A new law on pharmacies: they will be many times smaller, and the prices are higher

Новый закон об аптеках: их станет во много раз меньше, а цены в них – выше

In the first days of a new session of the Verkhovna Rada will try to consider the bill on amendments to the current law “About lcars zasoby” from 04.04.1996 No. 123/96-BP.

We are talking about fundamental changes of the working conditions of pharmacies. Introduced this bill No. 8591 from 12.07.2018 several deputies Iryna Sysoyenko (Samopomich) as well as Alexandra Kuzhel, Olena Kondratiuk (both Batkivshchyna), Oleh Muse (independent), Olga Bogomolets, Irina Gerashchenko (both PPO), Alexander Danchenko, Anna Romanova (both Samopomich), Taras Cremini (popular front), Andrei Shipko (Vidrodzhennya). First name – remember, all the rest – it is rather a tribute to the procedure, but Ms. Sysoyenko is the real promoter of this bill, she also appointed as Rapporteur during its consideration in Parliament.

So, what is the bill? In short, about how to ruin the competition in the pharmaceutical market. And, as a result, make the pharmacies prices are higher and medicines less affordable, and the ability to reach the nearest of them sporting achievement. And all this is a result of monopolization of the market, although the title of the bill says that the purpose of his opposite – the struggle for competition and patients ‘ rights. To begin to understand.

A minimum of 500 meters between pharmacies

The authors of the bill shed crocodile tears – they do not like what we have in the cities a lot of pharmacies that we don’t have to rush between them in search of the drug, covering miles on foot or in crowded buses. The bill is the provision that the license for the retail sale of drugs will not issue if “the day of submission of the application for the license distance in a straight line from the place of the planned location of the pharmacy nearest pharmacy is less than 500 meters.”

Nonsense, you say? Retired datapult? Perhaps, but for an old man every extra hundred meters, right across the street, but in the autumn and winter slush is the bigger challenge of the marathon. In addition to the elderly affected persons with disabilities with disabilities.

Here is what the head of the Association of disabled of disabled people in wheelchairs of Ukraine Ivan Marusevich: “I don’t see any merit in limiting the number of pharmacies… pharmacies No excess, neither in city nor in rural areas. There are villages, even in the Kiev region, where one pharmacy left. And why 500 meters you need to go to the pharmacy?! We, our Association is willing to write a letter to the relevant Committee of the Verkhovna Rada on the pointlessness of these restrictions. As a result of the proposed measures will improve the service people? Instead of five people in the queue will stand ten, and not everyone who can get to the pharmacy, will be able to stand in that line”.

But that’s not all: the rule of “500 metres” eliminates the ability to open new pharmacies that will leave the market without competition. Remain major public and municipal pharmacies. And a few scattered independent pharmacies that are not included in the network. Why few? And this is a separate issue.

Guild of pharmacists, not otherwise

In binding the law on regulation of trade in medicines(the same “On medicines” dated 04.04.1996 No. 123/96-BP) there are reasonable requirements for qualification of personnel and material – technical base. In fact, according to the requirements of Ukrainian pharmacies are open for twenty years. And no scandals about the lack of qualifications of pharmacists was not.

But the authors of the bill decided that doing the pharmaceutical business as owners of pharmacies only pharmacists. And it is said: “…to have a document on higher education not below second (master’s) level in the specialty “pharmacy” and… to have a certificate of the pharmacist – technician issued by the institution of post-graduate education, or a certificate of assignment (confirmation) qualification category”. This requirement is reasonable in relation to the head of the pharmacy. But what sense to demand it from the private entrepreneur who owns the business? And furthermore, what sense to demand from the founders of the legal entity which claims a pharmaceutical license?

There is no sense in this, unless you aim for the Monopoli-zation of the market, closing the “extra” pharmacies and other anticompetitive actions. Of course, not all closed – some on the cheap will buy a large network to attend where they want.

I will say that it’s okay – educated pharmacists to open new pharmacies is closed? And here you can’t, because the planned restriction of “not closer than 500 feet to the existing store.”

More than eight in one hand not to give

From obvious no-go rules in the bill – the prohibition to have one legal entity more than 8 pharmacies, if they manufacture drugs on the spot, or not more than 4 pharmacies, if this function is not in them. And yet – all one legal entity must be located within only one region of Ukraine. However, this restriction is not proposed to extend to the pharmacy network, state-owned or communal property. Apparently, those are not as scary as the private pharmacy network.

So it appears that the business is conducted have come to monopolize the market in the interests of the state or municipal pharmaceutical networks? Unlikely. So it is very crazy looks. This rule is rigidly and directly conflicts with constitutional rules that declare the equality of ownership and the right to do business. And, of course, this provision conflicts with the obligations of Ukraine in the Association Agreement. Because there is nothing similar in the EU and do not close.

