NGO news

Is there a pharmaceutical cartel in Georgia?

by | Jul 13, 2012

TBILISI, DFWatch – Transparency International Georgia on May 22 presented the results of a study showing that three pharmaceutical companies control almost the whole Georgian market.

The three companies are: AVERSI (35 %), PSP (30%) and GPC (15%).

According to the report, the price of medicines has increased too much in Georgia, 102 percent compared to Europe. Eka Gigauri, head of the organization, says that the high prices are the result of Aversi, PSP and GPC dominating the market.

Pharmaceutical companies are free to set the prices on medicines. The way this is done varies in different branches. The drug Korsizi in different branches costs 0.85 GEL or 1.05Gel, Enozit H 5.48 GEL or 6.85 GEL.

The low costs are in the braches near the Pharmadepot’s branches. Pharmadepot is a company characterized by lower prices. It entered the Georgian market in 2009, after which prices in the other companies began to fall.

Unlike Aversi, PSP and GPC, Pharmadepot pays value added tax, but still, it has lower prices. Misha Abramishvili, head of Pharmadepot, says that the reason why medicines are cheaper at his company is that they do not spend a lot of money on TV commercials or on different gift cards.

Thec companies unexpectedly announced a price decrease on about five hundred medications. TI Georgia notes that the increase as well as decrease in the big three companies happened simultaneously, which seems to indicate a cartel agreement between the importers.

On October 15, 2009, parliament passed a law about medication and pharmaceutical activity, aimed at easing the procedure for importing and selling pharmaceuticals, and contributing to the establishment of a competitive environment in the pharmaceutical market. This gave an opportunity for smaller firms to reduce their dependence on large importers that have exclusive rights and contacts with producers, and determine the price in accordance with the real cost of the products and not according to the prices in the market.

The author of the TI Georgia’s report, Gerard De Bore, during an interview with Radio Liberty noted that changes introduced in 2009 only partly influenced the situation in the market. According to another study conducted by the Curatio International Foundation, despite an overall price decrease on medicines during last three years, the price on medication has fallen only 30%.

Paata Kurtanidze, director of Aversi, says the numbers are incorrect. According to him, the price increment is not 102 percent but 25-30. Prices on medication have decreased by 35 percent since 2009.

“You know how big the German pharmaceutical market is and there are only two distributors, in the USA there are three, in Georgia there are 456 distributors. If Aversi’s share is 20 percent of the overall market and PSP has approximately the same share, how can we talk about an oligopoly or even a monopoly?” Kurtanidze asks.

According to Eka Gigauri, the report is based on data provided by the national statistics department GeoStat and the web portal Invest in Georgia. The heads of Aversi, PSP and GPC were asked to cooperate with the study, but refrained.

President Mikheil Saakashvili addressed the issue of high prices on medication on 25 January, 2011. He said it is unacceptable that the prices on medicine in Georgia are the highest in the region and the situation should be improved. According to him, the prices on medications in Georgia are artificially increased and a year ago the government managed to prevent a price rise.

Taking into consideration that the pharmaceutical market is independent and the government has no tools to control it, what Saakashvili said contradicts the situation, but if the market is controlled, it results in the creation of monopoly and oligopoly which is exactly what is happening in Georgia.

The report concludes that “the newly created Competition and State Procurement Agency should examine the activities of dominant actors in the market, while the statistical department should gather and publish complete data regarding the sector. The amount spent by citizens on pharmaceutical production can be reduced with the introduction of a list of necessary medication, promotion of usage of generics and by the proper enforcement of prescription procedures”.

 



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