Chile From Within

Chilean pharmaceutical companies busted for price-fixing

Posted in Chile culture, Corruption, mierda, US by tomasdinges on December 12, 2008
Chilean pharmaceutical companies SalcoBrand, Ahumada and Cruz Verde, which account for 92% of pharmacy sales in Chile, have been charged with collusion to fix prices of at least 222 pharmaceutical products, including medicines for diabetes, epilepsy and anti-conceptives.
The investigation by the Tribunal de Defensa de Libre Comercio was described in a 51-page document found here. Follow the story at El Mostrador. Soon, you will be able to follow the story at CNN Chile, which i think will change the Chilean mediascape.
Anyone who has spent time in Chile will understand the importance of this to Chileans. First of all, Chileans love their pills. Common cold, take a pill. Depressed, take a harmonyl. Pills cure what ails Chileans, without a doubt, part of a synthetic culture that surely took hold once the Chileans abandoned the British ideals and went with the Ford Foundation and Milton Friedman, lets say, of America the beautiful. Within the last ten years antibiotics could be purchased without a prescription. Secondly, consumers are bombarded with advertisements for discounts throughout the cityscape.
Now, three companies aimed to guarantee their profits on drugs including prescription drugs, for which, alas, there was no other substitute.
A “Guerra de Precios” waged in 2007  decimated profit margins among the pharmacies. Consumers were highly elastic and responded immediately to discounts or rebates on common drugs. Competition was ugly, according to the Tribunal investigation:
Ahora bien, los efectos de esta guerra se tornaban en extremo preocupantes
para sus tres actores, pues los márgenes seguían reduciéndose e incluso
comenzaban a ser negativos respecto de muchos productos, poniendo en
duda los reales beneficios de esta situación para un eventual vencedor, en
comparación, claro está, con los beneficios de la colaboración.
In the meantime, Salcobrand undergoes a corporate reorganization, newly purchased by Empresas Juan Yarur SAC, and a repositioning of their brand name. They recruit executives from other companies, including Cruz Verde.
Salcobrand then set up a distribution deal with a company owned by Cruz Verde for distribution of generic pharmaceuticals as of October 1 2007. In November the three companies hold a meeting and declare the price war to be over, and make a truce, recognizing that the battle has cut too deep and profits are suffering across the board.
They decide to raise prices again in unison. Why coordinate their price increase? Because any difference in prices would send Chileans running to the cheaper pharmacy.

Para ello, sería necesario alzar los precios significativamente, desde luego,
en los productos que más bajaron durante la guerra. Pero había que
coordinarse muy bien, porque esos productos eran los denominados notorios
y éticos, como se señaló, de modo que si una de las Cadenas de Farmacias
alzaba su precio y no lo hacían al unísono las otras, la demanda se desviaría
hacia éstas.
According to the complaint, the three companies listed the pharmaceuticals they were losing money on and coordinated a schedule of coordinated price increases.
In December 2007, the price increases began on 62 pharmaceuticals, including among them 15 anti-conceptives. I do not know whether this is a reflection of the fact that anti-conceptives were previously very cheap as a result of price competition, or some sort of cynical religious conservative agenda to deny anticonceptives to all but the rich.
One anticonceptive, “Marvelon-20”, a pack of 21, went up on average 94%, in all three chains, on the same day, December 28th, 2007
And with that the chains raised prices on groups of pharmaceutical products together in a systematic stages, 72 in January, 31 in February, and 40 in March.
The groups of products with the greatest frequency of increases:
A mayor abundamiento, las categorías de medicamentos más afectadas por
el acuerdo, en términos de número de productos, fueron: “G3. Hormonas
sexuales y productos con efectos deseados similares, solo acción sistémica6”
(25 productos), “N3. Antiepilépticos” (20 productos), “N6. Psicoanalépticos
excluyendo preparados antiobesidad” (18 productos), “N5. Psicolépticos” (16
productos) y “C9. Agentes activos en el sistema en angiotensinas y renina
(15 productos)”.
Diabetes and antianemic drugs were those which increased most drastically in price, on average, according to the complaint, rising by 100% and 88%.
The costs of these actions? Fines of $12 million dollars on each company.
Chances that the pharmaceuticals will wrangle a better deal? We shall wait and see.

8 Responses

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  1. […] Several Chilean pharmaceutical companies have been charged with collusion for price-fixing of more than 200 products writes Tomás Dinges of Chile From Within. Posted by Eduardo Avila  Print Version Share This […]

  2. Vicki Lansen said, on January 9, 2009 at 3:01 pm

    My husband take Lamictal, and when we first arrived in Chile we purchased it for 32,000 pesos a box (30). Within two months, the price skyrocketed to 47,000 pesos. I guessed I was finally being charged the “gringo” price. Now I feel much better. Everyone was getting gouged. By the way, just a little over one-year later, it is about 50,000 pesos a box. See, it’s all better now.

  3. tomasdinges said, on January 9, 2009 at 3:58 pm

    what months are you talking about? Does it coincide with the months talked about in the posting, I think over the turn of 2007 to the first months of 2008? You guys haven’t been here for that long, have you?

  4. Vicki Lansen said, on January 9, 2009 at 4:10 pm

    Yes absolutely it coincides. I would have to dig through my volcanic ash encrusted junk to get the receipts, but I have them. We have been in Chile since October 2007. Living in Futaleufu. And it is interesting that when the prices sky-rocketed, I went to Esquel, Argentina to buy Lamictal, where I had purchased it previously while waiting for my Chilean order, and it suddenly was not available. I suppose I may have missed the rush across the border to buy it at the cheaper price. But on subsequent trips it is still virtually unavailable.

  5. Vicki Lansen said, on January 9, 2009 at 4:14 pm

    Just one more comment…for people with epilepsy who take those anti-epilepsy medications, it is criminal to raise the prices like that. For us, we could manage, but shame, shame, shame on the companies…for what they did to people who may not have been able to afford the cost increase and cut down on the dose.

  6. Vicki Lansen said, on January 9, 2009 at 5:49 pm

    apologies if I am clogging up your blog with comments…just a clarification
    Salcobrand was selling Lamictal, for 39,000 pesos a box in April 08
    Ahumada sold it for 35,000 pesos in November 08, and Cruz Verde sells it for 47,000 pesos at the same time. I have no comparison for Salcobrand at this time. But it has certainly not, on average gone down.

  7. Vicki Lansen said, on May 25, 2009 at 6:39 pm

    On the price fixing in the farmacia chains issue, I found that one specific medicine was originally (more or less on the dates):

    26-28,000 pesos for a box of 30 in 2006-2007. It was pretty much the same at the three main farmacias: CruzVerde, Ahumada, and Salco. It jumped to:

    38-39,000 mid 2007, and upped again to:

    $44-49,000 pesos a box by late 2008.

    Maddening. Now that the farmacias have been busted for price-fixing, the price at Cruz Verde is listed for 44,925 but they gave me a generous discount which brought the price to 35,940. Across the street at Ahumada, the list price was 29,970 and after asking for a discount (you have to ask) the price was 24,584. I haven’t taken the time to check Salco. Cruz Verde made it look all generous with the discount, but the base price was cheaper at Ahumada than with a discount at Cruz. Shop around, and always ask for a discount.

    Needing 3 boxes a month, I saved 34,068 for one months supply. That’s a savings of 408,000 more or less a year. I can use that 800US. Annoyingly though, I am not recouping the money I paid for a year and a half…just now paying the fair price.

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