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Legal and organisational innovation in the Italian pharmacy system: commercial vs public interest

Published online by Cambridge University Press:  26 April 2017

Alceste Santuari
Alceste Santuari*
Affiliation:
Department of Sociology and Business Law, University of Bologna, Piazza Scaravilli, Bologna, Italy
*
*Correspondence to: Alceste Santuari, University of Bologna, Piazza Scaravilli, 1 40126 Bologna, Italy. Email: alceste.santuari@unibo.it
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Abstract

Pharmacy services are undoubtedly an important part of primary care. Pharmacists are entrepreneurs and simultaneously they are entrusted with a public mission in the health care sector. Pharmacies then reflect a contrast between a commercial/economic objective and public interest, which is to be identified with citizens’ universal right to health care services. This is the reason why in Italy, as in many other EU countries, pharmacies supply their services according to a prior authorisation granted by public authorities. In common with many EU countries, this authorisation is secured according to a demographic criterion. It is only by means of these licensed pharmacies that citizens can buy drugs under medical prescription. Accordingly, the health system is to be driven by public interest, which has yet to prove how competing interests may be regulated in serving health needs. In the light of EU law, the article advocates for an innovative legal and organisational tool whereby to organise the Italian pharmacy system in order to combine economic consideration and public benefit.

1 Introduction

European health care systems were devised as schemes driven by public interest. Over the years, though, this milestone has progressively been coupled with commercial considerations. Pharmacies are no exception to this rule; perhaps they witness to one of the clearest example of such a combination between public goals and entrepreneurial approach.

Community pharmacies represent an essential part of primary care and pharmacy services, which can be regarded as integrated health services, and are critical for reaching universal health coverage (Martins et al., Reference Martins, Foppe van Mil and Alves da Costa2015). The Italian legal system provides that pharmacies can be run by publicly owned agencies or by chemists. These can be organised either as single entrepreneurs or incorporated as a company. Both types of pharmacies supply their services according to a prior authorisation granted by local and health authorities. Pharmacies are granted this authorisation if they supply their services in a given local area that amounts to a maximum threshold of 3300 citizens and it is only through these outlets that medicines can be purchased under prescription. The demographic criterion allows pharmacists to ensure themselves a certain level of profits. However, the overarching purpose of the Italian National Health Service has been to create an organised pharmacy system especially geared to accomplishing patients’ health protection. On this account, along with a per capita limit on planned pharmacies, the system relies on other provisions and restrictions, such as (a) the allowance that chemists can be sole owners of pharmacies; (b) a ban on adopting the joint stock company form to manage a pharmacy and; finally, (c) a cap to the number of pharmacy chains. So much for the public interest side.

As far as the commercial side is concerned, it is noteworthy that since 2006 a growing number of supermarkets and drugstores have also been authorised to sell drugs that do not need medical prescription. Some statutory laws have introduced a minimum degree of liberalisation in the pharmacy sector, although drugstores are still prevented from selling medicines requiring a prescription. The Italian Competition Authority made clear in its 2015 Annual Report that it considered pharmacies to be ‘rent seeking’ and failing to ‘foster competition and innovation’. Under the pressure of both public opinion wanting lower prices for drugs and of economic lobbies searching for new market shares, in April 2015 the Government drafted a Competition Bill with the intention of enabling the Italian health system to decide whether to authorise both supermarkets and drugstores to sell a range of medicines under prescription. The Italian pharmacists’ national associations firmly opposed this provision, which eventually was repealed from the last version of the Bill, thus maintaining the status quo. Both public and private pharmacies defend the current pharmacy system, albeit for different reasons. Crucially, they claim that the current system ensures a high level of protection and caters to areas that would not be regarded as profitable for diversified retail businesses. On the contrary, supermarkets and drugstores are urging Parliament to amend the Bill to authorise them too to sell medicines under prescription. They maintain that this would facilitate greater competition without harming the quality of health protection. Such a contrast somehow reflects the distinction among commentators that are similarly split on the broader dynamic between markets and health care provision. Some point out that comparing free market competition with health protection is a stretch and undermines the social nature of the right to health care (Petretto, Reference Petretto2011). Others consider the implications of this convergence between competitive markets and public services in implementing policy and regulation, which is already occurring in other countries, such as the United Kingdom (Lluch, Reference Lluch2009; Chico et al., Reference Chico, Hervey, Stirton and Warren-Jones2014).

This raises the point that the domestic dispute in Italy is replicated in other Member States, all of which are fundamentally affected by broader EU oversight. This is because over the years the EU has gained an increasing number of powers that it exercises over Member States (MSs), occurring by a slow and step-by-step process: moving from establishing a common market, through the social market economy (Müller-Armack, Reference Műller-Armack1990), to reach out for budget constraints. The whole process has inevitably influenced the identity and level of state intervention in the European economy, transformed individual MSs’ constitutional systems, and ultimately this evolution has affected the public interest principle (Caldirola, Reference Caldirola2014).

