How would you evaluate the performance for 2017?
Everything is going its way; we are moving in line with our development plans and have already summarized the results of 2017. We are satisfied with them. We have showed 21% increase in sales of our products in the retail pharmaceutical market in monetary terms. For eight years now, we are leading the pharmaceutical market of Ukraine.
I am satisfied with steps the company takes to develop our export potential. Whereas we closed the year 2016 with an exports share in sales of 24.7% (in monetary terms), in 2017, exports accounted for 25.2%, and 27% is planned for 2018. Our goal is to increase the share of exports in our sales to 40% by 2020, while remaining the leader of the pharmaceutical market of Ukraine.
We want to increase our presence in foreign markets. I am pleased with our successes abroad. For instance, we are now ranking third among all pharmaceutical companies present in Uzbekistan and tenth – in Kyrgyzstan. This confirms that we are a strong player in the CIS market. I cannot boast such achievements in European markets yet, but we see that we are moving in the right direction, developing dossiers focused on the European market. Thus, three new drugs should undergo European authorization process during the first quarter of this year. It is very important for us.
We are also working on a number of production development projects. As soon as in 2018, the project ‘Solid dosage forms No. 2’ will be completed. The new manufacturing site operates on the basis of German and Italian process equipment. After its commissioning, our total tablet manufacturing capacity should be doubled: up to 3 billion dosage units per year.
Furthermore, we have launched the construction and conceptual design of a new site manufacturing liquid aseptic drugs. This will be the third site of this kind at Farmak: the first was commissioned in 2001, the second – in 2010, but currently we have experienced the shortage of such high-tech capacities again.
Where will these new lines be located?
At our plant in Kyiv. The building will be completed in 2018, and in 2019, installation of the process equipment will be started.
As regards corporate governance, we have some news as well. A huge surprise for all of us was when Augustin Dubnička left the post of Executive Director on 16 March. He took this decision out of family concerns. So we were challenged with the selection of a new Executive Director.
We have a candidate, who has been trained for this for many years: Volodymyr Kostiuk. He is currently holding the position of Chief Operations Officer. He went a long way from an ordinary economist, headed several units of companies, in particular, developed IT, underwent internship in the production department, managed workshops. Volodymyr participated in the organization of clinical studies of drugs produced by Farmak JSC in Europe, Canada, and the USA.
Despite his young age, he has repeatedly proved his professionalism to the entire team. He is passionate and enthusiastic about his work. So I believe that everything will work out. We have set him a number of tasks. If he succeeds within half-year and his decisions satisfy us, we will appoint him. For the time being, he will be acting Executive Director. This is a major change in the management structure, but I think we can handle it and our decisions will be effective.
As regards Augustin Dubnička, last year we invited him to work in Farmak, so that he moved the company’s business processes to a European level, making them convenient and clear to European managers. For 8 months of work, he highly praised our existing achievements. There were no fundamental changes, as he believed that Farmak was developing correctly. He also highly evaluated the work of our managers. We completed the budget planning for 2018 and closed 2017 successfully.
However, Augustin did make a difference in the company; I am talking about the new level of communication. When he came to Ukraine, he did not speak Russian or Ukrainian, so our top managers had to communicate with him in English. Now English has become a working language for them, and they are much more confident both at Farmak, and in international markets. Augustin confirmed the high level of their knowledge.
Perhaps, we would like to have some major steps or large-scale projects under his leadership, but unfortunately, we did not have enough time. Still, I am very satisfied with my managers and see that we are moving in the right direction, working properly and will make further progress.
Will Farmak change its development strategy with a new Executive Director?
No, we will pursue our strategy. We were hoping that cooperation with a European manager like Augustin Dubnička would accelerate our presence in the European market. However, we understand that it is impossible to enter the European market in one day. We are aware of this and continue to work in this direction.
Are oriental and Asian markets important for Farmak?
Every market is important. We are aware that the presence of our drugs in Asian markets means additional jobs in Ukraine, new experience, increase in sales volumes, and production efficiency, to name a few. I would like to emphasize that products we ship to different markets – be it Ukrainian, Uzbek, Kazakhstan, Kyrgyz, or European market – are absolutely the same in terms of quality. For me, any market is important; all 20 markets where we are present mean responsibility to patients first and only then the economic indicators. For Farmak, quality and efficacy are always a priority.
Are Eastern markets easier to enter compared to Western ones? Is it true that it is simpler to enter, obtain authorizations and control quality in Asian countries?
There are mothers and children, who want to receive high-quality treatment, be it in Uzbekistan, Poland, Ukraine or Vietnam. Different countries have certain specifics of regulatory policy, but we want to adhere to high quality standards everywhere, including Australia, where we first supplied drugs in 2017. Patients want high-quality medicines everywhere, so we have a uniform attitude to all markets: the same batch can be supplied to different markets.
What new markets did Farmak enter in 2017?
The Australian market was completely new for us in 2017; we intend to increase our presence there in 2018. Generally speaking, as regards exports, we increased supplies to Iraq, Vietnam, and Poland.
We have extensive plans for 2018. We are still planning to launch about 20 new drugs in the market, but which exactly – will significantly depend on ways and directions of development of the pharmaceutical market in general and the healthcare system in particular.
