Manufacturers and wholesalers have been manipulating drug prices for years, Äripäev writes. The actual prices of medicines are sometimes a third lower than the prices reported to the state, and the difference is pocketed by the wholesaler as an after-the-fact bonus, the newspaper claims.
“The difficulty is that we don’t know how large a pile of millions will go to the wholesalers as a bonus, and we’re actually paying that money through the health insurance, we’re paying for it ourselves,” Martin Johannes Teder , journalist at Äripäev, wrote.
This bonus mechanism is known as kickbacks. Pharmaceutical companies reimburse distributors for a portion of the transaction several times per year. Invoices will include an explanation, such as a discount for early payment of an invoice or an additional annual incentive.
“The more the wholesaler buys, the more they can sell in the pharmacy, the more the pharmaceutical company has to pay this bonus to the wholesaler. And it can be up to 40 percent of their total portfolio,” Teder said.
The Competition Authority’s analysis showed four years ago that there could be a double game in the pharmaceutical industry.
“The information we were able to compile there revealed that distributors occasionally receive extremely large discount rates from producers. The question is whether they pass these discounts on to the customer,” Evelin Pärn-Lee, director general of the Competition Authority, said.
“The consumer has to be able to pass on this potential discount, and if it doesn’t, then I think there is a case for the state to take a closer look at what these operators are doing,” he said.
The Estonian pharmaceutical market is largely controlled by two players – Magnum, owned by Margus Linnamäe, from which Apotheka and Südameapteek order most of their products, and Tamro, with which Benu Pharmacy is connected.
Drugmakers unwilling to pay bonuses to wholesalers may not be able to get their products on store shelves, said Maris Jesse, former head of the Health Insurance Fund.
“In essence, the wholesaler forces the pharmaceutical license holder to pay additional fees or risk having the product not reach the wholesaler and, through the wholesaler, pharmacies. As a result, the Estonian market occasionally or consistently lacks a medicine that is available in our neighboring nations,” Jesse said.
Although the markup on pharmaceuticals is carefully controlled by law, Jesse said that the state is unaware of the exact prices at which pharmaceutical producers and distributors trade due to intricate bonus structures. The authorities do not have the authority to prohibit scheming either.
“What is specifically needed here is greater legal rights for the appropriate authorities. The transfer of these powers to the competition authority, and some to the Medicines Agency, has not been politically supported – there has not been a government where there was a political consensus to add these powers,” Jesse said.
Drug wholesaler Magnum Medical denies seeking refunds from drug manufacturers.
“These are accusations with which I disagree completely. Surely Magnum and, to our knowledge, other wholesalers do not ask for refunds and do not inflate the price of the drug. This is categorically not the case,” Timo Danilov, member of the management board of Magnum Medical, said.
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