This article analyses the legal, institutional and organisational aspects of the Italian pharmacy system, especially in the light of EU legal framework. It draws on the insights of a health lawyer and former Chief Executive Officer (CEO) of a regional publicly run pharmacy agency, who focusses on the right to health care and endeavours to understand whether competition law is fully applicable to chemists. In this respect, the article considers whether it is feasible to introduce accreditation in the Italian pharmacy system as an innovative legal and organisational tool whereby to properly balance commercial and public interest.

The article is divided into five sections. The first two sections consider the broader European context: Section 1 provides a brief overview of pharmacy services in the EU; and Section 2 identifies the European legal framework governing pharmacies, especially commenting on the decisions taken by the European Court of Justice (ECJ). The analysis then considers the situation in Italy: Section 3 focusses on the Italian national health system, with particular reference to the system of public and private pharmacies; Section 4 assesses the liberalisation debate concerning pharmacies occurring in the Italian Parliament; and Section 5 looks at the notion of Services of General Interest within which to encompass health care services. Finally, the concluding remarks summarise the analysis as the basis for introducing some innovative legal and organisational tools in the pharmacy system.

2 The pharmacy systems in the European Union: a brief overview

European health care systems badly need to find a balance between the values they are committed to (solidarity, equity, availability and access to health care) while promoting efficiency and competition. Member States and the European Union are responsible for providing options that can benefit patients and help contain health care expenditure.

Against this background, pharmacies play a key role in the delivery of health care: their range of services covers not only pharmaceutical specialities but also a number of pharmaceutical services (pharmaceutical care) to patients, including health promotion activities. These may include medication control, monitoring of therapy, advising patients, diabetes test, information and advise to physicians. In some countries, like in the Netherlands, pharmacists are also encouraged to help decreasing the total cost of drugs by replacing more expensive drugs with cheaper alternatives (Philipsen, Reference Philipsen2003).

The pharmacy system is part of the broader national health systems that falls within the province of MSs, which are then solely responsible for their organisation and their management (Petretto, Reference Petretto2011). The relevant role played by pharmacists in the delivery of health care has made pharmacies subject to high regulation in most European countries (Vogler et al., Reference Vogler, Arts and Sandberger2014). In particular, single Member States’ regulatory systems provide for restrictions on the ownership and number of pharmacies, which are claimed to ensure the independence of the service provider and enhance access to pharmaceuticals. Yet, the pharmacy system and pharmaceuticals are not only highly regulated at the national level (Lluch and Kanavos, Reference Lluch and Kanavos2010), they are also controlled at the European level. This is because the EU must ensure three main public purposes: the public interest in health care delivery; market competition among different economic operator; and health budget restraints (Golino, Reference Golino2013; Caldirola, Reference Caldirola2014). Since these restrictions usually result in a monopoly for pharmacists, the pharmacy system – and especially the public drug reimbursement system, particularly since 2008 – have undergone important reforms in response to criticisms that good value for money is not being delivered and public resources are being wasted (Gibson and Lemmens, Reference Gibson and Lemmens2014). The challenge is to amalgamate the pursuit of economic effectiveness in the promotion of a regulatory environment conducive to business with health protection (Directive 2004/27/CE, Preamble).

The promotion of business-oriented policies in the pharmacy sector is limited in many Member States, which provide for direct regulation on pharmacists relative to population ratios. In this respect, Germany is an exception since pharmacists are free to set up a new pharmacy in any area of the country should they regard it as profitable enough. In Ireland (Gorecki, Reference Gorecki2011), Italy, the Netherlands, Sweden and the United Kingdom (Noyce, Reference Noyce2007) only pharmacists or their partnerships can own pharmacies. Whereas the purpose aimed at health protection is supported by the licensing of pharmacies in all EU and European Free Trade Association (EFTA) states and by the provision according to which prescription and over-the-counter (OTC) medicines are to be dispensed in conventional pharmacies and by professional pharmacists. Such a general rule does not apply to the Netherlands and to the United Kingdom: in the Netherlands, drugstores are allowed to supply a full range of OTC medicines. In the United Kingdom, general sales list OTC medicines can be supplied by any retailer and only pharmacy OTC medicines have to be supplied under the medical supervision of a pharmacist.

The combination of restrictions on the number of pharmacies and on the range of potential suppliers has ended up with creating a monopoly over the supply of medicines. Empirical evidence (Paterson et al., Reference Paterson, Fink, Ogus, Merz, Fink and Berrer2003) highlighted that high levels of regulation prevent pharmacies from competing and restrict opportunities for mergers or new forms of service provision, which might benefit some sections of the public. This is exactly the position raised during the Parliamentary debate in Italy, where proposals to open up the pharmacy system to new economic operators have been strongly supported.

