Bethel Finance news:
Israelis pay more for non-prescription drugs, and not only food, compared with other countries. An investigation by "Globes" of international pharmaceutical brands found that prices of non-prescription drugs in Israel were several times higher than in the US and UK. For example, aspirin costs 460% more than in the UK and 315% more than in the US, and Neurofen pain reliever costs 158% more in Israel than in the UK, and Advil Liquid Gel is twice as expensive in Israel than in the US.
"Globes" only compared the same international brands. In both Israel and other countries, alternative drugs are available that are cheaper, but they are not readily comparable because of their different ingredients. The Ministry of Health unsuccessfully tried to make a similar comparative study.
According to the Non-Prescription Drug Association, another factor also has to be taken into account. List prices in Israel do not necessarily reflect the actual price. In Israel, many non-prescription drugs are subsidized by the health funds. For example, prescription Acamol aspirin is cheaper than Acamol sold without a prescription.
"In Israel, most drugs are still included in the basket of healthcare services," says Non-Prescription Drug Association chairman Avi Oval. "Therefore, the list price of a drug does not reflect reality. On the basis of our figures, more than half of consumers buy drugs via their health funds at subsidized prices. Prices of drugs on store shelves, in small packages, and imported products, are relative high in Israel. However, prices for 90% of products at the health funds are substantially cheaper in Israel."
Oval added that the comparison of prices for international brands in other countries does not reflect the conditions for Israeli consumers, because they are not included in the basket of healthcare services, and there are usually similar, but cheaper, alternatives. "For example, Advil Liquid Gel is a relatively expensive product, but the healthcare basket include Ibuprofen, which has the same active pharmaceutical ingredient, at a much lower price," he says.
The Ministry of Health supervises and sets prices for non-prescription or over-the-counter (OTC) drugs. Price controls for general sales list (GSL) drugs were abolished in 2006, which resulted in higher per unit prices. As "Globes" has reported before, prices for GSL drugs cost substantially more than drugs bought at the pharmacists' counter, let alone compared with prices for the drugs bought with a prescription from a health fund.
Prices jumped when controls were lifted
The Ministry of Health has said that it wants to remove price controls for OTC drugs. "Lift prices for OTC drugs will result in an equilibrium of prices between the two marketing methods, and GSL drugs will no longer be clearly more expensive," said Ministry of Health pharmacy branch director Batia Heren at a Non-Prescription Drugs Association conference four years ago.
Drug companies disagreed, saying that the high prices were right for the market, and that the change should be upward - which is exactly what happened with the price controls were lifted. Today, in the aftermath of the social protest of the summer 2011, things may appear different.
Going Dutch
In April 1998, the drugs price controls committee decided to adopt the Dutch model, in which prices are set on the basis of the average price in four European countries (Belgium, France, Germany, and Switzerland). Adopting the Dutch model was supposed to import the European competitive prices environment into the small and uncompetitive Israeli market.
The Ministry of Finance estimates that adopting the Dutch model will cut prices of non-prescription drugs by 60% in Israel. It proposes adopting the model in two steps: in the first step, the average price for drugs will be set; and in the second step, price controls on GSL drugs will be abolished, in order to allow competition between drug companies, which will result in lower prices.
On June 1, 2001, price controls on Israeli made non-prescription drugs were lifted, after the prices had been frozen for several years. The result was a jump in prices, which affected the Consumer Price Index (CPI). In November 2001, the Ministry of Finance told the Pharmacists Association in Israel to cut prices for non-prescription drugs, because their profit margins were too high. At the same time, the pharmacists directive was amended to apply to non-prescription drugs sold in locations besides pharmacies.
Prices controls on Israeli made non-prescription drugs was restored in 2005, but shortly afterwards, the price controls were lifted on non-prescription drugs sold in locations besides pharmacies, and remained in place only at pharmacies. As a result, prices of non-prescription drugs rose by up to 40% - belying the intention to benefit consumers.
The logic underpinning the lifting of the price controls was that competition and supply would result in lower prices; reality proved otherwise. Another goal was also missed: consumer access to non-prescription drugs at supermarkets and convenience stores. It never happened, and pharmacies continued to be the main purveyors of non-prescription drugs, in close proximity to the pharmacists' counters.
No competitive market
A comparison of supervision of non-prescription drugs shows that, in the UK, while they can be purchased freely, most non-prescription drugs can only be sold by a pharmacist. The situation in the US is completely different: consumers can by almost all non-prescription drugs at any supermarket without a pharmacist, a model that is freer than in most countries. However, from time to time a non-prescription drug is returned to the supervision of the pharmacist. Israel lies between the US and the UK, but non-prescription drugs purchased independently cost much more.
The Ministry of Health said in response, "In early 2011, the ministry examined prices for non-prescription drugs, in an attempt to compare them with prices overseas. The study found it very difficult to compare prices because of the substantial differences in the mix of the active pharmaceutical ingredients. The study found drugs that cost less in Israel, and some drugs whose maximum price was higher in Israel. However, no material differences were found.
"Following last year's reform in prescription drug prices and in view of the study, the Ministry of Health director general appointed an inter-ministerial committee with the Ministry of Health, Ministry of Finance, and Ministry of Industry, Trade and Labor to review price controls on these drugs. The committee is due to submit its recommendations soon. Recognizing that this market does not necessarily have the conditions of a competitive market, prices for non-prescription drugs are supervised, which makes Israel different from every country in Europe where the market is completely free."
According to the Non-Prescription Drugs Association, the non-prescription drugs market totals $200 million a year - 15% of the entire drugs markets. There is also a flourishing market of nutritional supplements, vitamins, toiletries, medical cosmetics, and medical accessories, which are not supervised. D&B Israel estimates that drugs are actually only a small fraction of total sales by pharmacy chains and independent pharmacies.
Oval says that in Israel, in contrast to other countries, many drugs require a prescription. "Consumer power is a global trend," he says. "Governments prefer for consumers to treat themselves first, without the intervention of the health system. The question whether this is a good or bad thing is another issue."
Independent pharmacies are going out of business
Teva Pharmaceutical Industries Ltd. (Nasdaq: TEVA; TASE: TEVA) and other wholesalers, including Neopharm Ltd., Medison Ltd., and Dexcel Pharma Inc. market non-prescription drugs in Israel Pharmacies dominate the market's retail side: pharmacies of the health funds account for 45% of all pharmacies, the two main chains New-Pharm Drugstores Ltd. and Superpharm Ltd. account for 15%, and independent pharmacies account for 40%. However, their market share has been shrinking over the years, due to the complete domination of the market by the health funds for prescription drugs, and their contractual agreements with the two pharmacy chains. This may be the reason why a fifth of independent pharmacies have closed in the past decade, whereas some other countries actually encourage private pharmacies and restrict the number of branches that chains can operate, in order to prevent the creation of large chains.
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