Economic Policy Review ISSN 1313 - 0544

Follies in the Pharmaceutical Sector

Author: Adriana Mladenova / 01.02.2007
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The establishment took a characteristic turn ‘to the left’ and backed out from the texts of the bill on medical products in human medicine. The bill was already adopted at first reading last August, but its debate at a second reading was continuously delayed. The proposed bill stipulated for liberalization of the procedure for establishing pharmacies and for allowing all traders (including legal entities), not only master pharmacists, to own pharmacies. This would have legalized the already existing practice of current pharmacy chains. But as the numerous statements made in the press and the shorthand records of the sessions of the Healthcare Committee reveal, free market logic and common sense will once more fail to triumph. As it has been until now, only master pharmacists will have the right to own and operate pharmacies.

The ruling class are haggling also over the issue regarding the regulation of prices – the Socialist party wishes for prices to be fixed on prescription medical goods, instead of allowing for maximum prices to be determined, which is the current practice. This is precisely what the Union of Pharmacists in Bulgaria has also been lobbying for. Such a move would very much stultify any competition between pharmacies and would in effect mark the impossibility for prices to go down, except if they are amended by a state decree.

The chief motive of the establishment for the decisions made ad hoc and for the change in their position is the ‘protection’ of small businesses from the imminent threat of ‘monopolization’ of the market. If one is to follow that sort of logic, every bookstore owner should also be a professional writer, for instance. And the resources used for fighting the establishment of monopolies are by no means restriction of competition and non-liberalization of the market, quite the opposite. How is it possible in a state claiming to be free and democratic, rights to property to be enforced by the ruling class? Small businesses do not need protection against competition but protection against unlawful government intervention. The attempts to artificially thwart the natural processes of consolidation of pharmacies cannot lead to anything good; on the opposite, a gray sector shall emerge, in addition to the ‘selling’ of diplomas and corruption, as a result of which customers will lose the most. With this decision the country erases 18 years of progress. What is more, this decision overbears the fundamental tenets of the EU for free movement of capital. The right of establishment and the freedom of disposing of one’s own property are fundamental rights of the free and rational person acting out of his own choice. It is a pity that in Bulgaria such anti-free market, immoral and irrational decisions can be made by those in power out of hypocritical motives ‘in the interest of society’.

It is a matter of money, a lot of money…

Here is what Todor Kumchev, a member of parliament from the ruling Socialist party, comments in the daily Sega regarding the delay in adopting amendment to the Law on medical products: ‘The pharmaceutical sector is worth many millions, and this is the reason why it is hard to make a decision.’ The MP acknowledged that personal interests are the crucial factor in decision making, rather than economic logic, the rule of non-interference of the state in business transactions, or the free movement of capital. It should not follow that the size of a particular sector of the market is the decisive factor in the passing of laws, because this would suggest a lack of objective and uniform criteria in the ‘creation’ of laws and would signal the presence of large-scale interests and financial appetites.

What will the European Commission say?

On July 28, 2006, the European Commission (EC) initiated infringement proceedings concerning Italy, Austria, and Spain with regard to the limits and restrictions, existing in their national legislations, pertaining to the acquisition and ownership of pharmacies. The EC decided to take Italy to the Court of Justice on account of restrictions imposed by its national legislation on the acquisition of holdings in and ownership of retail pharmacies. According to the Commission, the Italian legal provisions, as interpreted by the Constitutional Court, are not consistent with Articles 43 and 56 of the EC Treaty concerning freedom of establishment and free movement of capital within the EU. The Commission also made a formal request to Austria and Spain to amend their national rules relating to the setting-up of pharmacies. Under the Spanish legislation, only pharmacists can own and run a community pharmacy open to the public. It is also forbidden for one and the same pharmacist to have a holding or a joint holding in more than one pharmacy at any one time. In Austria, there is discrimination based on nationality with regard to the establishment of pharmacies; non-Austrians do not have the right to obtain a license to operate a pharmacy. There are also various limitations on the number of pharmacies in a particular territory according to the number of inhabitants and the minimum distance between pharmacies.

With regard to all of these cases, the European Commission has declared its position, namely that the imposed restrictions are in contradiction with the principles of the Treaty establishing the European Community (TEC). Despite the presence of this precedent, the governing class in Bulgaria does not conform to the decisions of the European bodies and is ready to jeopardize the national interests while making use of unpersuasive motives and contradicting goals.