Poland has emerged as a focal point for Chinese pharmaceutical giants eyeing a strategic entry into the European Union (EU) market through the acquisition of Neuca, a prominent Polish pharmaceutical wholesale company with a 30-year legacy. This surge in interest coincides with the rise of Poland’s right-wing ‘Law and Justice Party,’ which took power in 2015, and the subsequent fourfold growth of Neuca thanks to favorable industry regulations.
Neuca S.A., with an impressive annual revenue exceeding $3 billion USD and a workforce of nearly 5,000, holds a pivotal role in Poland’s pharmaceutical sector. It directly influences job opportunities and the availability of essential medicines for Polish citizens, underscoring its strategic significance.
The pharmaceutical giant currently supplies over 31.6% of medicines and medical supplies to over 4,000 pharmacies across Poland, presenting an alluring opportunity for China to penetrate the EU market swiftly. This pursuit, however, contradicts expressed US policy.
Poland’s Regulatory Gaps: A Gateway for Chinese Investment
The allure of Poland stems from perceived regulatory gaps and an investment-friendly environment that has drawn the interest of Chinese pharmaceutical firms within the EU.
This positioning makes Poland an appealing target for Chinese entities like Sinopharm, aiming to establish a foothold in the expansive EU market. Critics have voiced concerns over the effectiveness of Poland’s local pharmaceutical regulator, casting doubt on its ability to maintain rigorous oversight comparable to other EU nations.
National Security Concerns
Foremost among the concerns surrounding Neuca’s sale to Chinese investors is the issue of national security. The pharmaceutical industry deals with sensitive medical data, proprietary research, and critical supply chains. Surrendering control to foreign entities, particularly from a country with a history of data breaches and questionable practices, could jeopardize Poland’s ability to safeguard its pharmaceutical infrastructure.
China’s Checkered Track Record in Healthcare
Beyond these complexities lies a broader geopolitical dimension. A sale of Neuca to Chinese investors could entail significant economic and diplomatic consequences. Poland’s alignment with China in such a manner might strain its relations with the United States, given the American stance against nations strengthening ties with the Chinese communist regime.
China’s track record in safeguarding sensitive data, technology, and medical security, highlighted by the controversy over the origins of COVID-19, deepens these concerns.
Recent Changes in Polish Pharmaceutical Laws
Recent amendments to Polish pharmaceutical laws, known as ADA2, require examination due to their profound implications. These changes place restrictions on companies, preventing the establishment of pharmaceutical franchise chains and capping ownership at five branches. Moreover, they prohibit existing pharmacy owners from transferring ownership, merging with franchises, or selling their businesses.
Of particular concern is the provision granting Polish Provincial Pharmaceutical Inspectors the power to retroactively revoke pharmacy licenses. This provision is expected to result in the closure of around 1,000 pharmacies, leading to the loss of over 6,000 pharmaceutical jobs and a significant impact on the economy.
Pharma Law Amendments and Anti-Trust Concerns
The ADA2 amendments cast a shadow over the pharmaceutical industry’s expansion prospects. Restrictions on branch growth and client outreach limit their purchasing power, rendering them unable to negotiate favorable bulk deals for essential medicines and medical devices.
To secure advantageous medicine discounts, Polish pharmacies, limited to a maximum of five branches, must enter into long-term service agreements with Neuca. These anti-competitive legislative changes, combined with Neuca’s existing 31.6% market share, give the wholesaler significant influence over prices within its clientele.
Allegations of Polish Parliamentary Corruption
In a parliamentary session convened with the primary objective of passing the Treasury Guaranteed Export Insurance Act, a startling development emerged as MP Adam Gaweda introduced unexpected amendments to pharmaceutical regulations. This surprise move has ignited significant concerns and suspicions within the industry, prompting insiders to vocalize their allegations of impropriety.
Legal experts well-versed in the intricacies of jurisprudence have closely examined the recently revamped pharmaceutical laws. These legislative changes were orchestrated by none other than Polish Minister of Development and Technology, Waldemar Buda, in collaboration with Mr. Gaweda, both of whom belong to the prominent political party, “Law and Justice.” The amendments have faced intense scrutiny due to their potential infringement upon the nation’s constitutional framework.
Adding complexity to this situation are allegations of corruption. Jakub Kulesza, a member of the libertarian political party Wolnościowcy, has actively scrutinized the legislative process behind the ADA2 amendments.
In a speech at the Polish Parliament, the “Sejm,” Kulesza brandished a folder labeled “Scam” and claimed to possess evidence of illegal lobbying practices.
Subsequently, Jakub Kulesza filed formal complaints with the Central Anti-Corruption Bureau (CBA) and the Polish Supreme Audit Office (NIK), alleging illegal lobbying and corrupt politician involvement in shaping ADA2 regulations.
President Andrzej Duda’s Veto Power
The unease surrounding this situation is shared by Polish President Andrzej Duda and his advisors. Insiders within the presidential palace suggest that President Duda is dissatisfied with the recently ratified pharmaceutical laws and possesses the authority to nullify them via executive veto. President Duda is expected to deliver his decision to accept or veto the new pharma laws by September 7th.
The Herba Family and Tax Evasion Allegations
Until recently, the founders of Neuca, Kazmierz Herba and his spouse Wiesława, who collectively own 53.14% of the company’s stock, utilized a Cypriot entity named Abrasco Ltd for potential tax-related advantages.
Industry insiders, speaking anonymously, assert that for over three decades, despite conducting their personal lives and corporate activities primarily in Poland, the Herba family avoided paying 19% Polish capital gains taxes amounting to millions of euros annually. This tax evasion was facilitated by Cyprus laws exempting dividend and capital gains taxes on foreign companies.
The sudden transfer of Neuca’s controlling stock by the Herba family from the Cypriot entity to a Polish corporation has raised suspicions of an impending sale and a desire to reduce government and public scrutiny.
Experts suggest that if Poland’s National Revenue Administration determines that the Herba family participated in tax evasion, the 52.14% controlling shares could potentially be confiscated, pending civil or criminal charges. A confiscation of stock would prevent its sale to communist regime investors.
Risks in Exporting 30% of Poland’s Medicine Wholesale Market
While proponents of a Neuca sale, particularly stock investors, may emphasize immediate profits, long-term economic implications could be less favorable. Allowing foreign communist control over Poland’s critical healthcare sector could compromise its ability to dictate the pharmaceutical market’s direction and pricing strategies. Experts anticipate detrimental impacts on local businesses, jobs, and the overall economy.
The multifaceted nature of pharmaceutical law amendments, coupled with political, economic, and global health considerations, underscores the gravity of the decision.
As Poland grapples with these challenges, the consequences for its pharmaceutical industry and international relations remain of paramount concern. Granting a foreign power, in this case, China, significant control over Poland’s pharmaceutical wholesale market raises the specter of uncomfortable dependency. Essential medications and medical supplies could become vulnerable to disruptions in supply chains and logistics.
