Some remarks on Reckitt Benckiser

Transcription

1 Some remarks on Reckitt Benckiser Philippe Choné 1 1 CREST-ENSAE October 25, 2012, ACE Conference, Paris Philippe Choné (CREST-ENSAE) Reckitt Benckiser ACE, Paris, October 25, / 12

2 1 UK: A competition-friendly environment 2 A matter of time 3 Competition agencies as regulators of (very) last resort? Philippe Choné (CREST-ENSAE) Reckitt Benckiser ACE, Paris, October 25, / 12

3 UK: A competition-friendly environment Regulatory framework is country specific Kanavos, Costa-Font and Seeley (Economic Policy, 2008) Philippe Choné (CREST-ENSAE) Reckitt Benckiser ACE, Paris, October 25, / 12

4 UK: A competition-friendly environment Some characteristics of the UK environment No reference pricing for patient reimbursement Mandatory (?) generic prescribing (and/or financial incentives for fundholding GP) No unit pack dispensing requirement Little price regulation For generics, Drug Tariff driven by retail competition (based on quarterly surveys of actual transaction prices) High generic penetration rate Kanavos et al. (2008) find 74% in their sample Germany: 67%, USA: 63%, Canada: 51%, Spain: 50%, France: 32%, Italy: 19% Philippe Choné (CREST-ENSAE) Reckitt Benckiser ACE, Paris, October 25, / 12

5 UK: A competition-friendly environment Expenditures on pharmaceuticals Kanavos, Costa-Font and Seeley (Economic Policy, 2008) Philippe Choné (CREST-ENSAE) Reckitt Benckiser ACE, Paris, October 25, / 12

6 UK: A competition-friendly environment Effect of generic competition on prices Danzon and Chao (JLE, 2000), Kanavos, Costa-Font and Seeley (EP, 2008) Significantly negative in less regulated markets (US, UK, Germany) Successive generics enter at lower prices Competition through volume discounts on large packs (no unit pack dispensing requirements) No effect or even positive under strict price regulation (F, I, J) Regulation at the manufacturer and retail pharmacy levels undermine competition Generic competitors often licensed co-marketers or new versions of old molecules introduced to obtain a higher regulated price Philippe Choné (CREST-ENSAE) Reckitt Benckiser ACE, Paris, October 25, / 12

7 A matter of time Stronger incentives to avoid generic competition in the UK than in France Similar case in France for anti-allergic drugs By the time of the withdrawal the company had lost dominance! Case dismissed On top of that, the effect on generic entry was less clear Here in the Gaviscon case Very early GL withdrawal Much too early in retrospect: many monopoly years lost Company already punished! Deterrence? Increase in the penalty How to account for uncertainty? RB attitude towards risk? Philippe Choné (CREST-ENSAE) Reckitt Benckiser ACE, Paris, October 25, / 12

8 A matter of time Sacrifice period is uncertain Fully controled Partially controlled random Patent expiry Withdrawal Generic name in prescribing softwares Sacrifice period Figure: What is the optimal sacrifice period for the firm? Philippe Choné (CREST-ENSAE) Reckitt Benckiser ACE, Paris, October 25, / 12

9 Competition agencies as regulators of (very) last resort? Competition agencies as regulators of (very) last resort? European view AstraZeneca: Tricking a regulator can be a 102 infringement Few abuses of dominant position in general A substantial fraction of cases involve regulated industries OFT case, Napp and Genzyme include excessive pricing or margin squeeze regulatory issues Article 102 guidance paper assumes that all the necessary tradeoffs (consumer surplus/innovation) are correctly solved by the regulator Philippe Choné (CREST-ENSAE) Reckitt Benckiser ACE, Paris, October 25, / 12

10 Competition agencies as regulators of (very) last resort? Competition agencies as regulators of (very) last resort? American view: Trinko (2004) U.S. Supreme Court Existence of regulation weakens, not supports, the case for antitrust infringement Distinction between the goals of regulation and antitrust law Long-term efficiency for regulators probably shorter horizon and more consumer-oriented Here: Decision 6 years after the withdrawal Preventing this from happening? Product currently unavailable - Generic name under review in the prescribing software Philippe Choné (CREST-ENSAE) Reckitt Benckiser ACE, Paris, October 25, / 12

11 Competition agencies as regulators of (very) last resort? Understanding a complex web of incentives OFT market study on the PPRS scheme, 2007 For competition agencies, requires investment in qualified human resource - staff specialization Philippe Choné (CREST-ENSAE) Reckitt Benckiser ACE, Paris, October 25, / 12

12 Competition agencies as regulators of (very) last resort? OFT recommended value-based pricing including for off-patent brands Setting a maximum price for a product in accordance with clinical benefits ie more price regulation Are we sure that more price regulation will not undermine the effect of price competition (as suggested by the literature) Philippe Choné (CREST-ENSAE) Reckitt Benckiser ACE, Paris, October 25, / 12