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Competition watchdog: Markup system for medicines inadequate

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

The current system of markups for pharmaceuticals in Estonia is inadequate and supervision is fragmented, according to the Competition Authority (konkurentsiamet).

The current system of markups for pharmaceuticals in Estonia is inadequate and supervision thereof fragmented, according to the Estonian Competition Authority.

The competition watchdog has carried out an analysis of the competitive situation in the field of retail and wholesale of medicinal products with a view to assessing the efficiency of the regulation of markup threshold values. Results of the analysis show that the risk of non-compliance with rules is considerable.

"The lack of an economic regulator with clear authorization in the pharmaceutical sector and dysfunctional price regulation have an adverse effect on competition, consumers and appropriate use of health insurance instruments," Director General of the Competition Authority Märt Ots said in a press release.

Even though threshold values have been established for markups in the wholesale and retail of pharmaceuticals, the Competition Authority's analysis shows that the purchase price for wholesalers can be manipulated.

In reality, drug manufacturers often repay wholesalers a part of the purchase price in the form of so-called kickbacks - bonuses or fees for extra services. Markups, however, are calculated on the basis of the higher price marked on the purchase invoice, making the final retail price higher than it should be.

For the purpose of bringing some clarity into purchase prices, the Competition Authority deems it necessary to subject pricing to a set of rules without loopholes and establish clear oversight competence and supervisory rights. The objective is to ensure the economic availability of pharmaceuticals to patients and a fair price of medicinal products based on their actual purchase price.

Tanel Kuusmann, CEO of medicines wholesaler and retailer Tamro Eesti, told BNS on Wednesday that the company has not yet had a chance to thoroughly acquaint itself with the Competition Authority's analysis. He said that one can conclude based on the information published in the media, however, that the competition watchdog's criticism targets price regulation, which is why it would be appropriate to turn in this regard to the parliament, social affairs committee and the ministry as the bodies implementing regulations.

"I would like to point out that prescription medicines account for 85 percent of the volume of the pharmaceutical market, price agreements with regard to which are made by drug manufacturers and the state. Wholesalers do not get the information on purchase prices until the state has agreed to them and confirmed them," Kuusmann said.

"The Competition Authority has also said itself that this is a risk analysis; they haven't said that they've discovered any unlawful behavior," he said.

Kuusmann noted that the issue will be handled by the Association of Pharmaceutical Wholesalers as price regulations concern the entire sector, not just individual businesses.

Manufacturers support goal to improve supervision

The Estonian Association of Pharmaceutical Manufacturers supports the Competition Authority's proposal to improve supervision of pricing of medicinal products and to amend regulation of markups for pharmaceuticals.

Chairman of the association Riho Tapfer said that markups for pharmaceuticals should be better regulated in the Medicinal Products Act.

"Drug manufacturers are glad that the Competition Authority is is tackling this issue. During discussions of the pharmacy reform, the Association of Pharmaceutical Manufacturers highlighted the need to focus on supervision and clear rules," he said in a press release.

Tapfer added that stricter regulation could include new reporting obligations or other supervision activities.

"We also attach great importance to concrete rules that are clear and understood by everyone. For that reason, we fully support the Competition Authority's assessment and will provide our cooperation with the aim of the field being regulated clearly," the association chairman said.

Tapfer noted that new medicinal products are mainly funded by way of risk and cost sharing agreements, which means that a share of costs relating to the product is covered by the marketing authorization holder.

The Estonian Association of Pharmaceutical Manufacturers is a non-profit organisation that represents manufacturers of research-based original medicinal products and companies manufacturing generic medicines. The association has 26 members.


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Editor: Helen Wright

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