Competition rules remove barriers to good healthcare

Doctors perform spinal surgery to a patient at Jaramogi Oginga Odinga Teaching and Referral Hospital Theater in Kisumu on May 16, 2018. FILE PHOTO | NMG

What you need to know:

  • Effective competition in the healthcare sector can facilitate the physical and financial affordability of these services within the country and for all citizens as envisioned in the Constitution.

The Constitution of Kenya, 2010 recognises health as a fundamental human right, indicating that every person has the right to the highest attainable standard of health, including the right to healthcare services.

Indeed, the health of a population is inextricably linked to a country’s productivity and economic development.

Whereas the government has implemented measures to enhance the availability and affordability of health products and technologies, out-of-pocket expenditure as a proportion of total health expenditure still remains high at 26.1 percent. Half of this cost is attributable to the high cost of medication which, unfortunately, leads to financial hardship.

Studies have shown that in the private sector, the retail cost of healthcare products is over 30 times more expensive when compared to regional and international indexes.

It is against this backdrop that the Competition Authority of Kenya joined the World in commemorating the World Competition Day on December 5, under the theme Competition Policy and Access to Healthcare.

This year’s commemoration took place under unique circumstances with the world facing an existential threat in the form of Covid-19 pandemic.

The timely theme choice recognises the fact that competition enforcers have a crucial role to play to lower or remove barriers to access of healthcare. However, regulators must remain cognisant of the fact that the healthcare marketplace is a unique one to interrogate and enforce.

For starters, novel medication are patent protected, typically for about 20 years. This is meant to enable innovator firms recoup their costs. Additionally, these pharmaceutical firms may take advantage of their patent-granted monopoly power to impose stringent distributorship conditions downstream that further restrict competition.

The pricing and availability of such medication is therefore not solely signalled by the forces of supply and demand. Therefore, regulators should balance between being pro-innovation with hard enforcement to ensure that these firms do not abuse their unique status.

The high cost of medical technology and medication in Kenya has also been determined to be as a result of, among others, high costs of local production, consumer information asymmetry, exorbitant markups, and regulation gaps in terms of registration of medication.

These are some of the issues that an inter-agency taskforce under the Ministry of Health, and in which the Authority is represented, is currently considering with the aim of enhancing access and affordability, while promoting competition and innovation.

Some of the interventions that have been successful in other jurisdictions include enhancing price transparency for bulk and individual customers, supporting local production, introducing tax incentives as well as policy interventions promoting generics use, among others.

However, countries should not resort to price setting to address the existing competition concerns. Indeed, price control regimes are counterproductive since they end up incentivising black market trade while also depressing the investment climate.

Another contributory factor to high cost of healthcare products and technologies is flawed procurement. Data from the Pharmacy and Poisons Board (PPB) shows that pharmaceutical imports in 2018 were worth $728 million, with a bulk of these purchases ultimately being made by the Government.

To facilitate the purchase of goods that are value for money, and whose quality is guaranteed, the Authority and the Public Procurement Regulatory Authority (PPRA) have this year developed standard tender documents which will guide public procurement across all sectors.

It is expected that this intervention will translate into tangible benefits in terms of choice, quality and pricing of goods and services, including in the healthcare sector.

Another intervention by the Authority, which is meant to ensure unfettered supply of essential medication, vaccines and personal protective equipment during the pandemic, is the development of Block Exemption Guidelines.

These instruments will allow firms to, for a set period of time, collaborate and share material information with the sole aim of ensuring availability of goods being utilised in the fight against Covid-19.

These guidelines are supplementary to the countrywide enforcement action we undertook when the first Covid-19 patient was announced locally in March 2020, consequently stabilising the prices of these key commodities which had experienced a spike due to price gouging.

Kenya loses revenues of over Sh10 billion annually as patients seek treatment and expertise, which is available locally, abroad. Effective competition in the healthcare sector can facilitate the physical and financial affordability of these services within the country and for all citizens as envisioned in the Constitution.

Mr Makongo is the director competition and consumer protection, Competition Authority of Kenya.

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