Ukraine's pharmaceuticals: from dependence to endogenous development

Abstract

The article substantiates various theoretical and applied principles of developing high-tech pharmaceutical industries (HTPI). It is established that the key problem of developing countries in this area is the dependence on resources and markets of developed countries, while the involvement of advanced foreign technologies can be a catalyst for increasing the technological potential of host countries (subject to the availability of proper knowledge and human capital, changes in the institutional environment, and improved the framework conditions for innovation). In the context of the development of HTPI, the author shows the importance of the network nature of the acquisition by pharmaceutical companies of sustainable competitive advantages based on resources that are difficult to simulate or replace. It is substantiated that networks built with local research institutions, higher education institutions, and research units of other companies, give pharmaceutical manufacturers the opportunity to access complementary assets and become their specific resource, which provides unique competitive advantages. The author reveals various methodological and statistical features of the categorization of industries by the level of technology in the conditions of globalization. It is substantiated that the current low value of the ratio of research and development (R&D) to value-added generated by pharmaceuticals of individual countries is not a sign of the industry’s low technological level, as the current revenues are the result of long-term R&D and harmonization procedures for launching new drugs with lags of 10-15 years. A new tool for the study of international trade in high-tech pharmaceuticals is proposed, whose peculiar feature consists in the categorization of nomenclature items by end use; the List of high-tech medical and pharmaceutical intermediate goods is formulated (in accordance with SITC Rev.4 and UKT FEA); the following indicators are proposed: the coefficient of import dependence of pharmaceutical production, the coefficient of "purified" exports of pharmaceutical products and the coefficient of imports coverage with HTPI output, and the formulas for their calculation are provided. The author's approach is the first to create the opportunity to assess the scale of costs and the dependence of the pharmaceutical industry on imported components that embody advanced technologies and are the industrial supplies for HTPI. It was found that in Ukraine the share of foreign intermediate high-tech goods in the consumption of the industry reaches 82.2%; the industry, working on imported substances, produces mainly products for the domestic market, without earning foreign currency, even to cover the cost of purchasing the necessary ingredients; manufacturers do not rely on synthesized chemical products of domestic production, primarily due to the fact that the products of the chemical industry for the needs of pharmaceuticals in Ukraine are virtually non-existent; and the increase in output depends on foreign technologies and intermediate goods. It is substantiated that Ukraine’s pharmaceutical industry is critically dependent on imported supplies to ensure the smooth operation of enterprises and the healthcare industry. Key endogenous barriers that hinder the development of HTPI have been identified, including problems in the training of specialists and a lack of scientists whose competencies would contribute to solving the problems of endogenous development of the industry; lack of state aid to business entities for research, and technological and innovative activities; lack of own funds to increase expenditures on R&D and implementation of large-scale investment and innovation projects; and lack of cheap loans, due to which Ukrainian pharmaceutical manufacturers find themselves in unequal conditions compared to foreign competitors. Conceptual bases of HTPI development in Ukraine are proposed; justified the expediency of legal changes, definition of strategic priorities and introduction of measures of development of HTPI in Ukraine based on the comprehensive approach, which will cover creation and development of pharmaceutical ingredients for medicines (chemical and biotechnological goods), medical products, fillers, packing materials, machinery and equipment for pharmaceuticals to help reduce the dependence on foreign technologies, and to increase the level of production localization, employment and revenues to the budgets of all levels.

Challenges of the COVID-19 pandemic to pharmaceutical manufacturing: the EU and Ukraine’s response

“…The deterioration of the economy due to COVID-19 prompted the Cabinet of Ministers of Ukraine to adopt regulations to stimulate the economy, identifying among key activities the production of essential pharmaceutical products and preparations [2]. Among the short-term initiatives, it is among the following measures are indicated: "Financing research, development and innovation projects aimed at preventing the emergence and spread of COVID-19" with a planned allocation for 2020 of UAH 500 thousand 15 , or USD 17.58 thousand (at the NBU official exchange rate on 01.11.2020).…”

“…The development of pharmacy in Ukraine, as noted in [2], has a number of obstacles. It is revealed that the small amount of the government request for training pharmacists at public expense and the low admission rates to training in the specialties of "pharmacy" and "industrial pharmacy" cause a shortage of specialists and personnel shortage in the sector.…”

“…The EU leadership, assessing the reasons for this situation, pointed to the dependence of EU member states' pharmaceutical production on imports from third countries of active pharmaceutical ingredients (APIs), some drugs and commodities related to COVID-19 [1]. The Ukrainian pharmaceutical industry had a similar impact but on a larger scale due to operating predominantly on imported substances [2]. The closure of foreign plants supplying APIs due to strict quarantine through COVID-19, the introduction of a ban in certain countries, particularly India, to export certain types of APIs, and the inaccessibility of air and sea transportation resulted in market shortages of both intermediate and finished products (medicines) and medical products, prompting the leadership of both the EU and its member states and Ukraine to look for ways out of the crisis situation, and reduce vulnerability and dependence of pharmaceutical production [3].…”

“…In particular, these include areas relating to security, health and care, access to goods, services, and technology 4. In[2] it was noted that this issue was raised by supporters of the theory of dependent development, pointing to the dependence on foreign technological resources as a key obstacle. T. Santos drew attention to TNCs, which are holders of advanced technologies, as the reason for the formation of technological-industrial dependence due to their impact on the internal structure and orientation of production in recipient countries.…”

The Theoretical Approaches and Methodological Principles for Development of Ukrainian Pharmaceutical Production in the Conditions of European Integration

“… здійснення досліджень і розробок (ДіР) як джерела технологічних інновацій;  нагромадження знань і навичок кваліфікованого персоналу як носія технологій;  активізація підприємницької діяльності як механізму трансформації ресурсів у нові процеси, товари та послуги. Проте ці процеси, за теорією залежності, мають перешкоди в країнах, що розвиваються: залежність від іноземних технологічних ресурсів і ринків, а також брак ендогенних інновацій [16]. Але в епоху глобалізації з'явилася нова форма залежності -розвинених країн від країн, що розвиваються, зокрема в поставках проміжних товарів для фармвиробництва та готових ЛЗ і МВ для системи охорони здоров'я.…”