Can Competition-Promoting Policies Reduce Medicine Prices in Developing Countries?

Loraine HawkinsICIUM, Track 2c Economics

Tuesday, 15 November, 3.15-5.45 pm, 2011loraine.hawkins@gmail.com

Competition, prices and availability

Generic competition increases availability of low priced medicines

Competition works best for institutional buyers

Healthy competition needs effective medicine quality regulation & general law enforcement

Competition law can help secure competition at all stages of the medicines supply chain

What is competition law and what is it used for?

Objective: maintain & enhance competition in order to enhance consumer welfare Control mergers & takeovers Restrictive agreements that reduce competition

e.g. price-fixing, market-sharing Abuse of a dominant market position Market studies

Remedies: fines, price monitoring & controls, divestment, undertakings on company conduct

Where has competition law been applied to medicines markets? OECD countries

US, EU have many cases & market studies Some OECD country experience may offer

lessons for middle income countries E.g.South Korea, Ireland, EU accession states

Middle income countries with adequate institutional capacity South Africa, Argentina Many LMICs have adopted Competition Law

but with limited implementation

What institutional and technical capacity is required? Judicial system independence &

competence

3rd party enforcement of law, regulation & contract without undue political or industry intervention

Adequate human & financial resources for the competition & medicines regulatory agencies

Case study: South Africa New Competition Act 1998 adopted after

inclusive policy making process Cases covering every stage of supply chain:

abuse of dominant position by multinationals exclusive distribution agreements, merger & acquisition of retail pharmacy chains collusion in public procurement by local firms

Remedies: substantial fines, orders to divest, undertakings to change conduct

Price monitoring committee

What challenges were encountered and lessons learnt? Choose strategically important cases to

set precedents to guide the sector Use public information & education to

advocate for the whole sector to comply with the principles established by landmark cases

Willingness to tackle a complex, high profile case involving patent-protected ARVs was important for credibility

Mobilize international donor & technical resources to support legal action

Complementary competition-promoting policies

Effective, timely, low cost, transparent medicines quality regulation

Openness to imports of quality-assured generics with low/zero tariffs

Competitive public procurement Competition in distribution & retail pharmacy Health insurers use competition for

formulary listing & setting medicine reimbursement rates

Consumer information & protection policies Ethical codes

Competition-promoting policies for low-capacity contexts

Using public pharmacies or public/NGO partnerships to promote competition in areas were the poor are under-served

Promoting generics as “good value” Accreditation & partnerships with low-cost

drug-sellers to increase consumer confidence in their quality

Market studies on how to remove barriers to quality-assured generic entry & to formation of efficient wholesale/distribution/retail sector

Can public, NGO or accredited outlets stimulate price competition?

Kyrgystan rural pharmacy initiative Successful revolving drug funds in

villages with no private sector pharmacy NGO support, village committee support Social health insurance fund contracts

Competition from RPI led private pharmacies in the district town to cut prices to match RPI prices

Generics pharmacy chains: creating conditions for private sector

Philippines Chains &wholesaler-

retailer integration permitted

Franchise model Generics promoted

by advocacy for “Cheaper Medicines Act”

Mexico Farmacia Similares Parallel context

WHO/HAI Project on Medicines Prices and Availability: Review

Series on Pharmaceutical Pricing Policies and Interventions

Working Paper #4: Competition Policy

http:/www.haiweb.org/medicineprices/policy/index.html