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UKRAINE BUSINESS NEWS – TEN ARTICLES

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1.  U.S.-UKRAINE BUSINESS COUNCIL URGES PRESIDENT YUSHCHENKO TO VETO NEW LAW PLACING MORATORIUM ON INCREASE OF PRICES OF MEDICINE
Joins with European Business Association (EBA) & Pharmaceutical Industry Associations
U.S.-Ukraine Business Council (USUBC), Wash, D.C., Thu, Nov 5, 2009

2.   EBA AND HEADS OF PHARMACEUTICAL COMPANIES ASKING UKRAINIAN PRESIDENT TO VETO MORATORIUM ON INCREASE OF PRICE OF MEDICINE
Interfax Ukraine, Kyiv, Ukraine, Friday, October 30, 2009

3 UKRAINIAN PHARMACEUTICAL ASSOCIATIONS URGE PRESIDENT YUSHCHENKO TO VETO A LAW PLACING A MORATORIUM ON HIGHER PRICES OF MEDICATIONS 
Yurii Vinnychuk, Ukrainian News, Kyiv, Ukraine, Friday, October 23, 2009

4.  EBA URGES UKRAINIAN PRESIDENT TO VETO MORATORIUM
ON INCREASE OF PRICES OF MEDICINE 
Interfax Ukraine Business Express, Kyiv, Ukraine, October 22, 2009

5 MORATORIUM ON INCREASE OF PRICES OF MEDICINE IN UKRAINE TO LEAD TO LACK OF MEDICINE, SAY EXPERTS 
Interfax Ukraine, Kyiv, Ukraine, Wed, October 21, 2009

6 UKRAINIAN DRUGS PRODUCERS, SELLERS SHARPLY CRITICIZE
POSSIBLE MORATORIUM ON RISE IN MEDICINE PRICES

Interfax - Ukraine Business, Kyiv, Ukraine, Mon, Oct 12, 2009

7.  UKRAINE: DRUG PRICE RISES BANNED 
UkrInform, Kyiv, Ukraine, Wed, October 21, 2009 

8.  UKRAINIAN PM TYMOSHENKO INITIATING SETTING UP OF STATE DRUGSTORE CHAIN
Interfax Ukraine, Kyiv, Ukraine, Mon, November 2, 2009

9.   UKRAINIAN PRIME MINISTER TYMOSHENKO ORDERS FVPM
TURCHYNOV AND 14 MINISTRIES TO WORK OUT STRATEGY OF
BUILDING CHAIN OF STATE OWNED AND RUN DRUGSTORES 

Ukrainian News Agency, Kyiv, Ukraine, November 4, 2009 

10.  UKRAINIAN ASSOCIATION OF PHARMACEUTICAL RESEARCH AND DEVELOPMENT COMMENTS ON LAW TO PLACE MORATORIUM ON
RAISING PRICES ON MEDICINES AND HEALTHCARE PRODUCTS

Letter To: Mr. V. M. Lytvyn, Chairman, Verkhovna Rada of Ukraine
Ukrainian Association of Pharmaceutical Research, Kyiv, Ukraine, Wed, Oct 7, 2009
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1U.S.-UKRAINE BUSINESS COUNCIL URGES PRESIDENT
YUSHCHENKO TO VETO NEW LAW INTRODUCING
MORATORIUM ON INCREASE OF PRICES OF MEDICINE
Joins with European Business Association (EBA) & Pharmaceutical Industry Associations

U.S.-Ukraine Business Council (USUBC), Wash, D.C., Thu, Nov 5, 2009

WASHINGTON, D.C. - The U.S.-Ukraine Business Council (USUBC) today called on the President of Ukraine, Victor Yushchenko, to quickly veto a new law recently passed by the Ukrainian Parliament (Verkhovna Rada) that introduces a moratorium on the increase of the prices of medicine.

USUBC joins with the European Business Association (EBA) in Kyiv and several pharmaceutical industry trade associations in strongly urging President Yushchenko to veto the drug price control legislation.

The new legislation is bad all the way around, USUBC said.  The people of Ukraine will lose as there will be a severe shortage of critical medicines, the shelves in drug stores and pharmacies will be empty, businesses will lose money, many stores will be forced to close their doors, and major drug manufacturers will stop shipping needed supplies to Ukraine.  Legislation like this never works and is always counterproductive according to USUBC. Ukraine is shooting itself in the foot big-time once again. 

