The Effectiveness of Pharmaceutical Price Regulation Mechanisms under Conditions of Limited Competition and Their Impact on Access to Medicines

The pharmaceutical sector worldwide is characterized by high market concentration, information asymmetry, and low price elasticity, which makes government intervention necessary. This study examines pharmaceutical price regulation mechanisms and their impact on access to medicines, with a particular focus on the Georgian pharmaceutical market. Georgia’s market is especially affected by these challenges, as a significant share of medicine importation, distribution, and retail is concentrated in the hands of a few large economic groups. Moreover, vertical integration strengthens monopolistic power and constrains the natural functioning of competitive market mechanisms.

The study is based on a qualitative analytical approach that combines documentary analysis, comparative policy analysis, market structure assessment, and the use of secondary data. The analysis covers a range of pricing regulation instruments, including External Reference Pricing (ERP), Internal Reference Pricing (IRP), direct price controls, price negotiations, tendering mechanisms, and policies aimed at strengthening competition.

The findings indicate that, in a monopolistic environment, the ERP method provides only a partial solution to price regulation. While it establishes an administrative price ceiling, it does not lead to substantial price reductions or generate a meaningful impact at the consumer level. High market concentration and limited competition reduce the potential effect of generics and biosimilars and restrict patient choice. The study further highlights the close interrelationship between price regulation and competition policy, demonstrating that effective price regulation is not feasible without sufficient competitive pressure.

Based on the findings, the study proposes several policy recommendations, including the adaptation of ERP to market-specific conditions, the strengthening of competition through increased use of generics and biosimilars, the limitation of vertical integration, and the development of price negotiation and tendering mechanisms. The implementation of these measures would contribute to improved access to medicines, enhanced market sustainability, and greater effectiveness of pharmaceutical price regulation.