Chinese pharmaceutical giants are eyeing Poland as a potential gateway into the European Union (EU) market by targeting the acquisition of Neuca, a 30-year-old leading Polish pharmaceutical wholesale company. Since the right winged ‘Law and Justice Party’ gained power in 2015, Neuca skyrocketed by 400% in growth due to favorable industry laws and regulations.
With an impressive annual revenue exceeding $3 billion USD and a workforce of nearly 5,000 employees, Neuca S.A. is a significant player in Poland’s pharmaceutical landscape. Its operations directly impact jobs and the accessibility of vital medications for Polish citizens, further amplifying its strategic importance.
The pharma wholesale giant is currently responsible for supplying over 31.6% of medicines and medical supplies to over 4,000 pharmacies in Poland. This presents an enticing opportunity for China to swiftly enter the EU market and tap into an established distribution network, against expressed US policy.
Poland’s Lack of Regulation Provides Chinese Investor Gateway to EU
Poland’s perceived regulatory gaps and relatively open investment environment have captured the attention of Chinese pharmaceutical firms within the EU member states. This positioning has rendered Poland an attractive target for Chinese companies such as Sinopharm, who are aiming to secure a foothold within the expansive EU market.
Critics raise concerns over the efficacy of Poland’s local pharmaceutical regulator, suggesting it might not uphold the stringent oversight seen in other EU nations.
National Security at Stake
First and foremost, the sale of a crucial pharmaceutical company like Neuca to Chinese investors raises red flags in terms of national security. The pharmaceutical industry deals with sensitive medical data, proprietary research, and crucial supply chains. Handing over control to foreign entities, especially from a country with a history of data breaches and questionable practices, might compromise Poland’s ability to safeguard its pharmaceutical infrastructure.
China’s Questionable Track Record in the Medical Industry
Beyond these intricate dynamics lies a broader geopolitical context. A sale of Neuca to Chinese investors would potentially involve significant economic and diplomatic implications. Aligning with China in such a manner could strain Poland’s relations with the United States, considering the American expressed policy against any nation strengthening ties with the Chinese communist regime.
China’s questionable history with safeguarding sensitive data and medical security further deepens the concerns. Expert testimonies and evidence submitted to various investigative committees have consistently exposed the widespread COVID-19 illnesses, causing immense global suffering and over 10 million deaths, were the result of a lab leak in Wuhan, China.
Recent Changes in Poland’s Pharmaceutical Laws
The intricacies of recent Polish pharmaceutical law amendments (known as ADA and ADA2) warrant a simplified explanation, revealing their profound implications. The amended ADA laws place constraints on companies, preventing the establishment of pharmaceutical franchise chains and capping ownership at five branches. Equally significant is the prohibition of existing pharmacy owners from transferring ownership, merging with franchises, or selling their businesses.
A more alarming facet emerges for existing prescription drug retailers. The ADA legislation grants Polish Provincial Pharmaceutical Inspectors the unsettling power to retroactively revoke pharmacy licenses, effectively rendering established pharmacies obsolete. This disconcerting provision is projected to lead to the closing of approximately 1,000 pharmacies, with a grievous ripple effect of over 6,000 professional pharmaceutical jobs lost, deeply impacting the economy.
Pharma Law Amendments Allow Anti-Trust and Price Fixing
The ADA amendments cast a shadow over the expansion prospects of the pharmacy industry. Limitations on branch growth and clientele outreach directly undercut their purchasing power, rendering them unable to negotiate favorable bulk deals for essential medicines and medical devices.
Industry insiders point out that the only viable avenue for Polish pharmacies which are now limited to having only 5 branches to secure advantageous medicine discounts is through long-term service agreements with Neuca. The anti-competitive legislative changes, along with Neuca’s existing 30% grip on the medicine market increases the value of the company to potential buyers by allowing the wholesaler to fix or manipulate prices amongst its’ clientele.
Polish Government Corruption Allegations
Complicating matters is the emergence of allegations and controversies. Jakub Kulesza, a member of the libertarian political party Wolnościowcy, is a fierce opponent of the pharma law changes and has proactively taken steps to scrutinize the legislative process behind the ADA amendments. In a speech at the Polish Parliament, known as the “Sejm”, Kulesza held a folder with the inscription “Scam” in his hand, and claimed he has evidence of illegal lobbying practices.
Jakub Kulesza later filed formal complaints to the Central Anti-Corruption Bureau (CBA) and the Polish Supreme Audit Office (NIK) alleging illegal lobbying and corrupt politician involvement in the shaping of ADA regulations.
Will President Andrzej Duda Veto the Legislation?
The unease surrounding this situation is echoed by Polish President Andrzej Duda and his team of advisors. Palace insiders claim President Duda is not content with the recently ratified changes to the pharmaceutical laws and holds the power to nullify the legislation via an executive veto.
Herba Family – Tax Evasion Allegations
Until recently, the founders of Neuca, Mr. Kazmierz Herba and his wife Wiesława (combined ownership of 53.14% of stock), utilized a Cypriot entity named Abrasco Ltd (company number HE282597) for apparent tax-related advantages.
Pharma industry insiders close to the Herba family, speaking on condition of anonymity, claim that for over three decades, despite maintaining the center of their personal lives and corporate activity in Poland, were able to avoid paying the 19% Polish capital gains taxes amounting to millions of euros annually. They state that the tax evasion was made possible due to Cyprus laws exempting dividend and capital gains taxes on foreign companies.
The sudden shift of the controlling Neuca stock by the Herba family from the Cypriot entity to a Polish corporation has since raised suspicions of an impending sale, with an underlining desire to reduce government and public scrutiny.
According to experts, should the Polish tax revenue service (National Revenue Administration) deem the Herba family participated in evading taxes, the 52.14% controlling company shares could potentially be confiscated by the authority pending civil or criminal charges. Should a confiscation of stock occur, the company would be prohibited from being sold to the communist regime investors.
Dangers in Exporting 30% of Polish Medicine Wholesale Market
While proponents of a potential Neuca sale, specifically stock investors, might argue in favor of immediate profits, the long-term economic implications might not be as rosy. With control over the critical health sector slipping into foreign communist hands, Poland’s ability to determine its pharmaceutical market’s direction and pricing strategies would be compromised. Experts have no doubt it will harm local businesses, jobs, and the overall economy.
The complexity of pharmaceutical law amendments, coupled with political, economic, and global health considerations, underscores the weight of the decision at hand.
As Poland navigates these uncharted waters, the impact on its pharmaceutical industry and international relations remains pivotal.
Allowing a foreign power, in this case, China, to gain significant control over Poland’s pharmaceutical wholesale market could lead to an uncomfortable level of dependency. Essential medications and medical supplies become vulnerable to disruptions in the event of geopolitical tensions or diplomatic disagreements. This could have dire consequences for the health and well-being of Polish citizens.