It is obvious that this most odious rule will be reset in the review process, so the others – no less odious, but for developers is really valuable.

And whence feet grow?

In the explanatory note the authors of the bill argue that the proposed rules are the need to prevent monopolies, to cherish the competition – allegedly for the sake of economic competition. But then allege that pharmacies too much that they are too addicted to price competition – indeed, but why is it bad for consumers? The authors agreed in the explanatory Memorandum even to the point that pharmacies now have “limitations offers the most available drugs or those destined for the treatment of orphan diseases.” About “orphan” is for professionals at all funny, drugs for rare diseases because rare that they need a very limited number of consumers. And therefore are sold through a limited number of pharmacies, including the programme of state support for such patients.

All this verbal smoke screen raised in order to push through the odious norms, which, as you can see, will lead to monopolization of the pharmaceutical market. And what are the consequences of monopolization is clear: rising prices, harsh irritation of elderly consumers in connection with complication of access pharmacies.

The mechanism of the monopolization of the pharmaceutical market will look more like this: dominance manufacturers and suppliers. The fact that now the pharmacy network fiercely competitive, but they are due to their sizes can actively and effectively negotiate with manufacturers and suppliers about prices and conditions of supply of medicines. As soon as the network in favor of the new law will destroy the market chaos: the remaining single players will have a weak position, they are manufacturers and suppliers without much difficulty to twist arms. Prices will rise, the range is narrow. Both are a necessary consequence of the dictates of the suppliers and manufacturers.

And finally – the main sponsor of the bill. Before his election to the Verkhovna Rada Iryna sysoyenko was engaged in legal business together with her colleague Elena Babich law firm “Babych, Sysoyenko and partners.” Specialized colleagues among other things, on customer service in the sphere of medical and pharmaceutical business. But after the election of the Parliament Iryna sysoyenko to continue to practice law was no longer law, and her colleague transformed joint business in the firm “Law office Elena Babich”. They even the office location has not changed.

Ms. Babich is not particularly shy to publicly present yourself as an expert medical lawyer at various public events, and as a lawyer specializing in pharmacy activities even on TV – for example, in 2016, she performed 1+1.

All these circumstances create grounds for the fears that the activity of Ms. Sysoyenko’s a potential having the appearance of a conflict of interest. Interestingly, in the explanatory note it is about a possible conflict of interest is not mentioned.

And about the “European practice”

In the explanatory note, Ms. Sysoyenko in the justification of the proposed restrictions actively refers to the European practicerelevant pharmacy market. And these practices really are. Here in the EU they actively sought pursuing deregulation and actual deregulation.

Here is an example of Italy – fifth the scale of the pharmaceutical market. Out of 17.8 thousand pharmaceutical institutions operating in Italy in 2011, about 16.5 thousand belonged to individuals, and 1.5 million were in municipal ownership. There is a private owner could own only one pharmacy, as a pharmacist. A license for this activity handed down from generation to generation and the cost of entry into this business is very high, which led to low level of competition in the market pharmaceutical sales. The number of pharmacies is limited by regulations. Even prooptiki have the right to access only certified pharmacists.

Therefore, in Italy was very high margins – the margin was 15% against the EU average figure of 8.1%(data from report “Italy Pharmaceuticals and Healthcare Report 2011”). And if in the EU the average share of the pharmacy’s retail price is around 19.2 per cent(data from The European Federation of Pharmaceutical Industries and Associations, report in 2017), in Italy, was 26.7%(data for 2011, before the deregulation). Of course, such high level of margins were due to the monopolization of the market and a shortage of pharmacies.

It is important that in 2010-2012, in Italy began the process of deregulation of the pharmacy market, as the state budget faced with unacceptably high costs to compensate for the cost of medicines. On 20 January 2012 the Italian government headed by Prime Minister Mario Monti (Mario Monti), initiated the bill, which has led to further deregulation of the pharmacy segment and growth in the number of pharmacies by a third. The law provided for the increase in the number of licenses issued by local authorities for the opening of pharmacies, and also allowed paraparam to sell some prescription drugs.

This liberalization has not ended: in accordance with Act No. 124, dated 4 August 2017, which entered into force on 29 August, the Italian Parliament passed away measures which liberalize the retail pharmacy sector in Italy, with the aim of stimulating competition.

Corporate companies ( società di capitale ) now have the right to own private pharmacies and possess the necessary licenses to control the pharmacy business. The requirement that the managing Director of pharmacy (licensed pharmacist) was one of the owners. Every owner of a pharmacy (including legal entities) will be permitted to directly or indirectly control (as defined by Italian law) no more than 20% of pharmacies in a given region or Autonomous province. Manufacturers of medicines is forbidden to participate in any pharmacy business in Italy. Here’s a European practice.