"The new law will lead to a crisis in the pharmaceutical industry and huge losses," the director of the European Business Association (EBA), Anna Derevianko, said at a press conference in Kyiv last Wednesday.

"Mr. President, we ask you interfere in the situation and employ the president's right to veto," said Petro Bahrii, the president of the Association of Pharmaceutical Producers, in a recent statement in Kyiv.

Nadia Chyslenko, president of the Pharmaceutical Professional Association, said recently the enactment of the law will result in closure of most of drug stores in the country and operation of the industry in the shadow.

Volodymyr Dudka, president of the Association of Pharmaceutical Distributors in Ukraine, assesses the moratorium as being absurd. "The law introducing the moratorium on prices is, in my opinion, as absurd as the law on the moratorium on devaluation of the hryvnia," he said.

The U.S.-Ukraine Business Council (USUBC) urged President Yushchenko to veto the legislation immediately in order to stop the severe disruption that has occured in the marketplace.  Winter is coming and the flu season has already hit Ukraine hard.  Stability and order is needed in the marketplace, not unnecessary and major negative, misguided interventions by the government of Ukraine, according to USUBC (www.usubc.org).
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2.  EBA AND HEADS OF PHARMACEUTICAL COMPANIES
ASKING UKRAINIAN PRESIDENT TO VETO MORATORIUM
ON INCREASE OF PRICE OF MEDICINE

Interfax Ukraine, Kyiv, Ukraine, Friday, October 30, 2009

KYIV – The European Business Association (EBA), jointly with the heads of pharmaceutical companies, have asked Ukrainian President Viktor Yuschenko to veto a law on the introduction of a moratorium on the increase of the prices of medicine.

This was announced during debates at the European Business Association entitled "the Moratorium on the Increase of Prices of Medicine: Fighting Super-Profits or a Blow to Consumers?" held in Kyiv on Thursday.

In particular, the head of the Ukrainian representative office of Sanofi-Aventis Jean-Paul Scheuer said that if the law comes into effect, pharmaceutical companies are to cut the prices of medicine by 60%.

"If we take a look at the prices [of medicine] in dollars, we'll see that we're being forced to pay for the devaluation in the country. Unfortunately, we cannot afford it. Otherwise, cutting prices by 60%, we'll have to dismiss people, and we don't want to do that," he said.

In turn, the director of Morion Company Ihor Kriachok said that if the Ukrainian president signs the said law, most drugstores and pharmaceutical chains will close due to losses, and cheap but high-quality Ukrainian-made and imported medicine will disappear from their shelves.

The Ukrainian parliament has imposed a moratorium on the increase of prices and tariffs for medicine and medical products for the period of the financial crisis, until minimum wages and pension are set to the subsistence wage level and wage and student grant debts are paid in full.
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3.  UKRAINIAN PHARMACEUTICAL ASSOCIATIONS URGE
PRESIDENT YUSHCHENKO TO VETO A LAW PLACING A
MORATORIUM ON HIGHER PRICES OF MEDICATIONS 

Yurii Vinnychuk, Ukrainian News, Kyiv, Ukraine, Friday, October 23, 2009

KYIV - Representatives of the associations of the pharmaceutical industry have called on President Viktor Yushchenko to veto a law introducing a moratorium on higher prices of medications made in Ukraine and abroad until the end of the economic crisis in the country. The representatives of the pharmaceutical industry presented their stance on the law at a press conference.

"Mr. President, we ask you interfere with the situation and employ the president's right to veto," said Petro Bahrii, the president of the Association of Pharmaceutical Producers.

Nadia Chyslenko, the president of the Pharmaceutical Professional Association, said in her turn that the enactment of the law will result in closure of most of drug stores in the country and operation of the industry in the shadow.

Volodymyr Dudka, the president of the Association of Pharmaceutical Distributors, agreed with the stance of Chyslenko and assesses the moratorium as being absurd. "The law introducing the moratorium on prices is, in my opinion, as absurd as the law on the moratorium on devaluation of the hryvnia," he said.

