The Danish Competition Authority has published a report finding that regulation restricts competition in the pharmacy sector
On 23 February 2010, the Danish Competition Authority published a report regarding the pharmacy sector concluding that the current regulatory system restricts competition in this sector.
The Danish pharmacy sector – as other parts of the health sector - is characterised by significant regulation based on healthcare political considerations, notably:
- Ownership of a pharmacy is subject to a restrictive licensing system
- An equalization system transfers money from pharmacies with a large turnover to pharmacies with a small turnover
- Price and profit regulation
The report found that the regulatory system restricts competition, as it (i) limits access to the market, (ii) excludes price competition, and (iii) only to a limited extent provides incentives to compete on service. The lack of competition is manifested by waiting time in pharmacies in urban areas and a significant difference in earnings between high profit pharmacies in urban areas and low profit pharmacies in rural areas. Pursuant to the report, healthy competition would result in new pharmacies opening up in urban areas, which would in turn lead to lower profits and reduced waiting times in pharmacies.
In order to improve competition in the Danish pharmacy sector, the report suggests:
- Lowering the barriers to entry by lessening the requirements for obtaining a license to own a pharmacy and
- abandoning the equalization system in order to strengthen the incentive to compete on service and to develop distribution.