Action required to modernise pharmacy – Trinity College Dublin Policy Institute Study

Posted on: 13 December 2004

A 19th Century apothecary would not recognise today’s retail pharmacy showroom, but he would certainly recognise the regulatory environment, which has remained virtually unchanged since 1875, according to a new study launched on 13th December 2004 by Dr. John Fingleton, Chair of The Competition Authority in Trinity College Dublin’s Policy Institute. The report shows that Ireland has the highest retail margins on medicines in Europe (at 33%) and a poor deal for consumers and the economy. The comprehensive study entitled, Competition and Regulation in the Retail Pharmacy Market, finds that much could be done to open up the market, in terms of access to the pharmacy profession, and the price, supply and sale of medicines. It suggests a large number of pro-competition reforms that are both desirable and possible, without prejudicing the underlying public interest objective of public health protection. The most urgent of these are: 1. A new Pharmacy Act is needed to provide an appropriate and modern statutory and regulatory framework for the pharmacy sector, and to replace the current Victorian-era legislation. 2. The Minister for Health and Children should move swiftly to remove the ‘three-year rule’ prohibiting overseas-trained pharmacists from opening their own pharmacy in Ireland. This should be accompanied by an expansion in the number of University Pharmacy Degree places, to facilitate greater entry to the pharmacy profession. 3 . The reference list of EU benchmark countries against which Irish wholesale medicine prices are fixed should be revised to reflect a more realistic set of comparators. 4. As recommended by the Brennan Commission, the 50% mark-up paid to pharmacists under the Drug Payment and Long Term Illness Schemes should be abolished. “There are many things wrong with the way this business is regulated”, states Declan Purcell, the study’s author and Director of Advocacy, The Competition Authority. “First of all, the law is over a hundred years old, creaking at the seams, and is completely unsuited to today’s needs. Secondly, at a personal level, it’s extremely hard to qualify as a pharmacist because of an historic monopoly on pharmacy education, and unnecessary obstacles are put in your way when you do qualify. If you do manage to get a foot on the bottom rung of the business, though, the rewards are great – including restrictions designed to keep other people out, and guaranteed high margins on the medicines you sell. All this results in assets more valuable than most other kinds of retail outlet, and the consumer suffers in the end.” For example, under the heading of ‘Fees and mark-up’, pharmacies earned an average of €172,800 per contracted outlet in 2002 across all State Community Drug Schemes. Under the Drug Payments Scheme specifically, the average income per contracted outlet was €47,000 from the 50% mark-up component alone. The study draws together data on the operation of the Pharmaceutical sector in Ireland, and highlights the unnecessarily restrictive nature of the regulatory environment in which it operates. It also presents a comprehensive new comparison with regulatory environments in other countries showing that the same forces, both market and non-market, also operate elsewhere. Regulation levels are even heavier in many other countries, for example controlling pharmacy ownership. Nonetheless, heavily regulated environments elsewhere still manage to produce medicine price levels that are, in general, significantly lower than in Ireland. ” The Government and the pharmaceutical industry have a long-standing agreement setting the maximum wholesale prices of the vast bulk of prescription medicines in Ireland, ” says Mr Purcell. “Retail pharmacies charge a 50% mark-up on medicines supplied to most consumers; this practice has existed for about a hundred years, and does not appear ever to been explicitly agreed, altered or challenged. The effect is that Irish pharmacies benefit from the highest overall retail margin on medicines in Europe, averaging 33%. ” This report is the 14 th Blue Paper in the Series, ‘Studies in Public Policy’ published by Trinity’s Policy Institute, (known informally as the Blue Papers). The series aims to bridge the gap between the academic and professional policy communities and to make a real difference to pubic policy debate in Ireland.