Archive for April 20th, 2012


Pharmaceutical policy, quality control and government

April 20, 2012

In the past few days, maybe a week or so, pharmaceuticals, the costs of medicines and quality thereof, have come under the critical eye of the government.  It proposes to interfere in the market and drive down the cost of medicines to the public.

To be fair it does have several levers to do so, be it via insisting on generic copies of well known drugs or via the licensing system for Ukraine coercing manufacturers to a lower price amongst that assorted bag.  Hopefully not by subsidies the country can’t afford.

All jolly good if you are the person buying medication, and it is another social circus trick to attract the voters before the next election in October.  Also a golden opportunity if you are the manufacturer of generic drugs without the need to pass on R&D costs through new products hitting the market.

I have no intention in going into the ethics of generic drugs verses big pharma’s ability to finance future R&D.  I don’t work for big pharma but I do occasionally need to buy a drug as most people do.  Needless to say, the cheaper the drug the better from the consumer point of view as long as they are safe and they work.  Grandma’s secret elixir, GlaxoSmithKlein or generic copy, I have taken them all and care only that they cure my ills.

However, governmental interference is often frowned upon by any market sector it directly affects, concern others thinking of entering a country less they be the next market sector to be subjected to excessive government regulation, and of course those who simply find any form of State capitalism and/or market regulation politically abhorrent.  Generally how far left or right of the political centre ground you sit is the guide to how much governmental interference in a market you will accept.

Nobody will complain about improvements of quality control which is about to take a step in the right direction if the Prime Minister is to be believed.   What concerns me is this statement from the link above.

“We need to introduce in our country the recognized standards of the independent distribution practice and independent drugstore practice that are applied by all European countries, in the same way as we introduced the European independent practice of medicine production.”

In 10 years of living in Odessa and having visited hundreds of Aptekas (drug stores) during that time, I can honestly say I have not come across one that doesn’t meet European standards.  The staff regardless of Apteka have known exactly what they are talking about and given sound advice – every time.

In fact, as there are literally hundreds is not thousands of aptekas in Odessa, competition is huge.  Standards are high, most offer loyalty discount cards to retain your custom, (and I have a vast collection of apteka discount cards), and the free market is doing what it is theoretically supposed to do via competition.

There maybe something I am missing.  Maybe their procurement procedures are not robust enough to prevent to purchase of counterfeit drugs, but everything I have ever been sold has done exactly what it was supposed to do.  Over a decade and I estimate a thousand or more purchases from random aptekas during that time, my personal experience is that they are up to any European standard you want to throw at them.

In fact, given that most useless and misleading political opinion polls in Ukraine are based upon about 1000 – 1200 supposedly random people with a margin of error of 2-3%, my personal apetka survey over  decade is equally as legitimate by way of number, randomness and results.

Why, you ask, am I concerned about the above emboldened quote?  The answer is simply that with government intervention on price, what seems likely to be unwarranted and critical examination of the apetkas in Ukraine, probably more and not less bureaucracy, and with the existing extremely competitive market, you can envisage a scenario where half will close as the profits or bureaucratic grief will no longer make them viable one way or another.

I accept that any government in any nation has a duty to society and that health, like education, must rank highly amongst those duties (particularly in Europe where they hold high priority amongst the voter base over almost every other issue).  I accept there simply must be quality control and a transparent procurement system for those distributing drugs.  I can even accept that there are occasions where government simply has to interfere in the markets to ensure access to it by all levels of the society it represents.

What concerns me about this latest government action is that it has not been thought through properly (again) and that the casual effects may bring better prices, but will also vastly reduce the amount of places society can actually buy these drugs when they need them.

Now I may be jumping the gun a little.  There may well be a system emerge with a recommended retail price plus x% mark-up on the way, and it could be that x% is enough to keep all aptekas in business.  It may be that a move towards a predominantly generic pharmaceutical base will generally work in keeping costs down, if exceptions are made for the latest cutting edge drugs that are far superior to their predecessors is within the model.

It maybe that a centralised procurement system will reduce dramatically counterfeit drugs, or, it may be that such a centralised procurement system will quickly become corrupt and overly bureaucratic.  How independent will the independent drug suppliers be?  I suspect not very independent and/or under interested party oligarchy control.

Time will tell, but my concerns remain over the government interfering so robustly in an already competitive apteka market and the supply chains they currently have.

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