https://doi.org/10.56079/20222/6

At the present stage, it is relevant to study, analyze and make certain assessments of the problems and challenges in the pharmaceutical market. The paper presents the development trends of the Georgian pharmaceutical market, the analysis of the main economic agents in the market, the competitive environment, the existing market barriers and restrictions, the mechanisms for regulating the pharmaceutical market. Based on the obtained results, conclusions are made and recommendations are proposed.

         Based on the research, three dominant companies were identified in the pharmaceutical market - "Aversi", "PSP" Ltd and JSC "Gefa", which are major market players and they have practically distributed market (total share -70%), however, they pursue a single policy of pricing and price discrimination. Mentioned companies import and distribute pharmaceutical products, have retail sales and production of medicines. Their revenues and profits have been steadily increasing in recent years.

         According to the data published by the Organization for Economic Cooperation and Development in 2019, compared to European countries, the share of pharmaceutical expenditures in total health expenditures is the highest (41.2%). As of 2021, 96% of expenditures on medicines in Georgia are out-of-pocket payments, and the state's share in this regard is only 4%.

         More than 90% of the Georgian pharmaceutical market is imported medicines. In the market, for the last three years, there has been an almost irreversible process of price increase. In 2020-2021, compared to 2019, prices for medicines increased by an average of 14%, while the prices of some medicines increased by 28-30%. The increase in prices for medicines is largely due to the devaluation of the national currency. As a result, compared to 2015, in 2020, the volume of imports of medicines increased by 41% in GEL and by 7% in US dollars. Other factors have been identified as the reason for the increase in prices for medicines. In particular, the low level of local pharmaceutical production, the uncontrolled consumption of medicines, the low remuneration of doctors, which is often offset by a fee paid by their pharmaceutical companies in favor of prescribing the desired drug to the company. The main reason for high prices in the pharmaceutical market is also the lack of price regulation, in particular, companies set high profit margins (which is more than 100% for some medicines), which can not be controlled by the state.

         Significant changes are observed in the volume of both exports and imports of medicines. According to the data of 2021, in the largest commodity group in Georgia, imports of medicines is 4%, exports - 2%. The total value of imports of medicines amounted to 382.0 million US dollars (import growth 17%), exports amounted to 99.1 million US dollars. In general, the dynamics of imports are increasing compared to exports.

         The pharmaceutical market is characterized by high concentration. In particular, the market is dominated by companies with dominant and group dominance conditions, high degree of horizontal and vertical integration and holding arrangement, which increases the market power of companies. The current situation requires some control and regulation.

         The pharmaceutical supply chain in the pharmaceutical market includes product import and production, wholesale supply and retail sale. The regulation of the activities of economic agents operating in the market is not strict. In particular, the market is characterized by asymmetric information, namely, low user awareness of generic medicines. This problem requires a more active information campaign.

         The existing prescription policy could not ensure the existence of a competitive environment in the market and the protection of consumer interest. The relationship between pharmaceutical companies and the prescriber should be public and transparent; Pharmaceutical activities should be monitored in stages, including the pharmacist's delivery responsibilities to the end user, which will help to create a healthy competitive environment in the market.

         There are actually several product suppliers in the pharmaceutical market that have a practically fragmented market and pursue a more or less uniform pricing policy. It can be said that there is an oligopoly. Pricing for various types of medications and levels of delivery is different. In some cases, generic medicines, as well as medicines that are imported into the country under the generic name, are priced within 200%. Therefore, the pricing policy on medicines should be revised and the combined rules of price (pricing) regulation should be applied.

         Profit margins in the pharmaceutical market and rising prices for medicines have become an irreversible process. The problem is more global and the steady rise in prices depends on exchange rate volatility, hence the cost to importers, however, under the terms of the regulation, the relevant authority should be able to study the contracts and draw some conclusions. Therefore, it is necessary to set a certain profit margin on medicines.

         It is important to improve the quality of medicines. In particular, all medications must fully meet the GMP standard and generic medications must be bioequivalent. The standard should apply to both the production and import of medicines. All medicines on the market must meet the quality standards required by law.

Keywords: Pharmaceutical market, pharmaceutical companies, price tag on medicines, competition, oligopoly, profit margin, import and export of medicines.

JEL Codes: H44, I10, I11, I18