing committee of “National Medical Award”, Honoured healthcare worker of Ukraine.

The round table agenda included hot issues of the pharmaceutical market, such as OTC (over-the-counter) medicinal products advertising, new license terms, antimonopoly and competition legislation, AMCU’s inspections, personal data protection, as well as anticorruption law enforcement practice.

Participants of the event started the discussion with the issue of OTC medicinal products advertising prohibition. Thus, the Law of Ukraine “On Amendments to Certain Laws of Ukraine in the Sphere of Health Protection regarding Enhanced Control over Circulation of Medicinal Products, Foods for Special Dietary Use, Functional Foods and Dietary Supplements” as of December 20, 2011 No. 4196-17 in force as of January 13, 2012 allows advertising only for OTC medicinal products that are not on the list of medicinal products prohibited for advertising (approved by the Ministry of Healthcare of Ukraine).

In particular, Timur Bondaryev noted that the law requirement as to OTC medicinal products advertising not on the list of prohibited for advertising medicinal products shall take effect six months after the enactment of the law (on July 14, 2012). In this way the legislators gave the market time and opportunity for proper registration of such medicinal products. At the same time, the lawyer expressed the market’s concern, since the law contains no criteria for dividing medicinal products into those that are allowed and those that are prohibited for advertising, which creates certain risks for abuse and corruption in the sphere. Thus, the Ministry of Healthcare of Ukraine should quickly define the appropriate criteria.

In his turn, Mr. Stetsiv suggested that the Ministry of Healthcare of Ukraine (MOH) should work closely with representatives of public organizations, professional associations, and involve experts from MOH expert centers, the State Service and the State Drug Control Service during the elaboration of data selection criteria. The expert pointed out that the elaboration should be stepwise, so that all market participants’ interests could be allowed for.

One of the last year’s most important novelties for the pharmaceutical market were the new License terms for conducting economic activities in the production of medicinal products, wholesale and retail in medicinal products (License Terms), approved by Order of the Ministry of Healthcare of Ukraine No. 723 dated 31.10.2011. Among other things, such novelties as the definition of the concept “medicinal products manufacture (industrial production)” and “medicinal products manufacture” were discussed. They are especially important for pharmaceutical companies that are thinking over production localization in the light of the state program for supporting domestic pharmaceutical manufacturers.

Moreover, experts considered the introduction of the requirement regarding distributors’ mandatory compliance with the Good Distribution Practice (GDP) as a positive factor for the market. However, attention was paid to the anticompetitive component of the said norm, which might serve as an instrument to drive small retailers out of the market.

Trade in medicinal products via internet and mail services has also been prohibited. Such a major innovation for the pharmaceutical market has long been discussed, but is still reflected in the new License Terms. According to Timur Bondaryev, it will reduce the spread of counterfeit products and uncontrolled consumption of prescription drugs.

Furthermore, the new License Terms introduce considerable changes in the pharmaceutical segment by prohibiting OTC medicinal products advertising in the sales area, placement of prescription drugs on display, in glass and open cabinets in the sales area. As a result, the final consumer has fewer sources of information about medicinal products and, thus, is induced to consult a doctor every time. It is planned to terminate and liquidate kiosks one year after the enactment of the License Terms.

Mr. Bondaryev stressed the positive effect of the new License Terms for the development of pharmacy chains in rural areas. Thus, the required minimal area of pharmacies situated in rural areas has been reduced from 40 sq. m to 30 sq. m. In case there is no pharmacy or its structural division in a rural area, retail in medicinal products is allowed at first-aid stations, first-aid and obstetric stations, rural, district hospitals, outpatient’s clinics, general practice outpatient’s clinics (family medicine) by employees of these institutions on the basis of agreements concluded with the licensee (pharmacy).

