Price agreements between pharmacies and pharmaceutical companies technically legal

Practice nevertheless seen to undermine public confidence

Sinikka Mönkäre

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The National Agency for Medicines has found that discount price agreements between pharmacies and pharmaceutical manufacturers endanger public confidence in the independence of pharmaceutical sales.
      According to an interpretation published by the agency on Thursday, the practice does not actually violate the law on medicines.
     
In March last year Helsingin Sanomat revealed an extensive jungle of agreements between pharmacies and pharmaceutical companies. The manufacturers would offer pharmacies wholesale discounts on medicines in return for a promise that the pharmacies would primarily recommend the products of the company in question to their customers.
      The preparations were not necessarily the cheapest available versions of the drugs.
      A survey commissioned by the Ministry of Social Affairs and Health reveals that last summer only 16 of Finland’s more than 600 pharmacies did not have such a discount and sales agreement.
      About 20 large pharmacies had price agreements with more than ten drug companies at the same time.
      More than 40 out of 60 pharmaceutical companies said that they had discount agreements with pharmacies, while 14 had contracts involving generic substitution.
      The Minister for Social Affairs and Health, Sinikka Mönkäre (SDP), is bringing a bill before Parliament that would require pharmaceutical companies to offer any discounts on an equal basis to all pharmacies; the pharmacies, meanwhile, would be required to pass the savings of any such discounts directly to the consumer.
     
Present law forbids the retail sale of medicines at a discount. The wholesale discounts have been between 3% and 35%, with the pharmacy pocketing the difference.
      One pharmacist estimated that the profit generated by the wholesale discounts had risen as high as two percent of turnover.
     
A new law on generic substitution of brand-name medicines came into effect about two years ago, permitting the pharmacy to substite a cheaper generic alternative in place of a costlier name brand drug.
      As many medicines can have numerous alternatives containing the same active ingredient, there is considerable competition over which preparation is recommended to the customers. Some drug companies have set as a condition of the wholesale discounts that the pharmacy’s computers be programmed to show a specific medicine as the primary option, even if it is not the cheapest.
     
In addition to the National Agency for Medicines, the Finnish Competition Authority is conducting a separate investigation to see if the practice violates legislation on competition.


Previously in HS International Edition:
  Mönkäre denounces price agreements between pharmacies and drug companies (8.3.2005)
  Planned legislation would reduce available generic drugs (6.8.2004)
  AstraZeneca board member says generic drug manufacturers take advantage of Finland (11.3.2004)
  Generic drugs bring savings of EUR 55.1 million (5.1.2004)
  Generic medicines spark considerable price competition at pharmacies (15.4.2003)
  Finnish pharmaceuticals industry could lose about 200 jobs (11.3.2003)

Helsingin Sanomat