The representatives of the associations of the pharmaceutical industry also denied accusations of purposeful unfounded raise in the prices of medicines. They said the prices grow together with the devaluation of the national currency against the dollar.

As Ukrainian News earlier reported, the Verkhovna Rada on October endorsed a law introducing a moratorium on higher prices of medicines produced in Ukraine and abroad until the end of the financial crisis.

In particular, the Verkhovna Rada has introduced the moratorium for the period of the financial crisis until the minimum wage and pensions in Ukraine grow to the level of living and until wage arrears are redeemed in the country.

The parliament has decided that the prices of medicines produced in Ukraine are regulated by the state. As for the medicines produced abroad, they must be sold at prices effective as at July 1, 2008.
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4.  EUROPEAN BUSINESS ASSOCIATION (EBA) URGES 
UKRAINIAN PRESIDENT TO VETO MORATORIUM ON
INCREASE OF PRICES OF MEDICINE 

Interfax Ukraine Business Express, Kyiv, Ukraine, October 22, 2009

KYIV - The European Business Association (EBA) has said that a moratorium on the increase of prices of medicine and medical products imposed by the Ukrainian parliament will affect the Ukrainian pharmaceutical market.

"This will lead to a crisis in the pharmaceutical industry and huge losses," the association's director, Anna Derevianko, said at a press conference in Kyiv on Wednesday.

"Carelessness of the decision is so obvious that next time I propose to adopt a law on the fact that everyone are healthy. We expect that the president will veto the law," an EBA board member and the head of the representative office of Astellas Pharma in Ukraine, Krzysztof Siedlecki, said at the press conference.

As reported, on October 20, the Ukrainian parliament imposed a moratorium on the increase of prices and tariffs for medicine and medical products for the period of the financial crisis, until minimum wages and pension were set to the subsistence wage level and wage and student grant debts are paid in full.
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Promoting U.S.-Ukraine business relations & investment since 1995.
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5.  MORATORIUM ON INCREASE OF PRICES OF MEDICINE
IN UKRAINE TO LEAD TO LACK OF MEDICINE, SAY EXPERTS 

Interfax Ukraine, Kyiv, Ukraine, Wed, October 21, 2009

KYIV - A moratorium on the increase of prices and tariffs for medicine and medical products imposed for the period of the financial crisis by the Ukrainian parliament may cause a shortage of medicine in the country, according to Kyiv-based Arterium Pharmaceutical Corporation.

The press service of the corporation said that the freezing of prices of medicine in the long-term will lead to fundamental changes in the system of the provision of the population with medicine, as private capital will loose interest to the sector, and this would force the state to spend funds on the creation of an alternative system.

Arterium said that the initiative to freeze the prices of medicine is not in line with the Ukrainian Constitution. The press service said that during the economic and financial crisis, the Ukrainian pharmaceutical sector is being led up a dead end.

The company also expressed hope that Ukrainian President Viktor Yuschenko will veto the law.

The press service of Kyiv-based GlaxoSmithKline Ukraine pharmaceutical company told the agency that the price of imported medicine and Ukrainian-made medicine mainly depends on the hryvnia exchange rate, which lost value against the U.S. dollar from July 1, 208 to October 1, 2009 by 65%.

The company said that the impact of the national currency devaluation and sales of medicine at the prices that are not in line with the real economic situation could lead to large losses and the stoppage of market players' activities. Thus, the moratorium on the increase of the prices of medicine will affect producers and distributors, GlaxoSmithKline Ukraine said.

The press service said that the introduction of the said measures for economic entities should be preliminary discussed with all interested parties. CEO of the European Business Association Anna Derevianko, in turn, said that the rise in the prices of medicine and medical products this year was linked to the hryvnia devaluation. "The prices of medicine of many European producers even fell," she said.

Thus, the temporary moratorium on the increase of the prices of medicine with their state registration will lead to large losses for medicine distributors, Derevianko said. She said that the forecasted aftermath of the initiative are plunges in sales of imported medicine.

"This would lead to a fall in payments to the national budget, in particular, payments of tax on profit," the expert said.

Derevianko said that one of the negative after-effects of the law could be the saturation of the Ukrainian market with products of dubious origin and low quality, and the forecasted positive social effect in practice could be canceled out by a lack of medicine.