Other studies (Vogler et al., Reference Vogler2012; Vogler, Reference Vogler, Habimana and Arts2014) show that across Europe there is an overall acceptable standard of service quality and of users’ access to pharmacy services as well as the need for a sound regulatory framework for pharmacies. This is expected to support pharmacies in better fulfilling their key tasks (i.e. providing safe medicines to patients, counselling and advice, involvement in health promotion and prevention). Although each national market has its own regulatory arrangements, national rules must balance the need for national health systems to be financially sustainable, in the context of ever-expanding demands for new health technologies and requirements for cost containment. The fair combination between national statutes concerning pharmacies and their degree of market competition has been scrutinised by the ECJ.

3 Pharmacies in the EU: the ECJ rulings

Despite the general recognition that pharmacists’ value should not be judged only by economic criteria (Buttigieg, Reference Buttigieg2009), their monopoly and regulation started to be questioned. Ultimately, it has been up to the ECJ to decide whether the national legal framework for chemists’ activities are consistent with the EU law, i.e., with the internal market rule. In a succession of cases, the ECJ paid particular attention to:

  1. 1. the system of a planned and restricted number of pharmacies ( C-634/15 ; Diverio, Reference Diverio2014);

  2. 2. the possibility for licensed chemists only to sell drugs under prescription (Delattre 1991; Gormley, Reference Gormley1995; C-322/01 ; C-159/12 ; C-161/12; Urbani Neri, Reference Urbani Neri2013; Diverio, Reference Diverio2014);

  3. 3. the exclusive ownership right of chemists and their organisation and management ( C-531/06 ; C-171/07 ; C-172/07);

  4. 4. the population to be served as the criterion determining authorisation of pharmacies to carry out their activities (C-367/12); and

  5. 5. the role and activities of drugstores, as opposed to authorised pharmacies ( C-159/12 through C-161/12; Opinion of the Advocate General, 12 March 2015; C-497/12 ).

Overall, the ECJ has confirmed the special character of chemists by recognising that:

  1. a. local authorities are free to set up public companies to run pharmacies;

  2. b. public-run pharmacies do not pursue a profitable aim which could be seen as detrimental to public health;

  3. c. local authorities are free to choose the most adequate legal form for chemists that is capable of optimising public interest;

  4. d. public and private pharmacies do not act in a free market, but within a legal framework in which the pursuit of the public interest takes priority over economic and commercial drivers (Den Exter and Guy, Reference Den Exter and Guy2014).

Medicines do not fall under the definition of consumption goods subject to market rules. Rather, they are health products, which depend upon public supervision during all their life phases: invention, production, distribution, prescription and delivery. It follows that pharmacies need to balance their private ownership and management with stringent public regulation. This has a twofold aim: on the one hand, it is geared to ensuring quality and safety of medicines. On the other hand, it must ensure citizens a universal access to medicines by means of public funding, within a political framework based on rational use of medicines and budget control.

The ECJ rulings do not suggest that the Court either wants to keep European health care systems less competitive or that it is against pro-competitive policies (Lluch, Reference Lluch2009). The ECJ simply acknowledges that the pharmacy sector is not a typical market, in which the traditional supply-and-demand model does not apply. It is rather a three-tier system (supplier–payer–patient/user), which is defined by a low price elasticity and information asymmetry exactly like a public health care system. The information asymmetry stems out of the fact that consumers cannot assess the quality beforehand and this may lead to poor-quality appraisal because of adverse selection. This is the reason why specialised expertise is often required to assess the kind of drugs that are required, such as the expertise of a general practitioner or hospital specialist. Consequently, choices about drug consumptions are typically not made by the consumers themselves (Levaggi and Capri, Reference Levaggi and Capri2013). Accordingly, a minimum degree of public regulation is regarded as necessary to guarantee accessibility to services. However, the degree of such a regulation is entirely up to the discretion of the single Member State’s governing body to decide. Member States are then responsible to set out whether or not a pharmacy should be owned by a pharmacist only, which medical products are reimbursed and at what price (Council of the EU, 2016). Likewise, it is up to the Member States to decide whether to opt for a legal framework that programmes the number of pharmacies or the possibility also for drugstores and supermarkets to sell a certain class of medicines. This has been exactly the focus of the ongoing debate in Italy.

