Academic journal article The European Journal of Comparative Economics

Regulation of Pharmacists: A Comparative Law and Economics Analysis

Academic journal article The European Journal of Comparative Economics

Regulation of Pharmacists: A Comparative Law and Economics Analysis

Article excerpt

1. Introduction

The pharmaceutical profession is highly regulated, especially when compared to other professions such as accountants, architects, engineers and lawyers. (1) Some regulation of entry, conduct and price is needed in order to ensure a minimum quality of and adequate access to pharmaceutical services. However, such regulation should not restrict competition more than necessary, especially when it serves private interests rather than the public interest. In other words: regulation should both be justified and proportional. (2) The economic theory of regulation, which focuses on regulation as a means to correct for certain market failures, has provided an excellent theoretical framework for regulators and competition authorities worldwide. (3) Indeed, questions about regulatory reform and deregulation in the professions have received much attention, particularly over the last decade or so. This immediately becomes clear from the long list of academic literature, policy reports, conferences and workshops, and competition cases on professional regulation.

Where overly restrictive entry and conduct regulation exists in self-regulation it can be assessed by competition authorities directly. For example, the European Commission in 2004 imposed a fine of 100,000 [euro] on the Belgian Architects' Association for adopting and making available a scale of recommended minimum fees. (4) This is diffferent when it concerns (self-regulation that follows from) public regulation. In the well-known Wouters case from 2002, which dealt with a ban on multidisciplinary partnerships between lawyers and accountants, the European Court of Justice decided that the regulation concerned did not infringe European competition rules, because it "could have reasonably been considered necessary for the proper practice of the legal profession as organised in the Netherlands". (5) In 2009 two similar judgements appeared, this time on ownership regulations of pharmacies as laid down in German and Italian law (to be discussed in section 4.3 below). The result of these cases is that competition authorities--notably the European Commission's Competition DG--have to resort to other strategies like competition advocacy or cooperation with other authorities. (6)

It should be noted at the outset that the aim of this paper is not to give a general introduction into the economic analysis of different types of entry and conduct regulation to be found in the professions. There already is an extensive literature on that topic (including many of my own contributions), to which I refer in footnotes where appropriate. Also, the aim is not to give an in-depth description of each and every restriction to competition that might exist with regard to pharmacists. The objective is rather to present a comparative overview of the most common forms of regulation of pharmacists that are found today and their effect on competition, and to investigate whether there is an economic rationale for these rules.

In the next section I will briefly present the changes that have taken place over the last decades in the market for pharmaceutical services. There is now a strong focus on 'pharmaceutical care', in addition to the traditional tasks in the field of drug distribution. Sections 3 and 4 address, respectively, entry and conduct (including price) regulation in the market for pharmaceutical services. There I will present and analyse--from an economic perspective--the most common forms of regulation found in the EU, with occasional references to other jurisdictions such as Canada, the United States and China. In section 5 the results of a recent ECORYS study into the effects of regulation on performance are presented, this being the first comprehensive empirical study of efficiency of regulation in pharmaceutical services markets. (7) Section 6 concludes.

2. The Market For Pharmaceutical Services

The pharmaceutical profession has been subject to many changes since the middle of the last century. …

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