October 2018

 

 
 

THE NATIONAL MARKETS AND COMPETITION COMMISSION UPHOLDS THE LEGALITY OF THE FREE PRICE POLICIES APPLIED BY SEVERAL PHARMACEUTICAL COMPANIES IN SPAIN

 
     
 

In a resolution passed on 30 August 2018 (File S/DC/0608/17, EAEPC vs Pharmaceutical Companies - the “Resolution”), the National Markets and Competition Commission (the “CNMC”) brought to an end the infringement proceedings initiated against six multinational pharmaceutical companies (Pfizer, Lilly, Janssen-Cilag, Novartis, Sanofi and MSD) for alleged practices prohibited by article 1 of the Spanish Competition Law (the “LDC”) and by Article 101 of the Treaty on the Functioning of the European Union (the “TFEU”). The practices in question mainly consisted of setting up an alleged dual-pricing system for their medicines, depending on whether they were dispensed in Spain or intended for intra-community trade or export.

The Resolution, which concludes that there was no infringement, confirms and reiterates the CNMC’s analysis in its resolution of 19 January 2017 on Pfizer’s free price policy. The Pfizer policy had initially been reported by Spain Pharma, S.A., which at the time was the Spanish member of the European Association of Euro-Pharmaceutical Companies (the “EAEPC”). Shortly afterwards, the EAEPC reported the six pharmaceutical companies previously mentioned (including Pfizer) on identical grounds. The two sets of proceedings have been conducted in parallel.

At first instance, the Spanish National Competition Commission (the “CNC”), the CNMC’s predecessor, closed both files without initiating infringement proceedings as it considered there was no evidence of infringements. These CNC resolutions, which were appealed by Spain Pharma and the EAEPC, were annulled by the Spanish National Court in two separate rulings (dated 13 June 2011 and 5 December 2012) that were, in turn, confirmed by the Spanish Supreme Court (rulings of 3 December 2014 and 4 March 2016).

As a result of the Supreme Court rulings, the CNMC initiated infringement proceedings initially against Pfizer (settled in the resolution of 19 January 2017) and afterwards against the six pharmaceutical companies reported by the EAEPC.

In the Resolution, which concludes the second file, the CNMC reproduces verbatim the reasoning set out in its resolution of 19 January 2017 in relation to Pfizer. The CNMC takes the view that, even though the free price policies of the pharmaceutical companies may differ from one another in various aspects, the basic legal analysis must be the same for all of them. In short, it concludes that the pharmaceutical companies do not set a dual price depending on the final destination of the medicines, but rather a single price that they each unilaterally decide on in exercising their freedom to set the prices of their products (ex. article 38 of the Spanish Constitution). This price is then replaced by the intervened price (ex. article 94 of Royal Legislative Decree 1/2015 of 24 July approving the consolidated text of the Law on guarantees and rational use of medicines and medical devices) once it has been verified that the intervention requirements are met: public funding and dispensation in Spain.

The CNMC reaches this conclusion after assessing the pricing policies in the light of the case law of the Court of Justice of the European Union in the Glaxo case, since this was the main reason why the National Court had annulled the CNC’s initial resolutions. The CNMC considers that the judgments in the Glaxo case cannot be applied analogically to the six pharmaceutical companies’ policies because the practices differ and were carried out at different times: the approach taken to the design of contractual relations with wholesalers differed significantly, and the legislation applicable at the time the six designed their policies varied in terms of pricing rules as opposed to the legislation applicable in Glaxo.

In addition to reiterating the doctrine of the previous resolution, the CNMC also echoes the recent order (“Auto”) of the Supreme Court of 18 April 2018 (the “Order”). Some time ago, the EAEPC also sued a pharmaceutical company (this time, Janssen-Cilag) before the Spanish commercial courts for infringing article 1 of the LDC and Article 101 of the TFEU on grounds identical to those raised in the initial complaint before the CNC that resulted in the Resolution. Both the Commercial Court of Madrid and the Provincial Court dismissed the EAEPC’s claims, adopting a reasoning very similar to that contained in the Resolution. In its Order, the Supreme Court rejected the cassation appeal filed by the EAEPC, and the judicial decisions dismissing the EAEPC’s claims against Janssen-Cilag therefore became final. This Order undoubtedly constitutes a very important milestone in this judicial “saga”.

Finally, reference should be made to another infringement of which the EAEPC accused the pharmaceutical companies before the CNC: collusion in the design and implementation of their free price policies. The CNMC concludes that the overlaps between the policies of the six pharmaceutical companies are explained by changes that were made to the law (partial liberalization of medicine prices and reduction of the scope of administrative intervention to those medicines which satisfy, among other requirements, that of dispensation in Spain) and the evolution of the distribution sector brought about by various mergers (which has resulted in a decrease in the number of distributors with which the pharmaceutical companies can contract). For these reasons, it concludes that there is no evidence of concerted action.

Despite the clarity of the consolidated doctrine set out by the CNMC in the Resolution, we have yet to see the end of this file, given that the Resolution can be appealed before the National Court (and possibly before the Supreme Court). That said, there is no doubt that the CNMC’s defence of free price policies in the Resolution will greatly complicate the task of those who argue that these systems are illegal.

 
 

 

 
 

In case of any doubts or comments, please do not hesitate to contact

 

Teresa Paz-Ares
teresa.paz-ares@uria.com

 

Alfonso Gutiérrez
alfonso.gutierrez@uria.com

 

Beatriz Cocina
beatriz.cocina@uria.com

 
 

This newsletter provides general information and does not consitute legal advice

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