Source of enrichment for some and of panic for others

Maka Ghaniashvili

Whole world is panic-stricken due to spread of pig flu. Healthcare World Organization’s statement that 7 million people might become the victim of infection intensified the fear even more.

However, gains of pharmaceutical business were considerably increased with this. Experts reckon that, vaccine industry might grow by 5 percent in a year, up to $780 billion. This showing increases up to 12 percent by 2012Y. What is the situation on Georgian pharmaceutical market?

Sales forecasts of three leading companies at European pharmacological market are impressive – the company GlaxoSmithKline is going to sell $1.7 billion vaccine in the fourth quarter. Novartis is anticipating income of $700 million within the same period; and Sanofi-Aventis is planning to receive $500 million at the end of the year. World’s pharmaceutical industry will get 7 billion Euros of income with the sales of vaccine in 2009Y. Income of the company Roche ten times increased since April month with the sales of medicine Tamiflu and made up $1 billion. According to the information provided by the management of the mask producer company 3M – they have sold masks of $100 million. Demand is so high that factory cannot handle all the orders. Making of big investments is already started in this direction. Swiss pharmaceutical giant Novartis will open the first factory producing adjuvanted cell culture-based A(H1N1) vaccine in USA in 2011. Investments made up $1 billion. Sales of cell culture-based vaccine have not been allowed in USA yet. However, Novartis gained production permit in USA. The company owns such factory in Marburg, Germany (www.BusinessWeek.com).
Medicine price is a subject of speculations in many countries and our northern neighbour is not an exception in this. Prosecutor’s Office of Russia conducted research concerning pricing of medicines at the country’s local market. As the research results showed, the prices of essential medicines in Russia are increased by 380% compared with their prime cost. In Jan-Oct of the current year the drug prices at Russia’s pharmaceutical market increased by 47.6 percent.
The price of medicine Tamiflu at Russian customs is 688 Rubles, while the price at drugstores increases up to 3,500 – 4000 Rubles. The volume of Russian pharmaceutical market is $16 billion. 2500 distributor companies are importing and selling drugs at the market (www.lenta.ru).
In the recent period, society and mass media pays special attention to the price increase tendencies of the medicines. Object factors of price increase might be the country’s inflation processes and change of prices of the producers. However, it is possible to relieve or considerably milden affect of the mentioned factors at the market.
Pharmaceutical business is a regulated activity in Georgia at present. Ministry of Labour, Health and Social Care and its sub-department -Medical Activity Regulation Agency – are responsible for safety of pharmaceutical products, their quality and effectiveness. In order to accomplish these tasks, agency is obliged to control permission of pharmaceutical production; control permission on retail sales; register pharmaceutical products at the market; control clinic studies and selective control of pharmaceutical production (measures against falsification). However, it is worth of noting that in comparison with the regulation practice applied in western countries, Georgian pharmaceutical market is freer in the current situation. For instance, state is not accomplishment regulation of production price. Many experts reckon that high prices are the result of this factor. Drugs Agency established in Sep-2004 was abolished in 2008Y. Part of the expert reckon that the main reason of catastrophic advance in prices is that organ controlling pharmaceutical activity is not authorized to define prime cost of the medicines.
State does not intervene in pricing of medicines and regulation policy at pharmaceutical market. Monopolists absorbed small entrepreneurs running pharmaceutical businesses, bankrupted small drugstores. Other drugstores are induced to import contraband medicines, sell psychotropic medicines without prescription, and sell non-registered drugs in order to simply exist. In some of the western countries, owners of wholesale networks are not allowed to establish retail network at all. In the meantime, Aversi and PSP are the owners of not only wholesale and retail networks, but also of pharmaceutical enterprises and medical institutions. These companies are even establishing insurance agencies. Under such conditions, it is hard to talk about healthy competition.
Despite the fact that big pharmaceutical companies decreased prices on minor part of the medicines, this is just a drop in a bucket. The company PSP cheapened famous medicines – Noshpa, Essential-Forte, Festal, Kordaron and Magne-6 within the range of 1-5 laris. PSP explained that the reason of this is that manufacturer company, French pharmaceutical giant Sanofi-Aventis made special discount for its distributor in Georgia – PSP Pharma. PSP continues negotiations with other manufacturer factories and declares that similar agreement reached with any supplier will necessarily reflected on price of medicine. The price of mentioned medicines is similarly reduced in Aversi drugstores. The company’s management said that after negotiations with Sanofi-Aventis the price reduction simultaneously took place in both companies. The company representatives declared that it depends on suppler companies how long these prices will remain unchanged.
