Anticompetitive unilateral conductAbuse of dominance
In what circumstances is conduct considered to be anticompetitive if carried out by a firm with monopoly or market power?
Abuse of dominance is dealt with under the Competition Law, similar to the corresponding provisions of article 102(1) of the TFEU.
In the pharmaceutical sector, the practices most likely to give rise to an abusive conduct would mainly be as follows:
- refusal to supply;
- abusive pricing policy, especially in the form of a margin squeeze;
- discrimination among customers, despite similar transactions; and
- dual pricing practices, between various distribution channels (hospital versus retail), consisting of applying different prices (lower in hospital and higher in retail), aimed at gaining new patients in hospitals that would remain ‘locked’ on the product and boosting sales in retail, as a direct consequence of initiating patients in hospitals. The rationale is that a dominant company is presumed to be powerful enough to grant very significant discounts to one channel, namely a hospital, to gain and secure very significant sales on the retail channel (cross-subsidisation between the channels), to the detriment of its competitors who would run the risk of being excluded from the market or seeing their market share drastically diminish.
Is there any de minimis threshold for a conduct to be found abusive?
There are no such de minimis thresholds in cases that deal with an abuse of dominance.Market definition
Do antitrust authorities approach market definition in the context of unilateral conduct in the same way as in mergers? If not, what are the main differences and what justifies them?
Market definition would, as a matter of principle, be approached by the Competition Council in line with the Commission Notice on the Definition of Relevant Market for the Purposes of Community Competition Law, transposed as such into Romanian law.
If unilateral conduct is assessed in the context of dominance, or where a merger is likely to give rise to a dominant market power, the Council would most likely consider a rather narrow market definition, at ATC4 level, and would perform a comprehensive in-depth analysis of the relevant market and its configuration, focusing in particular on:
- the market configuration and its evolution, the main competitors of the parties and their market shares;
- the barriers to market entry; and
- the trends of offer and demand and influencing factors.
In mergers that are not considered problematic (eg, combined market shares are below 30 per cent), the Council will likely leave the market definition open, similar to the practice of the EC.
Overall, market definition in cases of potential abuse of dominant position tend to be narrower in practice than in merger control cases.Establishing dominance
When is a party likely to be considered dominant or jointly dominant? Can a patent owner be dominant simply on account of the patent that it owns?
Under Romanian law (unlike EC law), there is an express presumption of dominance once the market share exceeds 40 per cent on the relevant product and geographical market. In theory, this is rebuttable; however, in the case law of the Competition Council, there have not yet been situations when the parties concerned were able to successfully overturn the presumption of dominance, although, at least theoretically, this remains possible, as there are several other elements that need to be analysed in addition to market share before reaching the ultimate conclusion that a company is dominant (market shares of competitors, barriers to entry, excess capacity, etc).
A patent holder would not normally be deemed dominant simply on account of the patent itself. However, the patent would most likely enable its holder to acquire a dominant market share, as a result of the revenues accomplished on the relevant market throughout the entire exclusivity period conferred by the patent.IP rights
To what extent can an application for the grant or enforcement of a patent or any other IP right (SPC, etc) expose the patent owner to liability for an antitrust violation?
An antitrust risk may exist to the extent that an application would exceed the mere exercise of legitimate rights concerning patents. This might include a more comprehensive abusive strategy by a dominant company to harm competitors, by preventing their entry on the market. However, there would need to be more elements pointing to such abusive conduct than the simple application for a patent or other IP rights.
When would life-cycle management strategies expose a patent owner to antitrust liability?
Life-cycle strategies could expose a patent owner to antitrust liability to the extent that they could be deemed to fall under the ambit of an abuse of dominance, being designed by a dominant company to exclude competitors and to create, maintain or enhance its dominant market power.
The Competition Council has not yet dealt with cases concerning specifically life-cycle management strategies, although at the beginning of 2020 the authority fined the Romanian subsidiary of Roche in connection with conduct allegedly aimed at preventing the entry of generic products on the market for certain oncological medicines. The total fine amounted to €12.8 million and the sanctioning decision was issued following two separate investigations initiated in 2017.
In the first investigation, the authority found that Roche’s actions included margin squeeze practices within the context of public tenders. According to the authority, Roche’s conduct was motivated by a strategy to delay access to the market of biosimilar alternatives (as per the Competition Council, if the wholesalers were given a chance to win the tenders, they would have been able to replace Roche products with similar, cheaper products of other manufacturers).
In the second investigation, the authority fined Roche for designing a commercial strategy aimed at preventing the sale of competing, cheaper drugs containing the same active substance as one of its innovative medicines; in practice, the incriminating conduct consisted of directing patients to one of its expensive products, through the Roche Patient Card and the Roche Call Centre programmes, and covering the price difference that patients should have had to pay when purchasing its product, in order for them not to buy another similar drug. The authority’s conclusions were that this conduct led to the creation of barriers to market entry, with foreclosing effects, delaying the entry of biosimilar products.Communications
Can communications or recommendations aimed at the public, HCPs or health authorities trigger antitrust liability?
Such communications would need to comply with relevant legal requirements concerning the promotion and advertising of prescription and non-prescription drugs. In the case of breaches, it would primarily be a regulatory issue rather than a competition law one.
Under Romanian law, the promotion of prescription drugs to the general public is strictly prohibited, while promotion of prescription drugs to HCPs is permitted under certain forms and subject to certain conditions. Also, the ARPIM Code provides for additional rules and constraints regarding the various forms of promotion towards HCPs (hospitality, sponsorships, promotional materials) that are binding on ARPIM members.
Such communications may nevertheless have an antitrust impact and may amount to abusive conduct to the extent that the entity disseminating them is dominant and they are targeted at preventing or limiting generic penetration on the market and encouraging the prescription of the innovative product. They could also be analysed as unfair competition practices if they are aimed at denigrating competing products or engaging in an unpermitted comparison with competing products.Authorised generics
Can a patent owner market or license its drug as an authorised generic, or allow a third party to do so, before the expiry of the patent protection on the drug concerned, to gain a head start on the competition?
There is no express prohibition to market or license a drug as an authorised generic before the expiry of the patent protection.
However, if this is done as part of a more comprehensive strategy aimed at delaying or preventing the entry of the generic products into the market, this could be analysed by the Competition Council as a possible abuse of dominance.Restrictions on off-label use
Can actions taken by a patent owner to limit off-label use trigger antitrust liability?
For clarity, under Romanian law, the promotion of off-label usage is prohibited, unless done as a response to an express written request from an HCP.
In principle, if the patent covers the off-label use, its holder could indeed enforce it in accordance with the relevant patent legislation, without such triggering antitrust liability, as it would be the exercise of a legitimate right.Pricing
When does pricing conduct raise antitrust risks? Can high prices be abusive?
Pricing conduct by a dominant undertaking could indeed trigger antitrust liability, if it can be considered an abuse of dominance. Given the fact that maximum prices are set by the law, an abuse could not take the form of excessive pricing in this sector; however, the interplay and replacement of various forms of the same drugs may raise issues.
However, practices like roll-back fidelity discounts would be a typical example of a pricing practice likely to give rise to an abuse, since the customers would be heavily incentivised to purchase most or all of their requirements from the dominant company, to benefit from the low net prices resulting from the application of the roll-back discounts.
Margin-squeeze would be another example of an abusive pricing practice, relevant especially in the case of public tenders when the dominant company, present both on the upstream market (where it sells to its wholesalers) and on the downstream market (where it competes with its wholesalers), offers, for example, a bidding price that is equal to or lower than the price at which its distributors are purchasing the products from it, leaving them no reasonable margin to compete in the respective tender.
By way of example, at the beginning of 2020, the Competition Council fined the Romanian subsidiary of Roche in connection with, inter alia, margin-squeeze practices within the context of public tenders (Roche competed in tenders with its own wholesalers, but the price at which Roche offered the drugs to the wholesalers was higher than the price Roche offered to the hospitals in the tenders, so the competition authority found that these actions led to the elimination of competition in tenders since the wholesalers were not able to compete effectively or profitably).Sector-specific issues
To what extent can the specific features of the pharmaceutical sector provide an objective justification for conduct that would otherwise infringe antitrust rules?
While the pharmaceutical sector does have particular features mainly related to the necessity of ensuring adequate and sufficient quantities of drugs for the patients, a company could not objectively justify anticompetitive behaviour by such special features, to obtain a free pass from antitrust liability.
For example, if a drug would objectively need to be banned from export to serve the interests of Romanian patients (eg, there is an urgent national need for chronic disease drugs and the drugs in questions are scarce), such measure would typically need to be taken by the MOH (as per specific legal provisions dealing with export bans and within the limits of the acquis communautaire) and not as a private initiative, by the pharmaceutical company that supplies the drugs in question via an export ban in relation to its wholesalers.
One cannot exclude specific situations with more flexibility (eg, a dominant company abruptly interrupting supply to a wholesaler for which there is evidence of lack of safety); however, this would be handled on a case-by-case basis.
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10 April 2020