VZCZCXYZ0000
RR RUEHWEB

DE RUEHKV #1832 2941414
ZNR UUUUU ZZH
R 211414Z OCT 09
FM AMEMBASSY KYIV
TO SECSTATE WASHDC 8631

UNCLAS KYIV 001832 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON UB
SUBJECT: PRICE FREEZE IMPOSED ON MEDICINES AND MEDICAL 
PRODUCTS 
 
 ¶1. (U) Summary. Ukraine's parliament has enacted a new law 
fixing prices of imported medicines and medical products at 
their July 1, 2008 levels.  Prices of domestically produced 
medicines would be regulated by the GOU under the 
legislation.  Industry analysts expect the law would 
negatively impact the 2 billion USD pharmaceutical industry 
and create market shortages, but indications are that 
President Yuschenko will veto the legislation.  End Summary. 
 
¶2. (U) The Verkhovna Rada passed Draft Law no. 3426 into law, 
setting a moratorium on the increase in prices for 
pharmaceuticals and medical products.  The bill was 
registered by two Communist Party deputies, Pyotr Simonenko 
and Vladimir Matveev, in December, 2008, following sharp 
local-currency price increases (42.2% over the past 12 
months) on medicines, largely due to the devaluation of the 
Ukrainian hryvnia (UAH).  Until the GOU introduces official 
price lists for domestic pharmaceuticals and medical 
products, those items will also be set at their July 1, 2008 
UAH prices.   Medicines made domestically will be sold at 
prices regulated by the GOU, while the prices of imported 
medicines will be fixed at their local-currency prices as of 
July 1, 2008. 
 
¶3. (U) Imported medicines make up 65% of the 2 billion USD 
Ukrainian market.  Medical importers do not have significant 
back stock purchased at July 2008 prices, and analysts expect 
that new deliveries will be suspended, causing shortages and 
industry losses of approximately UAH 6-7 billion (750 million 
USD).  When the Cabinet of Ministers established limits on 
profit margins for medications in December 2008, pharmacies 
saw the volume of imports drop and even basic imported 
medicines, such as imported antibiotics, became more 
difficult to find for consumers.  The limits are still in 
effect, through local business sources indicate that they are 
no longer being enforced.  The head of global pharmaceutical 
firm AstraZeneca's Ukrainian branch, Vladimir Ignatov, said 
that imports will not be possible if the law is implemented, 
unless the GOU subsidizes distributors who incur losses or 
offers a special optimal exchange rate for importers.  The 
medical importers' lobby attempted unsuccessfully to prevent 
the adoption of the bill on the second reading, and is now 
pinning hopes on a promised presidential veto and challenges 
to the law's constitutional validity. 
 
¶4. (SBU) Comment.  Since resuming its legislative functions 
in early October, the Verkhovna Rada has pushed forward a 
number of populist bills.  With Ukraine,s presidential 
election coming in January 2010, it appears that, in this 
instance, Ukraine,s parliamentarians are attempting to curry 
favor with the electorate with price controls.  End comment. 
PETTIT