Competition and the European Pharmaceutical Market

Do Market Components Account for Higher US Prescription Prices?

“…This is also seen in Europe, where prices differ for prescription drugs by as much as 500% among European countries. 24 Once a buyer of prescription drugs is placed into a segmented channel of distribution, based on purchasing practices, it is possible, but difficult, for that buyer to switch channels and change market power. In the past, small hospitals and community pharmacies have joined together to form buying groups for this purpose.…”

Recent developments in regulating the pharmaceutical business in the EU

“…From January 1995 a new marketing licensing system came into play in the EU: the European Medicines Evaluation Agency system. This system is part of the drive towards a single EU market [8, 9, 10, 11, 12]. The system has two main parts: the European Medicines Evaluation Agency (EMEA) and the European Commission’s decision.…”

“…The EMEA system involves two core aspects of regulation: the transfer of member states’ regulatory powers to the EU and the co‐ordination of regulatory policies on drug licensing. At first sight the EMEA system seems to signal the evolution of more bureaucracy in the EU [9, 10, 11, 15, 18, 19, 20, 21, 22]. This is a valid interpretation given that there is basically no need for the EMEA itself if, in the pre‐1995 CPMP system, the CPMP or the Commission was given the power of binding decision.…”

“…The ultimate exercise of market power lies in the individual member state’s ability, up until 1994, to exercise territorial state autonomy in the provision of licenses of pharmaceuticals for human consumption. That is, the member states have been playing the role of territorial monopolies in the provision of market licences [9, 10, 11, 12, 27]. In general however the EMEA system will not resolve territorial monopoly problems but actually make them more nefarious and more omnipotent.…”

“…EU level Court rulings on these matters, however, raise some perverse interpretations of economic principles and logic. For instance in Case 56/87 Commission v. Italy (1988 ECR 2919) the Court held that a negative list (in this instance a list of products that the Italian health authorities would not pay for) was not incompatible with Article 30, so recognizing that member states had (according to Hancher[10]) a legitimate interest in keeping drug costs down. One economic problem relates to the entry and exit criteria of the lists [12, 22, 34].…”