Tuesday 31 January 2023

Most medicines are more expensive, despite a decree to lower them

The promise of the Government fell short: between August and December, only 2 of 16 of the INEC drug categories accumulated a decrease

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31 January 2023 - At The Banks - BCCR

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QCOSTARICA – Most medicines in Costa Rica are more expensive despite the decree signed by President Rodrigo Chaves in August, with which he assured that “import monopolies are destroyed.”

Semanario Universidad

This is reflected in the data from the Consumer Price Index (CPI) of the National Institute of Statistics and Censuses (INEC).

The decree eliminated the exclusivity for the importation or production of medicines in the country, with which the president sought to increase competition between companies and with which he assured that the prices of medicines would fall.

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Another decree signed by President Chaves allows the automatic approval of medicines that have already been authorized in developed nations with greater credentials than Costa Rica, such as the United States or member countries of the European Union.

Despite the measures, of the 16 categories of medicines included in the CPI, only 2 accumulated a price decrease between August and December 2022: medicines for gastritis (-3.50%) and cough medicines (-1 .81%).

“They didn’t even tickle the oligopolies. We warn you, the problem is much bigger and much stronger measures are required, the decrees are on the right track, but by far they are insufficient to generate a real impact”, lamented Leiner Vargas, economist and researcher in the drug market at the Universidad Nacional de Costa Rica (UNA).

The categories that increased the most in this period were drugs for heart disease (6.47%), for vascular problems (5.25%), for osteoporosis (4.47%) and vitamins (3.93%).

The increase in drug prices in December, compared to the previous year (year-on-year), exceeds 10% among drugs that treat hypertension, vascular problems, and osteoporosis. While those that treat heart disease (9.50%) and cholesterol (9.65%) follow them closely.

“The announcement of the decree was a scam. Why so much noise? We promised gold to Costa Ricans by banging on the table and what we have is practically nothing. We continue with skyrocketing drug prices, which even double the prices of other countries in the region,” added Vargas.

Market concentration

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Vargas assures that drug prices will not drop if strong measures are not promoted to balance the Costa Rican market, which, being small, is sensitive to concentration.

“It is a market that requires an open heart operation, stronger measures that affect the basket of medicines, the 20 most consumed by lower-income families,” said Vargas, who believes that price control or the private sale of this basket by the State could be options.

In Costa Rica, there are 1,167 pharmacies or drug sales points, of which 208 (31%) belong to the Cuestamoras business group and 83 are Walmart pharmacies, according to data from the MEIC and the Ministry of Health.

In addition, in the country, three distributors (GFI, CEFA and COFASA) control 60% of the market for the import and distribution of medicines. Another 46 divide the remaining 40%.

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These data were compiled by the economist and legislative adviser Luis Carlos Olivares, for legislator Melina Ajoy Palma, who is promoting a bill that gives legal certainty to the provisions of the government decree and adds measures to eliminate brand bias and the lack of pricing information.

Market distortions, Vargas and Olivares explain, are aggravated if we take into account that in the country the large chains negotiate exclusivity contracts with laboratories and there are drugstores with their own pharmacies that at the same time can be distributors. For example, Cuestamoras Salud (CMS) includes three distributors: CEFA, Farmacias EOS and Cefarma S.A.

The concentration of the chain, added to the lack of price transparency, makes it easier for them to maintain anti-competitive practices. Olivares mentioned that the high cost of medicines can be higher in peripheral areas, where on average there is lower income because pharmacies, drugstores, laboratories and distributors are concentrated in the GAM.

For example, 69% of pharmacies (807) are in the Central Region, according to MEIC data from 2018. In peripheral areas, most pharmacies are independent, therefore, they do not have the muscle to negotiate prices controlled by the distributors (that sometimes are also pharmacies).

Source: SemanarioUniversidad.com

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