In November 2017, the French competition authority, the Autorité de la concurrence, announced a new enquiry into the pharma sector. The issues set to be addressed are essentially an update of matters already investigated by the French authorities in a 2013 sector enquiry (see previous Bristows coverage here).
The new enquiry will again focus on 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 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 with regard to sale price dynamics.
This issue was also addressed by the UK authorities in an OFT Medicines Distribution Market Study in 2007. 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.
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. However these recommendations have not yet been implemented. The enquiry will therefore examine this topic again, taking into account new developments.
Finally, the Autorité will also assess pricing. In France there are two categories of pharmaceuticals: reimbursable products where the price is set by negotiation between a government body and the manufacturers, and generic medicines where prices are set by the market (as in the UK, until the recent passing of new legislation). The Autorité observed in its 2013 study that some generic products were subject to inflated prices due to the “existence of considerable ‘disguised’ rebates”. Since 2013, a scheme for declaring rebates has been implemented. This new enquiry will therefore examine whether this scheme has been successful, and whether the heavy discounts often given by pharmaceutical companies to dispensing chemists are passed onto consumers.
- Sector enquiries can impose an administrative burden on companies. Like other competition regulators, the Autorité has considerable investigatory powers to obtain information.
- Sector enquiries are often followed by investigations into specific companies and practices. The last French pharma sector inquiry was followed by a European Commission investigation into possible collusion between generic companies over pricing. That investigation was closed without any infringement finding, but scope remains for further investigations in future.