4 The health and pharmacy systems in Italy

Italy’s health care system is a regionally based national health service that provides universal coverage free of charge at the point of service. National governance is responsible for ensuring the general objectives and fundamental principles of the national health care system. Hence, the central government is responsible for listing the services that the national health system is required to provide for all citizens in all the regions. Regional governance, through the regional health departments, is responsible for ensuring the delivery of a benefits package through a network of local health authorities and public and privately accredited services (Constitutional Reform, 2011). Accreditation is based on a complex procedure whereby public authorities assess the legal, quality and organisational requirements that private suppliers must comply with. After this scrutiny, public authorities evaluate if the regional health budget allows for a new private organisation to deliver health care services. Should this analysis be in the affirmative, the organisation is accredited and it will work ‘in the name and on behalf of’ the regional health system, which will reimburse the costs incurred according to the agreed upon tariffs. By virtue of this system, residential care centres, hospitals and the like are all subject to an efficient public evaluation and authorisation system concerning their quality, work process, outcomes and outputs. In this respect, accreditation is a modern means of public powers and private organisations, both non-profit and for profit, entering into steady partnerships – provided that the activity carried out is consistent with programming and financial needs.

The accreditation system does not apply to pharmacies: their activities are based upon a national labour agreement with the Italian NHS, which deals with reimbursements, medical prescriptions, regional powers as well as with the role of pharmacists. Within this legal framework, pharmacies are private as to their commercial nature and public as to their function: they supply social and health care services ‘on behalf’ of the national health system, whereby every citizen is ensured the universal right to health care (Italian Constitution, s32). The public interest of the pharmacy system was cemented by the 1978 National Health System Act: whereas section 25 provides that health care services also includes pharmaceutical care, section 28 states that ‘local health authorities are entrusted with supplying pharmaceutical care by means of public-run and private chemists, which are all formally recognised by the health system’. In consequence the provision and supply of drugs have become an essential part of the broader health care system (Bertarini, Reference Bertarini2014): this also outlines which medicines are to be reimbursable by the Italian NHS and which need to be paid for in full by patients. This means that Italian pharmacies, regardless of their public or private legal nature, are entrusted with the delivery of a social service (pharmaceutical care). Chemists are granted a specific authorisation to carry out such a service, which is deemed to be of general interest (Mastragostino, Reference Mastragostino2006). Such a perspective is also supported by Section 41 of the Italian Constitution, which provides that free private economic activities may be geared to serving public goals. It is then clear that the Italian pharmacy system is driven by public interest and not by economic consideration, which makes the economic activity carried out by pharmacies, albeit important, only ancillary. Nevertheless, the economic activity of each single pharmacist is somehow protected by the provision according to which pharmacies’ premises located in towns cannot be close to each other by <200 m.

Medicines are mainly supplied through licensed private or public pharmacies. The former – accounting for about 92% of the total – are owned by pharmacists who act as independent contractors under the NHS, while the latter (8%) are managed by pharmacists largely employed by the municipality-run agencies carrying out the service. In addition to selling pharmaceuticals on prescription, both types of pharmacies are licensed to sell commercial products including bandages, contraceptives, personal hygiene items, baby products (such as nappies and infant formula) and cosmetics; some pharmacies also sell homoeopathic products. The 1991 Pharmacy Reform Act provided that a pharmacy would be licensed by local health authorities only, relative to the following population requirement: one pharmacy every 5000 people for towns with up to 12,500 citizens; and one pharmacy every 4000 people for all the other towns. Section 4 of this Act required that pharmacies, which are available to be run, or the new ones, are to be awarded through a public tender at county level. The Act also stated that the regional governments are entrusted with planning powers, according to which new pharmacies can be set up provided that the population rate changes due to the increase in the resident population, or because of new roads that make it easier for people to commute. Undoubtedly, the 1991 Act, which would be in force until 2012, was driven by public interest. The combined powers recognised to regional governments and city councils were envisaged to serve the purpose. This statute was expected to strike a balance between the recognition of the economic activity and the regulation of the access to health care services, being the latter to win the upper hand over the former. In this perspective, the demographic criterion and public works/transportation fall under the list of typical powers of public authorities. Accordingly, pharmacies must ensure the citizens’ right to the accessible delivery of medicines even to the detriment of pharmacists’ commercial interests.

At any rate, the public interest criterion set out in the 1991 Act would be later challenged by another approach, which was to be much more based on commercial interests.

4.1 Recent reforms introduced in the Italian pharmacy system

By the 2006 Economic and Social Restart Act, the aim of the incumbent Centre-of-Left Government was to break up the planned and rigid monopoly of licensed and authorised pharmacies by liberalising the supply of drugs, although confined to some medicines only. Accordingly, the 2006 Act allowed OTC drugs to be sold outside pharmacies (e.g. in supermarkets and drugstores), provided that a professional chemist is employed for this purpose, although it expressly banned the sale of medicine requiring a GP’s prescription. In the case of supermarkets, the Act also stated that medicines must be supplied in a separate booth within the premises. Whereas the 2006 Act did not alter the general legal framework within which pharmacies deliver their services, it added to it the possibility that other economic operators than pharmacists may carry out their activities. The Italian Supreme Court did not question the Act: its provisions were regarded as consistent with citizens’ right to access health care services (Decision No. 430 of 2007). Consequently, since 2006, the Italian pharmacy system has been defined by a mixture of general interest and commercial interests. Such a combination of approaches has though maintained unchanged a crucial actor in the system, namely the pharmacist. Whether he/she works in a licensed pharmacy or in supermarkets/drugstores, they need to be all the same authorised health professionals.

