Regulation of Pharmacists: A Comparative Law and Economics Analysis

By Philipsen, Niels J. | The European Journal of Comparative Economics, May 1, 2013 | Go to article overview

Regulation of Pharmacists: A Comparative Law and Economics Analysis


Philipsen, Niels J., The European Journal of Comparative Economics


Abstract

This paper discusses the regulation of pharmacists from an economic perspective, focusing on licensing, price and fee regulation, advertising restrictions and rules on exercise of the profession, and restrictions on business structure. A comparative overview is presented of the most common forms of regulation of pharmacists that are found today in the EU (and to some extent Canada, China and the US) and to investigate whether there is an economic rationale for these rules. Despite the rather strict regulatory frameworks found in all of these jurisdictions, in various countries there is a discussion on how to improve or increase the level of pharmaceutical care. The author suggests in that respect that changes in the reimbursement system may provide a better solution than stricter entry or conduct requirements.

JEL: K21, K32, L44, L51

Keywords: Licensing, Entry barriers, Conduct regulation, Price regulation, Pharmacists.

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 euro 100,000 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 simihr 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. …

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