Introduction

In the Soviet Union pharmaceutical production was concentrated in the Russian Federation and Ukraine but substantial imports were needed to complement local production. A network of state-owned pharmacies provided a range of outpatient pharmaceuticals with prices fixed at a comparatively low level. Outpatient medicines were available free of charge to vulnerable or high priority groups (such as pregnant women) and were free to all inpatients.

Following the collapse of the Soviet Union, disrupted supply chains initially led to severe shortages of essential medicines. The early 1990s saw the swift liberalization of the pharmaceutical market across the former Soviet Union and this helped to address supply problems but access was now limited by the patient’s ability to pay the new market price as opposed to the strictly controlled prices under the previous system. The formal exclusion of outpatient pharmaceuticals from full cover in the Soviet-era benefits package was retained in the post-Soviet period, although with exceptions for some population or patient groups. Not only was this easier politically but public expenditure on health was cut in the face of severe fiscal constraints. The combination of the high prices of pharmaceuticals and the increasing burden of chronic diseases means that access to outpatient pharmaceuticals and the related burden of OOP spending have now become some of the most pressing health policy issues in all former Soviet countries.

This chapter explores key trends and features of pharmaceutical care in the former Soviet countries. It begins by setting out the historical background of pharmaceutical supply and consumption in the Soviet period. This is followed by a discussion of challenges in stepping up domestic pharmaceutical production, which has a major impact on availability and prices. The chapter then considers the regulatory environment, pricing controls and measures to improve cost–effectiveness that have been adopted. This is followed by a discussion of the population’s access to pharmaceuticals in light of diverging benefit packages across the region. A concluding section brings together the key findings of this chapter.

Pharmaceutical production

Pharmaceutical production capacity was not evenly distributed across the territory of the former Soviet Union. Consequently, at independence, Belarus, Kazakhstan and Uzbekistan had some manufacturing capacity but the Russian Federation and Ukraine had a relatively large number of pharmaceutical production facilities, while capacity in most countries of central Asia and the south Caucasus was extremely limited or virtually non-existent. These different starting points in 1991 are still visible two decades later in the variation of locally produced pharmaceuticals as a percentage of total pharmaceutical consumption by value (Fig. 9.1).

Fig. 9.1

Proportion of total pharmaceutical consumption from imports and domestic producers by value, 2011. Source: Pharmexpert, 2013. Note: no data available for Kyrgyzstan, Tajikistan and Turkmenistan.

However, although domestic proportion is low in value, it is high in volume (Fig. 9.2). This is because local production capacity is overwhelmingly geared towards the production of low-cost generics. In order to overcome full reliance on imported pharmaceuticals, the development of domestic production capacity is high on the policy agenda in most former Soviet countries. The aim is to develop domestic production capacity for low-cost generics in order to improve financial security. However, the drive to boost domestic manufacturers of pharmaceuticals has also been part of a wider economic strategy to diversify the economy and support high-tech, knowledge-based industries. Policies supporting domestic production have had notable success in increasing the share of domestically produced pharmaceuticals in Armenia, Georgia, Kyrgyzstan and Uzbekistan, although it should be borne in mind that these countries were coming from a very low starting point.

Fig. 9.2

Proportion of total pharmaceutical consumption from imports and domestic producers by volume, 2011. Source: Pharmexpert, 2013. Note: no data available for Georgia, Kyrgyzstan, the Republic of Moldova, the Russian Federation, Tajikistan, Turkmenistan and (more...)

Across the region, pharmaceutical manufacturing, distribution and retail are now almost universally run for profit by private enterprises, although, for political and strategic reasons, the state retains a controlling stake in pharmaceutical manufacturers and wholesalers in Belarus. In Georgia, wholesalers have developed de facto monopolies on the import of brand-name medicines by acting as exclusive agents and this is one reason why pharmaceutical prices in this country are among the highest in the region (Transparency International Georgia, 2012). However, local production relies on imported materials; in the Soviet Union active substances were mostly manufactured in the Russian Federation but since independence this production has ceased.

