Fabian Demicoli

PRICE ORDERS ON MEDICINES

The Pharmaceutical section of the Chamber of Small and Medium Enterprises would like to react to the statement issued by Government where Government is warning that it will issue price orders to control the price of medicines.

The section feels that the general public is being constantly misinformed on this issue. The blame for the high price of pharmaceuticals in Malta rests fairly and squarely on those who misguided and made a mess of negotiations with the EU in the run up to accession to the EU.

Government’s position at that time was heavily influenced by those who were only interested in maintaining the status quo where lack of competition in the market was the norm. Furthermore, the negotiators who did the negotiations on behalf of government were more interested in setting up structures for attracting manufacturers to come to Malta than in the realities of the Maltese market. These so called negotiators did not advise the Maltese Government to join the CADREAC organisation that was set up specifically to ensure that registration of medicines and related issues would be settled before accession.

We now have a situation where many importers are being saddled with paying registration costs for their principals out of their own pocket. This is the reality that we are facing today. Furthermore, to add insult to injury, it is financially impossible to register generic versions of medicines already on the market. A healthy market would be a mix of both branded and generic pharmaceuticals competing with each other and offering consumers a choice of prices.

If government expects importers and pharmacies to voluntarily reduce or abide by unrealistic price orders that would eat further into already eroded profit margins it should think again and be warned. This is not acceptable and smacks of totalitarianism. Price increases on medicines are the result of misguided Government policy. That is a fact that no one disputes, except maybe Government itself.

It is however not only registration costs that push up the operating costs of the pharmaceutical sector. By joining the EU, Malta is also introducing new standards that are of benefit to patients. Pharmaceuticals are by their very nature temperature sensitive. The public should know that medicines are kept in premises which are constantly air-conditioned and temperature controlled whether in a warehouse or in a pharmacy. This requires vast amounts of electricity that needs to be paid for, surcharge or not.

Government should realise that this is a very heavy burden and someone has to pay for it. Pharmaceutical importers and pharmacies recognise their role in giving this service, but at the end of the day, they are not charities. It has become too much of a norm that Government is expecting commercial organisations to give their services for free. Government itself should set the example and pay for purchased medicines within the normal 30 day period as do other organisations. It is very easy for politicians to speak on issues to massage and capitalise on public perceptions without taking into account the realities being faced by the sector. The fact is that Malta’s inflation rate is mainly due to the price of fuels and water as well as the surcharge. That is the root of all inflation in Malta.

Government should also substantiate what it is stating regarding cartels. If high prices are due to identification of cartels and price fixing by importers/retailers., the tools are investigations. GRTU believes collusion should be investigated. Again here the Government has put the cart before the horse. There is a law that gives government powers of investigations against cartels. Dawn/Dusk raids, leniency programmes, and other investigative remedies are available, as is done in every serious country in the world. All this has to be done with full respect to the letter of the law and the rights of individuals and firms to due process and investigation before a remedy is adopted and implemented. Without substantial and documented proof, government cannot possibly conclude that there is a cartel and thus threaten to issue price orders. It is the wrong attitude altogether and smacks of a kind of totalianarism that we thought was a thing of the dark past.

GRTU feels that it would be very difficult to imagine Government establishing price levels when a market is competitive and is given all the help to be competitive. This is certainly not the case as regards pharmaceuticals. Government can only possibly adopt ceilings (maxima) and even then it will run the risk that there will be levelling at that maximum which is likely to be the average. In competitive markets we aim at the first best; i.e. marginal pricing… and not average pricing…. (which is the second best price). From what we have seen in Malta, our regulators know very little of price regulation and therefore Malta should not go down that route. This will hurt small businesses and at the end of the day do more harm than good.

One can argue that medicinals and maybe even foodstuffs in Malta are highly priced, but blanketing the problem with price orders will not end it there. Malta is a small market, with almost everything being imported and with not enough sales volumes in many areas to spread costs better and ensure low prices. It is high time that we accept that competition does not yield the same results in small market economies like the bigger ones. Fostering competition will help, and in the case of pharmaceuticals, opening the market wide will. Informing consumers better will also help, for consumers that are fully informed are the most effective regulators. Competition policy in small jurisdictions is different!

GRTU does understand consumer concern regarding the price of certain pharmaceuticals, but it will never accept the introduction of price orders to regulate prices. That is not the way forward.

Instead, GRTU has always consistently offered its personnel and expertise to Government in order to try and reopen negotiations with the EU so as to make it easier and less costly to register products in Malta. GRTU feels that a strong multi-sectoral representation with the EU in Brussels will bring results. Malta needs to speak with one voice on this issue. There is already a broad consensus amongst stakeholders on the issue. However GRTU will not anymore accept negotiations done on its behalf by Government with the EU. From now on, GRTU demands to be an integral part of such negotiations.

GRTU is calling on Government to call a spade a spade and not a hand powered mechanical earth moving device. On the issue of pharmaceutical registration and the costs associated with it, enough time has been lost in tail chasing; Many representations have been made by GRTU. A commission was even formed to consult with stakeholders on the issue. GRTU did a lot of work with its members and actually presented two reports to the commission, but has heard nothing since on this commission’s conclusions.

GRTU expects that Government, and all stakeholders join hands and take up this issue with the EU urgently as Malta is facing a shortage of medicines in a Sea of Plenty, and that is not what the EU is all about. We are missing the boat in a big way. The EU is awash with good quality medicines at affordable prices. We need to grab this opportunity.

Further information please contact Mario Debono on 99494405

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