The European Business Association asked the president to veto the law, Derevianko said.

The president of the association of Ukrainian pharmaceutical producers, Petro Bahriy, said in an interview with Interfax-Ukraine that he does not support state regulation of the competitive retail medicine market, adding that the Ukrainian pharmaceutical market is very competitive.

The Ukrainian parliament has imposed a moratorium on the increase of prices and tariffs for medicine and medical products for the period of the financial crisis, until minimum wages and pension were set to the subsistence wage level and wage and student grant debts are paid in full.
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6.  UKRAINIAN DRUGS PRODUCERS, SELLERS SHARPLY CRITICIZE
POSSIBLE MORATORIUM ON RISE IN MEDICINE PRICES

Interfax - Ukraine Business, Kyiv, Ukraine, Mon, Oct 12, 2009

KYIV - The Professional Association of Drugs Stores and the Association of the Producers of Innovative Medicines are concerned over the preliminary adoption by the Verkhovna Rada,Ukraine's parliament,of a bill imposing a moratorium on an increase in prices of medicines and medical products.

The two associations expressed their position in open letters addressed to Tetiana Bakhteyeva,the head of the Verkhovna Rada healthcare committee. The bill foresees that Ukrainian-produced medicines should be sold at prices regulated by the state,while the price of foreign-made medicines will be fixed at the level registered on July 1,2008.

Both associations claim that the decision to return to the prices fixed last summer cannot be executed because of the forex rate difference between the hryvnia and key foreign currencies for which they buy medicines and raw materials for the production of pharmaceuticals.

The Professional Association of Drugs Stores in particular says that over 70% of the medicines sold in Ukraine are imported,and 90% of Ukrainian-produced medicines are made of imported raw materials and substances that are also subject to state registration and price regulation.

As reported,the Verkhovna Rada passed the above-mentioned bill at first reading on October 6 by 345 votes,with 226 votes required for approval.
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7.  UKRAINE: DRUG PRICE RISES BANNED 

UkrInform, Kyiv, Ukraine, Wed, October 21, 2009 

KYIV - The Verkhovna Rada (Parliament) of Ukraine passed a law imposing moratorium on increase in the prices of medications over the financial crisis period.

The law clamps down the ban for the period until setting floor wages and pensions at the level of minimum of subsistence, and until repayment of overdue wages and grants.  Homemade medications must be sold at state-controlled prices of the July 1, 2008 level.
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8.   UKRAINIAN PM TYMOSHENKO INITIATING SETTING
UP OF STATE-OWNED DRUGSTORE CHAIN
Interfax Ukraine, Kyiv, Ukraine, Mon, November 2, 2009

KYIV - Ukrainian Prime Minister Yulia Tymoshenko says that the government is currently working on setting up a chain of state-owned drugstores.
She said this at a briefing on Monday, the cabinet's media relations office has reported.

"I think we'll do our utmost to create the necessary chain of state-owned drugstores in Ukraine," she said. "We're looking into the issue now."
She said that in previous years all Ukrainian drugstores were privatized, and this had yielded negative results. "The fact that all drugstores became private in previous years is a big mistake," she said. "This means that the state has not created a special network of drugstores and cannot de-monopolize the domestic market."

However, she said that when there is a flu epidemic, people should go to hospitals rather than to drugstores. "[There is] assistance available at hospitals, which have all the necessary provisions and are ready to service patients, rather than at private drugstores, which, unfortunately, have let down the country in this difficult time of epidemic," she said.
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9.  UKRAINIAN PRIME MINISTER TYMOSHENKO ORDERS FVPM TURCHYNOV AND 14 MINISTRIES TO WORK OUT STRATEGY OF BUILDING CHAIN OF STATE OWNED AND RUN DRUGSTORES 
Ukrainian News Agency, Kyiv, Ukraine, November 4, 2009 

KYIV - At a telephone conference with governors Prime Minister Yulia Tymoshenko has given an order to First Vice Prime Minister Oleksandr Turchynov and to four ministries to work out a strategy of building a chain of state-run drugstores. "I'd like to ask to start preparing a strategic document for building a state intervention chain of drugstores," Tymoshenko said.

In particular, apart from Turchynov, this order was given to the ministry of healthcare, the ministry of economy, the ministry of finance and the ministry of industrial policy.

