Posts Tagged ‘pharma’

h1

The imminent changes at the top occurred – Now what?

August 29, 2016

A few days ago an entry appeared forewarning of changes at the top within the Ukrainian political and civil service elite – forecasting that Boris Lozhkin would move on from Head of the Presidential Administration (as he has been trying to do for some time, wanting to return to the business world) and that in all probability Igor Rainin would cease to act as Head of Kharkiv Regional Administration and replace Mr Lozhkin (due to Mr Rainin being the least controversial choice for those that will be remaining within the Presidential Administration – and also the easiest to replace holding an Oblast level position).

It went on further to suggest Mr Lozhkin would not be completely released from the Presidential grasp/circle but could very well be appointed head of the newly invigorated National Investment Council.

Lo, all such predictions came to pass on 29th August – with the minor deviation of Mr Lozhkin assuming the position of Secretary to the National Investment Council.  (Nevertheless, hopefully most readers would agree the predictions made were close enough for a free to read blog.)

Mr Rainin will be a competent, adequately discreet (and fairly discrete) safe pair of hands as Head of the Presidential Administration.  Shocks to the system he will not cause.

Mr Lozhkin thereby leaves the Civil Service (prior to e-declarations going live with effect from 1st September) yet remains within the Presidential grasp and therefore presidential team no matter how indirectly it may appear.  Regardless of title and position, his unofficial “shadow rank” within the elite of the Ukrainian elite firmly keeps him within the inner sanctum of trusted Presidential advisers with easy access to the body (President).

He is now therefore free to return to the business world without annoying e-declarations and other such bureaucratic requirements, whilst also promoting (and to be blunt he will be driving) the National Investment Council.

Presumably the existing Investment Support Office will be rapidly (although probably not officially) subordinated to the NIC – and by extension to Mr Lozhkin.  Reading between the lines of Prime Minister Groysman’s statement regarding Mr Lozhkin’s new position such inference can certainly be drawn.

Boz

A reader may ponder who Mr Lozhkin will attract to the newly invigorated National Investment Council as he is very well though of internally and externally of Ukraine – and it was he that invited and convinced the foreigners that formed part of the Yatseniuk Cabinet.  Ergo it would be no surprise to see some very competent people appear as leading lights within the NIC.

Clearly with Ukrainian GDP growing at about 1.5% per annum that is not enough to provide a “feel good” factor among the electorate to return President Poroshenko (and parliamentary team) to power when elections arrive.  Annual growth of approximately 5% however could well (and probably would) do so as long as elections can be kept to their projected timelines per statute and not forced to arrive early.

Although it may be wishful thinking, 2.5 years with GDP growth of 5% (or more) consecutively wins a lot of votes – especially in mercantile cities like Odessa.

Mr Lozhkin will therefore be faced with the same existing statute that prevents significant FDI that has frustrated Governor Saakashvili, whose long list of legislation that requires repealing and/or amending has seen no traction within the Verkhovna Rada.

It seems unlikely that Mr Lozhkin will succeed without forcing some (if not the majority) of the very same statutory and de-regulatory issues already raised and submitted to the Verkhovna Rada by the Odessa Governor.  The question therefore is whether Mr Lozhkin can gather Verkhovna Rada momentum swiftly in order to give himself a chance of changing the economic fortunes in time to support the president by the time elections come around?

Further where is FDI going to be most effective when it comes to national development (and no doubt also in his mind, winning the Poroshenko political entities votes)?

The days of mining and metals as economy leaders, and with both being major employers (and exporters) are on the wain.  Road and rail infrastructure projects, of which there are innumerable, are potentially significant employers.

The necessity to bring the Ukrainian Military Industrial Complex to the modern day also presents significant opportunity.

The IT industry which suffers no oligarchy market capture, and boasts a significantly high proportion of globally recognised qualified people, simply has to be left to do its innovative thing – with support where necessary/possible, but otherwise unobstructed or interfered with.

Agriculture is and will remain a major economic driver (and should any reader have $150 million(ish) for investment in a 230 hectare, high tech farming corporation – this blog is aware of one discreetly for sale “off market”).  Thus the agro-industrial complex will have to be a top priority for FDI if the sector is to become more efficient.

The Ukrainian aerospace industry appears to be doing fairly well, but can do much better with some smart investment and a “harder” sales initiative.

The continuing clean-up of the banking sector by the NBU presents an ever-improving market place for entry (and if a reader has $40 million(ish) the blog is aware of a particularly healthy bank for sale “off market”).

