Etusivu \ Deregulation and New Legislation \ Proposals to Reform the Pharmaceuticals and Pharmacy Markets

Proposals to Reform the Pharmaceuticals and Pharmacy Markets

KKV Kilpailulain uudistusFor several years, the FCCA, on different occasions, has expressed its view on developing the regulation of the pharmaceuticals and pharmacy markets in a more competitive direction. The public debate in 2017 resulted in the Government parties taking a stand on the development of pharmacy legislation. A pharmacy group consisting of members from Government parties published a set of reform proposals (in Finnish) for the sector in the spring.

The pharmacy group proposed increasing the number of pharmacies, for example, but would maintain official steering with regard to their location and the number of licences. In the FCCA’s opinion, the current regulation protects licence holders from competition by unnecessarily restricting the number of pharmacies and their access to the market. When determined by official decisions, the location and number of pharmacies may not necessarily best fill the needs of changing demand for pharmacy services.

The proposals made by the pharmacy group, however, also included changes previously suggested by the FCCA for increasing competition. For example, the price of self-care drugs according to the drugs tariff will be changed to a regulated maximum price, which will allow price competition in this product category. The sales price of prescription drugs would continue to be the same retail price in all pharmacies, and only very limited sales of some self-care drugs would be allowed outside pharmacies.

In the FCCA’s view, the proposals of the pharmacy groups cannot be considered sufficient for well-functioning competition. The proposals would not sufficiently reform the industry and would not change the structures of medicine distribution; rather, they would continue on the path of gradual partial reforms. Furthermore, the proposals did not adequately take into account the fact that the distribution of medicines should be reviewed as a whole. Otherwise, the assessment of the impacts is difficult, and the changes will not necessarily achieve the benefits sought from competition.

The FCCA has proposed, for example, that the economic needs test associated with the establishment and number of pharmacies be discontinued, which would allow free entry to the markets and increase the number of and competition between pharmacies. Pharmacy operations would continue to require a licence. In addition, deregulation the ownership and company form of pharmacies and allowing pharmacy chains would strengthen the preconditions for competition and bring economies of scale. It would still continue to be possible to operate as an independent pharmacist. Free pricing under the maximum price limit, at least for self-care drugs, would bring savings to customers. Corresponding changes have already been implemented in the other Nordic countries.

In the summer, Kesko and the pharmaceuticals wholesale company Oriola established a wellness chain that the owners say has the capacity to expand into the pharmacy market, if allowed by regulation. The FCCA has concluded  that the acquisition will not impede, as referred to in the Competition Act, effective competition in the Finnish market according to present legislation. According to the FCCA, this joint venture may even generate efficiency gains that benefit consumers, such as a wider wellness product selection.

Due to Oriola’s drug delivery problems resulting from an information system change in the autumn, there was also discussion about the status of wholesalers in the distribution of pharmaceuticals and the single-channel distribution model they have adopted, where the products of a pharmaceutical manufacturer are usually only distributed by a single wholesaler. KKV discussed the matter in its blog (in Finnish), and noted that in its previous investigations, it had not found evidence that single-channel distribution would distort competition.

The Finnish Grocery Trade Association is also investigating the matter by commissioning a report on the need to reform medicine distribution, due to be completed in 2018.