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Competition issues in the BRICS pharmaceutical markets

01.10.2019
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The second day of the BRICS International Competition Conference has not only started with a varietal topic but was also concluded with another life and death importance level panel – pharmaceutical regulation. The issues that could be discussed within this area are vast; however, most of the representatives from BRICS competition authorities have focused on two common problems for all of the countries – generics and pricing.


Distinguished speakers representing competition authorities of BRICS have all contributed to creating a shared understanding of the problem in their countries as separate entities and in terms of exchanging experience and practices in the areas. Mr Timofey Nizhegorodtsev, head of the department for control over social sphere and trade of FAS Russia has shared the methods used for pricing in Russian Federation and noted that it has led to decreasing of the price of more than 1000 pharmaceutical products, the decrease averaging 40 per cent across the market. He expressed hopes that this experience could be beneficial for colleagues from other BRICS countries. 


The Indian delegation has continued the discussion by highlighting the fact that even having a vibrant generic market does not solve all of the problems and once again reinforced that pricing of pharmaceutical products is a challenging task. The representative brought up all-tool common issues such as the quality perception of the generic pharmaceutical products and the new problem of the ‘branded generics'. Madame Payal Malik, the head of economics division at the Competition Commission of India provided an example of a particularly interesting case from Indian practice where a pharmaceutical company managed to sell a simple ‘paracetamol molecule' under 20 different names with as many different prices. It is cases like this, which seem simple from the first glance, that help to fix the compliance and regulation process down to the minute details. Moreover, as a result of the outstanding experience and work by the Indian Competition Commission, entire supply chains in India can be self-regulated, and cooperation between businesses and government has increased significantly.

Hu Xinue, Deputy Director of Bureau of Antimonopoly SAMR from Chinese delegation with her presentation has shown that a year and a half on from the reform of the SAMR, the Chinese competition authority has successfully gone through the reform and has sprung back to protect the consumers. Although competition conditions vary from area to area, in general, concentration degree is relatively low, and competition is enhanced in the pharmaceutical market in China. In order to encourage R&D and innovation, China has been testing out a new approach since 2015 – marketing authorization system. Recently after evident success during the trial period, it has been decided to firmly adopt it, with the hopes of seeing even further improvement in the nearest future. China was also represented at a panel by an academic (name and text info is in photos for presentation)
The panel has further benefited from the speeches and presentations from a variety of partner countries' experts, such as Italy, Japan and the USA once again underlining the global agenda and international spirit of the VI BRICS competition conference.
Russell Damtoft, the Associate Director in the Federal Trade Commission Office of International Affairs, has started the discussion on the compulsory licensing, by sharing the experience of the USA authorities in their work with the pharmaceutical markets.
Mr Damtoft once again highlighted the amplitude of the damage caused by the anticompetitive behavior in pharmaceutical markets. Cost differences pre-regulation and post-regulation can vary hugely with branded drugs losing 90 per cent of the market on average, saving 3 billion dollars for consumers every week. Such profitability margins explain the ever-present problem of the anticompetitive practices in these particular markets - firms have a keen interest in blocking the entry of generic pharmaceutical and medical products into the market. Our American colleague provided examples of the practices which the competition authorities should be aware of, such as reversed payment agreement. Reversed payment agreement boils down to generic brand deferring or cancelling their entry into the market in return for the compensation by Big Pharma through a settlement of litigation. It generally delays entry for 17 months, and the loss for the consumer constitutes 3,5 billion per year. Furthermore, this creates a lot of problems for the competition authorities, as such cases are tough to fight, as it is difficult to prove that litigation is explicitly faked in order to engage in anticompetitive behavior. 


In response to all of the aforementioned problem, the Director of the BRICS Competition Centre Alexey Ivanov proposed the introduction of more proactive compulsory licensing. In his presentation he explained that compulsory licensing is a necessity when it comes to dealing with Big Pharma and excessive pricing in the market. He further highlighted that language is essential in representation of the cases, especially concerning the issues of compulsory licensing – thus in some countries like for example, the USA compulsory licensing can be presented by a string of procedures under a different name, thus making it easier to enforce. Alexey Ivanov stated that innovation for the society and well-being of the consumer, especially in such critical markets should be the priority and thus compulsory licensing should be adopted more widely and enforced more often in cases that require intervention. He emphasized his point by saying that we see a lot of disbalances favouriting companies-monopolists, as the structure in Big Pharma is not changing according to the report of leading companies in the market. Thus the market is stuck in the position where "Richest get richer by taking advantage of the vulnerable", thus causing massive inequalities and pricing inequalities globally.


His point was further reinforced by another researcher from BRICS Law and Competition Policy Centre – Bjorn Lundqvist. His presentation on intellectual property and competition protection has focused on the pharma sector access to patents through licensing. He talked extensively on the reasons for an increase in deals in Pharma and biotech markets and linked them to big companies buying new technologies from startups in the market and thus preventing the development of possible competitors at an early stage.


The participants have discussed issues of fair pricing in the pharmaceutical markets, in particular, the relationship between the volume of generic production and the price level. The speakers have paid specific attention to the discussion of the issue of finding a balance between antitrust regulation and compulsory licensing of intellectual property rights in the BRICS pharmaceutical markets.