Any limitation of parallel trade in vertical agreements is likely to raise competition concerns. After GSK notified a dual pricing scheme to the EC in 1998, the CJEU held on appeal, on the one hand, that any limitations of parallel trade, also in the pharmaceutical industry, were restrictions of competition ‘by object’, and, on the other, that the Commission had been wrong to reject the exemption sought by GSK for that restriction under article 101(3) of the TFEU. The litigation at EU level was accompanied by a myriad of cases before the Spanish competition authority and the administrative courts, which were eventually all decided in favour of GSK.
Following these precedents, pharmaceutical companies started adopting free pricing systems instead of the usual supply quota systems operated under the Bayer-Adalat case law of the European courts. Under these schemes, the manufacturers only set one free price, which applies to any situation not leading to a reimbursement under the public price intervention scheme described above. Thus, if a medicine is financed by the NHS and dispensed in Spain, the regulated price set by the state will apply, while medicine exports are subject to the (higher) free price set by the manufacturer.
The EAEPC and a Spanish wholesaler complained against this new pricing scheme to the CNC, which dismissed these complaints, holding that there was no dual pricing and therefore no restriction of competition. On appeal, the Spanish National Court quashed these decisions in two judgments of 2011 and 2012, holding that the scheme limited parallel trade and therefore had to be assessed pursuant to the GSK Spain case law of the CJEU, which qualifies agreements restricting parallel trade as restrictions of competition by object. It also held, however, that under the same case law, the agreements might qualify for exemption under article 101(3) of the TFEU, but that the CNMC had to pronounce itself in this respect. The 2011 and 2012 judgments of the Spanish National Court were confirmed by the Supreme Court in two judgments of 3 December 2014 and 4 March 2016. In particular, in the judgment of 3 December 2014, the Supreme Court rejected that there had not been an ‘agreement’ for the purposes of article 101 of the TFEU between Pfizer and its wholesalers, since Pfizer had concluded supply contracts with each wholesaler, which included the free pricing provisions. According to the Court, these clauses have as their main object to impede or restrict parallel exports of pharmaceuticals into other member states of the EU. The ruling recalls that the judgment of the Spanish National Court rests on the CJEU’s ruling in GSK Spain, where the Court held that the application of different prices to financed medicines dispensed in Spain and higher prices to exported medicines, amounted to a restriction of competition contrary to article 101(1) of the TFEU.
Further to the Supreme Court’s judgments of 3 December 2014 and 4 March 2016, in March 2015, the CNMC started infringement proceedings against Pfizer in relation to a possible restrictive practice consisting of establishing supply contracts liable to impair parallel trade and, in March 2017, it started infringement proceedings against several pharmaceutical companies in relation to the possible establishment of distribution systems involving dual pricing and a possible collusive agreement to establish these systems.
In its decision of 19 January 2017 in the first proceedings, the CNMC held that the pricing system established by Pfizer did not infringe article 1 of the SCA. First, the CNMC found that Pfizer did not establish a dual pricing system with the object of restricting parallel trade, but only set a free price, which was then replaced by the regulated price when the requirements for the application of the latter were fulfilled. According to the CNMC, Pfizer’s behaviour was not autonomous, owing to state intervention, and could not therefore be deemed to infringe competition law. Second, the CNMC found that the GSK Spain case law could not be applied by analogy to Pfizer’s case, since the applicable legal framework was different. According to the CNMC, the establishment of a dual pricing system by GSK was the result of a voluntary decision by GSK, who made an extensive interpretation of the legislation then in force that required the application of the regulated price to all financed medicines sold in Spain (independent of where they were dispensed). In the new legal framework that entered into force in January 2000 - in which the regulated price no longer applies to all sales of financed medicines in Spain, but only to sales of financed medicines actually dispensed to patients in Spain - the establishment by Pfizer of different prices for the same medicine merely complied with the applicable legislation, which implicitly introduced the existence of two different prices for the same product.
In its decision of 30 August 2018 in the second proceedings, the CNMC reached the same conclusion regarding the legality of the pricing mechanisms implemented by the pharmaceutical companies being investigated and also found that the companies at issue did not collude to establish these mechanisms.
Similarly, in a judgment of 7 December 2015, the Provincial Court of Madrid held that the GSK Spain case law was not applicable to the free pricing system of a pharmaceutical company, essentially arguing that the legal framework of the Medicines Act had changed since the GSK Spain case and that the scheme did not amount to dual pricing, but rather was the result of a unilateral decision of the pharmaceutical company. In the same judgment, the Provincial Court held that the restructuring of the distribution system of that pharmaceutical company, which resulted in a reduction in the number of wholesalers, was objectively justified since it pursued the objective of increasing efficiency and therefore could not be held abusive, even assuming that the company were dominant. In April 2018, the Supreme Court denied leave to appeal against the judgment of the Provincial Court of Madrid, which has thus become final.
In October 2018, the CNMC decided not to open infringement proceedings against 20 producers of veterinary medicines for alleged resale price maintenance, territorial restrictions and information exchanges with their distributors. In particular, the CNMC found that the information exchanges at issue did not raise competition concerns since they were carried out in the context of a vertical relation and were necessary for pharmaceutical companies to define their competitive strategies regarding their competitors.
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