Enhancing access to healthcare through competition enforcement

By Boniface Makongo, Director of Competition and Consumer Protection, CAK

The Constitution of Kenya 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 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 (CAK) joins the world in commemorating the World Competition Day on December 5, un­der the theme “Competition Policy and Access to Healthcare”.

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

The timely theme choice recognises that competition enforcers have a crucial role to play to lower or extin­guish barriers to access to healthcare. However, regulators must remain cog­nizant 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 take advantage of the 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 a result of, among others, high costs of local production, consumer information asymmetry, ex­orbitant mark-ups, 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 subsidiary pieces of legislation 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 ex­perienced a spike due to price gouging.

Kenya loses revenues of over Ksh10 billion annually as patients seek treat­ment and expertise that 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.

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