Session in the BRICS + format "Competition issues in the markets of drugs and medical devices during a pandemic"
The discussion took place as part of the traditional International conference "Antimonopoly Policy: Science, Practice, Education" supported by the BRICS Competition Centre
Timofey Nizhegorodtsev, Deputy Head of FAS Russia, noted that one day we will have to rethink the experience gained during the pandemic. Many economic structures could not withstand the increase in demand, which led to the introduction of protectionist measures. Fragmentation of markets occurred instantly - states prohibited the export of drug components, international specialization in the production of drugs was collapsed. We have also seen horrific unfair competition when states appropriated contracted goods at border crossings. As for the Russian Federation, first of all, we stimulated the flow of drugs against COVID-19. The prices of such drugs have been increased so that they come from markets where they are cheaper. Registration was simplified, taxes on some drugs were reduced, and measures were introduced for a short time to restrict the export of personal protective equipment.
According to Alexey Ivanov, director of the HSE - Skolkovo Institute for Law and Development, now we have “slipped into a systemic crisis,” and this is not the first and not the last crisis that humanity has faced. The Hong Kong flu epidemic in the 1970s was already testing modern institutions. The GISRS (Global Influenza Surveillance and Response System), which based on the principle of “open science”, helped to cope with the crisis. The victory over influenza became possible thanks to the cooperation of the international community, a system based on the principles of sharing, distributed use of resources.
In the case of COVID-19, we see completely opposite trends. The actions of states are more like paramilitary actions rather than economic competition. We have tremendous opportunities to make money for those countries that have managed to create vaccines, and hundreds of regions that collapsed in the pre-industrial era, which are deprived of the ability to prevent coronavirus.
The reason for this catastrophic situation is that instead of open science, we are seeing the opposite dynamic: fragmentation and conflict. Everyone believes that it is important not to create a vaccine, but to create it first. Intellectual property is becoming one of the main levers of influence - if the fight against influenza was built on principles that do not take into account intellectual property, the fight against coronavirus relies heavily on commercialization institutions.
When the intellectual property becomes a central element in the development of a vaccine, the natural reaction of countries is to disarm the enemy. We are now seeing an increase in compulsory licensing tools. Moreover, the countries that are armed with this tool, previously actively said that compulsory licensing is an evil that reduces investment activity. Canada and Germany introduced similar measures in the spring of 2020, and Israel also introduced comparable measures. In Russia, we live without compulsory licensing tools, because we believed in the cargo cult of intellectual property. In this situation, it is extremely illogical - other countries are arming themselves with unilateral instruments of competition that strengthen national economies, and Russia continues to believe that the protection of the intellectual property is the main tool for supporting innovation, and in fact operates in antiphase.
Andrey Tenishev, head of the FAS Russia Anti-Cartel Department, noted that problems in the economy naturally lead to the cartelization of the economy. To fight cartels, the FAS used the full range of rights that it has. It is mainly preventive measures, but also as initiation of cases. In general, the number of cartel agreements decreased by 46%, and if we talk about pharmaceuticals - by 23%, so cartel activity dropped significantly. In addition, the structure of identified cartels changed during the pandemic. There are fewer cartels in the auction, but cartels in the commodity markets have become more active.
Björn Landqvist, professor at the University of Stockholm, Fellow at the International Center for Competition Law and Policy BRICS, spoke about the report on the killer acquisitions. Killer acquisitions are negatively affecting the fight against the pandemic. In addition, research shows that such mergers can negatively affect scientific development. Many companies enter into R&D agreements when they have some promising research, in the hope that a large firm will produce a drug. At the same time, it is more profitable for large campaigns to stop such research. In addition, researchers often have lack business skills and are unable to negotiate with large companies.
Jin Jing, an expert of the Antitrust Bureau of the PRC's, spoke about the impact of the pandemic on the pharmaceutical market in China. The pandemic affected entire market segments, there were shortages, and companies were more prone to create cartels. It have posed a new challenge for the antitrust bureau. On the other hand, there were and will put the consequences of this situation, for example, reform was carried out in the pharmaceutical sector. The provision of online medical services and online trade in medical products also have been significantly developed.
The department also released an explanation of specific situations when cooperation is not punishable and does not fall under the prohibitions imposed on companies to prevent cartels. If such agreements have social benefits and help tackle the pandemic, they are not considered as cartels. However, these agreements must otherwise be consistent with other provisions of competition law.
Andrea Minuto Rizzo, Head of the International Department of the Italian Competition Authority, noted that there were also situations of shortage in Italy, caused by insufficient production and growing demand for essential goods - ventilators, masks, sanitizers. Italy's antitrust authority has found it difficult to distinguish legal and illegal pricing practices. Usually, the agency makes conservative decisions about intervention, since high prices in the market often attract new players.
In his opinion, in is important to be very careful with measures such as compulsory licensing. Sometimes the behavior of companies is completely legal, sometimes, due to interference, companies can go to another market, where there is less regulation, and there will be a shortage in this market. For example, laboratories charged high prices for tests, and the agency forced them to publish prices on the site in order to gently influence them. Agencies must be flexible, use the tools that are available to us - market monitoring, appeals to governments, and other soft measures in this extraordinary situation. Flexibility and targeted interventions are vital.
Marato Ramokgopa, a representative of the South African competition authority, spoke about the problems in the health sector in South Africa. She noted that access to medicines depends on a number of factors - the structure of the health care system (in South Africa, the public sector - 84%, the private sector - 16%), the high cost of medicines (2.5 billion South Africa spends on the purchase of medicines). All of these inequalities have only worsened with the onset of the pandemic.
In 2020, the South African antitrust authority focused its efforts on the pharmaceutical sector. Antimonopoly authorities can help to improve the availability of medicines. For example, earlier pharmaceutical companies agreed to grant licenses to generic manufacturers for antiretroviral drugs and gave permission to export such drugs to neighboring countries. This is an example of how an agency can help ensure access to specific types of drugs.
Ruslan Kokarev, Deputy General Director of the AEB, noted the positive role of the introduction of accelerated registration of medical devices. In his opinion, for the pharmaceutical market the issue of ensuring equal access conditions for all manufacturers and maintaining a predictable regulatory environment remains extremely relevant. In this regard, the new draft law on the release of a drug without the consent of the patent holder is of concern, as it may cause a number of companies to leave the market or become an obstacle to the entry of new players.
Yana Kotukhova, Chairperson of the AEB Health and Pharmaceuticals Committee, mentioned such problems as the economic situation associated with changes in the exchange rate, the closure of borders and the inability to access the components of medicines. She proposed to provide an opportunity for more operational interaction - to create coordinating bodies for the health system within the BRICS countries. In addition, it was proposed to ensure the possibility of proactive re-registration of prices by companies.
Timofey Nizhegorodtsev summed up the session, concluding that there are two possible paths for further competition policy. The first one is the path of protectionism, the second is the introduction of common universal rules and the creation of islands of stability for companies, where they will have the possibility to cooperate and jointly coordinate their actions. The second way will reduce the impact of the pandemic on the development of national economies.
Almost all countries have reduced administrative requirements in pharmaceutical markets within reasonable limits. We must reduce such regulatory requirements, and if such measures are effective, these solutions can be used on an ongoing basis.
Despite the fact that each of us acts within the framework of our own national system, we must think about a common cause - how to create conditions in which all citizens would be protected. It is necessary to create such an international mechanism that would return us to the era of cooperation, which Alexey Ivanov spoke about, because it is critically important for our citizens to receive all the benefits from innovations and from the development of our economies.