Raphael Lafargue/Abaca/Sipa USA via AP Images
People queue in front of a drugstore on March 16, 2020, in Paris.
PARIS – I’m heading home today after spending three months in Paris on a trip that was mostly research and reporting, and partly pleasure just by being here. Along the way, I learned a lot about the French health system.
One fascinating detail, with lessons for policy in the United States, is how France regulates pharmacies. Under French law, a pharmacy must be owned by a licensed pharmacist and each pharmacist may have only one.
As a consequence, there are no chains. It would be illegal in France for a pharmacist to front for a chain.
The results are the opposite of what free-marketeers might expect and what chains like CVS would claim. Drugs, both prescription and over-the-counter, are cheaper than in the U.S., and the service is far better.
To some extent, lower-cost drugs are also the result of France’s system of regulation of drug pricing, which evaluates pharmaceuticals on the basis of efficacy and pays accordingly. Once a drug is approved, price increases (common in the U.S.) are illegal.
But the system of retail drugstores also accounts for the lower prices. There are 23,000 separately owned pharmacies in France. There are six within a short walking distance of where I’ve been living.
This system produces plenty of competition for price and for service. Due to the combination of wholesale and retail regulation, and the salutary competition it produces, studies show that the average French person spends about half on prescription drugs what the average American does.
Independently owned local French drugstores are also part of the fabric of neighborhoods. So while the French have the reputation of being “statist,” in this case state regulation defends and promotes small business, competition, and community.
Meanwhile, back in the United States, the retail drugstore industry only gets more concentrated. Even worse, pharmacy chains have merged with both insurance companies and pharmacy benefit companies, creating additional monopoly pricing power and conflicts of interest, as these giants bargain with themselves—at the expense of both consumers and the remaining independent pharmacies.
CVS, beginning in 1977, acquired 12 other pharmacy chains, and then bought Aetna in 2018 for $69 billion. CVS, with 9,939 retail stores as of the end of 2021, is now also a large insurance company, as well as one of the largest pharmacy benefit managers (the latter being a middleman that was advertised as containing costs but now raises them). And with its absentee corporate ownership, CVS is also a sweatshop for pharmacists and technicians, according to this exposé in The New York Times.
As our colleague David Dayen has reported, the Federal Trade Commission, which allowed all of this concentration, finally got around last June to investigating the abuses of chain drugstore cross-ownership of pharmacy benefit managers. But the antitrust authorities never should have allowed CVS to so dominate retail drugstores, much less own a major insurance company.
The French have a neat and simple solution: one drugstore per licensed pharmacist. North Dakota is the one state in the U.S. with a similar law, but it has loopholes. A drugstore has to be 51 percent owned by pharmacists. One Midwestern chain, Thrifty White Pharmacy, uses its employee stock ownership plan as a basis for operating in North Dakota. And six CVS stores there are grandfathered. Even so, the preponderance of locally owned drugstores leaves North Dakota with lower drug costs than most states.
Louis Brandeis, in many ways the father of modern antitrust regulation, was especially worried about chain stores, which seemed convenient and efficient but had the potential of destroying local small businesses and gouging consumers. He sure got that right.
