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Estonian Competition Authority

Press release: New restrictions on establishment of pharmacies significantly harm free competition

The Estonian Competition Authority made a proposal for revision of the pharmacist-owner requirement and the prohibition of connection with wholesale sellers to medicinal products, and for annulment of the restrictions, for which there is no necessity. The benefits for the public resulting from such restrictions have not been substantially analyzed.

Following the decisions of the Supreme Court of 9 December 2013 and 22 December 2014, by which the restrictions on establishment of pharmacies were declared as contrary to the Constitution, a combination of two new restrictions was added to the Medicinal Products Act, according to which the majority owners of pharmacies can only be pharmacists, and the companies related to wholesale sale of medicinal products cannot establish pharmacies. As a result of the mutual joint impact of the two new restrictions, free competition is hindered.

The pharmacist-owner requirement constitutes a big change in the pharmacies’ market, as a result of which during approximately five years the majority of pharmacies will have to be transferred by force to pharmacists, or will have to be closed. However, according to the Estonian Competition Authority, not a single analysis was referred to, that would demonstrate that the service provided by pharmacies not belonging to pharmacists is of poor quality. Starting from 20 March 2015, when only pharmacists will be allowed to open new pharmacies, opening of new pharmacies has almost stopped.

The amendment to the Medicinal Products Act that entered into force on 1 July 2014 prohibits connection of wholesale sellers to general pharmacies. At the same time, this restriction obviously did not have a positive impact on competition. Approximately 80% of pharmacies in the Estonian pharmacies’ market are related to one of four chains of pharmacies through either ownership or cooperation agreement. The competitive situation is first and foremost maintained between these four chains integrated vertically as a whole, and not separately in the wholesale sale and retail sale markets. The chains of pharmacies already operating in the market are the ones that are first and foremost interested in and have the possibilities of expansion in the market, and from the position of competition is it also important that they have freedom to give efforts with the goal of increasing their market shares. However, with the restrictions added to the Medicinal Products Act such possibility was eliminated.