Amendments to tax reform bill for Ukrainian defense enterprises could trigger drug shortages – European Business Association
Amendments have been introduced to the bill amending the Tax Code to support defense industry enterprises (Bill No. 13420) that aim to regulate the circulation of pharmaceuticals – a move that could derail government medicine procurement programs and cause shortages, the European Business Association (EBA) warns.
"According to information received through working channels, the amendments were submitted to the Verkhovna Rada's Committee on Finance, Tax, and Customs Policy as part of the work on Bill No. 13420, On Amendments to the Tax Code of Ukraine and Other Laws of Ukraine Regarding Support for Defense Industry Enterprises. The proposed amendments to Bill No. 13420 could deprive Ukrainians of access to many essential medicines and disrupt the operation of state drug-supply programs," the EBA said in a press release.
According to the EBA, the changes specifically involve amending the Law on Medicinal Products.
"First and foremost, it should be noted that the substance of this amendment does not align with the bill's purpose, as it introduces regulation of the pharmaceutical market rather than measures to support defense industry enterprises. Given its significant impact on Ukraine's healthcare system, the Association believes any changes to the Law on Medicinal Products should be considered within the Rada Committee on Public Health, Medical Care, and Health Insurance," the EBA said.
The association notes that the proposed amendments would lead to drug shortages by imposing mandatory state laboratory testing on every batch of pharmaceuticals imported into Ukraine, with no exceptions based on country of origin. This creates the risk of delivery delays of one to three months, particularly for innovative medicines.
The association also warned that the amendments undermine procurement transparency by allowing automatic substitution of medicines without competitive bidding or mutual consent.
"The proposal to allow suppliers to automatically replace goods without a competitive procedure contradicts public procurement legislation. This practice opens the door to abuse, reduces competition, and erodes trust in procurement processes," the EBA stated.
Furthermore, EBA experts believe the changes could create clinical risks for patients by allowing replacement of drugs specified in signed contracts with so-called "equivalent" products – even if they are unregistered or imported through parallel trade.
According to the Patients of Ukraine charitable foundation, the amendments to Bill No. 13420 were introduced by Member of Parliament Valeriy Dubil, a member of the Batkivschyna faction.
"These amendments give medicine suppliers the right to replace drugs scheduled for procurement with state funds – but which they are unable to deliver – with so-called 'equivalent' drugs, without obtaining approval from the state procurement agency. This change strips the state-owned enterprise Medical Procurement of Ukraine of its authority to reject supplied goods," the foundation said.
Patients of Ukraine emphasized that "these changes are being pushed against the backdrop of failed deliveries by the drug supplier Deutsch-Pharm, which has already delayed shipments of 12 critically important medications for patients with cancer, autism, and pulmonary hypertension. Some of these deliveries are more than nine months overdue." The foundation also pointed out that Deutsch-Pharm "is owned by the wife of the head of the Chernihiv regional branch of Batkivschyna."
In addition, the foundation noted, "Dubil's second amendment introduces mandatory laboratory testing for medicines procured through parallel import, which will effectively delay drug deliveries."
"Parallel import is one of the few ways to provide patients with more affordable, high-quality medicines that have already been verified under European standards. To undergo repeat testing in Ukraine, documents are required that parallel importers do not and cannot possess – they are only available from the manufacturers. This will cause delivery delays," said Inna Ivanenko, executive director of Patients of Ukraine.
Such changes to the law contradict both civil law and public procurement legislation, the foundation stressed, because they allow suppliers to unilaterally alter the terms of a contract after it has been signed.
"This not only harms the interests of the state and taxpayers but also opens wide opportunities for corruption. Instead of holding suppliers accountable when they fail to meet state contracts, this amendment would create a greenhouse environment for their continued operations," the foundation concluded.
As reported earlier, on July 16 the Rada passed in first reading two bills – No. 13420 (Tax Code amendments) and No. 13421 (Customs Code amendments) – to implement the Defence City concept. These bills provide for the creation of a list of defense industry enterprises (Defence City residents) to be formed and maintained by the Ministry. The list, along with company information and reporting, will be restricted and protected according to established procedures.