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Editorial & Column


Drug Wars: Competition Is Good


September 18, 2003
Copyright © 2003 CARIBBEAN BUSINESS. All Rights Reserved.

Ever wonder why you have to wait in line so long every time you go to pick up your prescription drugs?

According to one report, local demand for prescription drugs has jumped 300% in the past 10 years while the number of pharmacies in Puerto Rico has grown only 1.6%.

Two weeks ago, U.S. District Court Chief Judge Hector Laffitte gave the local government regulation limiting the number of pharmacies on the island a pass, not a blessing. The judge upheld the validity of the Certificate of Need & Convenience (CNC) required under local law to establish or relocate a drugstore on the island, over the objections of the largest nonlocally owned pharmacy chain, Walgreens, which argues the regulations unconstitutionally discriminate against big stateside chains in order to protect local mom-and-pops.

The decision means a lot to lawyers, but brings little consolation to the consuming public. It also gives homework to our local legislators.

In a nutshell, Judge Laffitte said that even though the CNC law & regulations may be lousy, they aren’t unconstitutional. Therefore, it isn’t for the court to change it, but for the Legislature.

"While it may be true," Laffitte wrote, "that the procedures put in place by the CNC Act are inefficient, unnecessarily bureaucratic, and overly time-consuming, it isn’t the duty of this court to undergo a utility analysis."

While acknowledging the law, as it exists right now, may be injuring consumers, the judge said that’s a matter for the local legislature to fix, not the federal court. "Even though a statute may cause the consuming public to be injured by the loss of the high-volume, low-priced businesses, if it doesn’t burden interstate commerce, the problem will be one as to the wisdom of the legislation, not its constitutionality."

Puerto Rico’s CNC Act was adopted in 1975, modeled on federal legislation enacted the year before requiring states to adopt certificate of need regulations in order to maintain eligibility for federal financial assistance in the healthcare area. The federal legislation applied to hospitals and other healthcare facilities, but never to pharmacies. In Puerto Rico, it applied to pharmacies starting in 1979.

In 1986, Congress repealed the 1974 legislation mandating state implementation of the certificate of need process. Puerto Rico, however, kept its local law. To this day, the island remains the only jurisdiction in the U.S. to apply its certificate of need law to pharmacies.

The local Health Department argues the CNCs are necessary, among other things, "to certify that [a new pharmacy] is necessary for the population it is to serve and that it won’t unduly affect the existing services." In our opinion, that judgment is best left to the consuming public.

There are some aspects of the CNC requirement, such as the existence of a long-term service development plan, that clearly serve a legitimate public purpose. It wouldn’t be a good idea, for example, to let any fly-by-night operation come in and price-undercut an existing independent pharmacy only to go out of business later or just take off, leaving the community without a nearby drugstore.

On the other hand, even if, as Laffitte concluded, the local CNC requirement isn’t an unconstitutional burden on interstate commerce, there is little doubt that in some instances it is having the effect of depriving the local consumer of better, cheaper alternatives when it comes to buying prescription drugs.

Competition is good. If the expansion of a stateside pharmacy chain such as Walgreens has the effect of putting pressure on mom-and-pop drugstores to improve their services and facilities (like parking!) and offer competitive prices, all the better for the consumer. Locally owned chains such as El Amal and others are proof that raising the competitive bar a notch or two is not only good for consumers but also helps locally owned businesses turn challenges into profitable opportunities.

This Caribbean Business article appears courtesy of Casiano Communications.
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