Aug 07, 2018

Exclusive interview with Susana Khalilova – Marketing and Sales Director of Farmak JSC

– Which most clear trends do you see in the pharmaceutical market as at mid-2018?

– In the first quarter, we observed, on the one hand, the revitalization of hospital procurement using the procurement procedure with participation of international organizations, and on the other hand – unresolved procurement problems regulated by the National List of Essential Medicines (hereinafter – the National List), which took effect in the second half of 2017. There were rather specific discussions regarding the absence of certain categories of drugs in the National List, which makes it impossible to purchase them with budget funds. But, unfortunately, the problem has not been resolved yet. Despite official statements on the expansion of the National List, pharmaceutical companies have repeatedly received a clear message from the Ministry of Health that the National List will not be expanded. Clarity in this matter would help us and other pharmaceutical manufacturers in planning.

As regards the “Affordable Medicines” program, it seems that further quantitative increase in sales of drugs under this program has settled down. The frenzy has subsided; more or less clear number of patients taking part in the program has formed. We hear from municipal pharmacy companies that pharmacy institutions and chains periodically have to invest own money in the program to cover the costs and meet the patients’ requests, although the state program is supposed to work uninterruptedly. This is especially true for insulin, because here human life depends of the availability of funds for reimbursement of insulin costs.

These are the trends of hospital procurement. As for retail sector, the market is generally growing and developing in all directions more or less evenly.

– You have said that the National List is not actually expanding. Why is it so?

– According to publicly available information on the website of the State Expert Center (SEC), we can see that none of the applications for inclusion in the National List has been approved so far. All applications are being rejected for one reason or another.

– Do you also have rejections?

– We have not submitted any applications yet, as we are trying to develop an optimal tactic for participation in this process. Clearly, the extension of the National List should be initiated by pharmaceutical companies, but we would like to have a fundamental decision from the state: whether it will expand the List or not; how much money it is ready to invest in the procurement of included drugs. It has been six months since the public discussion in this respect, but nothing has changed. Many hospitals even have already purchased the essential drugs from the List for future use, not understanding that they will not need any of these drugs further, while they cannot buy any medicines not included in the National List. Some try to write rationale for off-the-List procurements and they even take place. But this generally concerns very large medical institutions with staff who can justify their need for such drugs. The rest of the medical institutions are waiting so far.

However, I would not advise clinics to spend all available money to buy unnecessary drugs simply because they are included in the National List.

– Why don’t you submit any applications for inclusion in the National List?

– Many of our drugs were included the National List already at the stage of its formation. We cannot submit applications just in case. There is a clear mechanism: the hospital formulates the need, the pharmaceutical company takes part in the bidding and wins or loses. The main factor is value for money.

If a product is not included in the National List, this is exclusively the retail market with its own, more stringent rules. There one has to face competition from brands and non-brands, generics and originators. These are completely different marketing and other strategy costs. Therefore, we would very much like to understand the future of the National List, whether it will be combined with the list of drugs available under the “Affordable Medicines” program; whether it will apply to reimbursement programs; whether procurements with state budget funds will be carried out according to the National List, as the Ministry of Health claims. Currently, these are all different lists, which is not very convenient.

The most important thing is that we want to understand the strategy of the state in this respect. At one of the most recent meetings in the Ministry of Health, a direct question was asked: whether the National List will be expanded. Acting Minister (Ulyana SuprunIF) replied that it will not – despite the official invitations to apply for inclusion in the National List. However, so far, not a single application has been approved: all products that are now in the List were included at the time of its formation in 2017.

-Why so?

– Submitting an application for inclusion in the National List is immense work. There are no specialists on the market understanding how this should be done. So far, we are setting ourselves a global task: to submit several applications by the year-end, perhaps two or three, not more. We are concerned that the list of affordable drugs is not expanding, nosologies are not added. As the market leader, we are willing to participate in all these programs and reforms, but starting from a certain point.

– How much does the pharmaceutical market need such active regulation by the state? The National List and the reimbursement programs seem to dictate to companies what should be manufactured. Shouldn’t the market be completely free instead?

– As regards manufacture of medicines, there should be no absolute freedom, because each company understands freedom in its own way. In all developed countries, the pharmaceutical industry is always very stringently regulated by the state. The National List is not something new and unique; in other countries, counterparts of this document have long existed. But Ukraine’s global difference is that our document does not protect domestic manufacturers. In other countries, such documents are written not only to put things right in procurement, but also to support the domestic manufacturers. For us, the situation is different. All the molecules included in the National List may be provided by domestic manufacturers. Even if it contains a molecule not manufactured in Ukraine, in the presence of a government order, local companies will arrange its production within 2-3 years and the domestic pharmaceutical industry could cover the entire range of medicines.

