j'accuse

Ubi aemulatio? (Where's the competition?)

Medicine could be bought directly by the government if importers stop bringing over products issued with a price order after being deemed too expensive. “If we have a situation where an importer says he cannot bring over a particular medicinal product at the price established by the price order, then the government can choose to source the medicine itself,” Finance Minister Tonio Fenech said.

The battle clouds are looming as Minister Tonio Fenech takes on the healthcare businesses represented in the Chamber of Commerce, Enterprise and Industry by Reginald Fava. What is at issue here is the (alleged) repeated offence by vendors of medicine of keeping prices high notwithstanding the (apparent) possibility of selling such healthcare products at a lower price. Medicinal products are cheaper elsewhere than in Malta and the government allegation seems to imply that prices on the Maltese market are artificially inflated.

The government’s answer to this is that of “threatening” to issue a price order that would essentially fix the price for certain products. Now the sector of medicinal products is treated with gloves due to the sensitive nature of the products in question. One does wonder however whether the full mechanisms of the anti-trust legislation have been brought to bear before opting for direct government intervention in the market.

The assumption behind artificially high prices is that there is an agreement to keep such prices high. Such agreement is the result of lack of competition since in a pure competitive environment if it were possible for a product to be sold at a cheaper price, then the vendor to opt for that cheaper price would be more successful. As I said, this IS the medicines market so normal competition rules do not apply but it is strange to see the government resorting to the draconian measure of price orders – particularly when such schemes of bulk buying/government importation are normally the subject of vilification and are associated with the Mintoffian epoch.

Can you imagine Joseph Muscat suggesting the same kind of measure as Tonio Fenech is proposing? No prizes for guessing the reaction from the lapdogs of the party from triq Herbert Ganado.

So. Has anyone heard anything from the Office of Fair Trading?

***

Speaking of weird remedies…

Spot McCartney’s brother.

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One response to “Ubi aemulatio? (Where's the competition?)”

  1. Matteo Avatar
    Matteo

    The not so obvious to assume assumptions:

    1. The government will have to stick to local regulatory requirements for medicines, which is one of the reasons medicines in Malta are expensive. We can assume that the efficient public service will manage to do this at less of a cost.

    2.Pharma companies will agree to the government buying from another source. As such it will be a form of parallel importation. Anyone can do (and does) this. Again we assume the goverment can get better prices and be more efficient in adhering to the local requirements (such as packaging meeting maltese requirements).

    3. There are no repercussions on jobs or prices of less essential medicines from the importers side. (talking about supporting SME
    !!)

    Realistically, it is about time an institution to regulate prices is set up. This cannot be a simple % discount of current prices but based on an ex-manufaturer price based on the invoice price, with fixed markups. The price can be compared to average European price data. But obviously, one can never expect the cost of goods, with the small volumes of a Maltese importer to be comparable to any other place in Europe.

    One other option is to piggy back on the regulatory requirements of another european member state, this is what luxembourg does with belgium. This would involve EU negotiations and would be a positive step in favour of SME.