There is of course the impoverished yet potentially massive tourism industry (perhaps with the “added incentive” of legalised gambling returning one day).  The blog is aware of numerous experienced international gambling entities waiting to enter Ukraine – Turkey, Israel, Georgia etc have all contacted the blog regarding legislative updates and visited potential locations for casinos in the past 9 months.  FDI money for this there is – legislation prevents.  (Should a reader have $12 million(ish) the blog is aware of a small gated and profitable beach front resort for sale “off market”).

There is also the expansion of the existing pharmaceutical and chemical industry that should not be overlooked – neither should energy extraction/production/infrastructure.

(Getting out of the way of SME’s wherever possible will also bring about swift local economy benefits, but clearly this falls outside of the competence of a National Investment Council charged with finding and protecting big money investment.)

Thus it is not only going to be a question of how many $ billions Mr Lozhkin can attract (and protect) by way of FDI (and in what time scale), but also what areas are deemed a governmental priority and his ability to nudge investors that way.  Investors can be strange creatures and want to invest in areas that are not governmental priorities – unsurprisingly.  Some have no interest in PPP, others only in PPP.  Some are quite rigid in their internal governance and expectations, EBRD etc., where as others, for example “Investment Fund X”, may be far more flexible.

Having now written all this, a reader may perhaps ponder just how much time Mr Lozhkin will have to return to his own businesses, and the business world – which was the reason for his wanting to leave the Presidential Administration in the first place.

(As an aside – Teasers for the “off market” assets mentioned (and others) are available for investors subject to the usual NDA/contractual requirements.)

h1

To pharma or not pharma – That is the question (and the SCM answer)

September 19, 2013

At the end of August, some time around the 20th, my Facebook friend Natalya Yemchenko let it be known that Rinat Akhmetov and his 100% owned investment vehicle SCM were leaving the Ukrainian pharmaceutical market and selling Ukrainian Pharmacy Holding.

Now Natalia would know – she is the Communications and Public Relations Director for SCM.  Her Facebook page, aside from pleasantries about family and children, often contains interesting snippets pointing to the direction in which SCM, DTEK and many other assets of Mr Akhmetov are taking.

As an example, on 15th August:  “Мы начинаем менять подходы к закупкам не только в части корпоративных подарков. Теперь все значительно серьезнее. Первая ласточка – от ДТЭК. Официальное сообщение компании в разделе ТЕНДЕРЫ. Цель – через обдуманную политику закупок стимулировать создание новых рабочих мест в тех городах, где работают наши предприятия”

In English – “We are starting to change our approach to procurement, not only in terms of corporate gifts. Now everything is much more serious. First signs – from DTEK. Official announcement of the company in the tender process. The aim – through the deliberate policy of procurement to stimulate the creation of new jobs in the cities where we operate.”

Interesting if you are one that follow corporate governance issues in Ukraine.

This exit of Mr Akhmetov from Ukrainian pharmaceuticals seemingly confirmed at the end of August with confirmation of the sale.

Since that exit he has furthered his purchases in Ukrainian mining and metals I should note.

However, according to Oleksiy Solovyov, the head of the State Service for Medicinal Products, Ukrainian pharmaceutical exports grew by an impressive 25% in 2012 compared to 2011.

Now I admit to being something of a part time “Rinat watcher” – primarily because I bank with his bank in Ukraine (which kindly made me a VIP account holder – meaning I able to jump the queue and drink tea with branch managers at any branch in the nation amongst other things it seems) .  Therefore I have an indirect interest in how well his entities do lest there be domino-like repercussions for his bank.

Somewhat unsurprisingly, it seems that where ever his interests go, money is made rather than lost.  Profits may rise and fall, but profitable they remain.  Even more unsurprisingly, his investments seem to follow areas in which government subsidies oft follow – solar energy was an example.

It is therefore somewhat surprising that SCM has left Ukrainian pharmaceuticals when 25% growth in exports is being cited by the government.

It maybe that SCM see more grants/subsidies (both domestic and EU)/money making opportunities in energy, mining and metals than within pharmaceuticals across Europe if the DCFTA is signed.  It maybe SCM believes Ukrainian pharma will be crushed by the influx of EU pharma if the DCFTA is signed.

Whatever the case, as I use Mr Akhmetov and SCM as one of a number of a weather veins pointing to what is hot or not in big Ukrainian business, momentarily this SCM move seems out of sync.

