FARMINDUSTRIA/CODICE DI AUTOREGOLAMENTAZIONE
PRESS RELEASE
PRESS RELEASE
Farmindustria liable for concluding anti-competitive agreements.
On 7 December the Competition Authority completed its investigation into Farmindustria, the National Association of the Pharmaceuticals Industry, with a membership of 217 pharmaceutical companies. The Authority ruled that Farmindustria had concluded a number of agreements that distorted competition in violation of section 2(2) of Law no. 287/90 (the Competition Act).
Its anti-competitive conduct lay, firstly, in the fact that Farmindustria had directed the conduct of its member companies supplying public hospitals, for which the the normal practice is through competitive tendering, permitting competition on the basis of price even for medicines and drugs whose prices are regulated. In this instance, Farmindustria had introduced into its Code of Conduct a provision prohibiting its member companies from granting a discount in excess of the statutory minimum 50% discount on the retail price of each drug when bidding for competitive tenders. Fines could be imposed on member companies which failed to comply.
From a sample of local health authorities and hospitals contacted during the investigation it transpired that bidders had in fact complied with the instructions issued by Farmindustria in a very large number of competitive tenders.
Farmindustria had also been encouraging members to create Temporary Joint Ventures to bid for contracts to supply public hospitals. By so doing, Farmindustria had advocated the adoptionm of an instrument that facilitated the complete coordination of all the possible competitive parameters, such as prices and quantities, between all the bidders.
Lastly, Farmindustria had also told its membership the terms of sale to be adopted for all pharmaceutical products supplied to public and private hospitals to which the statutory 50% hospital discount did not apply.
Farmindustria was also found to have distorted competition by urging its member companies to actively oppose the introduction of generic drugs into Italy as members of other business associations which had a direct interest in developing the generic drugs market. Since this had to do with an issue with a direct bearing on the economic and commercial prospects and strategies of all its member companies, the Authority found that it was liable to distort the conditions for ensuring competition on the pharmaceuticals market.
Farmindustria had also been promoting the conclusion of an agreement between industrial associations for the grant of licences by multinational corporations to small and medium firms. These were commercial activities that the companies involved would not have embarked on if left to make their own entrepreneurial decisions, and the main economic reason underlying such an agreement would be to protect the medicinal specialties market against the generic drug manufacturers.
The Authority also found that the code regulating Class C drug prices drawn up by Farmindustria in 1998, setting a benchmark price to which all the member companies could align their prices, interfered with the price formation process for the products in that Class, and also constituted am infringement of Competition Law.
Another infringement of Competition Law was the action taken by Farmindustria to regulate the provision of information and promotions by its member companies with prescribing physicians, through complex control mechanisms that included disciplinary penalties and fines.
In the course of the investigation Farmindustria made numerous and detailed undertakings to remove these statutory infringements being investigated, and agreed to comply henceforth with the Competition Act. In view of these undertakings, and in order to appraise their practical implementation, the Authority ordered Farmindustria to submit a report on progress with these measures within six months of the date of closure of the investigation.
Rome, 28 December 1999.