Pealtnägija: Medicines sold for several times cost price ({{contentCtrl.commentsTotal}})

Pharmacy. Photo is illustrative.
Pharmacy. Photo is illustrative. Source: Siim Lõvi/ERR

The ETV Pealtnägija program managed to get its hands on a database of pharmacies and hospitals' pharmaceuticals buying-in prices from 2018, showing what wholesalers charged retail and hospital pharmacies.

The episode reveals that an ordinary pensioner may end up paying hundreds of euros more for the same drugs as a hospital over a single year.

There are international pharmaceutical manufacturers who want their products sold in Estonia; wholesalers who buy these products, stockpile them and sell them on; and finally, pharmacies selling the products to patients. In addition to Estonia's close to 500 retail pharmacies, there are hospital pharmacies that do not sell drugs but make sure they are available to patients who have been hospitalized.

Auditor General Janar Holm explained that a hospital pharmacy is not a pharmacy that's located in a hospital but rather a hospital's pharmaceutical stockpile used by doctors in their work.

The National Audit Office first wrote in 2012 that people in Estonia are paying too much for pharmaceuticals in pharmacies, considering how cheaply the exact same drugs are made available to hospitals. The agency last reported in December that retail pharmacies pay 10 percent more for drugs than hospitals on average.

Holm said that looking at the differences in price, patients should be charged much less for drugs.

"There are some pretty big differences there. Regarding very common drugs, such as ibuprofen or Ibumax, the difference in price is 40 percent or even 67 percent. So, 10 percent is the average difference, while individual price differences are much greater," Holm said.

Markup of pharmacies and wholesalers is fixed in legislation – 13 percent and 4 percent on average respectively – however, the public has no idea what wholesalers pay for drugs.

Head pharmacist of the Estonian Pharmacists' Union Kaidi Sarv said that pharmaceuticals price formation is unclear and market participants are not interested in changing the status quo.

"The price of a drug is decided by the wholesaler today. They are the only filter through which drugs come to Estonia, and they get to decide the price," Sarv said.

Minister of Social Affairs Tanel Kiik (Centre Party) also believes the situation is opaque. "The least transparent side of it concerns contracts between importers and wholesalers of pharmaceuticals and the price formation therein. What are the different components there, what is the agreement and the content of these contracts – that is what the state finds the most mysterious," the minister said.

Former social minister, Social Democratic Party (SDE) member Jevgeni Ossinovski says that there are not enough resources for effective supervision. "Pharmaceutical profits in Estonia happen in that dark place where manufacturers meet wholesalers," he said.

Member of the board of wholesaler Magnum Medicals Tiina Lätti described pharmaceuticals price formation as clear-cut and described claims to the contrary as unfair. She said the wholesaler cannot dictate prices to manufacturers. "Drug prices come straight from manufacturers, the wholesaler cannot dictate the price of a single product," Lätti said.

The pharmaceuticals business in Estonia is peculiar also because while there are a total of 60 registered wholesalers, the market is dominated by just three companies that also own most of the pharmacies between them.

There is Tamro, with foreign owners, that owns Benu pharmacies; Margus Linnamäe's Magnum Medical that owns Apotheka and his brother Aivar Linnamäe's Apteekide Koostöö Hulgimüük OÜ that controls the Südameapteek chain. The brothers Linnamäe alone control over 50 percent of the market. Even though their companies claim they are independent of each other, they use each other's email addresses and even the same warehouse.

Minister Kiik said there is reason to believe the enterprises are clearly linked.

Tiina Lätti said that's not true. "It's not true. Apteekide Koostöö Hulgimüük is a wholesaler without stockpiling rights. There are others like them in Estonia and what they do is they find a wholesaler that is allowed to maintain stockpiles and buy distribution services from them," Lätti explained.

The database at Pealtnägija's disposal does not show import prices but reveals the difference between prices for retail pharmacies and hospitals. Experts who looked at the database described it as the first black and white proof of how pharmaceutical businessmen are fleecing the people.

If a hospital can buy a pack of Ibumetin for €0.48, a general pharmacy is charged €1.45. The latter adds its own markup and sells the drug for €2.56. Comparing prices of medicinal products for pharmacies and hospitals in the database, one comes across many such differences concerning everything from paracetamol and headache medicine to sleeping pills and digestive aids, with the difference in price reaching 60 and even 90 percent.

The difference in price for hospitals and people going to the pharmacy was biggest for hypertension drug Betaloc that was made available to the former for €0.01 and to the latter for €3.13.

"The manufacturer or their representatives in the region want wholesalers to take free shipments to hospital pharmacies, and because Estonian legislation only allows wholesalers to supply hospital pharmacies, we handle such intermediation," Tiina Lätti said.

She added that wholesalers do not attach a markup and send the drugs to hospitals free of charge.

Wholesalers claim that hospitals qualify for discounts as major clients that buy drugs using public procurements.

"The markets are very different and perform very differently. And the medicinal products used by them generally do not overlap," Lätti explained.

"Public procurements usually take two years, sometimes three. And this allows pharmaceutical manufacturers who determine prices for the retail market and for hospitals to offer discounts inside tenders," she added.

Kaidi Sarv said that retail pharmacies move a lot more product than hospitals. "A situation where smaller quantities are eligible for discounts while bigger ones aren't is peculiar in itself," she said.

The chart at Pealtnägija's disposal offers a telling example. Hospitals bought 2,500 packages of Ibumetin in 2018, while pharmacies bought almost 200,000 packages.

The representative of the manufacturer said it was a gift to national defense as those 2,500 packages were sent to the armed forces. We are seeing similar discounts for other ibuprofen products.

Tanel Kiik said that higher prices for retail clients are the result of the recent integration of pharmacies and wholesalers.

Both Tamro and Magnum claim that conclusions of astronomical profits are mistaken. They say that manufacturers offer hospitals major discounts for various reasons. "The hospital market is one thing and the retail market another, and they perform very differently," Tiina Lätti said.

"When a wholesaler sells to an associated pharmacy on the retail market, for some reason, the scale effect is not created, despite the fact pharmacy chains are very big in Estonia. At the same time, in a situation where two wholesalers must compete with each other and fulfil hospital volumes at hospital pharmacy tenders, we can see much lower prices," Jevgeni Ossinovski said.

"Indeed, if we look at the chart, we can see retail pharmacies procuring several times the drugs between them that hospitals do, and it should be reflected in the price. But for some reason, wholesalers treat chain pharmacies like individual islands, like cooperation is impossible for some reason," Janar Holm added.

The topic is very complicated and confrontational, but to continue the same arithmetic – considering turnover, packaging volumes and markup, the ordinary Estonian paid approximately €20 million more for the 100 most common drugs than hospitals in 2018.

"The entire situation is undoubtedly opaque. It does not seem justified or fair from the point of view of common sense and patient interests. The pharmacy reform and steps the ministry wants to take to improve availability of medicinal products, boost market transparency would help people not only to have access to necessary drugs but also buy them at fair prices," Minister of Social Affairs Tanel Kiik said.

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Editor: Marcus Turovski

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