In 2009, the Government passed an Act by which it recognised that, in addition to the supply of medicines, both publicly run agencies and private pharmacies are entitled to:

  1. 1. take part in the local and regional residential care programmes;

  2. 2. cooperate with implementing health education programmes;

  3. 3. accomplish preventive campaigns against the main illnesses, also by carrying out laboratory analyses; and

  4. 4. book medical visits both at public and private hospitals, or clinics and to entitle citizens to pick up their medical reports at the chemist’s by some co-payment.

Whereas the 2006 Act aimed at introducing a minimum degree of competition in the pharmacy system, the 2009 Act has intended to make pharmacies more involved in the delivery of health care services. Given their positioning within the Italian national health system, the Government endeavoured to stimulate a larger number of health care provisions, thus enlarging citizens’ access to health care services.

The authorisation system and planned number of pharmacies, on which both the 2006 and 2009 Acts are based, has often been criticised by the Italian Competition Authority. (Denicolò, Reference Denicolò2004). Even before the 2006 Act, the Authority strongly recommended the liberalisation of the pharmacy system and highlighted that the authorisation system does not seem necessary to pursue general interest goals. On the contrary, in the Authority’s view it appears to be useful to protect chemists’ income (Italian Competition Authority, 1997). The Authority pointed out that the planned number of pharmacies is inadequate to accomplish a rational and satisfactory territorial distribution of pharmacies. Since planning creates monopolies, the system of territorial distribution of pharmacies should be more demand oriented (Italian Competition Authority, 1998). Accordingly, the Authority suggested that a better national territorial distribution of pharmacies could be pursued by setting a minimum number of chemists, as opposed to the current maximum limit. Such a proposal would better ensure the public interest in terms of offering a more effective distribution of pharmacies and enabling potential new entries in the supply of medicines. In this way, the Authority affirmed that citizens–consumers could benefit from a wider range of choice as well as from a sensible improvement of the services supplied. On advocating for a more competitive pharmacy system, the Authority did not intend to prioritise commercial interests. Its attempt was rather to modify the supply side of the system by enlarging the number of pharmacies carrying out their activities within the general interest framework.

Similarly, in its 2010 Report the Authority underlined that the limited number of pharmacies that can be authorised consists of a heavy restriction on free market and competition in the sector, because it represents a kind of ‘reserve land’ of patients for chemists. Since then the Authority has been against the territorial planning of pharmacies, especially in city centres. In 2011, the Competition Authority’s recommendations to the Italian Parliament were partially included in a Government Act enacted in the same year. It introduced the possibility for drugstores and supermarkets to sell ‘class C’ drugs, even though the same Act charged the Ministry of Health with identifying prescription-only drugs the list of which is to be frequently updated by the Italian Pharmaceutical Agency (Ghidini, Reference Ghidini2016). In addition, the 2011 Act provided that licensed pharmacies, drugstores and supermarkets can freely supply drugs with discounts, provided that ‘discounts are clearly stated and read by consumers and they are made for all users’.

In January 2012, another Act (known as the ‘Monti liberalisation package’) changed the way in which drugs are supplied to citizens. The aim of the Act was to widen the area of potential chemists and to support the administrative procedures entailed in opening up new pharmacies, making them more available to the public. The Act changed the ratio between pharmacies and the number of population by providing that a new pharmacy can be authorised every 3300 citizens as opposed to the previous threshold of 3500 people. Moreover, the Act allowed for the opening up of a further pharmacy if the population exceeds this threshold by >50%. The 2012 Act introduced a significant exception to the demographic rule by allowing regional governments to establish new pharmacies in airports, train stations, ports and motorway petrol stations, provided there is no other pharmacy within 400 m. Finally, the 2012 Act entrusted city councils with the power to identify the city areas in which new pharmacies can be set up, simplifying the previous system and ensuring that citizens living in low populated areas can access pharmaceutical care.