Ukrainian pharmaceutical manufacturers have traditionally complained of inadequate state support. To what extent does a domestic manufacturer need such state support? Should, for example, the export potential of domestic pharmaceutical industry be stimulated somehow?
I can say that the Ukrainian pharmaceutical industry is developing, improving the quality system and innovation, not with state support, but despite the actions of our government and the state. There is no way to avoid this. This is the reality and I am making this clear to everyone. We are not feeling any support yet, although even those 3,000 people we have provided with jobs need us. Ukrainian scholars, both recognized and young, need us as well and work with great pleasure in our R&D laboratories.
This is social responsibility, which, in our opinion, should be consistent with business, development and innovativeness of companies. There are lots of such companies in the Ukrainian pharmaceutical industry: I mean not only Farmak, but also other leading domestic manufacturers. We are doing a lot the state does not even know about. Is it really important? Life will show.
What is your opinion about the actions taken by the state with respect to medical supplies, e.g. the cost reimbursement program ‘Affordable Drugs’?
This is a great program. In my opinion, the medical reform is also urgently needed. However, healthcare specialists can tell about the medical reform better, while I would only like to note that ‘Affordable Drugs’ is a really good program. It is necessary to increase the number of participating molecules, to expand the number of nosologies. People need it. It is very important that the state opt for it, as the program stimulates visits to healthcare specialists, so that people not only pay for medicines, but also have adequate treatment.
We have analyzed the participation in this program at a meeting of the Supervisory Board. Seven of our molecules will be involved in the program and we are eager to take part, although we had to reduce prices for certain drugs. Yet, we are ready for this step, so that the program could continue.
Is this profitable for your company from a business perspective? Or is it rather a social project, sort of charity?
I cannot say that this is charity; this is rather the beginning of a fundamental change of the market, something we should achieve. We can already see that our share of prescription and hospital drugs is significantly increasing, because these are the drugs that cure illnesses and save lives. We need to change a lot in Ukraine in order to return to the production of such drugs. If we compare the top 10 drugs available in the Ukrainian and, say, Polish market, we will see that these are very different lists. Poland, and Europe overall, has treatment protocols, programs of 100% reimbursement of costs of treatment in a particular area, insurance medicine. It makes people monitor their health and helps pharmaceutical companies to work. OTC drugs are certainly profitable for pharmaceutical business, but if we want to be a worthy company with good reputation, a real embodiment of the word ‘pharmaceutical’, we should increase the share of prescription and hospital drugs. To date, we have 56% of hospital drugs, 40% of OTC drugs and approximately 4% are vitamins and bioadditives in terms of sales in the Ukrainian market.
What do you think was the main event or trend in the pharmaceutical market in 2017? What is your forecast for 2018?
The main event was probably the ‘Affordable Drugs’ program. What will happen in 2018, I cannot say yet. We still do not quite understand what will happen with the National List of Essential Medicines adopted in 2017, how it will be formed and developed. This is the way the market goes; the National List is urgently needed, but it is also the subject of many questions that are so far left unanswered. Hopingly, due to the medical reform, treatment protocols will be implemented in Ukraine; then we will be able to plan and do what is necessary for patients.
What do you need for that?
First of all, an operating healthcare financing system, a medical staff training system, a system helping doctors to work. The medical reform has many peculiarities, we can see a great number of people, who are satisfied with the medical reform, but also many of those who are not. In my opinion, the reform is required both for the State and for the President, and the Government, but most importantly – it is required for patients. Changes cannot be implemented in one day, ‘veni, vidi, vici’; the system will change gradually. I suppose, for the next three years we will be talking about the medical reform all the time; it will invariably improve, but we will constantly criticize it. Anyway, the ‘Affordable Drugs’ program as part of the reform should work; it is of benefit for our patients. But there is always room for improvement.
How tough is the competition in the pharmaceutical market today?
I am not aware about any area of the economy more competitive than the pharmaceutical industry. This is especially true for relationships between domestic and foreign manufacturers. The Ukrainian market has been open to everyone from 1992 to date. We even have a special law, whereby medicines authorized in countries with a strict regulatory system are registered in Ukraine within 17 days. And if such a drug is manufactured or imported in-bulk by a Ukrainian manufacturer, registration will take at least one year. What kind of competition is that?
Consider, for instance, the situation with the National List. Although it contains molecules and not medicinal products, these are the above-mentioned actual benefits for foreign drugs during the registration process that create discriminatory conditions for Ukrainian pharmaceutical manufacturers.
Therefore, Ukrainian manufacturers have nothing to gain from importing new drugs or technologies. The state does not understand this; as a result, Ukraine does not have, for instance, its own vaccines and other essential medicines. The problem could be solved rather easily by creating equal conditions for domestic and foreign manufacturers. For example, we do not abandon the possibility of producing vaccines, but this requires a constructive dialog with the state, as vaccines are drugs that will not be marketed in retail networks; vaccines require budget programs.
Filya Zhebrovska, Chairman of Supervisory Board, Farmak JSC, exclusively for Interfax-Ukraine.
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