CONSUMERS are paying through the nose for the second most expensive medicines in the EU partly in order to support the plethora of private pharmacies on the island, Health Minister Stavros Malas said yesterday.
He was commenting on an internal report compiled by the pharmaceutical services - leaked in the press - placing Cyprus second to Sweden in terms of drugs’ retail prices, alongside Denmark and Germany. Cyprus came up fifth in wholesale price behind the UK, Austria, Romania and Holland in ascending order.
“It is a fact that the study has shown that Cyprus is relatively very high (up the list) in relation to other countries,” Malas said. He was referring to the private sector.
Private pharmacies’ profit margin – at 37 per cent of wholesale price - is the second highest in the EU, Malas said. He said Cyprus had the second-highest ratio of pharmacies to customers in the EU, creating a “distortion” in the market.
According to Malas there are 468 private pharmacies catering to a 20 to 25 per cent of the population, given that the rest use state services. This places the upper limit of the market size at 210,000 and the lower limit at less than 170,000 people.
“The potential clientele of each pharmacy amounts to [only] 300 to 500 members of the public,” he said. “According to our calculations and given the current pricing of drugs, the average gross profit of a private pharmacy is not more than €85,000 per annum,” Malas added.
“You understand this creates a viability problem because we have so many pharmacies.”
“This is also a factor (contributing to high prices) and was presumably factored in when the pharmacies’ profit margin was set,” Malas said.
Under the pricing system introduced in March 2005, Cyprus sets a wholesale price on four-year cycles, based on the average wholesale price of four EU member states.
Under the 2009 price scheme, Sweden was selected as the expensive country, Austria and France as the mid-priced ones, and Greece as the cheap country.
Most of the profit is made by pharmacies which use the 37 per cent mark-up on wholesale price. Five per cent VAT is then added and a drugs distributor also adds 3.0 per cent on the wholesale price, “and this is the price the consumer ends up with,” Malas said.
When the government changed its pricing policy for medicines in March 2005, many importers and retailers said it was no longer profitable for them to sell cheaper products. The pharmacists’ association even said that two-thirds of medicines which used to be available on the market two years previously were no longer in circulation.
Drugs manufacturers usually look to make a 10 per cent profit and will not make the drug if they cannot meet their profit margin within the wholesale price set by the government.
Malas said that the study had exposed a number of weaknesses in the system setting the cost and price of drugs, and said it would be revised.
The Cyprus Association of Pharmaceutical Research and Development Companies (KEFEA) has requested a copy of the report “forms a position based on the complete picture and not just a few excerpts of the research findings”.
The head of the pharmaceutical association, Nicos Nouris, said he was surprised at the report’s finding “given how just a few days ago in public discussion of the same topic, the pharmaceutical services defended the existing pricing system” and placed Cyprus’ prices significantly lower.
“Of course the consumer understands the final figure - what they pay - but what we need to bear in mind is whether there is the possibility of lowering prices,” Nouris said.
He said that a small internal market and a lack of a National Health System (NHS) could not be overlooked.
Malas also referred to the lack of an NHS which could regulate the cost of medicines and make all of the market available to pharmacies. But until then, “we cannot reduce the number of pharmacies,” he said.
Malas said that the pricing policy would be changed within the summer.
