Can Competition-Promoting Policies Reduce Medicine Prices in Developing Countries? Loraine Hawkins ICIUM, Track 2c Economics Tuesday, 15 November, pm, 2011

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  3 rd 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