Italian pharmacists, professions aim to foil reforms

POTENZA Fri Jan 20, 2012 5:15pm GMT

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POTENZA (Reuters) - Pasquale Brandi owns a 130-year-old pharmacy in the center of the southern Italian city of Potenza, on Via Pretoria, the street where the townspeople take their evening stroll or "passeggiata."

Despite the heavily frequented central location, revenue has been falling since sales of non-prescription drugs were deregulated in 2006, and as the country heads into a prolonged recession things have got worse, he said.

These drugs can now be bought at so-called "para-pharmacies" that also sell soaps and cosmetics, as well as in special sectors of some supermarkets.

If prime minister and former European competition commissioner Mario Monti gets parliamentary approval for his so-called "Grow Italy" measures to open up the country's highly regulated services sectors, then Brandi said he may have to let go both his employees.

"I feel like a dog chasing his tail," said the 43-year-old, who runs the pharmacy with his sister, Stella, also a pharmacist. They inherited the pharmacy and the license to run it from their mother, who in turn received them from her father.

Monti's reforms are intended to encourage competition by loosening the strict rules that govern a host of professional groups in Italy, from pharmacists and journalists to notaries and taxi drivers.

However, his efforts to open up the "closed shop" mentality that has grown up behind the professions is being fiercely opposed by the insiders who benefit from the way things have worked for years.

The first set of deregulation measures came up for discussion by the cabinet on Friday and Industry Minister Corrado Passera says similar packages will be passed every month.

DEBT CRISIS

With Italy in the frontline of the euro zone debt crisis, the stakes are high. Monti is desperate to convince markets that a chronically sluggish, hidebound economy can be reformed, even if some commentators question the growth-boosting potential of the raft of micro-measures.

"Maybe liberalizing taxis and pharmacies won't have a big impact on growth, but not doing it would give the impression that Monti can't even liberalize taxis and pharmacies," said Alberto Mingardi, director of the Istituto Bruno Leoni, a Milan-based free-market think tank.

In Italy, pharmacy licenses are limited to one every 4,000 inhabitants, and they are often passed down for generations, effectively blocking newcomers unless they purchase a license at a high cost from a current owner.

"I don't like to consider people who buy medicine as consumers," said Susanna Sbarigia, who owns a pharmacy with a staff of eight in Rome. Like Brandi, she inherited her license. "People who buy medicine are sick and are looking for the proper medicine to make them healthy again. It's a public service."

Currently all prescription pharmaceuticals can be sold only in a pharmacy. The new law would boost the number of licenses and allow some prescription drugs to be sold by para-pharmacies.

Unlike in the United States or Britain, there are no drugstore chains in Italy.

Guilds representing lawyers, notaries, accountants and journalists have pledged to fight the abolition of minimum fees, while petrol stations and many others are digging in against deregulation measures that would affect them.

Paradoxically however, the fact that Monti has taken on such a broad swath of groups may end up helping him because it means no vested interests can say they are being unfairly picked on.

"The only way to overcome this kind of opposition is to pass a whole battery of changes together," said Mingardi.

PRIVILEGES

With Italy mired in recession - the International Monetary Fund expects the economy to contract in both 2012 and 2013 - and businesses fighting to hold on to their privileges, the deregulation battle is a key part of Monti's goal to make the country more competitive in the long term.

"The world wants to see if there's a new Italy, or whether it's still blocked by the crossfire of vetoes from special interest groups," said Daniel Gros, director of the Centre for European Policy Studies in Brussels.

But the professions have powerful allies in parliament. Of Italy's 945 lawmakers, almost a third are members of one guild or another. More than 130 are lawyers, 90 are journalists, 23 are accountants, 13 are architects and four are notaries.

Monti insists deregulation is "not against anyone, but in favor of all citizens." The aim is to lower costs, open up jobs for young people and plant the seed for long-term growth needed to pay down a debt worth 1.2 times the nation's annual output. A third of Italians between the age of 15 and 24 are unemployed.

The draft legislation before the cabinet on Friday combines an increase in the number of licenses for taxis and pharmacies with numerous other measures that, among other things, scrap minimum fees for all professions, deregulate discount sales by retailers, cap toll-road tariffs and open up the market for train transport.

The aim of the package is to boost Italian growth, which has trailed the euro zone average every year since 1996 when the European Union's statistics office Eurostat first began calculating comparative data.

By deregulating services, Italy could increase growth by 11 percent in the long run, with half of that coming during the first three years after the reforms, according to a 2009 study by the Bank of Italy.

As European competition regulator, Monti took on some of the world's biggest companies including Microsoft and General Electric. Failing to open up competition among Italy's taxi drivers and pharmacists would send the wrong message to investors whose confidence in the country is already low.

In 2006, former Prime Minister Romano Prodi's government passed two deregulation packages, but was forced to reverse those aimed at taxi drivers and to scale back the ones regarding pharmacies because of fierce lobbying.

Silvio Berlusconi's subsequent government then restored some of the old, more restrictive laws when he took over in 2008.

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