After the shortages experienced in the late Soviet era and in the early years following independence, the privatization of pharmacies in the first half of the 1990s resulted in a rapid expansion of the retail sector. The distribution of pharmacies is now mostly determined by market forces and there tends to be overprovision in urban areas and underprovision in rural areas, where many pharmacies have closed. Only in Azerbaijan, Belarus and Turkmenistan are there still a significant number of pharmacies owned by the state or local government. In Ukraine in 2012, 17% of pharmacies were still owned by the government. Geographical access to pharmaceuticals in rural areas remains a serious policy concern across the region and several countries have sought to address these imbalances. In the Republic of Moldova since 2011 new dispensing pharmacies must be at least 500 m away from existing ones, in order to ‘space out’ providers. In other countries, both public and private pharmacies have been opened on the sites of rural primary care providers. While this improves access to pharmaceuticals for rural populations, there can also be considerable conflict of interest in cases where prescribing doctors also own the only local pharmacy that can dispense the drugs. Few countries have sought to limit such conflicts of interest. Across the region the licensing requirements for pharmacies vary greatly but where there is still a significant number of publicly owned pharmacies these often have much weaker regulatory requirements than are required for privately owned pharmacies.

Regulation of pharmaceuticals

The swift privatization of pharmaceutical providers in the first half of the 1990s was often accompanied by a marked liberalization of the whole pharmaceutical market. However, the health ministries of the newly independent states were often ill-equipped to deal with the regulation of pharmaceutical import and production. There is no single institutional pattern of how the regulation of pharmaceuticals is organized. Most drug agencies in the region are semi-autonomous and most are self-financing, although in Belarus, Georgia, the Russian Federation, Tajikistan and Ukraine the agencies receive co-financing from the government. In Belarus, Kyrgyzstan, Tajikistan and Uzbekistan, the same bodies have retained responsibility for regulating the quality of imported and locally produced pharmaceuticals, as well as for the licensing of pharmaceuticals, pharmaceutical manufacturers and pharmaceutical suppliers. In Azerbaijan and the Republic of Moldova, medicines are regulated by the drugs agency and a separate agency is responsible for licensing (Ibrahimov et al., 2010; Turcanu et al., 2012). In Tajikistan, licensing can only be undertaken by the Ministry of Health.

Fake or poor quality pharmaceutical products are a concern for patients across the region. While there are nominal policies for ensuring the quality of pharmaceuticals, few studies have been undertaken to ascertain the proportion of substandard pharmaceuticals on the market, largely on account of the prohibitive cost of such research. Most quality management systems rely on quality control mechanisms at the expense of quality assurance, which is a less efficient use of limited resources (Bolokhovets et al., 2013). Four laboratories from the former Soviet Union have now, however, been prequalified by WHO and can be used as regional reference laboratories: two in Ukraine, one in Belarus and one in the Russian Federation. Nevertheless, while the policy focus is often on ensuring the quality of imported pharmaceuticals, there are also major concerns about domestically produced medicines. In the Russian Federation, for example, approximately 12% of all drugs sold were estimated to be counterfeit, and 60% of counterfeit pharmaceuticals seized were found to have been produced domestically (Popovich et al., 2011).

Compliance with good manufacturing practice (GMP) is not currently widespread through the region but achieving GMP compliance for domestic manufacturers is the professed aim of many policies directed at boosting domestic pharmaceutical production. It is hoped that achieving GMP compliance will boost consumer confidence in locally produced pharmaceuticals and enable countries to export to global markets and bring in important revenues. However, in 2011 just 10% of the 1100 production facilities in the Russian Federation were GMP-compliant; although by 1 January 2014 all facilities were supposed to be compliant with GMP standards by law (Pharmexpert, 2013). The Customs Union between the Russian Federation, Belarus and Kazakhstan has also advanced the GMP agenda, as joint drugs registration is an important aspect of the Union and would be greatly facilitated by GMP compliance (Richardson et al., 2013). In Ukraine, which has the largest pharmaceutical production capacity in the former Soviet Union, the biggest manufacturers are GMP-certified and the GMP inspector – the Ukrainian State Administration on Medicinal Products – is the only member of the international Pharmaceutical Inspection Cooperation Scheme from the region (Lekhan, Rudiy & Richardson, 2010).

In theory, there is a strict delineation between those pharmaceuticals that are available over-the-counter and those that are available on prescription only. However, in practice this distinction is only strictly enforced for narcotics, psychotropics and their precursors. The easy availability of first and second-line antibiotics for the treatment of TB, for example, has been identified as a serious obstacle for the control of multiple drug resistance in this disease (Mosneaga et al., 2008). Restricting over-the-counter access to antibiotics and other medicines by enforcing prescription-only rules has been attempted in most countries of the region. In the Republic of Moldova, for example, the provision of first-line drugs against TB was prohibited in 2012. However, in many countries such restrictions have not yet been fully enforced, partly because there is little support among patients and pharmacists. Over-the-counter access (at a price) to almost all pharmaceuticals means that potentially a significant proportion of household budget expenditure is spent on ineffective and possibly dangerous pharmaceuticals. It also greatly limits the scope for influencing prescribing patterns and generic substitution. Furthermore, adequate monitoring of adverse reactions is severely hampered by the routine purchasing of prescription-only drugs over the counter; this undermines attempts to strengthen mechanisms for pharmacovigilance (drug safety).