To support the previous speaker, Mr. Kropyvny added that according to statistics by the State Service of Ukraine the number of pharmacies in rural areas had grown by 9.25% in 2011 (as of January 1, 2011 – 2656 pharmacies, as of January 1, 2012 – 3164 pharmacies). He noted that the Procedure for Control of Compliance with License Terms (Order of MOH of Ukraine No. 724 dd. 31.10.2011) had been adopted along with the License Terms. For the first time, the Procedure provides for uniform acts of inspections of a licensee’s compliance with the License Terms thus promoting the transparency of such inspections.

The need for further development and improvement of legislation regulating the pharmaceutical market was referred to by Mr. Stetsiv. According to him, it is necessary to review the rule, under which the entire pharmacy network’s license is cancelled in case of violations made by a structural subdivision of the same network. Mr. Stetsiv added that bona fide businesses should be inspected once in two years only.

In his presentation Ivan Soroka stressed on strengthening the public element and its regulatory weight in the context of recent developments in the pharmaceutical market and encouraged the roundtable participants to cooperate.

While discussing antitrust regulation Oleksandr Dyakulych noted that the Antimonopoly Committee of Ukraine (AMCU) had become one of the key regulators for the pharmaceutical market. This is particularly shown by information requests received by representatives of the pharmaceutical market in October 2011 and early this year. Their subject is the Committee's intention to study the market in detail, to understand its structure and specifics as well as its major players. In these requests the Committee pays special attention to the distribution segment. Thus it can be assumed that a number of AMCU’s investigations regarding distribution policy in the pharmaceutical market should be expected in 2012. This year the antitrust authority will keep monitoring the public procurement market, price cartels, as well as the sphere of advertising in terms of bad faith under actual competition legislation. The speaker recommended that companies should carefully inspect the documents they submit to AMCU and review their internal policies for compliance with antitrust laws.

Svitlana Postrygan highlighted the regulatory aspect of legal relationships in the sphere of protection and use of personal data and focused on the types of personal data specific to pharmaceutical industry. In particular, she referred to personal data bases of physicians (pharmacists, representatives of distributors, pharmacies, pharmaceutical companies, insurance companies, hospitals), patients, including clinical trials participants and marketing (social) projects by pharmaceutical companies.

Svitlana Postrygan emphasized ​​that although the adoption of the Law on delaying administrative and criminal liability for violation of legislation in the sphere of personal data protection (until 1 July 2012) had given companies the time to bring their activities into compliance with the law, it did not mean that the latter were exempt from the obligation to register personal data bases and establish proper conditions for the protection of processed personal data. The lawyer finished her speech by recommending to register personal data bases by 1 July 2012 and to bring internal documentation into compliance with the law.

The last point discussed by the round table participants were the changes in anticorruption legislation having major implications for the pharmaceutical industry. Thus, on July 1, 2011 the Law of Ukraine “On Preventing and Combating Corruption” and the Law of Ukraine “On Amending Certain Legislative Acts of Ukraine Concerning Liability for Corruption” of 7 April 2011 entered into force.

In the opinion of Arzinger’s representatives the new anticorruption law has a significant impact on the marketing and promotional policies of pharmaceutical companies. It should be noted that the Law has considerably expanded the list of subjects liable for corruption offenses in comparison with the previously existing anti-corruption legislation. For pharmaceutical business, it means that officials of public hospitals and private clinics fall within the purview of the Law. It should be noted that officials are persons occupying positions related to the implementation of organizational, managerial, administrative and economic duties, and even a “simple” physician may be considered as such.

Furthermore, the law stipulates that an agreement concluded as a result of a corruption offence shall be null and void. Accordingly, commercial risks related to the possible invalidity of a number of agreements arise under civil law.

A considerable negative effect of a corruption offense is the fact that the person found guilty of committing such an offense is entered in the Unified State Register of persons that has committed corruption offenses. Mr. Bondaryev noted that representatives of pharmaceutical companies should also remember about reputational risks arising in connection with corruption offenses, which could negatively affect their businesses in the market, also in the international aspect.

Concluding the event, Timur Bondaryev summed up that the interest of regulatory bodies to the pharmaceutical market in 2012 would keep growing. Therefore, pharmaceutical companies should take it seriously and conduct their further activities accordingly.