monopoly versus competition Blood services: monopoly versus competition Paul Strengers, MD, FFPM Sanquin Blood Supply Amsterdam The Netherlands p.strengers@sanquin.nl April 20, 2017 | 1

WHO Model list of Essential Medicines Proposal of AABB : Whole blood and red cell concentrates on WHO Model list of Essential Medicines Supported by Regulatory Authorities, such as WHO BRN, FDA, Health Canada, Swiss Medic, Paul Ehrlich Institute, etc. Supported by the International Conference of Drug Regulating Authorities (IDRA) Supported by Canadian Health Services, South African BTS, etc Support requested from other national and international blood transfusion organizations/services, such as ISBT, EBA, IPFA, ABC, etc. April 20, 2017 | 2

Essential medicines connects to the basic functions of blood establishments Quality and Safety for: Collection Testing Processing Storage Distribution of human blood and blood components April 20, 2017 | 3

Quality management and regulatory oversight is needed for improvements .... April 20, 2017 | 4

Additional functions of blood establishments Patient blood management Knowledge of the primary process of the client Sufficient supply of blood Optimal usage of blood Client relations Creating of costumer intimacy Haemovigilance Research Offering excellent services to the customers Blood is a medicine with special characteristics. April 20, 2017 | 5

Blood components (whole blood and red cells) on the WHO Model List of Essential Medicines A major step forwards !!! April 20, 2017 | 6

Points to consider …… …….. Competition April 20, 2017 | 7

Blood transfusion is participation in a blood and plasma chain: hospitals recipients components blood donor whole blood donation Red cells, platelets, plasma plasma for fractionatio- nation plasma derived medicines BTCs / blood banks fractionation National Regulatory Systems and National Regulatory Authorities April 20, 2017 | 8

What about blood transfusion organizations ? Type of blood service organizations National BTS organizations Regional BTS organizations Local BTS organizations / blood transfusion services Hospital-based blood banks ….. Objectives: Serving public interest : physicians and patients Supply blood products in a market Competition ? In most countries, BTSs do not encounter competition April 20, 2017 | 9

Blood Transfusion Service as a monopolistic operation I From organizational point of view, BTCs are : Non-profit Voluntary non-remunerated donations Tradition Best way to serve public interest Intend to guarantee security, safety of supply, and optimal quality Fair prices Self-sufficiency April 20, 2017 | 10

Blood Transfusion Service as a monopolistic operation II From market point of view : no market mechanism. Does this work well ? Are market drivers for the demand met ? Are the costs under control ? Are prices disciplined ? Is the focus laid on clients ? Patients ? Physicians ? Is the quality of the products always optimal ? April 20, 2017 | 11

Plasma fractionation area faces competition Source material (plasma) Price of plasma Price of final product Markets And also competition on: Sufficient supply of plasma derived medicines Donors: Voluntary, non-remunerated versus remunerated/paid; Viral safety; Frequency of donation and effect on donors’ health (IgG level); Recruitment of donors Public service and private good April 20, 2017 | 12

General remarks on public interest and market failure I Guaranteed security of supply Fair prices Optimal quality If the required assumptions do not hold, if it is unable to realize these interests : the market fails Reasons: Lack of competition Information asymmetry and transaction costs External effects Public good April 20, 2017 | 13

General remarks on public interest and market failure II Full competitive equilibrium can be Paroto efficient: No position of a market actor can be improved without worsening the position of another Market fails if : - Lack of competition: dominant market position, no incentives for sufficient security of supply, good quality, efficiency and innovation. Government intervention needed for monopoly regulation. - Information asymmetry and transaction costs: consumers cannot assess quality properly, so no incentives to offer an optimal price-quality ration. Poor-quality providers may price good-quality providers out of the market. Government intervention needed otherwise increasing price-quality spiral. - External effects. Consequence: overproduction or underproduction - Public good. Non-rivalry and non-exclusiveness. Government intervention needed April 20, 2017 | 14

Concerns on competition in blood: Blood becomes a commodity Competition may copy the plasma experiences However: Growing pressure of commercial companies Paid donors Negative impact from this competition for donor recruitment Commercial blood banks may focus only on bulk products, and will not deliver specialized products such as irradiated cells, red cells with rare blood groups, etc. Protection of donors’ health and maintaining a safe donor base Ethically unacceptable Developments are threatening the current blood structure April 20, 2017 | 15

Blood Transfusion Services in competition I In USA, competition between not-for-profit blood banks Competition on donors Competition on deliveries of components to hospitals Competition on markets Market movements in supply (reduction of red cell consumption) Consequences: Bankruptcy of blood banks Merges between blood banks Quality issues and official warnings from FDA April 20, 2017 | 16

Blood Transfusion Services in competition II In Europe, competition between not-for-profit and for-profit blood banks 2006 Austria : blood supply shortage resulting from unregulated competition between non-profit and for profit blood service, when a commercial blood service went bankrupt 2007 Germany : for profit company withdrew abruptly from collecting blood and supplying hospitals in Prenziau and Brandenburg. Only 17% of the paid donor returned to the not paying blood services Infection risks. Germany Competent Authority closed commercial blood centre due to elevated frequency of infectious disease markers in its donor population April 20, 2017 | 17

Competition : Effects on demand and supply Represented by the hospitals Guarantee of safe blood, in-time deliveries, security of supply, setting of quality standard. May vary unpredictably Supply : minimum stock of blood must always be readily available April 20, 2017 | 18

Supply ? Supply of blood too low to meet demand Red cells: - hemorrhagic shock (bleeding at childbirth or from trauma) - correction of anaemia (malaria, haemoglobinopaties, such as thalassaemia, sickle cell disease) IVIG: - patients with PID while new immune modulating indications arrive Clotting factors: - haemophilia (WFH: 75% of haemophiliacs do not get treatment) April 20, 2017 | 19

Competition : Effects on quality Quality of blood components regulated Blood components standardized Quality management GMP in blood establishments Inspection by authorities April 20, 2017 | 20

In summary: monopoly versus competition …. Consider a BTS as a pharmaceutical organization without the aim of profit making and external share holders Continue with VNRBDs Work according GMP manufacturing Implement and work under Quality Management (be up to date : ICH Q10) Put yourself in the position of your clients Fulfill the wishes of your clients Have an optimal price-quality Consider collection of blood, plasma or other substances of human origin as a service of general economic interest. April 20, 2017 | 21

Recommendations Work according the highest standards of efficiency, safety and supply - security of the society - transparency - regulation on quality - meeting demands - no exploiting of the donors - no commercialization April 20, 2017 | 22