Georgian Pharmaceutical Market Still Monopolized and Overpriced
28 June, 2012
Georgian Pharmaceutical Market Still Monopolized and Overpriced

 

Georgian pharmaceutical market is still dominated by oligopolies and work on high profit margin, Transparency International Georgia reported in its recent research. Georgian pharmaceutical companies disagree with the research and find the reported data incorrect. Currently Georgia spends 4% of its GDP on pharmaceuticals that is twice as much as in the United States, a country known for its high expenditures on pharmaceuticals. Georgia Health Utilization and Expenditure Study 2010 shows that the expenditures on medical goods in 2010, made up

for 60% of the total health care expenditures per household. From 2007 to 2010 the expenditures on pharmaceuticals have grown at the pace of 23.7% each year.

Explanations for the increased expenditures on pharmaceuticals are ascribed to oligopolies and high profit margin they enjoy which greatly exceed those for general goods and services in Georgia.

Thanks to high profit margin Georgian pharmaceutical sector grows at a rapid pace every year. While the turnover of retail trade was GEL 196.6 million in the sector in 2006, this increased to GEL 543.3 million in 2010. The turnover of wholesale increased from GEL 502 million to GEL 896.5 million in 2006-2010, while the total production value increased from GEL 22.1 million to GEL 90.2 million in the same period of time.

Sector pundits have been hailing government for a decade the high prices in pharmaceutical sector were  reasoned by rampant monopolies that enjoyed about 120% of profit margin but only in 2009 when prices jacked by 50% up the President of Georgia acknowledged this fact. To discharge the market off monopolies government addressed removed import barriers and made medicine trade more accessible and liberal to smaller companies. However the pharmaceutical market still remains monopolized and enjoys high profit margin, Transparency International Georgia (TI Georgia) having researched the market recently reported on June 22, 2012.

“The pharmaceutical market is best described as an oligopoly and vertical monopoly of two companies (Aversi and PSP) that use their strong concentration of market power in the import/distribution, the retail and the manufacturing sectors to dominate the market. The 2009 legislative amendments designed to promote competition have only had a limited effect on the market. While the barriers to competition created by previous legislation have been removed, other barriers—such as the dominance of large companies—have not been adequately dealt with,” the TI Georgia experts stated.

According to TI Georgia report, the markup for medicines in Georgia is far above the average markup for medicines in other European countries and exceeds 100%.

The market still is controlled by three companies Aversi, PSP and GPC that have acquired a position where they are able to dominate the import/distribution, the retail and the manufacturing sector of the pharmaceutical market and although prices on Original Brands (OB) dropped by 27% in 2009-2011 and 21% for the lowest price generics (LPG), prices on the rest medicines making three fourth of the medicines got more expensive.  The Curatio Foundation presumes this decrease can be part of their short term strategy to push the new competitors out of the market.

There are 70 manufacturers in the Georgian pharmaceutical market but two companies Aversi Rational and GMP (PSP) account for 90% of manufacturing. They are also the largest companies in the import/distribution making 48% of this market jointly. GPC and ABC Pharmacy joint share accounts for 23%.

The prescription behavior of doctors appears to be influenced significantly by financial or other incentives offered by large pharmaceutical companies. The largest pharmaceutical chains reportedly promote their own medicines in their stores to an unacceptable extent.

The Agency for State Regulation of Medical Activities responsible for examining the quality of medicines appears to lack the resources to perform its role effectively. Due to a loophole in the registration procedure, there is a possibility that counterfeits or “bad medicines” will enter the market.

There appears to be a strong interrelation between the government and the largest pharmaceutical chains. The owner and founder of PSP Kakhaber Okriashvili has been a Member of Parliament for the ruling United National Movement since April 2004. He has also been a member of the Committee on Health Care and Social Issues, and a member of the Committee on Sectors of Economy and Economic Policy.  TI Georgia’s study of party financing showed that Aversi Pharma, PSP Pharma and GPC have been among the largest contributors to the electoral campaigns of the ruling party. Aversi Pharma donated GEL 200 thousand between 2007 and 2010, and won public procurement contracts with a total value of GEL 823.997. PSP Pharma donated GEL 200 thousand as well, and won public procurement contracts worth of GEL 141.044 . GPC spent GEL 175 thousand in donations and won public procurement contracts worth of 61.847 between 2007-2010.

PSP, Aversi and GPC top officials claim the data in the TI Georgia’s report are inflated and far from reality.

Companies questioned almost all data reported by TI Georgia and waived existence of trust deals and privileges at the market.

“If there was a trust deals there would not be Aversi, PSP and GPC pharmacy outlets located next to each other, “Gocha Gogilashvili, General Director of PSP, said.

Paata Kurtanidze, Head of Aversi, assures that the average markup on medicines makes about 25-30% that is quite a realistic profit margin.

The afflicted pharmaceutical companies plan to start an in-depth analysis together with the non-governmental watchdog over the research.

