On 19th November 2014, the Italian Competition Authority (the “ICA”) opened an in-depth investigation into two companies (the “Accused Companies”) belonging to the same corporate Group and who manufactured drugs for alleged infringements of Article 102 TFEU, the prohibition against the abuse of dominance.
In Italy, as far as the National Health System (“NHS”) is concerned, drugs are divided into three classes: Class A, Class H and Class C. Only drugs belonging to Class A and H are reimbursed by the NHS and because of that their prices cannot be freely decided by the manufacturer but must be determined through a negotiation procedure between the latter and the Italian Medicines Agency (“IMA”). If such negotiation fails the medicine goes automatically to Class C.
Between 2013 and 2014 the Accused Companies asked the IMA that some anti-cancer drugs produced by them be moved from Class A to Class C in order to bring the price paid in Italy in line with the much higher prices in other major European Union countries.
The IMA rejected such request saying that the anti-cancer drugs were deemed by its internal scientific committee as essential for patients affected by certain types of tumours and suggested starting the negotiation procedure to take into consideration an increase in price of the said drugs.
The negotiation ended up with a substantial increase in the price paid by NHS for the anti-cancer drugs.
The ICA believes that the Accused Companies implemented a strategy aimed at obtaining from the negotiation a significant increase in selling prices due to the following factors:
- There were no objective reasons justifying the request of an increase in price;
- The Accused Companies knew they enjoyed a dominant position in the product market as no other companies were in the same market or about to enter it;
- During the negotiation procedure the Accused Companies put pressure on the IMA and threatened the withdrawal of the anti-cancer drugs from the Italian market without a significant increase in the price.
Therefore, the ICA alleges that the Accused Company abused their dominant position in the relevant market in order to obtain higher profits and hinder parallel trade out of Italy to other European Union countries, in violation of Article 102 of the TFEU.
In our view, the investigation is welcome as, if wrongdoing is found, it can help provide the Italian healthcare sector with high cost savings and discourage other drugs manufactures from asking for illegitimate increase in price to the detriment of consumers/patients. However, it could also raise the commercially difficult point of when could a drug manufacture who was in sole control of a treatment raise their price without the fear of regulatory backlash?