In Setback to Toiletries-market Reforms, Health Ministry Pulls Its Proposed Regulations

Decision made during Knesset panel meeting to approve the rules aimed at cutting prices, with Israelis paying 62% more than other OECD countries

A Super-Pharm branch in Tel Aviv.
Daniel Bar-On

The government’s long-delayed plans to inject more competition into Israel’s toiletries market and lower prices by allowing parallel imports was dealt a major setback on Thursday, as the Health Ministry said it was withdrawing the regulations governing the reforms.

Moshe Bar Siman-Tov, the ministry’s director general, made known the on-the-spot decision taken while the Knesset Health and Welfare Committee was meeting to review the proposed regulations.

“We need to take a break in the process,” he told lawmakers. “It is proving difficult to make the leap forward between the existing situation and the future one. We’re are willing to go back and study it more. ... Everyone wants to go ahead with the reforms that will create a better and easier situation. [But] we need to delay, which means the law won’t go into effect at the end of the month.”

The reforms would make it easier and faster to imports toiletries and cosmetics, opening the way for more parallel imports, which are brought into the country by companies that have no official relationship with the manufacturer and source their goods from third parties.

Advocates of the reforms, which was approved by the Knesset as part of the 2016 Budget Arrangements Law, should bring down the price of toothpaste and haircare products by breaking a near monopoly of exclusive importers.

The reforms are part of a wider strategy of liberalizing imports for a range of products, including personal imports consumer orders from abroad online, to help bring down the cost of living. In the case of toiletries and cosmetics, a study by the Finance Ministry found that prices for cosmetic and toiletries are on average 62% higher in Israel than in other countries belonging to the Organization for Economic Cooperation and Development.

But the Health Ministry has delayed regulations, which were supposed to be ready in July, that would make it possible for the law to go into force. It has cited concerns about the risks of reduced supervision of health-sensitive products, like those used by children and pregnant women.

At Thursday’s Knesset committee meeting, Health Ministry officials began by detailing the problems they were having in formulating the regulations, including pressure from foreign governments whose companies will be affected by the reforms.

“Recently we’ve been getting requests for changes to the regulations,” said Osmat Luxembourg, a ministry official told the committee.

“We have received inquiries from the United States, Europe, other ministries and the industrialists. We need to examine all the points and bring a model to work here. We don’t want to move forward with a model that many people contend is unworkable,” she said.

In response, MK Eli Alalouf (Yesh Atid), the committee’s chairman, suggested they pull the regulations for now. Bar Siman-Tov said he would consult with Health Minister Yaakov Litzman and returned to the meeting to say that it what the ministry was doing.

However, the committee’s legal adviser Anat Maimon said the decision was legally problematic since a law had been passed instituting the reforms. She suggested MKs would have to approve a law authorizing a delay.

Lobbyists, among them the Policy Forum that represents the Federation of Chambers of Commerce, have been pressing committee lawmakers hard to block the reforms.

But even parallel imports aren’t convinced that the regulations as now formulated will be effective, particularly the planned regulations on sensitive products that they say will make harder than it it now to import. The Economy and Industry Ministry issued a statement expressing surprise at the Health Ministry’s about face.

“The Health Ministry is preventing us from winning the war on the high cost of living. The regulations were a historic opportunity to put an end to import exclusivity,” it said in a statement.