Medicines are marketed directly to the general public through all media channels, although there are strict restrictions on the advertising of prescription-only medicines to non-specialist audiences, except in Georgia where pharmaceutical advertising is practically unrestricted (Gotsadze, 2011). Direct marketing to doctors is generally permitted. While this can lead to distorted prescribing practices, it is also an important source of continuing professional development because many physicians would otherwise have no way of updating their knowledge or attending international conferences. Illegal ‘kick-back’ payments to doctors are not strictly controlled. Research in the Republic of Moldova has shown that this had a negative impact on patients’ trust in primary care physicians because patients were well aware of the bonuses doctors received for prescribing certain products (Bivol et al., 2012). In Tajikistan it has been found that payments from pharmaceutical companies are the only ‘perk’ keeping GPs in the profession (Isupov et al., 2010).

Pricing pharmaceuticals

Due to the high level of OOP spending on medicines, policies to control the prices of pharmaceuticals have been developed in most post-Soviet countries. Direct price controls have been successful in Belarus (Pharmexpert, 2013), although this also reflects the nature of the wider economic system in this country, which facilitates the implementation of such interventions. Legally mandated price controls in the Russian Federation use reference pricing mechanisms to set maximum prices, as well as maximum profit margins for wholesalers and retailers, but only for drugs included in the essential medicines list (EML) (Popovich et al., 2011). Profit controls are in place in the Republic of Moldova, limiting the maximum percentage mark-up on retail and wholesale prices. The Republic of Moldova also has a system of reference pricing in place for all medicines included in the EML (Turcanu et al., 2012). In Ukraine price controls for a restricted list of pharmaceuticals are set at both the national and regional level, and prices between regions can vary by a factor of three (Lekhan, Rudiy & Richardson, 2010). In Georgia, Armenia, Azerbaijan, Kyrgyzstan and Tajikistan there are no price controls, and wholesale and retail mark-ups are as high as can be borne by the market. Prices are closely influenced by exchange rates, demonstrating the region’s dependence on pharmaceutical imports (Marquez & Bonch-Osmolovskiy, 2010).

The pharmaceutical sector in all countries of the former Soviet Union is highly profitable and profit margins are generous, even in those countries that have adopted policies to contain prices. As most pharmaceuticals are purchased by patients at OOP cost price, governments do not have the same bargaining power when purchasing medicines that many governments in western Europe have used effectively. Centralized purchasing of pharmaceuticals is no longer universal. In Kyrgyzstan and the Russian Federation, for example, health facilities are themselves responsible for purchasing medicines in line with the EML, although the procurement of vaccines and insulin is tendered and these are purchased centrally through the Ministry of Health (Popovich et al., 2011; Ibraimova et al., 2011). Such fragmentation of purchasing means there is limited room for employing economies of scale, even in the Russian Federation, which is by far the largest market in the region. However, centralized purchasing has also been associated with challenges. In Ukraine, it has been criticized because prices were still high, despite the use of tendering in procurement (Lekhan, Rudiy & Richardson, 2010). Efforts to recentralize the procurement of pharmaceuticals in the Republic of Moldova have been stepped up but a recent study found that, on average, medicines procured by the public sector cost 1.7–2.4 times the international reference price (Sautenkova et al., 2012). Where international agencies are involved in the purchasing of essential medicines, the situation is further complicated. In Tajikistan, a specific body has been set up to coordinate centralized purchasing between the Ministry of Health and international development partners (Khodjamurodov & Rechel, 2010). The fragmentation of the wholesale market similarly contributes to the high prices of pharmaceuticals. Across the region there are a large number of relatively small wholesalers and their continued existence is facilitated by the large mark-ups on pharmaceutical products. This also makes it difficult to regulate the pharmaceutical market and equally does nothing to foster self-regulation.

Measures to improve cost–effectiveness

EMLs support and encourage the use of generics. They are in place or under development in all countries of the former Soviet Union and – at least in theory – guide and support the rational use of pharmaceuticals. Alongside clinical efficacy and public health impact, the main consideration when deciding which medicines should be included in the EML is affordability. However, implementation of EMLs varies; selection procedures are not always consistent, evidence-based or transparent. Across the region, not all pharmacies carry the full stock of drugs on the EML and the EML is not always used to inform selection procedures in pharmacies, although a wide range of other ‘off list’ drugs are stocked.

