COMPETITION COUNTDOWN: Level playing field

All along the supply chain, pharmaceutical players are preparing for enforcement of the Competition Act next year

Malaysia's pharmaceutical sector was worth RM4.6 billion by the end of last year.

Some of the smaller players hope for a bigger slice of that pie when the Competition Act is enforced in January, while some of the bigger players hope they won't have to go through "agents".

They complain that there are anti-competitive practices along the pharmaceutical supply chain.  If the act is enforced fairly, they claim, customers should get a wider range of products at better prices.  And small and medium enterprises would be more willing to invest and expand their businesses.

The Malaysia Competition Commission (MyCC) is working on guidelines which will be ready by  year-end.  The draft guidelines will be posted on www.mycc.gov.my for feedback and once the final version is published, businesses and groups will have to comply, says Shila Dorai Raj, MyCC chief executive officer.

The act bans two kinds of anti-competitive practices -- anti-competitive agreements and abuse of dominant position.

"The act will provide a level playing field for all, which will eventually benefit consumers," says Datuk Nancy Ho, president of the Malaysian Pharmaceutical Society (MPS), whose members are pharmacists in retail, hospitals, manufacturing and academia.

A common problem is "refusal to sell, denial of service", according to Wong Sie Sing, president of the Malaysian Community Pharmacists Association (MCPA).  He says that one multinational manufacturer only sells the higher dose of a common fever and flu relief tablet to clinics, "although it is an over-the-counter product.  That is anti-competitive."

Under the Control of Drugs and Cosmetics Regulations 1984, he notes, sale of such products must be approved by the Drug Control Authority:  "Only the product licence holder can import the product from other countries and can control the market."

MyCC chairman Tan Sri Siti Norma Yaakob says the MCPA can lodge a complaint, once the law is enforced, about any multinational or local pharmaceutical company "which has a dominant position, (and) refuses to supply goods or services to others, without reasonable commercial justification".

On the licence holder issue, she adds, MyCC would have to undertake a study to know the "workings of the trade in the market and why such licence is being granted to a sole dealer".

  If the licence holder becomes dominant and abuses that position, it will be subject to the act, "provided it is not exempted or excluded from the application of the law".

Health Action International Asia-Pacific also reports "predatory" acts.  "Some of the big buyers get their products at an extremely low price and sell to the public with only a small markup," says Shila Kaur, its coordinator at Universiti Sains Malaysia's School of Pharmaceutical Sciences.

 "The small pharmacies with sole ownership cannot compete."

Another complaint is that suppliers give different prices to different customers.  

"The biggest example is controlled medicines, for example, for hypertension, cholesterol-lowering and diabetes," says a retail pharmacist with more than 10 years in the business.

"The difference in price could be between 10 and 40 per cent.  Generally, the clinics get the better prices."

  Enforcement of the act would encourage small and medium pharmacy chains like his to expand the number of outlets to between 20 and  30 per cent per year, he estimates.

However, for pharmaceutical manufacturers such as David Ho, it's all about volume.

  "We can offer the same price to everyone but obviously, people who buy in bulk expect a lower price," says the managing director of Hovid Bhd, one of the leading local generic drug manufacturers.

As a World Trade Organisation member, Malaysia has to protect pharmaceutical patents for at least 20 years from the date the patent application was filed.  For such products, "If they are the only one with the patent they can set a very good price," says Ho, who is also on the executive council of the Malaysian Organisation of Pharmaceutical Industries (local, foreign and joint-venture manufacturers).

But off-patent products are "duty free and competition is  intense," he points out.  His company doesn't need to change any of its practices before the act is enforced because "we are in a segment of the market which is  competitive and competing with the rest of the world.  Sixty per cent of our production is exported."

The Pharmaceutical Association of Malaysia, which groups 42 local and multinational pharmaceutical companies, "hopes the government will continue its review of preferred locally manufactured drugs in its procurement process, regardless of price, for off-patent compounds", says president Ewe Kheng Huat.  "This will further allow an open, efficient and competitive marketplace in Malaysia."

Would more competition lower the cost of medicines? "All the big drug manufacturers have a presence in Malaysia because there is a market for their products," says lawyer Anand Raj, who has clients in the pharmaceutical sector. More competition would be better for consumers, he argues.

"And prices would come down if suppliers could take the shortest route to the customers. When there are more levels in the supply chain -- whether it is agents, distributors, clinics or hospitals -- that tends to add complexity and costs."

 Enforcing the act will also help Malaysia compete for foreign direct investment not just in this sector but in all sectors of the economy, he adds.

Pharmacists also expect the price of branded products to drop, says  Wong.  

"In Malaysia, we are paying 30 to 40 per cent more for patented products than in their country of origin -- although other Third World countries pay a lot less."

Will the price of medicines drop next year? Watch this space.

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