Market Study of the Chilean Competition Authority on Pharmaceuticals

On November 20, 2019, the Chilean Competition Authority (FNE) published the preliminary report of the market study it had been conducting since April 2018 on the competitive evolution of the pharmaceuticals market.

The FNE carried out a comprehensive review of the operation of the pharmaceutical industry in Chile — from the production of medicines to their sale. In its preliminary report, the FNE reveals the market failures that affect the pharmaceuticals market in the country and proposes 14 measures for their solution.

The preliminary report is subject to public consultation until Friday, December 20, 2019. Subsequently, the FNE will publish a final version of the report and will recommend to the President of the Republic, through the Minister of Health, the legal or regulatory modifications that it feels should be made in order to solve the competition problems affecting this industry.

In its preliminary report, the FNE recommends the following reforms to the pharmaceutical industry:

1. Modify the procedures before the Public Health Institute to obtain marketing authorization and to obtain the certification of bioequivalence.

As a first recommendation, the FNE considers it necessary to regulate adequately the procedures to obtain marketing authorization for drugs and the certification of bioequivalence by establishing clear deadlines and stages for those involved in the processes. This recommendation seeks to facilitate the entry to the market in order to increase competition.

2. Establish a faster procedure to certify bioequivalence and to grant marketing authorization to medicines that are already sold in other countries.

In order to facilitate market entry, the FNE recommends establishing a simplified procedure — ideally automatic — for granting marketing registration to drugs previously registered in countries that meet an adequate safety standard.

3. Establish obligations for laboratories to inform the Public Health Institute about current patents.

The FNE recommends obliging laboratories to inform the Public Health Institute of the expiration of all primary and secondary patents held on their products so that patents and their expiration dates may be published in the databases of the Public Health Institute. This will allow potential entrants to have greater knowledge regarding the difficulties they may face in entering a market, thereby facilitating their entry.

4. Grant a reward to the first generic drug to enter the market.

In order to enhance and expedite the entry of new competitors to the market, the FNE proposes granting to the first incoming generic drug generic exclusivity for a maximum period of one year. During that period, the entrant would be the only drug that would compete with the innovator drug whose patent has expired.

5. Implement measures to increase the number of bioequivalent drugs.

According to the FNE, penetration of bioequivalent drugs in Chile is still insufficient, which means that for several medications there are no real alternatives. This can generate incentives for practitioners to prescribe the original drug. Therefore, the FNE recommends the increase of the penetration of bioequivalence, in particular for basic drugs, in order to facilitate the entry into the market of effective substitutes that compete in price with the original drug.

6. Establish a policy of continuous production and dissemination of information.

The FNE believes that access to information by medical staff, pharmacies and relevant market players is essential to fostering competition. In this regard, the FNE considers that the Institute of Public Health should maintain on its website a database of marketing authorizations existing in the country, duly updated and easy to use. In addition, the FNE considers that the Institute of Public Health should periodically inform market players about new original drugs that enter the market, as well as the availability of alternative generics for existing drugs.

7. Apply effectively data protection regulations.

The Intellectual Property Law protects clinical studies related to the safety and efficacy of an original drug, such that they cannot be used by a third laboratory to obtain marketing authorization for a generic drug. However, such protection is inadmissible when the drug is not marketed in Chile within 12 months of the registration, or when the application for the marketing authorization was submitted after 12 months of obtaining the first registration or marketing authorization abroad. In its study, the FNE found that more than 60% of drugs in Chile should have lost the data protection established in the Intellectual Property Law, or said protection should not have been granted. Therefore, the FNE considers it necessary for the Public Health Institute to adequately monitor compliance with Intellectual Property Law provisions that would result in the loss of data protection.

8. Strengthen the National Drugs Agency.

The National Drugs Agency (ANAMED) is the department of the Institute of Public Health in charge of the control of drugs and of granting marketing authorizations, as well as exercising control and surveillance. For the FNE, strengthening the ANAMED — to the extent of it becoming an independent body — will allow for a more expedited process for the registration of drugs and the certification of bioequivalence, as well as the improvement in the duties of control and pharmacovigilance. The FNE believes that strengthening the ANAMED will grant greater confidence in the functions of the regulator, which will make it more likely that products certified by the agency will be considered as substitutes of the original drug.

9. Create a single national platform for practitioners to prescribe by the international common denominator.

The FNE recommends creating a single national prescription platform, mandatory for practitioners, which requires them to prescribe according to the international common denominator of the drug. Pharmacies will have access to the platform in order to dispense the prescribed drug. Such a platform will prevent the health professional from choosing a certain brand and will allow for a better control of the drugs prescribed to patients. The FNE believes that this measure is more effective than forcing doctors to prescribe for the international common denominator of the drug. This later alternative, that is being discussed today in Congress, is more difficult to control and implement according to the FNE, since doctors are unlikely to change the way they prescribe in the short term.

10. Regulate the dispensing and payment method of pharmacies.

The FNE proposes two structural modifications to the operation of pharmacies in Chile. First, the FNE recommends that pharmacies be obliged to dispense the most economical bioequivalent drug, although the patient may request another brand of its choice. With this, the current legal rule is modified, by which the dependent of the pharmacy delivers the prescribed product, which he can change for a bioequivalent. Second, the FNE recommends that pharmacies obtain a fixed amount for dispensing a drug, regardless of its value. With this, the retail price of the medicine will consist of the effective cost of acquiring the drug and the fixed fee for its dispensation. This measure will eliminate the pharmacy’s incentives to dispense one medication over another since whichever drug the pharmacy dispenses, it will obtain the same income. In order to make this applicable, the FNE considers it necessary to establish a series of measures, such as prohibiting growth and loyalty discounts, so that the price obtained by the pharmacy is only the fee for the dispensation of the drug.

11. Create insurances with drug coverage.

Complementary to the previous measure, the FNE recommends the implementation of a universal insurance with drug coverage, which will allow insurers to buy directly from laboratories or negotiate with pharmacies in order to obtain better prices for the products covered by the insurance.

12. Allow the sale of Over-the-Counter drugs (OTC) in establishments different from pharmacies.

In order to improve the distribution of medicines, the FNE first recommends allowing the sale of drugs that are sold directly to a consumer without a prescription (“Over-the-Counter drugs”) to be made by establishments other than pharmacies. The FNE believes that such measure does not increase the existing risk of overconsumption, and international experience shows that it has generated price reductions for these types of drugs. In addition, the FNE considers that regulation should be increased to ensure that the products are in good condition for consumption, and that regulatory burden for the dispensing of this type of drugs be decreased, for example, by not requiring a chemical pharmacist in the establishment.

13. Allow the sale of drugs online.

In addition to the previous recommendation, the FNE proposes to improve the distribution of drugs by allowing their sale online. This will reduce fixed costs and assist individuals who may have mobility problems.

14. Regulate the functioning of pharmacy committees and other public sector bodies.

Finally, in relation to the public sector, the FNE recommends the regulation of the manner by which purchased drugs are selected. In this regard, the FNE recommends a series of measures aimed at perfecting the pharmacy committees — entities responsible for selecting the medicines that are purchased — as follows: (i) maintaining a public and updated list of their members; (ii) keeping public records of their decisions; (iii) making its members declare any conflicts of interest; (iv) considering cost-effectiveness criteria; and (v) establishing sanctions in case of breach of its rules.

In addition, the FNE proposes to implement a single national resource for all purchasing bodies (mainly health services, municipalities and hospitals) so that the same drugs are purchased by all state bodies. This will increase the purchasing power of the State, and consequently reduce the cost of acquiring medicines.