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Unclear Perspectives for Improving Situation on Pharmaceutical Market

Government of Georgia has been long trying to tackle problems on pharmaceutical market, however, these attempts have not brought efficient results yet.

Both medications and medical services rise in value stage by stage. Patients often express discontent against doctors too, who prescribe more and more medications.

Our citizens and nongovernmental organizations always complain about expensive prices of medications and high profit margins. Medical expenses  significantly exceed financial resources of an averaged family in Georgia and this burden aggravates the condition of our society, especially of the poor.

Currently, five major pharmaceutical companies hold 70% of the market: LLC PSP Pharma, (22.32%), LLC ABC Pharmacy (14.91%), LLC Aversi Pharma (15.54%), JSC GPC (10.20%) and LLC GlobalPharma (7.02%).

Therefore, Georgian pharmaceutical market may be appraised as a weak oligopoly. However, it should be noted that ABC Pharmacy and JSC GPC have merged and market competition was restricted more. As a result, risks of misuse of dominating positions have grown. On the other hand, merger of companies will enable to unite resources, optimize expenditures and enhance efficiency.

According to official statistics by LEPL State Regulation Agency for Medical Activities, there are 2339 pharmacies in Georgia, including 1018 ones in Tbilisi and 1321 branches in regions.

Georgian Health Minister David Sergeenko noted that there is sharp competition on the market and there is no space for any cartel collusion system.

“Health Ministry has access to medications, customs and retail prices and markups, but the existing indicators do not prove that companies gain  surplus profits”, Health Minister David Sergeenko noted.

In response to the question whether medication prices grow because of monopolies and cartel collusions, David Sergeenko said that new players have appeared on the Georgian pharmaceutical market over the past 18 months and they have introduced transparent rules. As a result, any mechanisms for manipulations and collusions have been reduced to minimum, he said.

“Today we have sharp competition on the pharmaceutical market and I believe there cannot be any sort of cartel collusion system”, Sergeenko noted.

In response to the question, whether it is expedient that one person own a hospital, maternity hospital, inpatient clinic, pharmacy, insurance company and related directions, the Health Minister noted that this system is called as a vertical integration system and this is not a good practice.

“We should analyze these factors and risks, however,  artificial restrictions will be counterproductive. This process should not proceed for a long period and the Health System should receive its logical form. In 2013 this list also included urgent medical aid service and we had a catastrophic form of vertical integration. This practice was removed on January 1, 2014, when the Authorities took the district urgent medical aid services in management. This move has seriously corrected the then situation”, David Sergeenko noted.

To receive the full picture, we should compare markups in Georgia with markups in European countries, even more so solvency of averaged European citizen is higher compared to solvency of Georgia citizen.

The research conducted by Curatio international fund shows that  in Georgia the markup margin exceeds the markups in European countries at least twice.

According to the same research, the average markup in Georgia makes up 102%, while in European countries the markup amount is as follows: Hungary – 27%; Poland – 32%; Czech Republic – 35%, Greece – 46%, Italy – 49%. Markups are calculated starting from imports of medications ending with the retail network.

Georgian citizens find it more and more difficult to buy medications and the situation worsens year to year in this respect. Therefore, the government plans to expand the list of medications that our citizens are able to buy for 1 GEL or for preferential price. The information was unveiled by Health Minister David Sergeenko after his meeting with pharmaceutical companies. Previously, only state program beneficiaries with about 100 000 scores could receive 23 inpatient medications, but now this list will be enlarged and pensioners, PWDs and other segments will be also included in the list and the number of medications will increase to 50 ones.

“We have never made focus on any private company. We want to arrange as competitive system as possible and open entrance for new players to boost competition. On the other hand, it is our obligation  to shape clear control system, jointly with private  partners. This two factors guarantees to receive desirable results”, Sergeenko said.

Effectiveness of the Health Ministry measures will appear later, but today situation on Georgian pharmaceutical market remains unchanged.