This month’s Life Sciences & Healthcare newsletter focuses on the aspects of competition law. All the competition authorities in the Baltics keep a keen eye on the healthcare sector, which means that market participants should also keep up with possible changes in the authorities’ practices and approaches.
The European Union Commission’s report on enforcement of competition rules in the pharmaceutical sector
On 26 January 2024, the European Union Commission published a report on the enforcement of competition rules in the pharmaceutical sector from 2018 to 2022. Below you can find the key outtakes from the report.
1. The report highlights various precedents that provide guidance to market participants on how to ensure compliance with EU competition law. The market participants should:
- not submit baseless patent applications or claims in order to hinder or harm the competition;
- be wary of pay-for-delay agreements that have the objective of restricting competition and may also constitute abuse of a dominant position;
- avoid disparagement, e.g. disseminating misleading information about competitors’ products to the authorities, healthcare professionals, or the general public;
- be very careful with applying discounts, e.g. discounts given to hospitals may discourage hospitals from switching to another competitor’s products;
- not collude to put pressure on the authorities, e.g. in response to a tax, by withdrawing from the market;
- be cautious of excessive pricing, since the degree of vigilance has heightened in this matter.
2. Professional associations are under the spotlight. Pharmacy associations have been fined for fining pharmacists belonging to a certain group, for limiting the ability of pharmacists to advertise, and for preventing pharmacists from operating during the hours provided by law. And of course, our own local case in Lithuania where pharmaceutical companies and pharmacy associations were fined for submitting a proposal to a ministry.
The Estonian Competition Authority’s report about the pharmacy market
On 29 January 2024, the Estonian Competition Authority (ECA) published a report on the 2020 pharmacy reform. The main focus was on the wholesale/retail level, and the main takeaways were the following:
- The ECA stressed that in the case of a franchise agreement, decisions relating to the budget, business plan, profits and investments should remain within the competence of the pharmacy in order to avoid dominant influence. Subleasing pharmacy space from an undertaking related to the wholesaler creates conditions for influencing the business of the pharmacy.
- Pharmacies tend to buy goods only from one wholesaler. The ECA stressed that pharmaceutical wholesalers must ensure that the ordering system does not put one wholesaler in a privileged position. It should be easy for a pharmacist to compare offers from different wholesalers. The ECA supports the idea of creating a state-centred ordering system or an ordering system that all licensed wholesalers can join.
- The ECA supports changes to the principles of reimbursement. The ECA supports blind bidding, a procedure in which pharmaceutical companies, without knowing the prices offered by other companies, offer prices for their products. The ECA also pointed out that different kinds of repayments – i.e. kickbacks – (credit, sales bonus, discounts) are used in relationships between manufacturers-wholesalers or wholesalers-pharmacies, and that such repayments prevent discounts given by manufacturers from reaching the consumer despite the mark-up price established by law.
- The ECA recommends that certain individuals be banned from being part of the governing body of a legal entity that owns a pharmacy. The prohibition would affect persons who own or who are on the management bodies of a pharmacy franchiser, pharmaceutical manufacturer, wholesaler, or healthcare provider, or who are employed by or providing services to such a person or entity under a contract.
- Finally, the ECA wants its powers to be widened in the dominant influence assessment procedure. The ECA would like to obtain the right to impose structural or behavioural remedies on market participants based on market studies.
Latvian Competition Council priorities for 2024
On 7 February 2024, the Latvian Competition Council announced its priorities for 2024. Among other priorities, the Competition Council mentioned that it will complete its ongoing market surveillance and it plans to open new in-depth market investigations and preventive measures in several sectors, including healthcare, in order to improve the competitive environment and increase public welfare.
The Competition Council plans to prepare proposals for policy-makers to remove unjustified barriers and restrictions to competition, and to promote a more competitive business environment and restrict unfair trade practices in the sectors studied in-depth. The Competition Council also plans to take preventive measures and prepare amendments to the laws and regulations aimed at removing restrictions to competition and enabling consumers to buy the goods and services offered under fair competition conditions.
Latvian Competition Council priorities for 2024
On 18 January 2024, the Lithuanian Competition Council (LCC) announced its priority sectors. The “health (including pharmaceuticals)” sector is one of the authority’s four priorities. This means that the LCC is more likely to open investigations in this sector in particular. Moreover, it means the LCC will also monitor legislative changes, and submit comments if the LCC believes a proposed change may limit competition.
The LCC has also recently published its strategy document for the 2024–2029 period. However, the strategy simply outlines the more general values and goals of the LCC, such as independence, achieving value for consumers, etc. It does not contain anything more specific related to the healthcare sector.
Read about 2024–2029 strategies
Who is affected by the news?
- Pharmaceutical manufacturers
- Pharmaceutical wholesalers
- Pharmacies
- Professional associations
What is especially important?
- Professional associations are under the spotlight of competition authorities. Additional scrutiny in all communications and cooperation should be applied.
- The Estonian Competition Authority is very critical of the pharmacy reform as well as the functioning of the pharmaceuticals market in general. Time will tell whether the ECA’s proposals result in actual changes in the laws or the ECA’s practices.
- Both the Latvian and the Lithuanian competition councils have marked healthcare as their priority sector for 2024. Market participants should pay attention.
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Contact our experts:
Regional co-head of Life Sciences & Healthcare sector group
Senior Associate, Latvia
Senior Associate, Lithuania
