Factual data:
- Following 2021, there are 10450 sorts of medicines registered in the country, 3,213 pharmacies operating by 1712 undertakings in the country, 12 companies having more than 10 pharmacies, in total 1238, and 3 largest companies owning 927 pharmacies.
- In 2020, compared to 2016, the prime cost of medicines in GEL increased by 41% and in US dollars by 7%, respectively the increase in variable cost by 34% is directly related to changes in the GEL exchange rate and/or increase in the variable cost of medicines to be purchased in foreign currency;
- In 2016-2020, the concentration indicator HHI index at a level of market imports is within a moderately concentrated benchmark (1289-1799), and the number of importing economic agents ranges from 156 to 180 companies. Despite the existing concentration rate and the number of importing economic agents, the share of the 3 largest importing companies in the market import level is consistently high (from 57% to 68%);
- The volume of exports of medicines in 2016-2019 was characterized by an increasing trend, although in the pandemic 2020 there is a significant decrease in the total volume of medicines exported from the country, which is likely to be related to the introduction of GMP standard in exporting countries;
- In the selected 6 treatment groups, 1 company has 40% or more market share, and accordingly, the dominant position is on the face, also, in several cases, one of the main conditions for the existence of group dominance is confirmed by a group of companies in the form of market shares, and according to the Agency, there is also a group dominant position on the market;
- Statistics for 2016-2020 show that there is a high barrier to formation as a significant player in the market, because the composition of the 3 largest companies at both the import and retail level in 2016-2020 is unchanged, which is partly due to the high degree of market holding arrangement and vertical / horizontal integration. At the same time, the current legal/practical regulation of the pharmaceutical market, in particular the fact that the trade name of the medicines is indicated by the doctor during the prescription, is itself a significant barrier to market entry;
- Based on analysis of the Agency has revealed that the companies (50% or more of the total sales) sell medicines which are produced by these company/companies itself or imported by their holdings` member companies. This circumstance, in the position of the Agency, may be the result of vertical / horizontal integration, incompatibility of interests and / or market holding structure;
- Observations on retail sales data show that in the case of free choice and decision-making for the best interests of the patient, in the face of competitive pressure between interchangeable medicines, at the level of retail sales of selected groups and a few companies only, in 2016-2020, patients/customers would save an average of 16 million GEL for Ceftriaxone, Ceftazidime; Cefdinir; Cefpodoxime; Cefotaxime; Cefixime group medicines and 5 million Gel for Enalapril + Hydrochlorothiazide; Lisinopril + Hydrochlorothiazide; Ramipril + Hydrochlorothiazide; Captopril + Hydrochlorothiazide group medicines.
Agency assessment:
- he pharmaceutical market in Georgia is distinguished by the lack of regulations compared to European countries;
- The pharmaceutical market is highly concentrated in the country - There are undertakings, also groups with a dominant position on the market. Added to this is the high degree of horizontal and vertical integration and the market holding arrangement. Such a market structure gives the holding group/groups the power to make a significant impact on prescribing medicines, which may not be in the best interests of the patient but in the commercial and business interests of a particular holding group/groups. At the same time, as a result of the analysis carried out by the Agency within the framework of the monitoring, it is revealed that the holding groups sell most of the medicines imported/produced by the companies included in the group at the retail level, which represents 50% and more of the total sales;
- The prescription policy fails to provide a competitive market environment and does not meet the best interests of the patient;
- Conflicts of interest between medical staff and pharmaceutical companies / institutions need to be regulated accordingly;
- Pricing - Generic medicines are sold at a much higher markup compared to branded. In particular, the price increase for generic medicines in some cases reaches 200%, while for medicines that are available under trade names is in the range of 20-30%. The Agency identified small companies operating in the market, which are represented only at the level of import / production and Accordingly, medicines at the level of wholesale supply compared to the prime cost are selling for far more, which in some cases exceeds 1000%. The demand for such medicines by the Agency's position is driven by conflicting interests in the market. Overall, the weighted average total markup of large companies is in the range of 15-26%;
- Generic medicines - Legislation in the field is not aimed at increasing the market share of generic medicines, therefore the physical availability of generics in the market is low;
- An alleged benefit for the customers - By relevant legislative regulations and decisions, taking into account the best interests of the patient, the customer will save 25-30% for the costs of medicines every year and at the same time, will get an identical healing effect, which, depending on the market volume, may be up to 250 million GEL;
- Quality of medicines - 2 directions are important in relation to the issue: GMP standard and bioequivalence of generic medicines. The GMP standard is scheduled to be launched on January 1, 2022, although companies were given a specific grace period through June 30, 2022. Regarding the quality of generic medicines, the bioequivalence should also be highlighted, which is recommended to be ensured by the regulators of the field. Accordingly, industry regulators need to ensure that all medicines have good quality and are bioequivalent.
- An out-of-pocket expense and the role of private insurance companies - According to the study of the WHO Regional Office for Europe, in terms of total household healthcare, 75% of fees consist of out-of-pocket expenses. The share of out-of-pocket payments for medicines is 69%, while the cost of stationery treatment services is 14%. There is a universal health care program in the country, which benefits all citizens who do not benefit from private insurance programs (except for high-income individuals - 1% of the population). According to the agency, this and the fact that a person is not allowed to benefit from the universal health care program (except for the exceptions provided by law) in case of having a private insurance package is one of the factors contributing to the high rate of out-of-pocket expanses.
Recommendations:
1). Generic prescription only - It is the most crucial and fundamental leverage for ensuring competition between interchangeable products and increasing the market share of generics. It should be indicated only international, nonproprietary names (generic) of the medicine with the limited trade name in the prescription. Various studies and the experience of many countries have confirmed the financial benefits that consumers receive by purchasing generic medicines, which in turn is directly related to the reduction of spending on medicines;
2). Indication of a generic interchangables - It is advisable to indicate at least one interchangeable with major generic in the prescription;
3). Establishing a unified system of electronic prescription;
4). Continuous prescription control by the field regulators;
5). Quality of medicines - According to the agency, the GMP standard is necessary to operate at both levels of market access to medicines - manufacturing and importing. The industry regulators should ensure that the bioequivalence of generic medicines is checked and the result should be a guarantee that all medicines on the market meet the quality standards set by law;
6). Perfecting treatment guidelines;
7). Control of possible negative consequences of vertical and horizontal market integration - It is important to describe in detail the obligations of the pharmacist to deliver the medicine to the end-user to ensure a healthy competitive environment. In particular, in parallel with the introduction of a generic prescription, it is necessary to regulate the pharmacist's obligation during purchasing a medicine - to offer the consumer at least 3 medicines with the lowest price;
8). Tightening and effective control of the sanctioning mechanism - The facts of incompatibility of interests described in Article 30 of the Law of Georgia "on Health Care" must have an appropriate sanctioning mechanism, which, given international experience, can be administrative or even criminal liability. As for the issue of administrative liability, the amount of the penalty should be adequate to have a sufficient deterrent / preventive effect;
9). Ensuring maximum transparency and publicity of the relationship between who writes the prescription and the pharmaceutical companies;
10). Review of "free pricing" policy;
11). Limitation of market holding structure - According to the Agency, it is crucial to regulate the non-core activities of economic agents importing / wholesale and retailing of medicines, which excludes the possible negative consequences for the consumer and the overall competitiveness of the market;
12). Ensuring the coexistence of universal and private insurance "filler" packages - For reducing the out-of-pocket expenses for medicines and medical services in general, customers should be able to purchase a private insurance package to fill universal insurance at least in the medication component.
13). Conducting promotion campaigns on generic medicines by the regulators of the field.