After the passing of the 2012 Act, doubts started to arise about whether it would overcome territorial planning, thus opening up a sort of ‘free market’ for chemists. The Ministry of Health pointed out that the aim of the Act is clearly to repeal the territorial planning of pharmacies, although on interpreting the Act’s will and its provisions as a whole the legal system still entails a territorial planning mechanism. Overall, the 2012 Act introduced some significant changes into the traditional Italian pharmacy system by fostering the supply side. Although the previous system of planned pharmacies was not overtly repealed, the 2012 Act has allowed public authorities to extend and expand both the number and location of pharmacies at the local level. Whereas the Act did not open up the system to a complete liberalisation, by entrusting local and health authorities with the power to increase the number of pharmacies it has introduced several actions aimed at strengthening consumers and patients’ rights (Italian Supreme Administrative Court, 2016). In spite of these changes into the system, the Italian Competition Authority still criticised the pharmacy pattern in its 2015 Report. The Authority confirmed the need of overcoming the territorial planning scheme by replacing it with a minimum number of pharmacies to be guaranteed. Likewise, the Authority advocated for a greater liberalisation of the system by allowing pharmacists to decide upon opening and shift hours beyond a minimum regulated threshold. Finally, as stated in previous Reports, the Authority recommended to allow drugstores and supermarkets to sell ‘class C’ drugs under prescription whose out-of-pocket cost is to be incurred by patients.

The functioning of the pharmacy system, especially its mainly general interest-based approach has been questioned and challenged before the Supreme Court. Also under the influence of ECJ decisions, the Italian Supreme Court has been appealed to decide whether the territorial planning system and the ban on supermarkets and drugstores to sell drugs under prescription are consistent with the fundamental principle set out in Sections 32 and 41 of the Italian Constitution.

4.2 The Italian Supreme Court’s rulings on pharmacies: a contested approach

As to the abovementioned ban, in 2012, a regional administrative court pointed out that drugstores are allowed to sell drugs without medical prescription but, if these drugs are taken in wrong doses or under particular health conditions, they may be dangerous. According to the judges, the paradox is that these drugs can be supplied in drugstores, while other drugs with medical prescription cannot. The regional judges identified the ‘irrationality of the legal provisions concerning pharmacies’ and appealed the Supreme Court. The Supreme Court (Decision No. 216 of 2014) upheld the appeal stating the following crucial principles:

  1. 1. Pharmacies ensure individuals’ right to health and the whole system is driven by the general interest.

  2. 2. Accordingly, the health system has been arranged to ensure fair distribution, intending to avoid an unreasonable concentration of pharmacies in densely populated and profitable areas and leaving insufficient numbers in sparsely populated areas. In this respect, the territorial planning scheme is consistent with the overall health system’s purposes since provides public authorities with the legal and organisational tools whereby to locate the opening up of pharmacies.

  3. 3. Since chemists must comply with far more stringent regulations than drugstores, they can legitimately be recognised as in a privileged position within the health system.

  4. 4. The pharmacy system falls under the provisions of Section 32, though ‘some of the activities carried out by pharmacies do come under market competition law’.

  5. 5. A limitless liberalisation of ‘class C’ medicines could cause unpredictable effects on the territorial distribution of drugstores. Since these are not integrated in the national health system, they could modify the very system, which is fundamentally geared to ensuring citizens’ access to health.

Critics highlight the Supreme Court’s preference for a legalistic, rather than a realistic, approach (Salerno, Reference Salerno2014) and point out that almost all their rulings on pharmacies affect only portions and parts of the system. In particular, they emphasise that the pursuing of citizens’ health and territorial programming seem no longer adequate reasons to oppose liberalisation, which, on the contrary, is expected to bring in significant benefits, especially in term of price cutting (Ghidini, Reference Ghidini2016). In their opinion, the system badly needs a complete revision, because it is out of step with demand, which has radically changed since the legal and health system of pharmacies was established. Yet, it is noteworthy that although health needs have changed over time, chemists have maintained their role as health professionals, in particular with reference to ‘traditional’ pharmacies. As to the distinction between licensed pharmacies and drugstores/supermarkets, which both require the employment of professional chemists, critics argue that there should be no difference in how they are regulated because otherwise this would amount to discrimination between economic operators. According to critics the Supreme Court’s rulings have contributed to define the pharmacy system as one revolving around the role of chemists in the sense of the premises where the activity is carried out, rather than around chemists as health professionals.

As to territorial planning, in 2015 the Supreme Court (order of 27 February 2015, No. 24) ruled that the 2012 Act strikes a reasonable balance between an entrepreneurial approach and liberalisation, and health programming priorities. The programming function entrusted to city councils is intended to overcome the defence of commercial interests so as to affirm a fair distribution of pharmacies in the area to the benefit of patients. Ultimately, public regulation of the pharmacy system is deemed to be highly reasonable, because it is to be identified as a service of general interest.

5 The European notion of ‘services of general interest’

Health care services may be referred to the broad definition of ‘services of general interest’ and are to be regarded as those services that are necessary to ensure social cohesion at the European level. In this respect, they correspond to those services that match an entire range of general interest needs to which certain activities of the whole community should be geared. Health (and social) care services differ from other services not because of the different legal and organisational forms by which they are supplied, but because of the purposes they are to fulfil. Health (and social) care services are:

  1. 1. non-standardised provisions centred upon users’ needs and not providers’ benefit;

  2. 2. defined by a highly personal relationship between users and providers; and

  3. 3. regardless of management model, they concern patients’ rights as such and the right of people to enjoy a better life.

