FTC gives thumbs up to Drug Serv
Published:Friday | September 13, 2019 | 12:23 AM
The Fair Trading Commission, FTC, has found that the public-sector pharmacy partner programme undertaken by Drug Serv does not breach any section of the Fair Competition Act, since it is unlikely to substantially lessen competition in the market.
Drug Serv is a division of the National Health Fund, NHF, a state agency.
The competition watchdog said its determination was based on an investigation it undertook, based on a request from a private pharmacy on July 31, 2018, that the FTC explore whether the programme violated any provision of the Fair Competition Act.
Drug Serv is tasked with distributing medication used to treat chronic illnesses to patients of public medical facilities.
Under the public-sector pharmacy partner programme, selected private pharmacies distribute NHF-owned prescription medication at a minimal charge only to patients of public medical facilities, the FTC observed.
The NHF pays partner pharmacies a fee of $400 per prescription to dispense medication under the programme. In addition, partner pharmacies receive $200 per prescription directly from patients.
The FTC said it investigated allegations that the programme creates an unfair economic disadvantage for non-participating private pharmacies by channelling patients of public medical facilities to Drug Serv partner pharmacies.
“Through multiple initiatives since 2003, the National Health Fund has provided subsidies for prescription medication and since 2011 begun operation of publicly owned Drug Serv pharmacy services in Jamaica when the NHF Act was amended, thus fulfilling its mandate to offer its customers more affordable healthcare options,” the commission said.
The FTC said the NHF’s most recent initiative, the public-sector pharmacy partner programme, has brought to the fore allegations that pharmacies which enrol in the scheme are placed at a competitive advantage relative to private pharmacies which are not.
The effect of the programme on the competitive environment in which those partner pharmacies operate was therefore the subject of the competition watchdog’s investigation.
The FTC said the challenged conduct was investigated under provision of the Fair Competition Act, FCA, governing agreements to substantially lessen competition and abusive conduct by an enterprise occupying a dominant position.
The final decision about whether the alleged conduct gave rise to a violation of the fair competition law depended on the findings of an economic analysis in relation to whether or not the specific requirements for liability under either of the provisions had been satisfied in the case.
The FTC said its staff who participated in the investigation found that the relevant markets for assessing the challenged conduct comprised a Vital, Essential and Necessary, or VEN, list of medication available in multiple geographic regions across Jamaica.
It also comprised the set of pharmaceutical products other than the VEN list medication available in multiple geographic regions across Jamaica, and the set of narrower relevant markets segmented on the basis of whether consumers sought medical attention at either private or public medical facilities.
The FTC also found that the consumer base in the relevant market is segmented by ability to pay, and that Drug Serv pharmacies cater to public patients with modest disposable income, whereas private pharmacies cater to private patients with less modest disposable income.
The FTC determined that Drug Serv pharmacies are unlikely to be dominant despite participating in a market without any current rival or prospects for a rival in the foreseeable future.
It further finds that the challenged conduct is unlikely to have the effect of substantially lessening competition in any market.
“This finding is supported from economic analysis which concluded that the challenged conduct is unlikely to harm private pharmacies in any material respect and that patients with modest disposable income clearly benefit from the programme,” the FTC said.
The agency’s overall conclusion was that there was no breach of the FCA as Drug Serv was unlikely to have the effect of substantially lessening competition in the relevant markets.