On 29th January 2014, the Italian Competition Authority (“ICA”) opened an in-depth investigation into two leading Italian companies in the pharmaceutical sector for an alleged infringement of Article 101 TFEU; the prohibition of anti-competitive agreements or concerted practices.
The investigation stemmed from a complaint filed by Agenzia Regionale Centrale Acquisti (“ARCA”) a public entity owned by the Italian region Lombardy, entrusted to collate invitations made by pharmaceutical companies for medicines supply. The decision considers an alleged anti-competitive strategy between the pharmaceutical companies Novartis Farma S.p.A (“Novartis”) and Italfarmaco (“Italfarmaco”) (also the “Companies”).
The Companies are accused of avoiding competing with each other for tenders. In particular, the ICA focused its attention on tenders in three Italian regions: Lombardy, Emilia Romagna and Veneto from 2010 to 2013. The tenders were aimed at supplying regional hospitals with a particular medicine produced only by the Companies.
The Companies decided not to make independent tenders but instead asked for permission to make a joint bid through a joint venture. The Lombardy and Emilia Romagna regions denied them permission but permission was granted by the Veneto region. The Companies therefore submitted a joint bid only in Veneto and as two independent companies in Lombardy and Emilia Romagna. In Emilia Romagna however, the two companies offered the same supply price.
The ICA alleged that such conduct could constitute a concerted practice aimed at allocating markets and customers. In particular, the ICA pointed out that Novartis and Italfarmaco can count on the fact that they were and are the only producers of the medicine at issue.
The ICA also held that the Companies did not provide reasonable grounds justifying the abovementioned behaviour. In particular, the ICA alleged:
- The quantity of medicines required by tenders was in line with the productive capacity of the Companies.
- In each case, the mentioned quantity was reduced by 30% in order to meet the Companies’ request.
- All tenders regulations provided for the appointment of a third party should any problem with the quantity required arise.
In light of the above, the conduct of the Companies could raise serious issues regarding its compatibility with European Union competition rules and specifically with Article 101 TFEU. The alleged agreement between Novartis and Italfarmaco not to compete with one another is likely to fall within the prohibition in Article 101 TFEU as it amounts to undertakings allocating markets and customers amongst themselves.
If wrongdoing is found, the ICA’s investigation and subsequent enforcement action could help make the pharmaceutical sector more competitive and provide Italian healthcare sector with high cost savings.