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Competition Policies and Medicine Prices in Developing Countries

This paper discusses the impact of competition-promoting policies on medicine prices in developing countries, focusing on the availability and affordability of generic medicines. It explores the role of competition law, institutional capacity requirements, and case studies from South Africa and other countries. Additionally, it explores complementary competition-promoting policies and the potential of public, NGO, or accredited outlets to stimulate price competition.

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Competition Policies and Medicine Prices in Developing Countries

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  1. Can Competition-Promoting Policies Reduce Medicine Prices in Developing Countries? Loraine Hawkins ICIUM, Track 2c Economics Tuesday, 15 November, 3.15-5.45 pm, 2011 loraine.hawkins@gmail.com

  2. 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

  3. 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

  4. 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

  5. What institutional and technical capacity is required? • Judicial system independence & competence • 3rd party enforcement of law, regulation & contract without undue political or industry intervention • Adequate human & financial resources for the competition & medicines regulatory agencies

  6. 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

  7. 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

  8. 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

  9. 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

  10. 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

  11. 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 • FarmaciaSimilares • Parallel context

  12. WHO/HAI Project on Medicines Prices and Availability: Review Series on Pharmaceutical Pricing Policies and Interventions Working Paper #4: Competition Policy http:/www.haiweb.org/medicineprices/policy/index.html

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