The Ukrainian Government has instigated a raft of rapid cost-cutting measures across the drug retail sector, triggered by reports of overpricing, but there have been warnings that an expansion of the international reference pricing (IRP) scheme to over-the-counter (OTC) medicines may be a step too far.
In early February 2025, reports emerged in the Ukrainian pharma manufacturing sector about an unexpected set of requests from the government to make radical “voluntary” 20% to 30% retail price cuts on the most popular domestic retail medicines. At the time, this seemed like a tentative approach before the consideration of a limited one-off correction measure, as had been seen briefly in mid-2010 and 2012. However, this was the beginning of something far bigger.
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Within only a month of these initial letters, a flurry of presidential announcements heralded the rapid sign-off of successive pieces of legislation governing a raft of cost-containment measures for medicines, with little time for evaluation or consultation. These measures were instigated in response to a scathing report from the National Security and Defense Council, which featured allegations of widespread anti-competitive and overpricing practices in several pharmacy chains across the country.
Some of these new policies have been temporary one-off measures, such as the voluntary price cuts scheme, which was finalised rapidly and rolled out for more than 200 popular domestic medicines in early March. Other initial measures will be more permanent – the most notable of these being the application of more stringent differential margins across the entire market, rather than just on reimbursed drugs.
Additionally, several more cost-containment mechanisms have been rapidly drafted and are lined up to roll out this year. The most major of these is a fundamental revision of Ukraine’s IRP scheme, including amendments to the country basket and formula, and critically, a major expansion to include not only non-reimbursed retail drugs but also OTC non-prescription drugs – a highly unusual group to include in IRP.
The government has scheduled the rapid roll-out of this amended scheme in a phased manner from May to July 2025, beginning with reimbursed drugs, then non-reimbursed prescription medicines, and ending with the OTC sector.
Proposed IRP changes in Ukraine
The current IRP price control scheme in Ukraine is restricted to reimbursed drugs. It was first introduced in 2016 on a very limited basis for a small insulin reimbursement scheme. However, this was followed by successive expansions to its current range, which encompasses all state-reimbursed drugs under the Ukrainian National Health Service, excluding those subject to specially negotiated state procurement contracts. Few controls have been imposed on non-reimbursed retail drugs until now.
However, under the upcoming proposed changes, IRP controls are expected to be expanded to cover reimbursed and non-reimbursed drugs, covering both prescription and OTC medicines. Exemptions will apply for innovative medicines and several other specific categories, which will only be required to declare prices. Price linkage will also be implemented to contain generic and biosimilar prices at less than 60% of the originator drug price.
Changes to the IRP country basket have also been proposed. An additional three low-priced neighbouring markets (Bulgaria, Moldova and Romania) will join the existing list of the Czech Republic, Hungary, Latvia, Poland and Slovakia. There are also plans to amend the IRP formula by replacing the current use of the median of all available prices from the reference markets, and instead using the average of the next-lowest three prices, after excluding the lowest reference price. This new formula could drive prices downwards since the eight cited markets typically have relatively low prices. However, the exclusion of the lowest-priced market may help keep prices sustainable despite the constraints.
Industry pushback and concerns over rapidity of change
Several of the initial changes in this package were pushed through very rapidly – within a month in early March 2025, with little or no consultation – a highly unusual scenario in Ukraine, resulting in significant pushback from the pharma industry.
In late February, immediately before the first wave of changes, seven pharma associations trading in Ukraine sent a strongly worded letter calling for urgent dialogue on these new measures. In response, the government called a working meeting to establish a more consultative structure for the planning process over the coming months. Following the meeting, some last-minute amendments were made to the new distribution margins, and all of the upcoming changes, including the IRP expansion, are now expected to be subject to at least some feedback.
However, one major sticking point highlighted recently by the Medicines for Europe Association is likely to remain the expansion of IRP controls to include OTC drugs – a sector hardly ever included in such a scheme. In most EU countries, IRP is only applied to state-procured and/or reimbursed drug programmes, with other sectors generally left to self-regulate – and stakeholders have strongly advised that free retail pricing of OTC drugs should be maintained instead. Notably, one of the very few countries that has ever included OTC medicines in its IRP scheme, Kazakhstan, recently reversed this measure and deregulated that section of the market, finding that OTC prices were controlled more effectively by free competition.
Since the OTC sector is currently planned as the last phase of the expanded IRP rollout, in July, it may be dropped by that stage, especially if industry pressure prevails.
This article is produced as part of GlobalData’s Price Intelligence (POLI) service, the world’s leading resource for global pharmaceutical pricing, HTA and market access intelligence integrated with the broader epidemiology, disease, clinical trials and manufacturing expertise of GlobalData’s Pharmaceutical Intelligence Center. Our unparalleled team of in-house experts monitor P&R policy developments, outcomes and data analytics around the world every day to give our clients the edge by providing critical early warning signals and insights. For a demo or further information, please contact us here.