Substitution of brand-name pharmaceuticals with generics continues to be challenging in many countries. Prescribing policies in the Republic of Moldova and Ukraine require doctors to use generic names on prescriptions and in theory a dispensing pharmacist needs to get permission to substitute this with a brand-name product. However, in practice this is decided between the pharmacist and the patient without the doctor’s knowledge (Turcanu et al., 2012). In Belarus, generic substitution has been difficult, in part because, during training, doctors often learn the brand names rather than the generic names for drugs and when they start working, automatically prescribe brand names. In Georgia (and elsewhere in the region), pharmacies have incentives to dispense brand-name medicines in preference to generics (even when the prescription uses the generic name) and doctors are similarly incentivized to use brand names when prescribing because they are paid bonuses by pharmaceutical companies based on the medicines they prescribe (Transparency International Georgia, 2012). By contrast, prescribing studies in Kyrgyzstan and Tajikistan show a high level of generic prescription, about 70% in both countries (Abdraimova, Aleshkina & Samiev, 2009).

Across the region, measures to influence the behaviour of those prescribing or dispensing pharmaceuticals do not sufficiently promote the most cost-effective use of pharmaceuticals. There are strong incentives for doctors to over-prescribe and there is a preference among both doctors and pharmacists for newer and more expensive drugs, as these are perceived to be safer and more effective than well-established generics. This belief is often shared by patients. Policies promoting rational drug use have proved challenging to implement and their success is rarely monitored. Obstacles to rational drug use across the region include the frequent use of injections, the prescription of multiple drugs which have the same therapeutic effects, and the irrational use of antibiotics and other drugs.

Pharmaceutical expenditure per capita (for both inpatient and outpatient pharmaceuticals) varies widely across countries, with the lowest levels in 2011 in Uzbekistan and the highest in the Russian Federation (Fig. 9.3). Furthermore, there are also major variations within countries and pharmaceutical consumption in rural areas is much lower than in urban areas. In Belarus, for example, per capita consumption is 10 times higher in urban than in rural areas (Richardson et al., 2013).

Fig. 9.3

Total pharmaceutical expenditure, US$ per capita, 2010–2011. Source: Pharmexpert, 2013. Note: no data available on Kyrgyzstan, Tajikistan and Turkmenistan.

Pharmaceuticals also account for a high percentage of total health expenditure in several countries, reaching 44.1% in Georgia in 2010 and 34.6% in the Republic of Moldova in 2011 (WHO, 2014). According to expert estimates, pharmaceutical expenditure in Ukraine in 2012 accounted for 38% of total health expenditure.

Access to pharmaceuticals

Overall, in countries of the former Soviet Union, patients have very little financial protection from the high prices of pharmaceuticals. Benefits packages are limited in all three dimensions of coverage: breadth (who is covered), scope (which benefits are covered) and depth (what proportion of cost is covered). The breadth of coverage tends to be very narrow and only few segments of the population receive government assistance in purchasing prescription pharmaceuticals. The most generous coverage is often afforded to ‘veterans’, followed by population groups such as pensioners, children (of various age groups), pregnant and post-partum women, people registered as having disabilities, the registered unemployed, internally displaced persons (IDPs) and others. However, often not all drugs are available at all times in the pharmacies that are allowed to dispense them under government schemes, in which case even those who are formally eligible for free or subsidized medicines need to purchase them OOP. In Belarus and Turkmenistan, only state-owned pharmacies are able to dispense pharmaceuticals at a discount for eligible patients.

While the range of outpatient pharmaceuticals covered for these population groups is relatively comprehensive, outpatient pharmaceuticals for the treatment of certain conditions are covered for the whole population (see Chapter 4). This usually includes treatment for HIV infection, TB, epilepsy, certain psychiatric conditions, asthma and diabetes. Particularly rare or expensive conditions may also be included, for example haemophilia and post-transplant care. However, the range of pharmaceuticals that can be reimbursed for specified conditions tends to be limited and, while the treatment for the specific condition may be covered, co-morbidities or complications rarely are.

The depth of coverage under different benefits packages varies among and within countries and by eligibility. For example, in Belarus veterans are covered for 100% of the fixed price, while other categories of patients are expected to co-pay a variable percentage of the fixed price. In Kyrgyzstan and the Republic of Moldova, the benefits package under MHI only covers reimbursement of a limited number of outpatient medicines. Extending coverage to include certain outpatient pharmaceuticals can be a step towards strengthening prescription-based medication sales but can also improve cost–effectiveness through the promotion of generics, although the external reference pricing mechanism does not always ensure the lowest prices are reached (Sautenkova et al., 2012). In Ukraine, for example, a pilot project was set up in 2012, in which patients with hypertension benefited from having their anti-hypertensive medication to a large degree reimbursed. Consequently, the number of consultations and treatment adherence improved dramatically.

