The document discusses competition issues that may arise in the market for anti-malaria drugs in Burma. A charity called PSI is subsidizing the switch from ineffective anti-malaria monotherapy treatment to combination treatment (ACT) that is less susceptible to drug resistance, by offering the subsidy to a single wholesale distributor, AA. This could allow AA to build a dominant market position and exploit consumers through higher prices once the subsidy ends. However, the potential harm depends on the success of the subsidy program in making ACT affordable. The document analyzes ways to mitigate the risks, such as using a quality seal rather than AA's brand, extending the subsidy to AA's competitor BB, or having PSI retain intellectual property rights and

1. Competition issues in the
market for anti-malaria
drugs in Burma
UK Office of Fair Trading
Global Forum on Competition
Competition issues in the distribution of
pharmaceuticals (Friday 28 February 2014)
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2. Contents
● Background
● Theories of harm
● Mitigation
● Observations
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3. Background
● Resistance developing to anti-malaria
monotherapy treatment (“AMT”) in Burma, which
could potentially spread around the world
● PSI (a charity), backed with funding by UK
Department for International Development (DfID)
and others, subsidising a switch to combination
treatment (“ACT”) that is less susceptible to
resistance
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4. Background (2)
● Usual approach taken elsewhere would be to offer
subsidised product to any wholesale distributor that
wants it. Political considerations meant this not
possible in Burma.
● Non-permanent subsidy offered to a single wholesale
distributor, AA, with retail price control and significant
advertising.
● Success of scheme depends on
1. Growth of public sector, and
2. reduction of global unsubsidised price of ACT
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5. Competition issue
● Does giving a single firm (AA) such an advantage
create risks for competition?
OFT provided technical assistance to PSI in May
2013 under DfID’s Investment Facility for Utilising
UK Specialist Expertise (iFUSE) scheme, which
funds UK civil service expertise abroad.
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6. Theories of harm
● Primary theory is that subsidy allows AA to build
up a dominant position that it can exploit through
higher prices post-price control when the subsidy
has ended:
- Brand value: evidence that brand important to
consumers
- Foreclosure: main competitor, BB, could be
forced out of the market without access to
subsidy
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7. Theories of harm (2)
● …but, theory of harm will only apply if the
project is successful:
- Consumers cannot afford unsubsidised ACT
even at current wholesale cost, meaning no
ACT will be sold irrespective of monopoly
mark-up
- AA would only have an incentive to exploit a
monopoly position if unsubsidised wholesale
cost reduces to feasible levels
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8. Mitigation
● Identified three potential sources of mitigation
related to:
- Quality seal
- Extending subsidy to BB
- IP rights
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9. Quality seal
● PSI advertises a quality seal, rather than the
AA brand:
- Removes brand effect
- Removes barriers to entry (even if BB exit they
can easily re-enter with quality seal)
● Risks
- Difficult to assess as advertising just starting
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10. Extend subsidy
● Extend subsidy to include BB
- Removes brand effect, as there will be two
competing brands in the market
- Removes foreclosure, as BB will remain in
market
● Costs:
- Advertising costs for new brand
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11. Extend subsidy (2)
● Benefits?
- Perception of fairness
- Mixed evidence regarding whether BB
provides additional geographic scope
● Risks
- Political objective not met
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12. IP rights
● PSI retains all IP rights to AA ACT brand
● Post-subsidy PSI licenses IP to AA with price
control
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13. Observations
● Relatively limited competition risk in future if
scheme successful.
- Decisions to be made by PSI regarding appropriate
mitigation.
● Common themes in healthcare:
- Interaction of competition objectives with other
objectives, including health and political.
- Reliance on private sector in developing countries.
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14. Competition issues in the
market for anti-malaria
drugs in Burma
Office of Fair Trading
Global Forum on Competition
Competition issues in the distribution of
pharmaceuticals (Friday 28 February 2014)
14