Following the longstanding lobbying efforts of the European Business Association (hereinafter – the EBA) on 10 April 2014, the Parliament of Ukraine adopted the Draft Law «On Amendments to the Tax Code of Ukraine and other legislative acts of Ukraine to address some inconsistencies of legislation» No4645 dated 7 April 2014 (hereinafter – the Draft Law), which decreases the value-added tax (hereinafter – VAT) rate on the import and domestic supply of drugs, medical devices and medical equipment for approved clinical trials and has adopted a new tax rate as being 7%.
This is a substantial step forwards for Ukraine to improve its international image and attract additional clinical trials, consequently leading to expanded access to innovative patient care and encourage the investments in the country.
Clinical trials have been performed in Ukraine since 1996 and have experienced a number of challenges, as well as having overcome some significant obstacles on its complicated path towards becoming a separate branch of health care. One such challenge was the existence of an unreasonable tax burden, particularly the 20% VAT for the import of non-registered medical drugs (hereinafter – NMDs).
This approach to NMDs taxation was not in line with global trends and recommendations from the International Convention on the Simplification and Harmonization of Customs procedures, which was joined by Ukraine under the Law of Ukraine No.227-V of October 5, 2006.
According to the international sponsors of clinical trials, the existence of 20% taxation for clinical trials drugs has been one of the top negative factors directly affecting the choice of Ukraine for conducting clinical trials. This significantly hindered the development of clinical trials as a socially-important area; given all patients receive drugs on a free basis. Such a high VAT rate also worsened the country’s image and ability to attract global investment in new projects. This situation impeded patient’s ability to receive the high-quality and innovative treatment that often becomes their only chance to prolong their life, allowing them to receive proper screening and diagnostics.
This is why concerns have been raised by the Clinical Trials Subcommittee of the EBA Health Care Committee since early 2000 as one of the challenges which is essential for being addressed. For several years, the member-companies and the EBA employees have dedicated their main efforts to inform the public and clarify this problem to the government. International experiences show that reducing VAT rates leads to an increasing of a number of international projects and, therefore, government revenues.
In the process of advocating this issue the EBA repeatedly appealed and held a number of meetings with the Cabinet of Ministers of Ukraine, the Ministry of Health of Ukraine (hereinafter – MOH) and other related ministry representatives, and with deputies of Ukraine, in particular with Mr. V. Dudka, who defended this initiative in the Ukrainian Parliament. The EBA position has been supported by the MOH, as well as the State Customs Service of Ukraine.
The second and the last time an appeal was sent to the Prime Minister of Ukraine on April 4, 2014, which was followed by consideration and inclusion of EBA proposals regarding taxation of the import of NMDs via Article 5 of the Draft Law, which amended the article 193 of the Tax Code of Ukraine No2755-VI dated 2 December 2010 and accordingly reduced the tax rate.
Thereby the Draft Law has adopted a new tax rate on the import and domestic supply of drugs, medical devices and medical equipment for approved clinical trials as being 7%.
We would like to thank all Health Care Committee members and governmental authorities’ representatives who supported and contributed to our efforts focused on the solving of this issue. At the same time we hope that other challenges in clinical trials will be addressed as well, such as the improvement of import licensing procedures, shortening of expertise terms for clinical trial materials and the creation of a single database for clinical trials conducted in Ukraine.