– In which form should this order be? Intended for a particular company or all of them?

– All manufacturers. If none of the domestic companies manages to manufacture the drug by the set deadline, the state can buy it from foreign ones.

When the “Affordable Medicines” program was launched, there was chaos, as pharmaceutical companies could not ‘guess’ the required amount of medicines. One year later, we can estimate the quantities and specific drugs required; patients have also calmed down a little and do not buy 2-3 packs as reserve. It took time to adjust the process, but it would be much easier if the state had told from the start how much money it would spend for a particular molecule or what amounts of particular drugs would be consumed.

I think this should be done by the MOH’s analytical department.

– Cannot company analysts make such estimates?

– No. We can estimate consumption only on the basis of a certain period. The number of some very old molecules did not even increase; it means that patients do not need them. Still, they were included in the list of affordable medicines. We could forecast the need only one year later.

– Speaking about the retail sales strategy, you have touched on the subject of brand competition. How much is the branding issue relevant for the pharmaceutical market today?

– In legal terms, there is an expression: “well-known trademark”. In marketing terms, there is a notion of a “brand”. This is what the company invests its money in; its assets. This is especially true for the pharmaceutical market, as we operate on the market as a generic company. After the original patent for an original molecule expires, there are many companies willing to produce generics and each generic company creates its own brand accordingly. In any generic business, a brand is marketing activities aimed at brand awareness. We strive to ensure that consumers have a clear association with Farmak.

– Is there is a problem on the Ukrainian pharmaceutical market that different companies call their products the same names?

– Yes, we have such problem, for instance, with “Corvalol”. “Corvalol” is a brand developed by Farmak since 1960-s, with clear consumer association. “Corvalol” is not a molecule, it is a brand. However, today, another company offers “Corvalol” on the market. In our understanding, this is illegal. We do not imply that Corvalol cannot be manufactured as a medicinal product at all; but it should have a different name, because the owner of this brand is Farmak. I cannot say how many companies are currently manufacturing a similar product under a different name, but we are confronted with the competitor’s “Corvalol”, so we would like all market participants to understand that this is violation of the law. It is much easier to launch a product with a well-known name, even if we insert our company name in the brand, because consumers do not really understand the difference.

– How much cheaper can it be to launch a product under another company’s brand?

– We launch about 20 drugs a year; these are generics. Furthermore, we understand what brand development is. It is cheaper and easier to develop one’s brand based on another company’s, as consumers already have a clear association with the molecule.

Besides, consumers do not always understand the difference between products, manufacturing technologies, quality of raw materials, and quality control level.

 – Currently, there are legislative initiatives that, in theory, should lead to manufacture of more generic drugs in Ukraine, while patent protection acquires a more acceptable form. How can one build marketing strategies if the legislation promotes increase in generic production?

– Again, there are branded generics and unbranded ones. The companies themselves decide whether to launch a brand on the market or not. By way of example, consider our own molecule, “amlodipine”, included in the “Affordable Medicines” program. We also have its branded version. We do this because we want to be more recognizable, we want this drug to be clearly associated with Farmak.

Do you have many drugs in your portfolio, which you plan to brand?

– No. As a rule, we decide at the start, whether the generic will be branded or unbranded. For instance, if the formulation is not new, if it is already 30 years old, then, no matter how we name it, this will not affect the market: both patients, and doctors understand that it is, so this brand will have no marketing value.

– Can common names become brands? And vice versa?

– Under certain conditions, brands can become common names in length of time. OTC drugs are a tough competitive battle, in which patients personally decide, what to buy.

– How does Farmak invent names for its brands?

– Our company has a nomenclature commission. It includes marketing staff, patent attorneys, lawyers. There is a database, in which our attorneys verify that we are not in conflict with anyone. Legislation has certain requirements for names, for instance, one cannot use combinations of letters of already existing brands. So sometimes, we are very surprised when we see the names of other companies’ products.

We focus on the launch of branded products. According to our company’s strategy, we announce the launch of 15-20 new products annually, which means 15-20 new brands.

It takes 2-3 years for a brand to become recognizable. The cost of brand creation and development depends on the status of the drug, whether it is an OTC or prescription medicine.

Back to Farmak in the media

More posts