REPORT: PROVISIONS GOVERNING THE PHARMACEUTICALS SECTOR
PRESS RELEASE
PRESS RELEASE
Report of two anti-competitive provisions in the Finance Bill on medicines and drugs
The Competition Authority has submitted a report to Parliament and the government indicating that two provisions regarding pharmaceuticals set out in the 2001 Finance Bill, which has been already approved at the Chamber of Deputies and is currently being debated in the Senate, have the effect of distorting competition.
The first provides that the National Health Service shall refund the prices of purchase medicines and drugs for which patent protection has expired by reference to the weighted average price not exceeding the price of generic drugs, equivalent to 80 percent of the average European price. On the basis of this provision, the pharmaceutical companies are all induced to sell their products for the same maximum refundable price.
It is this lack of any incentive to compete on the basis of price that is preventing the market entry of the generic drugs, which can only conveniently enter the market if they are able to compete on the basis of price in order to acquire a share of the demand for medicines and drugs based on the same active principle.
The anti-competitive effects of this provision clearly emerge if it is compared with the provisions of another government Bill placed before the Chamber of Deputies which required the refund price to be set by reference to the "cheapest" drug. This provision, which appeared to have taken up some of the indications already issued by this Authority, was clearly competitive because it laid down procedures that provided a major incentive for pharmaceutical companies to compete on the basis of the selling prices of their drugs which were no longer protected by patent, making it possible to substantially cut the refund prices of these drugs and consequently generate considerable savings on medicines drugs to the Italian National Health Service.
The second provision which the Authority would like to see re-examined, is the one which provides that the Minister of Health, acting jointly with the Minister of Industry, after consultation with the representatives of the pharmaceutical companies and pharmacies, is required to establish "the criterion by which to define the mechanisms for competition in relation to prices" for over-the-counter drugs.
This provision does not remove the current obligation to charge the same price throughout the whole of Italy for these drugs, as was the case in the government Bill submitted to the Chamber of Deputies, which permitted pharmacies to offer discounts on the price set and printed on the package by the manufacturers of over-the-counter drugs, thereby encouraging pharmacies to compete on the basis of their retail prices for over-the-counter drugs, which was clearly to the benefit of the consumer.
Rome,12 December 2000