Ukraine's pharmaceuticals: from dependence to endogenous development
Authors:   State Institution ", Salikhova Olena ,   Institute for Economics and Forecasting, NAS of Ukraine", Honcharenko Daria ,   Department of the Main Department of Industries, Directorate of Industrial Policy and Stimulation of Regional Development, Ministry of Economic Development, Trade and Agriculture of Ukraine
Published: February 2021

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.