The pharmacy reform in Estonia was implemented on 1 April 2020, following a five-year transition period. Its objective was to prioritize professional development in the pharmacy market and strengthen the role of the pharmacists in the health system by allowing them to control capital of a general pharmacy. Previously, owners of wholesale distribution licenses for medicines were permitted to hold shares in pharmacies. Thus, the reform aimed to break the vertical integration between wholesale and retail pharmacies by changing the ownership rules. This allowed pharmacists to own pharmacies rather than wholesalers. The Competition Authority recently conducted an analysis to assess the impact of three-year-old reform. The focus was on the competitive landscape and the independence of pharmacies post-reform, examining both enabling and constraining factors. As part of the analysis, the Competition Authority surveyed 42 pharmacies (about 9% of all pharmacies).
The analysis results show that the pharmacy reform has not achieved its intended goal. While pharmacists now own pharmacies, these establishments remain connected to their former wholesale owners through supply, franchise, underlease, and other agreements. In addition, some pharmacies operate in premises within hospitals or shopping centres rented from companies or franchisors linked to wholesale distributors, limiting their independence. The Competition Authority has suggested additional measures to address this issue, particularly where the right to use commercial space should be controlled solely by the franchisor.
In addition, the Competition Authority discovered that there has been no new competition on the pharmaceutical wholesale market over the same period of time. Moreover, during the last years, the wholesale sector saw even greater consolidation of competition as the market shares of the two major wholesale traders have increased. Together, they now own more than 80% of the market.
In addition, the Competition Authority has previously expressed the view that the existing model of price regulation for medicines does not work. Although the prices of medicines are agreed between the manufacturer and the state, and wholesale and retail mark-ups are regulated, the manufacturers give wholesale traders significant discounts on the nationally agreed price. To ensure that manufacturers’ discounts to wholesale traders reach the retail level and from there the consumers, the Competition Authority suggested developing effective regulation and implement measures to stimulate price competition between wholesale traders. Nevertheless, there were no changes in this regard during the reform.
Furthermore, the Competition Authority’s analysis proposed introducing additional requirements for pharmacy ordering systems to promote equal access for all wholesale traders. It also suggested establishing a system that automatically selects the cheapest supplier or the best offer based on relevant criteria like delivery time. Such approach would motivate wholesale traders to engage in competition more actively.