Download Medicines and the Poor: What Role for Competition Law & Policy?

Medicines and the Poor:
What Role for Competition
Law & Policy?
Mariana Tavares de Araujo
Competition Department, Head
SDE, Ministry of Justice, Brazil
Cape Town, April 2006
Competition law enforcement as a
successful tool to promote access to
medicines in Brazil.
Two examples:
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Generic Drug Cartel Case
Pharmacy Chains Predatory Pricing Claims
Generic Drugs' Cartel Case
February 1999: Enactment of Generic Drug Law (Law no. 9.787).
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Despite its enactment, law did not result in immediate entry due to need for tests
before approval by the Regulatory Agency.
July 1999: meeting of executives of the main Pharmaceutical companies
(together controlled at least 47% of the market) who agreed to block entry of
generic drugs in the country.
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Tactics included: refusal to deal with distributors that sold generic drugs; a
campaign towards doctors "respect my prescription and don't change it for other
medicines"; and "quality program" against generic drugs.
September 1999: SDE received meeting’s minutes, started the
investigation and issued a preliminary order preventing the firms from
implementing those decisions .
November 1999, a congressional inquiry was initiated to investigate
"successive and abusive price increases”.
Generic Drugs' Cartel Case
Complex market.
Common elements include:
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information asymmetries
doctor-patient relationship
distribution is key
Competition in this markets is impaired.
6 years after enactment of the Generics Law:
although these are at least 30% less expensive
than the branded drugs, entry has been
extremely slow and market-shares significantly
lower than branded drugs.
Generic Drugs' Cartel Case
Brazilian Authorities concluded that the
agreement could have effectively blocked entry
of generics.
Defendants argued that they were interested in
developing generics in the country and this,
according to them, would disqualify the claim
against them.
Firms unable to rebut that their initiative would
allow them to start selling generics in the country
at a later moment and thus delay entry and
competition in the market.
Generic Drugs' Cartel Case
CADE heard the case 6 months ago and imposed fines
of 1% of the firms' turnover in 1998 (Janssen-Cilag's fine
was higher - 2% - because there was evidence that it
had organized the meeting).
Fines were not so high because their attempt failed.
Intervention guaranteed implementation of highly
relevant government policy to promote access to
medicines to the poor.
Predatory Pricing Claims against
Pharmacy Chains
In 2005, SDE began investigation against two
large Pharmacy chains that were supposedly
selling below cost to drive their small
competitors out of the market.
Consent agreement was celebrated in court by
one of the Public Attorney's Office , preventing
the firms from giving out discounts greater than
15% in the final price of the product.
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largest chain had started to offer discounts that varied
from 30% to 50% below the maximum reference price
for the drugs and the other one followed suit.
Predatory Pricing Claims against
Pharmacy Chains
SDE's investigation indicated that pricing difference was
significant but not anticompetitive because:
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non-concentrated market and none of the two chains had market
power;
since 2002 there are price control mechanisms;
even if prices of some of the drugs sold by the pharmacies were
indeed below those drugs costs’; and
no significant barriers to entry in this market.
SDE concluded that this was in fact a pro-competitive
practice that should be encouraged, not forbidden.
Predatory Pricing Claims against
Pharmacy Chains
Public Attorneys' Offices from different states sent numerous other
similar complaints to the Regulatory Chamber.
In these cases, the investigative agencies contacted directly the
Public Attorneys’ offices and were able to rescind these decrees in a
large number of jurisdictions in Brazil.
This successful initiative strengthened competition and thus resulted
in significant reduction of final prices of medicines.
It is a clear example of how effective enforcement and strong
competition advocacy can positively impact the access of drugs to
the poor.
Conclusion
Examples indicate
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Benefits of a sound competition policy can
indeed have obvious direct effects in the
promotion of equity and poverty reduction;
Possible to harmonize competition policy with
different public policies, but also state
attributions - such as law enforcement and
advocacy initiatives - with government
policies.