COMPETITION COUNCIL SUGGESTS TO LIBERALIZE PHARMACEUTICAL MARKET

The Competition Council (the Council) has carried out a market study on the parallel import of drugs. The Council‘s experts aimed to evaluate the situation within the pharmaceutical market in Lithuania, to ascertain  major reasons for small sales volume of parallelly-imported drugs within the Lithuanian pharmaceutical market and to suggest the ways to encourage competition within this market.

According to the Council, the point 19 of the Description of the Calculation of Basic Prices for Reimbursed Drugs (the Description) approved by the Government resolution of 13 September 2005 No 994 unreasonably impedes competition between pharmaceutical companies (suppliers) as it provides that the declared selling prices of parallelly-imported reimbursed drugs have to be at least  4-10 per cent lower than the declared selling prices offered by marketing authorisation holders for the same drugs. Parallel importers are banned from selling those drugs that are, although cheaper than the drugs by marketing authorisation holders, nonetheless not cheaper than the required minimum of 4-10 per cent.  Therefore, this part of drugs is not imported parallelly, and the consumers are deprived of an opportunity to choose a cheaper drug. Having evaluated the findings of the study, the Council submitted a proposal to the Government suggesting to abolish the aforementioned point 19 of the Description.

During the market study, the Council‘s experts evaluated the explanations provided by the Ministry of Health of the Republic of Lithuania, the National Health Insurance Fund under the Ministry of Health and the State Medicines Control Agency under the Ministry of Health, also the answers to the questionnaires completed by undertakings, conclusions of other market studies, published articles and other relevant publicly available information. Moreover, the Council‘s experts carried out an economic evaluation of the possible impact of liberalization, with positive and negative effects on the market and consumers weighed up against each other.

According to the Council‘s data, the wholesale trade share of parallelly-imported drugs in Lithuania constitutes only 0,61 per cent of the overall  drug sales, while in Denmark it accounts for 20 per cent, in Germany – about 10 per cent, in the United Kingdom – about 14 per cent and in Latvia – about 4 per cent.

The Council‘s experts believe that if the restrictions applied to the parallel import were removed, Lithuanian citizens could purchase the majority of reimbursed drugs at lower prices. Nevertheless, it is important to note that apparent advantage of market liberalization may take a while as some time is needed to arrange new supply contracts, register new drugs and organize their delivery.

Notes: Currently the majority of reimbursed drugs in Lithuania is sold by marketing authorisation holders.

(1) Activity of the companies engaged in parallel import of drugs is grounded on the principle of free movement of goods and services established in the Treaty on the Functioning of the European Union. Drug prices in Member States differ, therefore, companies engaged in parallel import of drugs buy drugs in Member States where the prices are lower and import them to the ones where the prices are higher.

(2) Parallel import of drugs may have not only direct benefit (when a parallelly-imported drug is cheaper than the one offered by market authorisation holders), but also indirect benefit to consumers resulting from stronger follow-up competition. Parallel import encourages competition between the companies engaged in the provision and distribution of drugs, which may also push prices offered by marketing authorisation holders lower.

(3) Parallel import may not only have a positive impact on consumer opportunities to purchase cheaper drugs but also benefit the State itself in terms of budget savings due to lower prices both in the public procurement of drugs for hospitals and in the amounts due for reimbursement for patients, which are covered by the Compulsory Health Insurance Fund.