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September 2, 2014
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Unhealthy policies mar drug market

Argentina is the fourth-highest consumer of prescription medicines per capita in the world.
By Fermín Koop
Herald Staff

Abusive use of medicines, lack of state control lead to distortion in the system

The government’s order last week forcing prescription-drug companies to decrease prices or risk hefty fines served as a stark reminder of how the highly-concentrated market is controlled by a few companies that make Argentina one of the most expensive — and unregulated — in the region for medicine.

There are some 250 domestic and foreign pharmaceutical companies that operate in the country with the likes of Roemmers, Bago, Gador, Elea and Bayer imposing a large footprint over the sector. Yet the number is a bit misleading — only 30 companies concentrate more than 75 percent of the sales in the country, according to estimates by prescription-drug experts.

“Ten percent of the companies hold 55 percent of the market,” Marcelo Peretta, the head of the union of pharmaceutical and biochemical workers (SAFYB), told the Herald. “Companies created powerful economic groups that own several laboratories, distributors and pharmacies and have a dominant position over the rest of the market.”

The large number of companies in the sector also hides the way in which a few companies have a virtual monopoly over certain categories of products.

“If you start looking at specific areas of the market you’ll find that, for example, all eye drops are made by the same company,” Federico Tobar, a prescription-drugs expert and researcher at CIPPEC, a local think-tank, pointed out to the Herald. “What’s really shocking is that foreign firms that have factories in the country sell their drugs at higher prices here than in the rest of the world.”

Drugs for all

Argentines like their prescription drugs. It is the fourth-highest consumer of prescription medicines per capita. Tied to an almost complete lack of intervention from the state when it comes to setting prices, this high level of consumption means pharmaceutical companies have been able to obtain large profits over the last decade. From 2006 to 2012, net revenue rose 12 percent according to official figures.

Yet that pie is far from divided up equally.

“There are many interests at stake here. There are four or five drugs firms that are doing well while the rest of us suffer. They sell large quantities of drugs so even though they are not authorized to raise prices that much they do OK,” Martín Álvarez, commercial manager of Temis Lostalo laboratory, told the Herald. “Firms used to have a 50-çpercent profit margin five years ago, now it’s 15 percent.”

The Herald contacted CAEME, COOPERALA and CILFA, the three chambers that represent the main pharmaceutical companies, but only the head of COOPERALA — Juan Carlos López — answered. López described the market as “perfectly competitive” and said the state should not intervene since “prices regulate themselves through competition.”

Any talk of market concentration is ludicrous, insists López.

“There are many players in the market and there’s a large variety of products at different price levels, which are not high since competition forces companies to keep them low,” López said. “There are no extraordinary profits as the government claims.”

War on prices

In addition to ordering the pharmaceutical companies to roll back prices, the government also said they must issue a report in no more than 10 days detailing the evolution of prices this year. In the past few months, more than 70 percent of pharmaceutical products have seen price increases of more than 70 percent, according to a survey by the Trade Secretariat.

Argentina’s prescription-drug market is largely deregulated so the government barely intervenes on setting prices.

As part of the broad price-watch programme, Trade Secretary Augusto Costa sealed a verbal agreement with firms for increases not to exceed four percent this year. Still that has been widely broken, as firms insist that is hardly enough to cover increasing costs, particularly considering the sector has agreed to 33 percent wage increases across the board.

The general lack of control over the sector reflects the gap that was left in oversight following the resignation of former Trade secretary Guillermo Moreno in November. His successor, Costa, has only held two meetings with the sector so far and has not continued Moreno’s practice of handshake agreements on prices that allowed companies to raise prices on certain drugs to compensate for cheaper prices in other, more popular products, market sources told the Herald.

“Moreno used to divide drugs in three categories: regular, premium and extra premium,” Tobar explained. “He asked companies not to increase prices on the prescription drugs he knew but gave them more leeway in others.”

That led to Argentina having much higher prices on expensive drugs used for complex diseases than other countries in the region. In a survey of 18 brands in Brazil, Chile, Uruguay, Paraguay, England and Argentina, Tobar found that almost all of the brands prices were more expensive in Argentina. For example, the drug Sutent, used by cancer patients, is 60 percent cheaper in England and the drug Gilenya for multiple sclerosis, is 32 percent cheaper in Chile.

These higher prices are largely a reflection of the government’s hands-off approach to the sector.

Across the world, countries have chosen numerous methods to keep prescription-drug prices in check. From establishing prices according to costs (a model followed by Spain, France and Portugal) to implementing price-freezes (such as in Germany, Greece and England) to establishing performance requirements for companies (Belgium, UK, Portugal), strict regulation is often the norm, not the exception.

“The state has tools that it could use such as setting prices for products before they arrive in the pharmacies and then authorize increases according to the inflation. It should have a relevant role on the whole pricing process. Now companies put the price they want and impose increase to keep boosting profits,” Peretta said. “Prescription-drug prices are far too important to be managed only by companies.”

@ferminkoop

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