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.