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With regard to OTC drugs, pharmaceutical companies in Thailand normally promote their products to customers through different mass media, including radio, television, and newspapers. Discounted drug prices for pharmacists and drugstores are also a common promotional practice. Although several methods of advertisement (e.g. exhibitions, symposiums, drug samples and gifts) are found in Thailand, the most popular means is the use of sales-representatives. Pharmaceutical companies, both locally owned and foreign-controlled, employ a large number of pharmacists as salespersons to doctors. The expenditures on drug advertisement incurred by the pharmaceutical companies in Thailand have been declared at between 0.43 and 20.81 per cent of the total sales. Of the total promotional expenditure, it is estimated that 45 per cent goes to sale representatives.42 However, since pharmaceutical firms are not required by law to provide the state authorities with specific information relating to promotional costs, the real expenditures may be much higher than these figures. As previously noted, the advertisement of drugs can influence the pattern of consumption. In Thailand, the problem is more acute. The Thai population, who mostly live in rural areas, generally medicate themselves without knowing how to use drugs properly. The advertisements of pharmaceutical companies seem to be the most important source of information concerning medicines. A survey on the use of medicines in Thailand reveals that drug promotion exerts a significant influence on medicine consumption. Consumers tend to buy a branded drug, which is heavily promoted, rather than non-promoted or less promoted drugs with identical therapeutic effects. In order to remind him- or herself, a consumer usually brings a package of the branded drug to a drugstore or tells the seller about the brand name of the drug.43 The study of the United Nations Asian and Pacific Development Institution (UNAPDI), which was based on an analysis of morbidity patterns in Thailand, found an asymmetry between drug consumption and requirements. The level of consumption in some drugs such as antibiotics was seven times higher than the requirement for the drugs. This was in contrast to the level of consumption in other drugs dealing with specific health priorities in the country, such as tuberculosis and malaria. Anti-tuberculosis drugs were found to be under-consumed, equivalent to only 5 per cent of estimated drug requirements.44 This data confirms that the pharmaceutical companies tend to market and promote drugs according to their own specific product lines, rather than the products suitable to the medical needs in developing countries. The marketing strategies of drug companies plus the character of the Thai market, based mainly on self-medication, causes several negative effects. These include: (i) unnecessarily high consumption of non-essential drugs; (ii) strong brand-name preferences; and (iii) high drug prices. There is no doubt that the brand loyalty built up by intense brand-name promotion can maintain a high demand for such drugs and results in high profitability for the drug companies. The new IP rules that demand a higher level of protection for trade marks will allow the pharmaceutical companies to prolong marketing practices. The IP and investment rules under the proposed FTA that allows foreign companies to directly sue the Thai Government for compensation will most likely discourage Thailand from taking measures to control the promotion and advertising activities adopted by the pharmaceutical companies. IMPACT OF PATENTS ON PHARMACEUTICAL PRICES AND TECHNOLOGICAL CAPABILITY This part examines the implications of patents on technological development. It is divided into three separate issues: (i) patents and pharmaceutical prices; (ii) patents and FDI; and (iii) patents, R&D and technology transfer. Patents and pharmaceutical prices The pharmaceutical industry has been widely criticised for its high prices and excessive profits. The peculiarity of the market and the use of marketing techniques create an oligopolistic situation. This allows drug companies to exercise market power and charge whatever prices the market will bear. The highly oligopolistic situation in the prescription drug market means the normal economic conditions of supply and demand are artificially skewed, and consequently there is no price competition among pharmaceutical companies. 45 There is a great deal of polemics surrounding the pricing of drugs. Ideally, a medicine should be priced in the market at the cost of production plus a reasonable level of profit. However, it remains unclear what that reasonable profit would be. It is very difficult to arrive at a comprehensive financial picture of the industry, due to corporate financing and accounting techniques used by the firms operating in this area. The following are the main factors responsible for high drug price: TABLE 4 comparison of prices of selected anti-retroviral drugs in Thailand, |
Footnotes 42. Food and Drug Administration, Thai Medical Directory, Ministry of Public Health, Bangkok, 2006. 43. Rattanarojsakul, cited above fn.41, p.147. 45. Oligopoly is defined as a "market where some degree of competition remains but where there is still a mere handful of competitive undertakings ... and the nature of the rivalry between them is substantially affected by this fact." D.G. Goyder, EC Competition Law (Clarendon Press, Oxford, 1993), p.10. See also F.M. Scherer, "Pricing, Profits, and Technological Progress in the Pharmaceutical Industry" (1993) 7 J. Econ. Persp. 97. |
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