Pharmacy reform may not introduce desired competition to drug market

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

Following Tuesday's rejection in the Riigikogu of a bill submitted by the Conservative People's Party of Estonia (EKRE) calling for the cancellation of the planned pharmacy reform, it became clear that the reform would be implemented as planned. As of April 1, pharmacies may only be pharmacist-owned, and drug wholesalers must forgo their pharmacy chains. It is nonetheless uncertain whether the reform will improve competition in retail drug sales.

Currently under the ownership of Estonian businessman Margus Linnamäe's pharmaceutical group Magnum are 78 Apotheka-brand pharmacies. Magnum retail business manager Kadri Ulla confirmed that the plan is to transfer these pharmacies to pharmacists prior to April 1, adding that she hopes that the majority of these pharmacies will remain open.

While she would not reveal the exact details of the contracts, Ulla noted that transferring a pharmacy meant for example the subletting of retail space currently rented by the group and the concluding of franchise agreements.

"We have long-term experience dealing with franchise pharmacies on top of our own; this is not a new model for us," she explained. "It's just that pharmacies that we have owned will now also be turned into franchise partner pharmacies."

Drug wholesaler Tamro Baltics has not yet made a decision regarding its own Benu chain of pharmacies, but is also considering moving forward with franchise contracts as well.

Competition Authority Director General Märt Ots said that he believed that nothing much will change on the market.

"Franchise agreements will pretty closely tie pharmacists to wholesalers, meaning that if the goal of the reform was to stimulate competition on both the retail market as well as at the wholesale level, then yes, I believe that these goals cannot be achieved after all," Ots said.

Minister of Finance Martin Helme, whose party, EKRE, had attempted to repeal the planned pharmacy reform at the last minute, likewise finds that the reform will not achieve its objectives. He noted that pharmacists who until now had been working as employees of pharmacy chains must now get involved in running a business, but they don't have the capital to do so, which still raises questions regarding their independence.

"There aren't very many people who have the €300,000 or €200,000 handy, and banks aren't very eager to provide these loans, and so we are left with the current owners, who are essentially saying — just as estate owners told peasants in the 19th century — to earn it through their work," Helme said.

Minister of Social Affairs Tanel Kiik (Center) said that of the nearly 200 pharmacist-run pharmacies currently in operation, most are connected to franchise agreements. These agreements will be reviewed in turn by the State Agency of Medicines, who will also consult with the Competition Authority regarding their legality.

"These pharmacist-owned pharmacies in a franchise network are no doubt more independent and more open to competition than the current wholesaler-owned pharmacy chains in the ownership of one or another specific wholesaler," Kiik said.

The Medicinal Products Act to enter into force on April 1 will prohibit pharmaceutical wholesalers from owning pharmacies and require a pharmacy's majority stake to be held by a pharmacist.


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Editor: Aili Vahtla

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