The lessons of war.

Russia's full-scale invasion of #Ukraine at the beginning of 2022 shocked the entire post-Soviet space. All countries of the former Soviet Union, as well as Europe, have realized how fragile the world is and how rapidly things can change.

As an unfortunate reality, #war is not an exclusive occurrence, lives are destroyed and markets are affected by war.

How did the Ukrainian #pharmaceuticalmarket fare during the first and second year after the invasion? Are there any lessons we can learn from the destructive impact of war on a market similar to our post-Soviet pharmaceutical market?

In the pre-war years, Ukraine's regulatory system was actively developing; it was one of the most advanced in the post-Soviet countries.

Ukrainian #pharmaceutical market was worth 2.2 to 3 billion US dollars in 2020, according to various sources. Domestic products accounted for 38%; more than 20 thousand pharmacies operated in the country. An increase of 30% in #drug consumption was recorded in 2021

However, Ukraine's pharmaceutical market in 2022 experienced a significant drop in volumes and cost increase. In general, pharmaceutical market in 2022 decreased by 42% in volume and 23% in monetary terms; cumulative sales in 2022 amounted to about UAH 61 billion (USD 1.6 billion) in #pharmacy entry prices. The average price per package increased by 15% - from 100.6 UAH in 2021 to 115.8 UAH in 2022.

Compared to 2021, 23% fewer drug packages were reimbursed to pharmacies in the Affordable Medicines program in 2022.

Furthermore, analysts pointed out that the Affordable Drugs Program only covers 7% of the overall prescription drug market in 2022, which patients can get for free or at a reduced rate. According to a WHO study, every fifth Ukrainian was unable to obtain the necessary medications. Lack of funds was the primary reason.

The overall drug sales in Ukraine increased only in three regions in 2022 - Transcarpathian, Poltava, and Ternopil - likely due to an increase in internally displaced persons from other regions. Meanwhile, the largest drop in drug sales was expectedly observed in temporarily occupied territories or areas of ongoing hostilities - Kharkov, Zaporozhye, Donetsk and Lugansk.

?A number of factors contributed to the decline of the market, including declining population incomes, migration abroad, and the loss of pharmacies in temporarily occupied territories and zones of active hostilities. International #medical humanitarian aid was another important factor.

Business conditions have become extremely difficult.

According to the executive director of the pharmaceutical company JSC Farmak Vladimir Kostyuk, at the end of 2022, pharmacy sales decreased by 29%. There was a 19% inflation rate in the pharmaceutical market.

?National market players suffered losses. JSC Farmak lost warehouses with all finished products and packaging materials worth more than UAH 1.5 billion. This is more than the company’s net profit in 2020

In the first months of the war, #supplychains were disrupted. High demand for motor vehicles, a ban on drivers traveling outside the country and problems with fuel have caused a shortage of transport and a sharp increase in the cost of these services.

A constant power outage, the forced shutdown of production plants due to bombings, and the relocation of storage facilities also caused significant problems.

During the first month of the full-scale invasion, drugs were scarce. This was due to two factors: logistical instability and an excessive amount of drugs purchased in the first days of the war.

At the beginning of the invasion, when normal logistics were impossible, supply chains were broken.

In addition, people suffering from chronic #health problems bought #medication in large quantities, thereby creating shortages. It was unclear how fast and whether there would be any deliveries to pharmacies, so people stocked up on everything they needed.

Within hours of the invasion, people with chronic heart disease began purchasing #medicines for future use. Sales of heart drugs increased by 13% in February and March compared to January 2022. The situation was similar with hormonal drugs, +20% in February compared to January.

Between July and October 2022, Ukrainian information space was flooded with news about a nuclear strike. A primary recommendation from experts was, "Use potassium iodide after being notified of the threat of a nuclear attack." As a result, the demand for products containing iodine in August increased threefold over July.

There has been mentioned a change in consumer demand since the war began. Stress, blood pressure, and pain medications were in higher demand, while preventive medications were in decline. Diabetes, epilepsy, and mental illness drugs also occupied top spots.

During the period from February 24 to March 31, Ukrainians did not purchase medicines online. Courier delivery problems and power shortages in areas where hostilities were active contributed to this. Customers were also uncertain whether pharmacies would continue to operate, whether they could pick up medications ordered on the website, so they bought offline in open pharmacies. In May, online purchases on pharmacy websites or partner sites began to grow, and in September the trend returned to pre-war levels.

However, since May overall the situation on the market started to stabilize, and since September the Ukrainian pharmaceutical business has fully adjusted to the pre-war rhythm.

Logistics chains were restored: raw materials and finished products were delivered by plane to European airports, from where they were delivered to Ukraine by land transport. Similar procedures are followed for exporting Ukrainian products.

The SMD company reported that domestic drugs' share of the pharmaceutical market in 2022 increased to 72% in volume and to 38% in monetary terms.

Ukrainian pharmaceutical markets have shown a high level of resilience in difficult times.

There is a great deal of credit to be given to the workers in the industry: pharmacists who went to work in the bombings and provided essential medicines to the population, workfolk and pharmacists who reopened pharmacies in deoccupied territories quickly, business representatives who established logistics corridors, and pharmaceutical enterprise employees who carried out their duties in wartime.

Just a year after the start of the war, the Ukrainian pharmaceutical market began recovering rapidly and reached 1.5 billion US dollars. Pharmacies are actively opening; their number has already reached 14,000 and continues to rise.

Are there any lessons we can draw from all this? Colleagues, invite you to participate in an active discussion.

Here's what I think:

1) #Logistics are of the utmost importance and must be prioritized.

Establish new border checkpoints and equip old ones on the borders with neighbors who are not a hypothetical threat. Kazakhstan, for example, needs to significantly increase its checkpoints with Uzbekistan and Kyrgyzstan and improve their conditions.

Increasing the number and improving the condition of roads and transportation infrastructure

2) Promote the opening of industrial and warehouse facilities in safe regions or away from external borders. In the case of Kazakhstan, this is the south and southwest.

3) Regularly inspect and improve generators in factories, pharmacies, and hospitals. The government should subsidise the purchase of new, modern generators.

4) Promote the country's attractiveness to pharmaceutical manufacturers who will not only go there for production, but will also open sales offices. Increased representative offices and branches will increase the number and load of drug and medical equipment warehouses, which may be essential in emergency situations. In addition, this will help diversify imports so you are not reliant on one or two countries. Not to mention the economic benefits.

But this requires liberalizing the law. ?As the pharmaceutical legislation in many post-Soviet countries has become increasingly complex and restrictive, businesses and drugs are gradually withdrawing from the market, the market is becoming increasingly monopolized, and the focus has shifted from drugs to medical supplements or narrow niches for specialized and orphan drugs. Meanwhile, the availability of quality drugs will decline, and drug prices will rise for the majority of patients with chronic diseases.