Pharmacy magnate Linnamäe submits to pharmacy reform, seeks damages

Margus Linnamäe.
Margus Linnamäe. Source: Magnum AS

The owner of one of Estonia's largest pharmaceuticals wholesalers and retailers has said he will hand over control of his pharmacy outlets to dispensing pharmacists in line with government reforms to come in force in less than two months, but will also submit a claim for damages to the state.

Margus Linnamäe, owner of Magnum Medical and its associated Apotheka retail chain, expressed his dismay at the reforms, which would make mandatory that dispensing pharmacists become majority owners of the pharmacies they work in, but said he would comply with the requirement and submit a claim for damages to the state.

"I am extremely disappointed that the state of Estonia has started eliminating free entrepreneurship and conducting an irresponsible experiment with public health," Linnamäe said Friday, according to BNS.

"Five years ago, a law was passed limiting the majority ownership of pharmacies to pharmacists only. However, despite this, the state has been unable to equip the transitional period in a way that guarantees fair compensation to current pharmacy owners. This is an unprecedented situation in Estonian history, where entrepreneurs are forced to give up their businesses. No one in our country can no longer have a guarantee of the inviolability of property," Linnamäe continued, in a press release.

The law, if it comes into effect on April 1, would require dispensing pharmacists hold a minimum 51 percent stake in pharmacy outlets, and arises from a requirement in a law passed around five years ago.

Linnamäe criticized the handling of the reforms, which he says will lead to large-scale closures of pharmacies nationwide, a crisis which had not been adequately prepared for by the social affairs ministry, he said.

"Unfortunately, the Ministry of Social Affairs has not met the expectations of market participants in developing implementing measures for the reform. It was already clear when the law was passed that pharmacists would not be able to obtain pharmacies from current owners at fair prices without state guarantees and assistance programs. In a situation where hundreds of pharmacies are facing mass closures, the state lacks analyses and plans to prevent a crisis. Regrettably, the state has created a situation where, in less than two months, patients will be at risk of an interruption in access to medicinal products and pharmacy services," Linnamäe continued.

Linnamäe used a study by pollsters Kantar Emor to back up his claims.

"It is largely thanks to the leadership of chain pharmacies that we have modern pharmacies and quality service today that are taken for granted by pharmacy visitors. A study by Kantar Emor also confirmed that the Estonian pharmacy market is working very well and people's satisfaction with the service is high. All the more astonishing is the consistent desire of the Ministry of Social Affairs to enforce the reform, despite the fact that there is no need for such a radical change and, as has become clear by now, it is practically impossible to carry out by way of ownership transfer," he said.

Linnamäe added that he would relinquish control of the pharmacies under his company's remiet – Terve Pere Apteek OÜ – but added the state should compensate him and other wholesale owners for the transfer of ownership.

"In the current situation, with less than two months left until the reform enters into force and pharmacies cannot be sold, I decided to hand over the pharmacies to the [dispensing] pharmacists currently working in the company. Patients do not have to suffer from the pharmacy reform, but the state must compensate businesses for the fair price of pharmacies," Linnamäe added.

Magnum medical and other companies called a one-off strike, rather more a lock-out, in December, in an effort to highlight what they say would happen when the reforms become reality. Linnamäe noted that while the topic was still hotly debated, it would not lead to the halt of the reforms.

"While, less than two months before the pharmacy reform enters into force, there is still a seeming debate continuing among politicians about whether or not the pharmacy reform is needed, I do not believe that the wish is to actually stop the reform. That is why I made the fundamental decision to hand over the pharmacies to my current pharmacists, whose experience provides assurance that pharmacy service will be provided and developed to the same high standards as it has been until now. These pharmacists take responsibility for ensuring the availability of medicinal products to the people of Estonia also after the pharmacy reform enters into force," Linnamäe said, according to BNS.

Linnamäe added that he would be seeking damages, without setting a figure, noting that the constitution permitted this.

"I have been building my company for over 25 years and it is clear that it has its value and price. The Constitution provides for immediate and fair compensation in the event of expropriation. The state must compensate the entrepreneurs for the damage caused," Linnamäe said.

While two rival bills, one from coalition party the Conservative People's Party of Estonia (EKRE) – who would swing contol back in favor of the larger owners - and the Social Democratic Party (SDE) – who would soften the April 1 blow by bringing in a phased transfer of ownership through the year, were tabled at the Riigikogu on the same day, it seems unlikely that these will pass.

Parts of EKRE's bill are verbatim the same as those in a bill tabled by the opposition Reform Party in 2018. An earlier attempt to reverse the course of the reforms, which saw the government scrap the now-reinstated reforms, were voted down at the Riigikogu just before Christmas. SDE MPs voted against that bill.

Margus Linnamäe is also owner of Postimees Grupp, one of the two major media corporations in Estonia and publisher off flagship daily Postimees and its regional variants, as well as radio and TV channels.

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Editor: Andrew Whyte

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