These characters identify a range of services that cannot be subject to privatisation, liberalisation or deregulation policies like any other service. To some extent health services fall under the scope of EU competition law but, because of the specific goals these services are to accomplish, EU law takes into account the tasks that are entrusted to the providers of these services.

Directive 2006/123/EC defines health care services as those including ‘pharmaceutical services provided by health professionals to patients to assess, maintain or restore their state of health where those activities are reserved to a regulated health profession in the Member State in which the services are provided’ and this is irrespective of ‘whether or not they are provided via health care facilities, and regardless of the ways in which they are organised and financed at national level or whether they are public or private’. This identifies that European health care provision comes in many forms of organisational division between public and private providers, all in pursuit of achieving an effective supply but both types of providers starting from fundamentally different interests’ perspectives.

6 Regulation vs liberalisation in the pharmacy system

Due to the public purposes pursued and the economic activities carried out, community services have been traditionally confronted with both regulation and liberalisation issues. Legal and economic regulations affect the qualification of pharmacists and further staff working in a pharmacy, the criteria for opening new pharmacies, the requirements for owning and running one or more pharmacies, the remuneration criteria as well as the list of medicines that pharmacies may offer (Vogler, Reference Vogler, Habimana and Arts2014).

It is noteworthy that in the expression ‘economic regulation’, the adjective (economic) bestows a special meaning on the term ‘regulation’. In its current use, regulation refers to any set of legal provisions which must be complied with, regardless of the goals which are aimed at, and consequently regardless of the interests that are expected to be served. Sunstein identified that in ‘the United States, Europe and elsewhere, many people endorse the Harm Principle. They regard national nannies as annoying meddlers at best – and perhaps as tyrants. In every recent period, democratic nations have engaged in both theoretical and practical disputes about the legitimate boundaries of paternalism’ (Sunstein, Reference Sunstein2014). Economic regulation then refers to provisions which aim at making economic operators’ behaviours consistent with market rules.

In the economic regulation system, public action can be ‘indirect’, meaning that the positive outcomes for the economy are expected from the effective functioning of markets which are regulated in this way. By contrast, public intervention can be described as ‘direct’ when economic activity is taken on within government responsibility. Such a responsibility can be carried out accordingly either through publicly run economic operators or through private organisations, which are subject to government control. At any rate, economic regulation and direct action of public authorities are not necessarily to be deemed as alternative methods. The economic regulation method implies that the regulated market is capable of supplying all utilities that citizens ask for. Subsequently, private companies operate on the market according to their economic interest, thus exercising their freedom of economic initiative. Conversely, public bodies directly take on economic activities either when the market is not available or in case of a market that is not capable of supplying services or goods that a political evaluation considers not adequate to match citizens/consumers’ demand. Under these circumstances, public authorities take on the responsibility of carrying out economic activities. In this perspective, if a private company is awarded to carry out those activities, it shall operate to accomplish the commitments that it accepts to fulfil within a specific relationship with public entities.

This is exemplified by Italian pharmacies: they are managed either by city councils or by private chemists, which operate on behalf of the national health system within a specific public procurement agreement. Consequently, the special health character of the pharmacy service has served as a barrier against competition in the sector. So much for regulation, but what about liberalisation? The rationale behind deregulation in the pharmacy sector is the expectation that through liberalisation competition will increase, prices will be lowered and access to quality pharmacy services will keep stable if not improved by the opening of new pharmacies (Lluch and Kanavos, Reference Lluch and Kanavos2010).

Against this background, at least three questions can be asked:

  1. 1. Do health-related services provided by pharmacies justify the special legal regime they are subject to?

  2. 2. Is it appropriate for these services to be opened up for competition?

  3. 3. Is it possible to achieve a balance between competing interests such as commercial and public?

It is to these questions that the final paragraph now turns.

7 Discussion

Pharmacy services, like other health care services, challenge public authorities to pursue a twofold approach. They must ensure a universal, equitable and quality service, as well as to some extent a pro market environment to allow health providers to compete. At any rate, the right to health care has a dominant position in the debate and it is to be ensured as far as possible, since it relates to one of individuals’ fundamental rights. Pharmacies are defined by a permanent conflict between the entrepreneurial nature of chemists’ profession and the public interest, which this profession is geared to. However, both Italian courts and the ECJ have maintained that the entrepreneurial nature must give way to the health care character of the services supplied by pharmacies. In this respect, pharmacies do not carry out their activities in a free market. Rather, they supply their services in a regulated system in which public interest is deemed to be more important than the lawful economic and business orientation of the service. In this respect, the whole pharmacy system should be revised to strike a new balance between the necessity of ensuring high-quality standards to citizens–patients and commercial interests. It is no easy task.