In addition, the prime minister instructed the health ministry to start on Wednesday, basing on data from responsible agencies, cancel licences of drugstores who have no minimum set of medicines for battling influenza and who do not keep to the fixed prices of them.

As Ukrainian News earlier reported, Tymoshenko on November 2 said she found it necessary building in Ukraine a strong chain of state-run drugstores. On October 30, the Cabinet of Ministers set ceiling wholesale and retail prices for antivirals and protection means for the epidemics of the А(H1N1) influenza.
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10.  UKRAINIAN ASSOCIATION OF PHARMACEUTICAL RESEARCH ANDDEVELOPMENT COMMENTS ON LAW TO PLACE MORATORIUM ON RAISING PRICES ON MEDICINES AND HEALTHCARE PRODUCTS         

Letter To: Mr. V. M. Lytvyn, Chairman, Verkhovna Rada of Ukraine
Ukrainian Association of Pharmaceutical Research, Kyiv, Ukraine, Wed, Oct 7, 2009
 
RE: Draft Law No. 3426 “On a Moratorium on Raising Prices and Tariffs for Medicines and Healthcare Products”, dated December 2, 2008.
 
Dear Mr. Lytvyn,
 
We would like to seize this opportunity to express our respect to you on behalf of all members of our association of manufacturers of innovative products, the Association of Pharmaceutical Research and Development (APRaD). Our Association represents 15 well-known international pharmaceutical companies involved in the development of original medicines.

Our members are Boehringer Ingelheim, Delta Medical (the official distributor of Bristol-Myers Squibb and Forest Laboratories), GlaxoSmithKlein, Ipsen, Janssen-Cilag, Eli Lilly, Novartis, Novo Nordisk, Pfizer, Sanofi-Aventis, Bayer Schering Pharma AG, Schering-Plough, Servier Laboratories, Solvay Pharma, and Abbott Laboratories.

Our objectives are to promote a policy of improving access to high-quality medicines for the Ukrainian population, raising public awareness of innovative medicinal products, and assisting the Government of Ukraine in reforming its healthcare system.

Our Association is a collective member of the standing Working Group on Pricing Regulation set up at the Ministry of Health of Ukraine and of the Working Group set up at the Verkhovna Rada Committee on Healthcare, which is currently drafting a new wording of the Law of Ukraine “On Medicines”.

Our representatives are also members of the Public Council on Proper Promotion of Medicines, established at the Ministry of Health of Ukraine, and cooperate with other state institutions and agencies to improve public access to safe and high-quality medicines.

We hereby express our deep concern over the fact that Draft Law No. 3426 “On a Moratorium on Raising Prices and Tariffs for Medicines and Healthcare Products” was adopted as a framework document at the plenary meeting held on October 6, 2009 (hereinafter referred to as the “Draft Law”).

The Draft Law provides for “the introduction of a moratorium on raising prices for all types of domestic and foreign manufactured medicines used by the people and medical institutions of Ukraine. Domestically manufactured medicines shall be sold at state-regulated prices and foreign manufactured medicines shall be sold at prices applicable as at July 1, 2008.”

We believe that possible further adoption of this Draft Law in any of its wordings will not only fail to ease social tensions, as promised by the authors of the Draft Law, but will also lead to a social explosion and catastrophic consequences for the pharmaceutical industry in the short term.

We would like to draw your attention to a similar situation which occurred in the recent past when poorly thought-out regulatory initiatives already caused shock and turmoil in the pharmaceutical market following last October’s approval of Resolution No. 955 of the Cabinet of Ministers of Ukraine “On Measures for Stabilization of Prices for Medicines and Healthcare Products”.

It took several months of numerous consultations with representatives of businesses, professional associations and patients’ organizations to repair the system of providing the population of Ukraine with medicines, which had been destroyed in a moment by the above-mentioned resolution.

Another argument put forward by the authors of the Draft Law in the Explanatory Note and saying that “this Law aims to improve healthcare services by putting an end to the cynical robbery of a majority of the population through excessively high mark-ups charged on medicines on their way from manufacturers to consumers.

The Law sets limitations on unreasonable and, therefore, criminal actions by pharmaceutical market players” does not correspond to the order of things currently existing in the industry and contains groundless accusations against market participants allegedly involved in some criminal actions.