However, these reimbursement mechanisms only affect pharmaceuticals purchased with a prescription and often only cheaper generics. If patients perceive brand-name drugs to be of better quality, they have to pay the full price. For population groups and conditions not included in benefits packages, the full costs of outpatient pharmaceuticals have to be paid for OOP and in full by patients and their households. Indeed, the overwhelming majority of outpatient pharmaceuticals are not covered by government-guaranteed benefits packages and the public share of total pharmaceutical expenditure is low across the region (see Fig. 9.4). The inadequacy of benefits packages for pharmaceuticals in all former Soviet countries means that even vulnerable population groups have to pay for their medications OOP most of the time. Pharmaceutical costs dominate OOP payments throughout the region, posing a major threat to financial equity and access (Balabanova et al., 2012). There is evidence that pharmaceutical costs constitute a major barrier to care and that patients forego necessary treatment as a result (Footman et al., 2014). In rural areas, recourse to traditional remedies is also commonplace in some countries, particularly Kyrgyzstan and the Republic of Moldova (Stickley et al., 2013).

Fig. 9.4

Public pharmaceutical expenditure as % of total pharmaceutical expenditure, lastest available year. Sources: ^aWHO, 2013; WHO, 2014. Note: no recent data available for Georgia, Kazakhstan, Tajikistan, Turkmenistan and Uzbekistan.

When compared with the Soviet era, the availability of pharmaceuticals has improved drastically, particularly in terms of the range of drugs now available on the market. However, this improved availability is largely confined to urban areas and community pharmacies are often better stocked than hospital pharmacies. Consequently, there are significant geographical disparities in access to pharmaceuticals, as well as logistical barriers to obtaining medicines that are nominally covered in public benefits packages. Shortages of pharmaceuticals also occur in hospitals, often as a result of underfunding, weak procurement capacity and a lack of transparency in procurement procedures. Inpatients (or their relatives) often need to purchase drugs at full price from private pharmacies to take into hospital, even though officially in all countries of the region inpatient pharmaceuticals are included in benefits packages. Sometimes inpatients also choose to purchase their own pharmaceuticals because they believe them to be of higher quality than those dispensed in hospital. In 2010, it was estimated that, be it by choice or necessity, 80% of inpatients had to pay part of the costs of their medicines in the Russian Federation (Marquez & Bonch-Osmolovskiy, 2010). In 2011, 62.7% of hospital inpatients in the Republic of Moldova reported buying their own medicines because the hospital was incapable of providing all the medicines necessary for treatment (Turcanu et al., 2012). The situation was found to be even worse in Ukraine, where, according to a 2012 household survey, 90.7% of hospitalized patients had to purchase their own medicines (State Statistical Committee, 2013).

Conclusion

This chapter has described major progress in access to medicines in post-Soviet countries and also a number of remaining challenges. Not only are there major geographical imbalances but also financial access is a problem throughout the region, as patients cover a large part of costs themselves.

Furthermore, there continues to be a reliance on brand-name pharmaceuticals. In low-income countries such as Kyrgyzstan and Tajikistan, where generics dominate the market and generic prescribing is heavily promoted, generic prescribing is high; it is also higher in countries in which the state bears more of the cost of paying for pharmaceuticals. Nevertheless, implementing rational prescribing policies in an environment in which most drugs can simply be purchased without a prescription over the counter is another significant challenge. The weak regulation of pharmaceutical marketing also contributes significantly to the irrational use of medicines. Consequently, although rational prescribing policies usually envisage retraining primary care doctors, there is also a need for patient information as well as incentives to reduce self-treatment, which can lead to the harmful overconsumption of pharmaceuticals.

It has also proved difficult to encourage generic substitution in the region, at least in part because patients, pharmacists and doctors perceive brand-name pharmaceuticals to be of better quality. While this is by no means unique to the region, weak regulation of the pharmaceutical sector throughout the former Soviet Union has contributed to this lack of trust in generics and also to the distrust of rational prescribing policies. It will be interesting to see whether the attempts to build national pharmaceutical capacity in line with GMP standards will help in fostering public trust as well as ensuring access to pharmaceuticals by reducing the exposure of pharmaceutical prices to volatile currency markets.

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