The CERM is an independent research center with the institutional aim of contributing to the improvement of the technical quality and transparency of economic policy decisions and market regulation. The CERM is chaired and directed by Prof. Fabio Pammolli, professor of Economics and Management at the University of Florence and Director of IMT Alti Studi Lucca. CERM has dealt with drugs and the distribution chain several times, analyzing their levels of legislative and economic regulation. In the study presented, Fabio Pammolli and Nicola C. Salerno analyze the revenue margins of class C drugs, arriving at the following results in summary. (go to document)
If we examine the first 30 packs (by countervalue of sales in 2003) of prescription and non-prescription and over-the-counter "C" drugs (30 for each of the three categories), and compare ex-factory prices and consumption, a clear result emerges the distribution revenue margin is proportional to the price with a rate aligned with that (33.35%) established by law for the first price bracket of reimbursable medicines, without applying the mandatory discount owed by pharmacies to the NHS. This occurs, despite the fact that in band "C" both exfactory prices and distribution margins have been free since 1995.
The perfect alignment of the revenue margins of packaging of different products from different manufacturers is another symptom of the condition of closure to the market and of a strong corporatist instinct of the distribution chain, which manages to always keep the contractual conditions unchanged, without distinction for the type of producer/product and for the volumes in transaction. This result is compatible with the presence of a real monopsony, i.e. a "single buyer" (the distribution chain) through which it is necessary to pass and which can therefore impose its bargaining power indiscriminately and arbitrarily.
This explains the "ranking" drawn up on behalf of the European Commission by the Istituto di Alti Studi of Vienna, which places Italy at the top for average revenue from the distribution on the standard unit of all medicines ("A" and "C") : +34% compared to the EU average and more than double the UK average.
In conclusion, there is no distribution chain for reimbursable drugs and a separate one for non-reimbursable drugs: operators and tools are the same and it is therefore logical that malfunctions and inefficiencies are transferred from one part to the other. Both in band "A" and in band "C", the objective that the policy maker should pursue is to bring revenues as close as possible to efficient production costs. The solution is common:
[to] fully liberalize the opening of pharmacies;
[b] fully liberalize pharmacy revenue margins;
[c] as a direct consequence of 1. and 2., allow full competition à la Bertrand between pharmacies, i.e. competition on the margin requested by them, under the constraint of the maximum consumer price for admission to reimbursement.
Without the first point (the basic liberalization of the offer) the other two easily remain formally viable options but concretely not convenient and therefore set aside, as evidenced by the form, level and alignment of the revenue margins in band "C".
The opening to the market does well both in range "A" and in range "C".
From "national movement for free pharmacists”
If we examine the first 30 packs (by countervalue of sales in 2003) of prescription and non-prescription and over-the-counter "C" drugs (30 for each of the three categories), and compare ex-factory prices and consumption, a clear result emerges the distribution revenue margin is proportional to the price with a rate aligned with that (33.35%) established by law for the first price bracket of reimbursable medicines, without applying the mandatory discount owed by pharmacies to the NHS. This occurs, despite the fact that in band "C" both exfactory prices and distribution margins have been free since 1995.
The perfect alignment of the revenue margins of packaging of different products from different manufacturers is another symptom of the condition of closure to the market and of a strong corporatist instinct of the distribution chain, which manages to always keep the contractual conditions unchanged, without distinction for the type of producer/product and for the volumes in transaction. This result is compatible with the presence of a real monopsony, i.e. a "single buyer" (the distribution chain) through which it is necessary to pass and which can therefore impose its bargaining power indiscriminately and arbitrarily.
This explains the "ranking" drawn up on behalf of the European Commission by the Istituto di Alti Studi of Vienna, which places Italy at the top for average revenue from the distribution on the standard unit of all medicines ("A" and "C") : +34% compared to the EU average and more than double the UK average.
In conclusion, there is no distribution chain for reimbursable drugs and a separate one for non-reimbursable drugs: operators and tools are the same and it is therefore logical that malfunctions and inefficiencies are transferred from one part to the other. Both in band "A" and in band "C", the objective that the policy maker should pursue is to bring revenues as close as possible to efficient production costs. The solution is common:
[to] fully liberalize the opening of pharmacies;
[b] fully liberalize pharmacy revenue margins;
[c] as a direct consequence of 1. and 2., allow full competition à la Bertrand between pharmacies, i.e. competition on the margin requested by them, under the constraint of the maximum consumer price for admission to reimbursement.
Without the first point (the basic liberalization of the offer) the other two easily remain formally viable options but concretely not convenient and therefore set aside, as evidenced by the form, level and alignment of the revenue margins in band "C".
The opening to the market does well both in range "A" and in range "C".
From "national movement for free pharmacists”