However, overall prices of medicines are still very high. Majority of the population cannot afford to buy medicines. Advance in price of medicines reached catastrophic scales in the country and this in the times when drugs exported from Georgia to neighbouring countries cost 30-40 percent less. One might say that drugs in Georgia are the mean of enrichment instead of curing. The price on some of the medicines is increased thrice-fourfold. For instance, Suprastin costed GEL 2.5, but now the price is GEL 6. Eukrabon costed GEL 1, now it costs GEL 3. The price of cheapest medicines against flu rose also: Tsitramon price was 9-10 Tetris, but now it costs 20 Tetris. You could buy Paracetamol for 20 Tetris, but now it costs 45-50 Tetris. The price of medical mask is 25-30 Tetris instead of old price 15-20 Tetris.
Information that Aversi Rational medicines cost much cheaper at Armenian market than in Georgia often appear in Georgian print media and information portals. Imported medicines cost much more at Georgian market than in many European countries. For instance, the prices of medicines manufactured by Aversi Rational in Georgia and in Armenia: Meloni syrup (100 ml.) costs GEL 5.78 in Georgia and AMD 800 in Armenia that is equivalent to GEL 3.5; Meloni (30 pills) costs GEL 5.4 in Georgia, AMD 780 in Armenia (GEL 3.4 apprx.); Effect-Flu (10 pills) cost GEL 3.81 in Georgia, AMD 500 in Armenia (GEL 2.2). The same tendency is noticed in GPC drugstore network: Cost price of Dufaston (10 mg. 20 pills) produced by SOLVAYPHARMA is EUR 2.37, while selling price is EUR 3.49 that is equivalent to GEL 11.58; The price of this medicine in Georgia is GEL 31.72 that is three times more than the selling price established by the company. Cost price of Sirdalud (2 mg. 30 pills) produced by NOVARTISPHARMA is EUR 2.56, while selling price is EUR 3.73 that is equivalent to GEL 8,6; The price of this medicine in Georgia is GEL 16,5 that is twice more than the selling price established by the company.
We can conclude that medicine pricing regulation policy does not exist in Georgia. Georgian pricing standard is deformed. The price of medicine in Georgia is the price working at the market (the price at which drugs are sold out) and this is allowed by the state. There is nothing surprising. Moral and solidarity are not the components of business. None of the European states has allowed free pricing at pharmaceutical market. Under the conditions of limited financing, big expenses on medicines directly define decrease of funds appropriated to healthcare. Price limiting policy defines proper and relevant prices on medicines. The price of medicines in overall medical service costs does not exceed 12.9 percent in USA, 10.5 percent in Switzerland, 9.8 percent in Dania and 9.4 percent in Norway. The price of medicine in overall medical service cost is almost 50 percent in Georgia.
This topic is of special currency as Georgia is facing danger of so-called Pig Flu epidemic. Is government of Georgia ready to fight the virus? Representatives of healthcare system noted in the interview with Ecopolicy that state is prepared to fight against new influenza spread all over the word. Mr. Zurab Utiashvili (the head of Emergency Situation Department of Georgia): We started preparations for possible spread of the virus in spring. We imported 1.245.000 masks, 26.470 packages of Relenza and 111.000 dozes of Tamiflu. We have quite enough quantity of antibiotics. We will use this reserve only if healthy people starts buying masks and medicines ahead and deficit will be observed in the country. The state has not spent big funds on purchasing of flu medicines: every medicine, except of Relenza is derived as a humanitarian aid and is imported in different periods. World Healthcare Organization and other international institutions are supplying us with medicines”. Otar Toidze (the head of the committee for healthcare and social issues of the parliament): the reserves of Tamiflu and Relenza are quite enough. These medicines are expensive, but in case of illness they are free of charge. The control of prices is not either our or health ministry’s prerogative. The price of medicines is a commercial issue and private companies must decide the price themselves. Our obligation is to avoid epidemy and provide population with the medicines in case of spread of epidemy”.
At present, the price of medicine Tamiflu is about GEL 60 in drugstores. If considering the fact that the game rules at Georgian pharmaceutical market are established by big companies and nobody controls the prices, the advance in prices might not be excluded.
Proper policy of price limiting might be the only solution in such condition. Argument that is often heard from government or business representatives that regulation impedes business development might be true to some extent, but maybe someone gives preference to the health of the population instead of business development and takes care that people to be able to afford buying medicines. Countries distinguished by strong pharmaceutical industry (England, Germany) chose liberal models of price regulation in comparison with the countries with less developed industry (Italy, Spain). Influence of pharmaceutical business on policy making is a well-known phenomenon.