April 1 saw the entry into force of Estonia's pharmacy reform that caused a lot of noise in recent years. As any sensible person could expect, the reform has failed to solve a single problem it set out to fix and has rather closed our pharmaceuticals retail market, hurting current and future competition and culminating in a colossal damages claim for the taxpayer, Huko Aaspõllu writes in Vikerraadio's daily comment.
The past few years have seen the pharmacy reform topic burn hot on people's minds. The sides of the debate sporting various different interests managed to muddy the water surrounding the reform to a degree where the ordinary person could no longer understand what was in whose interests and who would gain from what.
We saw pharmacies close doors in protest, count days until they would have to close shop, while we also saw dispensing pharmacists demand freedom and the right to a monopoly. All of it has been forgotten in the shadow of the coronavirus today.
Chained to wholesalers
The reform that finally entered into force on Wednesday last showed that nothing really changed. Twenty-five or about 5 percent of Estonian pharmacies closed their doors. That is not a lot. Most pharmacies that were not owned by pharmacists before the reform managed to find legal owners by April 1. For example, pharmaceuticals wholesaler Margus Linnamäe said he gave his pharmacies away.
Noble stuff. Were it actually true. However, it probably isn't. It is very likely that precisely what was to be expected from the reform happened instead and the recipients of that generous present are more dependent on wholesalers than ever. If until now, a pharmacist who wanted to quit only had to hand in their resignation, that is no longer an option. Instead, they are virtually chained to the wholesaler whose pharmacy they seemingly received as a present.
In many cases, pharmacists rent premises from wholesalers, are tied down by supply contracts and obligated to pay for franchise rights and comply with relevant conditions. No one outside the system can describe how it works exactly because pharmaceutical sellers are incredibly tight-lipped about their business.
It is clear wholesalers continue to operate in the same system as the pharmacies they used to own. Another good indicator is the fact we have not heard about layoffs in the pharmaceuticals wholesale business. Rather, companies are hiring more people to coordinate the work of pharmacies and ensure their smooth functioning. The same supply chain, warehousing, sales and accounting systems are still used, down to loyalty cards and sales promotion.
Everyone also knew that the pharmacist owners requirement would not translate into more competition. Rather, the opposite is true. The provision means that the Estonian pharmacy market will not see new chains. It is all but impossible to recruit virtually indentured pharmacists for a new chain, just as no new pharmacies will be opened in a situation where they must be owned by pharmacists.
A time-out would be sensible
While the sides have protested at different times during the reform debate, I fail to see any way in which the current situation is not in the interests of companies that have ruled the market until now. Locking the market should suit all current participants who are additionally planning a major damages claim against the state for ownership restrictions.
All of it was to be expected and only makes sense. Just not to the Ministry of Social Affairs that until recently kept saying how the entry into force of the reform would finally create real competition on the pharmacy market. This has clearly not happened and already there is talk of new reforms.
While I cannot imagine what they could be, if one's toolbox only holds a hammer, all problems tend to take the shape of a nail. It is likely further regulations and restrictions are planned with the noble goal of promoting pharmacists' independence through laws and regulations. The result of such reforms would be much the same – more harm than good.
I would urge the legislator to take a time-out and give the matter serious thought. The current emergency situation favors quiet contemplation anyway. If the aim is to foster competition on the pharmaceuticals market, it would be wise to drop all manner of ownership restrictions going forward. We do not require planes to be owned by pilots or hospitals by surgeons. Why should we only allow pharmacists to own pharmacies?
And should lifting the ownership restriction result in market concentration, let us give the competition watchdog greater powers to regulate those who rule it. We should definitely not continue the recent game of cat and mouse with regulations and ways to bypass them.
It is to be hoped we will learn not to reform certain fields. Learn what happens when you go against economic logic. How the result can be opposite to what was sought despite vast amounts of energy having been spent. How competition on the pharmacy market fell instead of growing. How the freedom of pharmacists was limited instead of being expanded. How new red tape and unnecessary expenses were created. And finally, how we will likely see a claim against the state stretching into hundreds of millions of euros that will make the rounds in courts for years to come.
Editor: Marcus Turovski