Breach of competition law seen in drug market

Speaking at a workshop on competition in the pharmaceutical sector held in Hanoi last Wednesday, Nam said signs of violating the Competition Law could be found in the link between foreign drug makers and local importers and distributors. They can collude with one another to impose drug prices, especially prices of special-treatment drugs, he stressed.

Data on pharmaceutical production and import reveals there is a fierce competition in this sector with 274 drug manufacturers, nearly 2,000 drug traders and thousands of outlets, drugstores and pharmacies across the country, forming a complex distribution network with several intermediary stages.

Tran Phuong Lan, head of the division for competition supervision and management at the Vietnam Competition Authority, wondered: “In this highly competitive market, drug prices should tend to go down, but why are they going in the opposite direction?”

The local drug output only meets 50% of the demand. The country still heavily depends on imported products, particularly specific drugs, inputs and active ingredients for drug production, according to the Vietnam Competition Authority.

Lan said there was nothing wrong with locally-made pharmaceutical products, as their prices had not increased suddenly in recent years. However, as for imported drugs, she wondered if there was collusion between foreign manufacturers and local importers and distributors to push up drug prices.

She remarked drugs imported by a local company were totally different from the products imported by other firms. Thus, each company distributes their exclusive products, making it possible for them to hike drug prices.

In addition, although foreign firms are not allowed to distribute pharmaceutical products in Vietnam, they can dodge the law through merger and acquisition. The involvement of foreign companies in drug distribution in the local market is another cause of drug price manipulation.

The drug market is special, Lan noted, because each product has it own market segment and can hardly replace each other. Patients do not have enough knowledge to look for alternatives to the drugs prescribed by doctors.

Therefore, each drug distributor enjoys their own monopoly, leading to unreasonable price hikes.

She asked: “If this is indeed an act of violating the Competition Law, can an investigation be conducted in accordance with the law?”

In response, a representative of the Vietnam Competition Authority said: “No, because drugs are subject to price stabilization by the State. If there was price increase, the State would have intervened to stabilize prices.”

The authority proposed the State management bodies tighten control on the link between foreign producers and local distributors as well as merger and acquisition deals to prevent foreign companies from taking over domestic firms in order to directly and legitimately participate in the distribution system.

The authority suggested companies operating in the pharmaceutical sector should raise their awareness of the Competition Law to not inadvertently violate it. In addition, they should know how to resort the Competition Law to protect their legal rights and interests.