Health Ministry Lays Out Vision For Healthcare Reform

BMI View : The reform agenda set out by the health ministry will be positive for Ukraine's pharmaceutical and healthcare sector over the long term. National health insurance and pharmaceutical reform will be mutually beneficial to drugmakers and citizens. In the short term, geopolitical risk and the country's unstable financial situation will restrict the pace of healthcare reform.

Ukraine is going through a turbulent phase, with a burgeoning government and active parliament introducing laws to simplify bureaucracy and remove corruption. However, the government is also responding to the severe depreciation of the hryvnia and the terms of its IMF agreement. While we see 2014 and 2015 as difficult years, we see encouraging signs of positive reform that will, in the long term, make Ukraine an attractive pharmaceutical and healthcare market once more.

Draft Resolution Calls For Eventual Rollout Of Health Insurance

Healthcare Spending Faces Short Term Pressure
2008-2018, USDbn

BMI View : The reform agenda set out by the health ministry will be positive for Ukraine's pharmaceutical and healthcare sector over the long term. National health insurance and pharmaceutical reform will be mutually beneficial to drugmakers and citizens. In the short term, geopolitical risk and the country's unstable financial situation will restrict the pace of healthcare reform.

Ukraine is going through a turbulent phase, with a burgeoning government and active parliament introducing laws to simplify bureaucracy and remove corruption. However, the government is also responding to the severe depreciation of the hryvnia and the terms of its IMF agreement. While we see 2014 and 2015 as difficult years, we see encouraging signs of positive reform that will, in the long term, make Ukraine an attractive pharmaceutical and healthcare market once more.

Draft Resolution Calls For Eventual Rollout Of Health Insurance

The health ministry has pushed for a complete and total reform of the healthcare system, drafting a resolution "On Approval of the Concept of Building a New National Care System of Ukraine". This draft calls for a two stage reform process; in 2014-15, the draft demands amendments to the Ukrainian constitution to agree on the details of a national health insurance system, targeted excise taxes on healthcare and rewriting Article 49 of the Ukrainian constitution to redefine the provision of healthcare services. The second phase planned for 2016-17 calls for funding of secondary healthcare (hospitals and speciality care facilities) and provisional rollout of primary healthcare services, which are currently lacking in the country. The legacy of a Soviet-style healthcare system has led to overcapacity in hospitals and neglect in the primary sector (primarily clinics and physicians), and the health ministry believes needs to be urgently addressed.

Pharmaceutical Law To Be Harmonised With Europe

In the pharmaceuticals sphere, the draft resolution calls for employing EU legislation as a guiding principle towards reforming the sector. Plans to introduce VAT and pricing restrictions will be put aside indefinitely, with these broader reforms set to take priority for now. Over time, EU harmonisation of pharmaceutical legislation will enable easier market access to for drugmakers and lessen the regulatory burden in the country, however, this may come at the cost of European-style pricing restrictions.

Healthcare System Reform To Address Considerable Disease Burden

Ukraine has a myriad of healthcare issues and lags behind the rest of Europe on many healthcare indicators such as life expectancy and disease outcomes (such as cardiovascular conditions, cancer, diabetes and tuberculosis). Ineffective governance, rife corruption and underfunding have left the country's public healthcare system in a dire financial situation. The draft resolution recognises that healthcare reform should focus on preventative care, with a focus on non-communicable diseases, which are the leading causes of death in the country.

Funding the implementation of these reforms will be considerably difficult especially now that Ukraine must face cutting back on expenditure or increasing taxes in the wake of an IMF emergency loan. Adding pressure to government finances will be the spectre of gas payments, the stability of the hryvnia and geopolitical tensions. A worsening in any of these positions will significantly delay to the reform agenda in healthcare.

Following the populist overthrow of Viktor Yuschenko and the election of Petro Poroshenko, the newly elected Ukrainian government is aligning itself strongly with Europe on a range of matters, such as trade, the rule of law and business reform. A crackdown on corruption has also been a highlight, following revelations of considerable kickbacks and cronyism in the previous government's procurement tenders.

The pharmaceutical and healthcare outlook for the next two years in Ukraine has turned bleak owing to the country's tenuous financial situation, but the Ukrainian health ministry is pressing ahead with laying the foundations for a European-style healthcare system, recognising the need to deliver healthcare services and its importance for the country's economic development. We see healthcare spending declining by 18.9% in US dollar terms in 2014 to USD10.92bn, and growing to USD14.18bn by 2018, representing a compound annual growth rate of 3.0%.

Healthcare Spending Faces Short Term Pressure
2008-2018, USDbn

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