 

Print
Other Stories
The World Digital Mining Summit to be held in Georgia
The summit is scheduled to take place between 21st-23rd September in the Hualing Hotel, Tbilisi, Georgia.
Galt and Taggart - Tourism Boom Continues in Georgia
Tourism has become one of the key drivers for the Georgian economy. Galt and Taggart has recently published research about the Georgian tourism sector in the first half of 2018.
"The worst dream for Putin is that Russians want to live in Georgia"
This year, visitors to the Adjara region would notice that there is a boom in construction in and around Batumi.
Underground gas storage facility to be built in Georgia
KfW, a German government-owned development bank signed a EUR 150 million promotional loan with the state-owned Georgian Oil and Gas Corporation (GOGC) for the construction of the first underground gas storage facility in Georgia.
New gambling rules for Georgia
Georgian lawmakers are preparing a new draft law relating to online-casinos and gambling that will seek to curb gambling addiction in Georgia.
How expensive is it to visit Georgia?
The Georgian Lari (GEL) is the official currency of Georgia and is the only legal means of payment in the entire territory of Georgia.
Trade with the EU and the Commonwealth of Independent States (CIS) has grown significantly
Trade with the EU and the CIS has grown by 26% and 33.5 % respectively, says GeoStat, the Georgian National Statistics Office.
The unemployment rate decreases in Georgia
The unemployment rate decreased in Georgia by 1,9% and amounted to 12.1% in the 2nd quarter of 2018 compared with the previous quarter,
Memorandum of Understanding to be signed between Georgia and Malaysia
According to the Georgian Ambassador to Malaysia Nikoloz Apkhazava, Georgia plans to sign a Memorandum of Understanding (MoU) with Malaysia.
“Blauenstein Georgia” due to expand in Georgia
“Blauenstein Georgia” is planning to open more shops in Georgia. It is an agriculture company that sells meat products, meat and convenience food.
The amount of Direct Foreign Investment rises in Georgia
According to the information of the National Statistics Office of Georgia, the amount of direct foreign investment in Georgia has risen
It’s going to get  harder for foreigners to get residence permit in Georgia
It’s going to get harder for foreigners to get permit of residence in Georgia.
Mziuri Park in Tbilisi to be renovated soon
It was the dream of prominent Georgian writer Nodar Dumbadze that when the original Mziuri park was constructed and opened in 1892 that it should be a park for children,
Winemakers to produce Kvanchkara in its place of origin - Racha
Khvanchakara is a semi-sweet Georgian red wine which originates from Racha, in the western part of Georgia. Kvanchkara is made of two types of grape Mujuretuli and Aleksandrouli.
The level of Georgian wine and Chacha exported has increased
The National Wine Agency of Georgia has recently published statistical information about the level of Georgian wine and Chacha exported between January and July, 2018.
New fire engines to be Manufactured in Georgia
The Acting Head of the Emergency Management Agency Shalva Khutsishvili said that the old Zili fire engines (which were made in the USSR) will be phased out and replaced with new ones, manufactured in Georgia.
Georgia witnesses a record number of tourists
The Georgian National Tourism Administration publishes statistical information about international visits to Georgia.
Canadian businessman plans to build a hotel in Bakhmaro
Canadian businessman Vadim Malishev plans to build a hotel in Bakhmaro resort, Guria, in the western part of Georgia.
Coffee Factory will open in Tbilisi in October
The first coffee factory (which will be located on the Kakheti highway) in Tbilisi will open in October.
Places in Georgia where real estate is the most expensive
The real estate market in Georgia is growing annually. In Tbilisi as well as other regions of Georgia new developments are increasingly taking place.
How much does a vacation cost in Tbilisi?
It is the middle of summer and those who have not yet taken a vacation are looking for an appropriate place for sure!
The price for extreme sports in Georgia
Georgia offers a variety of options to extreme sport lovers.
The number of Georgians who own property abroad increases
The number of foreign properties owned by Georgians is increasing.
How much does Taxi cost in Tbilisi?
Stories how Taxi drivers try to deceive passengers and charge them with more money than they should pay are known for everybody all over the world.
What are the highest paid areas in Georgia
According to the data collected by the National Statistics Office of Georgia in the first quarter of 2018 the highest paid jobs in Georgia are found in the financial and insurance fields.
PHOTO OF THE DAY
Exchange Rates
GEL Exchange Rate
Convertor
20.09.2018
21.09.2018
USD
1
USD
2.6179
2.6193
EUR
1
EUR
3.0606
3.0693
GBP
1
GBP
3.4517
3.4651
RUB
100
RUB
3.9087
3.9538
Other Stories
Recently Toyota rolled out Global Campaign under this slogan that reflects the Olympic and Paralympic Spirit of Encouragement,
A couple from Switzerland combines Swiss tradition and technology with Georgian products. Their cheese is made in the Georgian mountains and sold in local stores and hotels.
It has been more than five years since the residents of Lilo village, near Tbilisi, cannot open their windows.
63 000 GEL was received by the Georgian Agro Export Group which is just a small part of the European Neighbourhood Programme for Agricultural and Rural development.
Georgian entrepreneur Guka Tavberidze, who runs his own business in the UK and does it quite well, has been invited by BBC
The grand opening of 7-star The Biltmore Hotel Tbilisi took place in Georgia’s capital on July 31.
DUSHETI, Georgia – The Georgian government and the World Bank will allocate USD 5.6 million (12 million GEL) to fund
A new Georgian clothing brand named Person has emerged in Georgian market.
Georgia is in the midst of an economic maelstrom, Euronews reports.
Situation at Georgia’s mineral water market is interesting: over the last year, the volume of export has grown by 56 percent. According to “GeoStat”, over $114 million worth of mineral water was sold
GEL Exchange
USD
1
USD
2.6179
EUR
1
EUR
3.0606
GBP
1
GBP
3.4517
RUB
100
RUB
3.9087