Analytics, EU – Baltic States, Latvia, Legislation, Medicine

Some time ago, the IMPACT 2040 NGO conducted a survey to learn about the views of patient organisations.  The organisation asked government institutions to deal with problems in the system.  During the past year, alas, government institutions have failed to offer any explanation as to the Latvian laws which set out territorial limitations in terms of the placement of pharmacies.  It is no surprise that this problem is not going to disappear on its own or that it has become more distinct during the past year.  Perhaps other problems in the world of medicine have been more loudly discussed and heard, but this problem is also acute and requires urgent solutions, because it directly impacts the ability of local residents to afford medications that they need.  This was clearly seen in a Latvian Competition Council (KP) report on November 25, 2019, to say that Latvia has the least favorable medication pricing mechanism among all EU member states.  We believe that the KP must be objective in terms of not ignoring the fact that the market in Latvia is dominated by a single dominant pharmacy network. 

The sad fact that this is due to Latvia's laws, which make medications more expensive and also create a situation in which it is all but impossible for any new players to enter the market. 

We believe that the placement of pharmacies in Latvia shows that a single network has successfully made use of the rule that says that there must be at least 500 meters between one pharmacy and the next one.  We understand that the network is not really to blame, because after all, the law is what it is.  The bottom line, however, is that the government has purposefully or accidentally established a situation in which the government accepts a system in which the interests of a single pharmacy network are being lobbied.  This means a hypocritical situation in the retail sector because pharmacy networks are part of that sector, and this has everything to do with competition.  Latvia and other EU member states make sure that the market for grocery stores is not dominated by a single player so as to protect shoppers against excessive food prices.  Clearly, if another store is opened nearby, that allows shoppers to choose the best and most affordable products.

In trying to regulate the pharmacy business, the state has, to a certain extent, shot itself in the foot.  The pharmacy licensing system that is dictated by law and the limitation on the number of pharmacies that is based on the 500-meter limitation on new pharmacies cripple competition and severely limit consumer choice.  Medication prices in Latvia are higher than in Western Europe, where the standard of living, we must note, is far higher than that which exists in this country.

IMPACT 2040 is currently examining the situation in other EU member states when it comes to the placement of pharmacies, the aim being to see how the availability of medications for patients is regulated elsewhere in Europe.  One organisation which we have surveyed is the Swedish Association of Pharmacies, and the bottom line here is that the Swedes (whose lifestyle and understanding of policies have been seen in Latvia as an example to follow) are several steps ahead of us.  "There are no geographic or territorial limitations on the placement of pharmacies in Sweden," says the association's director, Johan Waller.  "Business freedom has created many new pharmacies, and that has increased the availability of  pharmaceutical services throughout the country.  Sometimes this has created excessive concentration, and some pharmacies have had to close.  That is not a problem, however, because at the end of the day, it is up to clients to choose the pharmacy that they wish to visit.  If pharmacies compete, it is only logical that only those which best satisfy client needs will remain in the market.  Competition among pharmacies has also reduced the price of over-the-counter drugs and, in general terms, expanded the availability of medications."

Perhaps Latvia really should see Sweden's more liberal approach as an example so as to make already difficult lives for patients easier.  The current approach is reminiscent of the one that existed in Soviet times, when only one player really was allowed to dominate in the market.  Thousands of patients are waiting for the new leadership at the Ministry of Health to address this issue so that people can choose cheaper medications in their nearby neighborhoods.

IMPACT 2040 is calling for an urgent and in-depth audit of this situation in Latvia to understand whether it serves the interests of a narrow group at the sacrifice of the interests of patients throughout the country.