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Clicks faces complaint over alleged uncompetitive practices

| Legislation

The Independent Community Pharmacy Association (ICPA) has approached the Competition Commission to "level the playing field" in what it alleges to be counter competitive practices by the Clicks Group.

The ICPA is a registered non-profit company, collectively representing a large number of independently owned pharmacies in SA. About 50% of ICPA's member pharmacies are based in rural areas.

According to the ICPA, it attempts to identify practices which distorts, restricts and prevents competition in the SA pharmacy sector in order to prevent increases in private healthcare costs and expenditure. In its view, the sector is "replete with uncompetitive practices".

One of the issues the ICPA has a problem with, is what it calls "the ownership of pharmaceutical manufacturing companies by retail pharmacy and the benefits corporate pharmacy derives from full vertical integration practices".

The Pharmacy Act (read with regulation 6), prohibits manufacturers of medicines to have a direct or indirect beneficial interest in a retail pharmacy. In this regard, the ICPA is objecting to what it claims to be the result of Clicks' ownership of Unicorn Pharmaceuticals, which is categorised as a manufacturer "and conducts business as if they are a manufacturer".

Unicorn is authorised in terms of the Pharmacy Act to own a manufacturing pharmacy and is licensed to carry on the business of a manufacturing pharmacy only at its plant in Woodstock, Cape Town. Unicorn Pharmaceuticals is one of the subsidiaries of Clicks Group, the holding company of Clicks Retailers, which has registered pharmacy licences, according to the ICPA.

The ICPA alleges that "it is almost impossible today for a pharmacist to become and entrepreneur within the independent community pharmacy sector as the costs of the entry are too high and the profits are non-existent". It alleges that "pharmacists as healthcare entrepreneurs will cease to exist and will become employees of profit driven monopolistic corporate enterprises".

In response to a query by Fin24, David Kneale CEO of Clicks Group, said in a statement the ICPA "repeatedly makes allegations" that Clicks Retailers use anti-competitive practices.

He emphasised that Clicks Retailers has consistently rejected all of these allegations as spurious.

"Clicks is a listed JSE company, our reputation is important to us, we obey the law and we observe the highest standards of professional conduct. Our intention is, and has been since we first introduced pharmacies into our stores, to offer our customers a wide range of affordable medicines in convenient locations served to them by dedicated professionals," stated Kneale.

He emphasised that Clicks stock a wide range of products, both branded and generic, with “the aim to provide quality products with proven efficacy, great value and customer choice".

Furthermore, he said Clicks Retailers, which owns and operates the Clicks pharmacies, has never applied for a manufacturing pharmacy licence. The manufacturing pharmacy licence that is held by Unicorn Pharmaceuticals, permits them to import or export medicine and conduct distribution activities.
   
"Clicks is not breaking the law in terms of vertical integration. Vertical integration is not prohibited in terms of the Competition Act. Furthermore, the pricing of medicines is regulated by the National Department of Health, which removes any competition law concerns. The licence held by Unicorn does not permit Unicorn to manufacture drugs," said Kneale.

The ICPA is also objecting to what it deems to be unfair practices in shopping malls, which favour large companies like Clicks.

The Competition Commission now has to decide on the validity of the ICPA's complaints.

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