Following the registration of this Draft Law on December 2, 2008, certain measures were taken to regulate mark-ups on medicines: by its Resolution No. 333, dated March 25, 2009, the Cabinet of Ministers of Ukraine created the “National List of Essential Medicines and Healthcare Products” and approved the Pricing Procedure for State-Regulated Essential Medicines and Healthcare Products. In particular, this Procedure sets limitations on maximum wholesale and retail supplier-and-sale mark-ups.

During the period while this Resolution has been in effect, average hryvnia-denominated prices for medicines have shown a tendency to drop despite an increasing exchange rate between foreign currencies and the national currency of Ukraine, which fact is proven both by the Ministry of Economy of Ukraine and by independent analysis and monitoring organizations. No doubt this tendency demonstrates the importance for prices for medicines of such decisive factors as stability and predictability of regulatory requirements.

As regards bringing the prices for imported medicines to the level of July 1, 2008, such an adjustment of prices is impossible in view of the past year’s critical fall in the hryvnia’s exchange rate against major foreign currencies, in which payments are made for the purchased imported medicines. No business entity can sustain such losses.

An equally important factor is the legal aspect of such pricing regulation. According to clause 3 of Article 116 of the Constitution of Ukraine, the only governmental authority authorized to introduce regulation of prices is the Cabinet of Ministers of Ukraine.

To add to that, part 1 of Article 191 of the Commercial Code of Ukraine and Article 4 of the Law of Ukraine “On Prices and Pricing” provide that the Cabinet of Ministers ensures the implementation of a state pricing policy in Ukraine and draws up a list of products, goods and services, the state-fixed and regulated process and tariffs for which are approved by competent state administration agencies.

Provisions of the proposed Draft Law also fail to comply with provisions of Articles 8 and 10 of the above-mentioned Law of Ukraine, according to which resolutions on introducing state pricing regulation methods should be passed by the Government of Ukraine.

These provisions further provide that “any changes in the level of state-fixed and regulated prices and tariffs for certain types of products, goods and services shall be introduced in the manner and within the periods established by competent agencies authorized to approve or regulate such prices (tariffs)”.

We would also like to mention some technical procedural aspects of the manner in which the Draft Law was approved by the Verkhovna Rada. It was approved in the first reading in breach of the following provisions of the Regulations of the Verkhovna Rada of Ukraine:

(1)  Article 93 of the Regulations, providing for the preparation and preliminary consideration of the Draft Law by the main competent Committee of the Verkhovna Rada of Ukraine, i.e. the Committee on Healthcare, for approval of an opinion regarding the expediency of putting it on the agenda of the Verkhovna Rada’s session;

(2)  Articles 88, 103 and 108 of the Regulations, providing that the main competent committee of the Verkhovna Rada of Ukraine should prepare the Draft Law for consideration in the first reading. It is important that at the meeting of such main committee, opinions of industry-specific ministries, public associations and competent experts should be heard regarding the advisability of adopting this Draft Law, because its adoption will seriously affect the situation with the provision of the population with medicines;

(3)  Article 94 of the Regulations, in its part containing requirements for the financial and economic substantiation of the Draft Law. In the Explanatory Note to the Draft Law, its authors say that its implementation does not require any additional financial expenses. This statement does not comply with part 6 of Article 191 of the Commercial Code of Ukraine providing that when setting fixed prices, the implementation of which will make it impossible for business entities to make any profit, executive and local self-government authorities must support such entities with subsidies in line with the law.

To sum up the above, we would like to point out that the proposed Draft Law will not perform any positive social function if adopted, but will cause a complete collapse of the system of providing the Ukrainian population with medicines. Patients in Ukraine will not be able to buy medicines that are essential for their lives.

Besides, no state pricing regulation can be implemented in such a socially sensitive industry without a comprehensive economic analysis with the engagement of professional associations and competent experts in the field.

Dear Volodymyr Mykhaylovych, we hope for your understanding and we hope that the opinion of the pharmaceutical community will be taken into account during further consideration of the said Draft Law by the Verkhovna Rada of Ukraine.
 
Sincerely,
/s/
Association of Pharmaceutical Research and Development        
Kyiv, Ukraine 
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