URGENT PROVISIONS REGARDING THE PRICE OF PHARMACEUTICALS NOT REIMBURSED BY THE NATIONAL HEALTH SERVICE
PRESS RELEASE
PRESS RELEASE
PHARMACEUTICALS DECREE: ANTITRUST SAYS AIMS ARE RIGHT BUT PRICE CONTROLS AND MAXIMUM DISCOUNTS MUST BE ELIMINATED AND SALE OF MEDICINES MUST BE EXTENDED TO SUPERMARKETS
The Italian Competition Authority, at the conclusion of its meeting on 1 June 2005, sent Parliament and the Government a note about the decree-law entitled “Urgent provisions regarding the price of pharmaceuticals not reimbursed by the National Health Service”.
The measure, which aims to contain pharmaceutical costs in general, with particular reference to consumers’ expenditure on non-reimbursable drugs, is intended to reduce prices by, on the one hand, taking advantage of the competitive pressures exerted by generic drugs, whose use is to be encouraged, and on the other hand by stimulating competition among pharmacies.
In this context, the decree may represent a step forward in broadening the market for generic drugs and in fostering greater competition in retailing. Nevertheless, there are various aspects of this same decree which are critical for their impact on competition.
The Authority pointed out, in the first place, the restrictive effect of maximum prices for non-prescription and over-the-counter pharmaceuticals, which are set by the manufacturer. Such prices may be changed only once every two years.
The Authority has already expressed its disapproval of price-fixing in the pharmaceutical market where prices had already been freed. Setting a maximum price does not achieve the objective of containing prices; on the contrary, it may become a point of reference used by companies in colluding over price-fixing. Nor does the mechanism of biennial changes guarantee a price ceiling, given that the manufacturers, when the time comes for the review, may undermine the effects of the “cap” imposed for the preceding two years by adopting a large price increase.
The decree also foresees the possibility of discounts by pharmacists, up to a maximum of 20%.
The Authority, while viewing positively the introduction of discounts, emphasizes that limiting the size of the discount effectively permits the establishment of a minimum price for the product.
Besides, the freedom to apply discounts is no guarantee that pharmacies will do so; this is a sector which has demonstrated a certain reluctance to compete on price.
So the discount rule may have a positive effect only if it is included in a packet of measures to increase competition in the distribution of pharmaceuticals free of price controls.
Furthermore, it is the Authority’s opinion that a provision should be introduced to stipulate that category C ethical pharmaceuticals should be so packaged as to allow pharmacists to prepare and dispense the exact quantity of the medicine prescribed by the doctor. This provision would have positive effects on consumer expenditure.
Lastly, the rules stipulated by the decree should be accompanied by other measures to encourage both “interbrand” competition (between drugs, involving a push for the use of generic products), and also “intrabrand” competition (between pharmacies).
As regards the first point (interbrand competition), the decree should include an obligation on the doctor to prescribe only the active ingredient. Thus, the choice of product would be transferred to the pharmacist and the end-user.
As for intrabrand competition, the measures to be adopted should be of three types:
a) abolition of single nation-wide prices;
b) abolition of the obligation on wholesalers to stock at least 90% of the category C products which are on the market, thus allowing distributors to decide their own supply policies for themselves;
c) freeing up of the sale of self-administered (over-the-counter) pharmaceuticals so as to allow their distribution through supermarket chains, as is the case in many European countries.
Rome, 3 June 2005