Namibia: 178 Pharmacies 'Guilty of Price-Fixing'

NAMIBIA'S competition regulator says it will institute legal action against more than 170 pharmacies that have been found guilty of contravening the competition law by manipulating trading conditions to fix the price of medicines.

Pharmacies that are members of the Pharmaceutical Society of Namibia (PSN) currently operate under a mandatory rule to charge a mark-up tariff of 50% on the actual price of medicine they dispense.

This practice, according to the Namibian Competition Commission (NaCC), is unlawful and contributes to the high price of medicines in the country.

This is contained in an NaCC report on an investigation into the process followed by various pharmacies in the country to determine the price of medicines they dispense.

The findings of this investigation were made public through the Government Gazette in December last year.

NaCC chief executive officer Vitalis Ndalikokule yesterday confirmed that the commission will take the concerned 178 pharmacies to court, seeking an order declaring that the conduct by the pharmacies contravened the Competition Act.

Ndalikokule said the commission found that the pharmacies concerned have agreed to maintain the 50% mark-up pricing structure even when presented with what appeared to be a better alternative.

He said the PSN rule prohibits pharmacies from deviating from the 50% mark-up.

"What is happening is that the Pharmaceutical Society of Namibia has a rule that forces all the member pharmacies to impose a 50% mark-up on top of the cost of all the medicines that they dispense. Pharmacies are competitors and they were not supposed to operate in this manner. This practice is not lawful in terms of the Competition Act," he said.

The NaCC findings state that the 50% mark-up is the margin that pharmacies add to the cost of medicine plus value added tax.

"The sticker price remains the same whether a medicine is dispensed to a medical aid fund member or cash consumers," the NaCC findings show.

According to the NaCC findings, PSN and its member pharmacies had agreed to maintain the 50% mark-up tariff without reasonable justification.

This is despite attempts by the Namibian Association of Medical Aid Funds (Namaf) to introduce a more realistic pricing model and do away with the 50% mark-up model.

"The respondents have, therefore, failed to provide a justification for the setting and implementation of the 50% mark-up. The conduct of the respondents, therefore, amounts to a decision, agreements and concerted practices to fix prices and trading conditions as a contravention of the Competition Act," NaCC said.

For these reasons, NaCC wants the court to order the concerned pharmacies to stop using the 50% mark-up pricing structure for medicines.

The commission also wants the court to impose an appropriate penalty against pharmacies that would have been found guilty of contravening the provisions of the Competition Act.

However, in a response contained in the same gazette, PSN indicated that it has not been strictly enforcing the 50% mark-up pricing structure and that the tariff is imposed depending on the medication.

According to PSN, the 50% tariff was drawn up in consultation with Namaf and has been "implemented for many years with the objective of sustainability and ensuring that healthcare services are accessible to all Namibians".

The society indicated that its members are allowed to exceed the 50% benchmark in certain remote areas to cover additional costs, such as transport.

PSN said the 50% benchmark was also not thumbsucked, as alleged by NaCC.

In addition, PSN argued that if pharmacies are allowed to operate without a pricing guideline (50% mark-up) "the cost of healthcare services would unreasonably escalate".

However, NaCC said it was not persuaded by the reasons provided by the pharmaceutical society as a justification to maintain the 50% pricing structure.

"This conduct automatically qualifies as concerted practices and/or agreements between parties in a horizontal relationship and a decision by an association of undertaking, to engage in price fixing which is a prohibited conduct in terms of the act," NaCC said.

NAMAF's chief executive officer Steve Tjovoro yesterday denied claims that his association was involved in the determination of the 50% benchmark pricing structure.

"That is the position that they advanced during the hearing by the competition commission. We have asked them to prove their allegations but they could not. Even in the way of how we go about our business, we would not be the one determining that mark-up pricing for a particular industry. So, there is no way that someone could come up with a thumbsucked figure like that and ordain that to be applied across the board," he said.

He added that if such a determination is to be made, there would be a formula adopted that would incorporate all the components of the services to be rendered by all stakeholders.

PSN president Ulrich Ritter did not respond to calls directed to his mobile phone yesterday.

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