Perhaps I am missing something?

h1

Pharmaceutical policy, quality control and government

April 20, 2012

In the past few days, maybe a week or so, pharmaceuticals, the costs of medicines and quality thereof, have come under the critical eye of the government.  It proposes to interfere in the market and drive down the cost of medicines to the public.

To be fair it does have several levers to do so, be it via insisting on generic copies of well known drugs or via the licensing system for Ukraine coercing manufacturers to a lower price amongst that assorted bag.  Hopefully not by subsidies the country can’t afford.

All jolly good if you are the person buying medication, and it is another social circus trick to attract the voters before the next election in October.  Also a golden opportunity if you are the manufacturer of generic drugs without the need to pass on R&D costs through new products hitting the market.

I have no intention in going into the ethics of generic drugs verses big pharma’s ability to finance future R&D.  I don’t work for big pharma but I do occasionally need to buy a drug as most people do.  Needless to say, the cheaper the drug the better from the consumer point of view as long as they are safe and they work.  Grandma’s secret elixir, GlaxoSmithKlein or generic copy, I have taken them all and care only that they cure my ills.

However, governmental interference is often frowned upon by any market sector it directly affects, concern others thinking of entering a country less they be the next market sector to be subjected to excessive government regulation, and of course those who simply find any form of State capitalism and/or market regulation politically abhorrent.  Generally how far left or right of the political centre ground you sit is the guide to how much governmental interference in a market you will accept.

Nobody will complain about improvements of quality control which is about to take a step in the right direction if the Prime Minister is to be believed.   What concerns me is this statement from the link above.

“We need to introduce in our country the recognized standards of the independent distribution practice and independent drugstore practice that are applied by all European countries, in the same way as we introduced the European independent practice of medicine production.”

In 10 years of living in Odessa and having visited hundreds of Aptekas (drug stores) during that time, I can honestly say I have not come across one that doesn’t meet European standards.  The staff regardless of Apteka have known exactly what they are talking about and given sound advice – every time.

In fact, as there are literally hundreds is not thousands of aptekas in Odessa, competition is huge.  Standards are high, most offer loyalty discount cards to retain your custom, (and I have a vast collection of apteka discount cards), and the free market is doing what it is theoretically supposed to do via competition.

There maybe something I am missing.  Maybe their procurement procedures are not robust enough to prevent to purchase of counterfeit drugs, but everything I have ever been sold has done exactly what it was supposed to do.  Over a decade and I estimate a thousand or more purchases from random aptekas during that time, my personal experience is that they are up to any European standard you want to throw at them.

In fact, given that most useless and misleading political opinion polls in Ukraine are based upon about 1000 – 1200 supposedly random people with a margin of error of 2-3%, my personal apetka survey over  decade is equally as legitimate by way of number, randomness and results.

Why, you ask, am I concerned about the above emboldened quote?  The answer is simply that with government intervention on price, what seems likely to be unwarranted and critical examination of the apetkas in Ukraine, probably more and not less bureaucracy, and with the existing extremely competitive market, you can envisage a scenario where half will close as the profits or bureaucratic grief will no longer make them viable one way or another.

I accept that any government in any nation has a duty to society and that health, like education, must rank highly amongst those duties (particularly in Europe where they hold high priority amongst the voter base over almost every other issue).  I accept there simply must be quality control and a transparent procurement system for those distributing drugs.  I can even accept that there are occasions where government simply has to interfere in the markets to ensure access to it by all levels of the society it represents.

What concerns me about this latest government action is that it has not been thought through properly (again) and that the casual effects may bring better prices, but will also vastly reduce the amount of places society can actually buy these drugs when they need them.

Now I may be jumping the gun a little.  There may well be a system emerge with a recommended retail price plus x% mark-up on the way, and it could be that x% is enough to keep all aptekas in business.  It may be that a move towards a predominantly generic pharmaceutical base will generally work in keeping costs down, if exceptions are made for the latest cutting edge drugs that are far superior to their predecessors is within the model.

It maybe that a centralised procurement system will reduce dramatically counterfeit drugs, or, it may be that such a centralised procurement system will quickly become corrupt and overly bureaucratic.  How independent will the independent drug suppliers be?  I suspect not very independent and/or under interested party oligarchy control.

Time will tell, but my concerns remain over the government interfering so robustly in an already competitive apteka market and the supply chains they currently have.

%d bloggers like this: