The CMA has opened an unprecedented number of new investigations in the pharmaceutical sector in the past month, with 4 new investigations during October 2017 (see the ‘update’ section here). However, the CMA is not the only national competition authority to be focusing its attention on the pharmaceutical sector, as, on 20 November 2017, the French Autorité de la concurrence announced a new enquiry into the industry. The issues set to be addressed have been recently covered by the French authorities in a 2013 sector enquiry (and see our earlier post here), so it will be interesting to see whether any progress has been made.
The new enquiry will again examine the pharmaceutical distribution chain. First, it will look at the changing role of intermediaries. The previous enquiry had found that intermediaries such as wholesale distributors and purchasing group networks often struggled to counter the market power of the large manufacturing companies. A particular source of difficulty arose from the decision of many pharmaceutical companies to start selling direct to the large pharmacy chains. This is particularly challenging to smaller pharmacies who are unable to match the buying power of the chains and then offer their customers competitive prices. The current enquiry will investigate whether the intermediaries are playing a greater role compared to 2013, particularly in regard to sale price dynamics.
This issue was also addressed by the UK authorities in an OFT Medicines Distribution Market Study in 2007. Traditionally, branded medicines for which a price had been agreed under the Pharmaceutical Price Regulation Scheme (PPRS) were supplied to the NHS via intermediaries such as wholesalers. However, some manufacturers were starting to implement ‘Direct to Pharmacy’ (DTP) schemes and the OFT examined the potential impact of these new arrangements. The study found that whilst DTP schemes could bring efficiency benefits, there were also risks of cost increases to the NHS due to the lack of purchasing choice available to pharmacists who frequently have no choice over which medicine to dispense (for an example of this in action see the Pfizer/Flynn excessive pricing case which we covered here).
Second, the new enquiry notes that France has heavy regulatory restrictions on the sale of non-prescription medicines. The Autorité has previously recommended that such restrictions be gradually removed, and in particular that online sales be permitted. This was in response to the finding that the “intensity of competition between dispensing chemists is relatively low, as demonstrated by major differences in pricing observed for medicinal products that are not reimbursed”. However these recommendations have not yet been implemented, whereas many of France’s European neighbours do allow online sales. The enquiry will therefore examine this topic again, taking into account new developments and ideas such as the creation of pharmacy chains and their flotation, and the relaxation of rules around advertising.
As reflected by the CMA’s recent investigations (see Pfizer/Flynn above, as well as the statements of objections sent to Actavis (in December 2016) and to Concordia (within the past week)), the Autorité will also look at pricing. In France there are two categories of pharmaceuticals: reimbursable products where the price is set by negotiation between the French Economic Committee for Healthcare Products and the manufacturers, and generic medicines where prices are set by the market (as in the UK, until the recent passing of new legislation). In 2013 the Autorité had observed that some generic products were subject to inflated prices due to the “existence of considerable ‘disguised’ rebates”. Since 2013, a scheme has been implemented under which rebates have to be declared to the regulatory authorities. This new enquiry will therefore examine whether this scheme has been successful, and whether the heavy discounts often given by the pharmaceutical companies to the dispensing chemists are passed onto consumers. The enquiry also plans to examine the criteria used in the negotiation of reimbursable medicines, as well as the bargaining power of hospitals when negotiating prices with pharmaceutical companies.
In due course we will report further on how the Autorité views the current state of the French medicines distribution market and whether it leads to any infringement investigations following on from the sector inquiry.