Reform Index 259: Transferring Defense Projects to Private Companies and New Rules for Drug Pricing

“The transfer of design documentation to the private defense sector is an important and promising step toward strengthening Ukraine’s defense capabilities.

Currently, Ukraine’s defense industry is operating at only 40–60% capacity. There is a significant shortage of the necessary weapons and military equipment (WME) to supply the front, especially amid escalating external threats and the challenges of the near future. At the same time, private defense manufacturers have highly skilled personnel, strong expertise, well-established production and logistics, and demonstrate high adaptability and flexibility.

Proactive implementation of this resolution will allow the state to:

• Rapidly scale up the production of critically needed WME, spare parts, and other equipment; 
• Engage a diverse pool of producers, thereby reducing the risk of supply disruptions, fostering competition in the sector, and ultimately improving product quality, reducing costs, and accelerating order fulfillment; 
• Elevate the organizational level of Ukraine’s defense industry and synchronize it with similar initiatives under the European Defence Fund (EDF), thereby opening new opportunities for attracting resources to the defense sector. 

The private sector, in turn, will gain access to government contracts and advanced technologies. This will promote economic growth, increase budget revenues, and create new jobs. History shows that the development of the defense industry has a direct positive impact on a country’s overall economic growth.

However, some risks may arise during implementation: 

• Resistance from state-owned defense enterprises; 
• Increased oversight and scrutiny by law enforcement; 
• The need for strict compliance with state secrecy regulations; 
• The need for private companies to invest in new production capacities.

However, there are already instruments in place to mitigate these risks, including Cabinet of Ministers Resolution No. 1288 of November 5, 2024, ’Certain Issues of Financial State Support,’ as well as initiatives by European partners aimed at investing in Ukraine and establishing joint ventures.

In short, the resolution aligns with modern trends in democratic countries — decentralizing WME production, involving the private sector, and enhancing industrial sovereignty. It marks an important step toward harmonizing Ukraine’s defense policy with European practices.”

“In response to the need to scale up weapons production during martial law, the Cabinet of Ministers adopted Resolution No. 279, establishing the procedure for transferring design documentation to other business entities. This will allow for the use of additional production capacities when primary manufacturers are already operating at 75–100% capacity. The resolution outlines:

• The procedure for selecting enterprises by the Ministry of Strategic Industries and the mandatory assessment of their capabilities by the state customer;
• The mandatory presence of state customer representatives at the enterprise;
• The conclusion of a contract between the holder of the technical drawings and the new manufacturer;
• A defined list of provisions to be included in the contract, such as protection of intellectual property rights, prohibition of transferring drawings to third parties, conditions for the return of documentation, and the possibility of involving the holder’s personnel in the production launch.

Implementing the resolution involves at least three key stakeholder groups, each with its own set of interests. Original developers or manufacturers seek to protect their intellectual property rights, preserve their market positions, and avoid quality degradation resulting from uncontrolled production. New manufacturers, by contrast, are interested in broader access to state defense contracts, technological growth, and participation in major national projects. The government’s goal is to rapidly scale up arms production to strengthen national defense capabilities.

One of the main challenges in implementing the resolution is the mistrust among documentation holders. Despite the contractual safeguards in place, there are ongoing concerns about the effectiveness of enforcement mechanisms. These concerns include the risk of unauthorized copying or modification of technical drawings, as well as increased competition arising from the use of transferred technologies. Ensuring timely oversight may also be difficult due to the absence of specialized procedures and a clearly designated oversight body. Another major risk lies in the difficulty of proving contractual violations — especially in cases involving technical modifications or breaches of intellectual property protections. In practice, detecting and verifying such violations can be complex, potentially discouraging documentation holders from cooperating.

Overall, the resolution represents an important step toward rapidly expanding the country’s defense production capacity. However, its successful implementation depends on recognizing the differing interests of stakeholders and establishing reliable mechanisms for oversight, protection, and incentives to foster cooperation. The effectiveness and long-term scalability of arms production during wartime will largely depend on the success of this approach.”

“Law No. 4239-IX introduces a number of systemic changes in the state registration of medicinal products, which could significantly transform Ukraine’s pharmaceutical market. Most notably, it establishes a unified electronic registry of medicines, enabling full traceability of each product — from composition and manufacturer to registration status. This move enhances transparency, strengthens quality control, and reduces the risk of counterfeiting. The law also introduces a fast-track registration pathway for drugs already approved in countries with high regulatory standards, potentially accelerating patient access to innovative treatments in Ukraine.

At the same time, these new requirements present challenges for businesses —particularly smaller players who may struggle to adapt to new procedures and technical demands. Without adequate IT infrastructure and clear guidance, there is a risk of delays in drug registration and supply. The success of these reforms will largely depend on transparent implementation, open dialogue with market participants, and the government’s willingness to provide support during the transition period.”