If fair distribution is being secured (for the public interest, but anti-competitively), this has a negative impact on affordability because it manages availability of medicines and this enables prices to remain high (against the public interest and commercial interests beyond those of the current providers). This is a central flaw in preventing pharmacies from having to compete in profitable areas. The ensuing questions are then: Is there a system which permits competition in profitable areas (keeping prices down), but ensures supply in areas which are loss-based? Is there a way of regulating innovatively to ensure economic and public interest goals? In this respect, the Italian system has tried to offer an answer: on the one hand, the NHS subsidises the pharmacies that meet demand in non-profitable areas. On the other hand, supermarkets/drugstores can compete, though there is no regulation that imposes on them to open their premises in ‘poor’ areas.

In this respect, the 2012 Act, by allowing for a greater number of pharmacies, has aimed at making the system slightly more competitive. Accordingly, city councils and to a lesser extent regional governments may decide to authorise new pharmacies or to locate them in different areas of towns to match new citizens’ needs. Private pharmacists have questioned and challenged this system, since they fear the risk of losing the investments they have made in a given area. Despite this opposition, the new system appears to be more patient oriented than in the past. Nevertheless, all the more it could be improved by making the current authorisation system evolve to a sort of accreditation-like scheme. In general, through accreditation regional and local health authorities incorporate private organisations that comply with national and regional standards into local welfare systems. Accordingly, once the health needs have been ascertained, the planning function of public authorities is to set out the procedure to integrate those health providers capable of being consistent with the budgeting and programming activities.

Likewise, under the proposed system chemists (public, private or employed by drugstores) would be incorporated into a public-regulated scheme within which they would be committed to delivering medicines as well as additional health care services. Such an incorporation process would be granted by regional governments after hearing the opinion of city councils and local health authorities. Temporary measures will have to be envisaged to put the system in place especially relative to existing agreed upon pharmacies. The proposed new pharmacy organisation would have the advantage of breaking up the current system, reliant upon a maximum number of pharmacies in a given area based on population ratios. Eventually, patients will choose pharmacies according to their needs, including territorial proximity. Competition will not be so much on prices as on quality, since prices of medicines are not the outcome of the balance between supply and demand. As Newdick (Reference Newdick2008) stated: “the provision of public services is not amenable to market forces”.

The challenge under way seems to revolve around the role of chemists as health professionals. If their role is to be more integrated into the overall health care system, the current differences between licensed pharmacies and drugstores have to be overcome. By contrast, if the debate continues to regard the pharmacy as the only premise through which medicines can be supplied, the whole system will be stuck in a battle that is no longer ideological, but risks being only a defence of an economic privilege. By moving from the public interest-driven approach, also chemists working in supermarkets and drugstores should be authorised for the pharmacy activity they intend to carry out within their premises. Under the proposed new pattern, regional health authorities would be vested to entrust pharmacies with more public tasks, including a different organisational arrangements for the traditional services. In turn, pharmacies would be requested a higher degree of compliance, which is expected to increase the level of general interest they are to pursue. The proposed new arrangements would overcome the current national agreement by providing for a better and more effective integration of pharmacies into regional and local health systems. The new arrangements would fall within the powers of regional governments, which accordingly would no longer fix a maximum number of pharmacies to be opened. Pharmacy services would be supplied upon a disclosed programming procedure, which will consider the actual quantity and quality level of services that are needed in a given area. The proposed new scheme would benefit the whole system since it is supposed to make regional governments’ powers clearer and city councils’ role more effective. As to the former, they will consolidate their power within the health sector by increasing the level of health programming. As far the latter are concerned, they would no longer be called upon to authorise the opening up of new pharmacies on the basis of population ratios. They would rather act by virtue of a monitoring and evaluation process of health needs in their areas, which would result in a recommendation to the regional health authorities to provide the area with new pharmacy services. Should the new arrangements be introduced in the current system, they would change the health authority in charge of licensing new pharmacies, namely, regional governments, and the requirements upon which new pharmacies will be licensed to open. Finally, the new procedural pattern would also make additional services in pharmacies mandatory and no longer only optional, thus increasing the integration of health services.

Ultimately, an accreditation-like system seems to be an adequate legal means whereby to promote the general interest without excessively neglecting commercial interests. In this way, the debate should not be on less or more regulation; the focus should rather be on which kind of regulation is capable of effectively ensuring equal access to medicines and budget control programmes. The challenge is to accept that innovation in the provision of pharmacy services can be implemented by adopting a new legal, institutional and organisational approach. This is expected to raise public responsibility and increase citizens’ choice, thus corroborating the public interest in the delivery of health care services.

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