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HomeEstoniaRegulator: Reform has not increased competition in Estonia's pharmacy market

Regulator: Reform has not increased competition in Estonia’s pharmacy market

An analysis by the Estonian Competition Authority shows that the pharmacy reform, which came into force in 2020, has not fulfilled its purpose and has not brought more competition to the wholesale pharmaceutical market, with pharmacies still strongly tied to the wholesalers that previously owned them.

Evelin Parn-Lee, director general of the Estonian Competition Authority, said a random survey conducted as part of the analysis shows that although pharmacies are owned by pharmacists, they continue to be linked to the wholesaler that owned them in the past through supply, franchise, underlease and other agreements.

“According to the State Agency of Medicines, one pharmacy not connected with a pharmacy franchise has been opened after April 1, 2020, but there is no new pharmacist owner there either,” Parn-Lee said.

In addition, a survey conducted by the Competition Authority revealed that, with few exceptions, pharmacies in Estonia operate in rented premises, which they rent from the franchisor or a business entity within the franchisor’s group. Pharmacies which are located in good business premises in terms of customer footfall, such as hospitals and shopping centers, are part of franchise chains and their independence is contractually restricted. The Competition Authority proposes considering additional measures to end the situation where the right to use business premises for running an independent pharmacy is under the control of the franchisor.

The market shares of the two large wholesalers meanwhile have increased in recent years, with the two already accounting for more than 80 percent of the market combined. The market share of Magnum Medical AS is nearing 50 percent, thus significantly exceeding the threshold of 40 percent that is deemed as dominant position in the market. The market share of rival wholesaler Tamro Eesti OU has also grown somewhat.

The Competition Authority has already expressed the opinion that the existing model of price regulation for medicines does not work. Although the prices of medicines are agreed between the drug manufacturer and the state, and wholesale and retail markups are regulated, a random analysis of manufacturers’ and wholesalers’ settlements made by the Competition Authority in 2020 showed that manufacturers give wholesalers significantly large discounts from the price agreed on the level of the state.

In order for manufacturers’ discounts to reach the retail level and ultimately consumers, it is necessary to develop effective regulation and implement measures to stimulate price competition among wholesalers.

The Competition Authority proposes considering additional requirements for pharmacy ordering systems.

“As a result of these requirements, ordering systems should be open to all wholesalers, and it should be easy to implement them in a way that the system automatically selects the lowest offeror, or the best offer based on some other relevant criteria, such as delivery time,” Parn-Lee said.

The focus of the follow-up analysis of the pharmacy reform by the Competition Authority was primarily on the competitive situation and the independence of pharmacies — in which it is expressed in the post-reform situation and whether there are factors that enable or limit it. As part of the analysis, the Competition Authority surveyed 42 pharmacies.

With the entry into force of the pharmacy reform, by April 2020, pharmacy licenses had to be brought into line with the requirement that a pharmacy must belong to a pharmacist and that pharmaceutical wholesalers must have neither a shareholding in nor control over a pharmacy. These changes were intended to ensure the separation between the retail and wholesale distribution companies of medicinal products, which were hitherto closely vertically linked to each other.

Source: BNS

(Reproduction of BNS information in mass media and other websites without written consent of BNS is prohibited.)


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