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Federal Antimonopoly Service fines Novo Nordisk nearly RUB 86 mln for avoidance of contracting a number of distributors

01/02/2011

On 20 January 2011, the Federal Antimonopoly Service of Russia (the FAS Russia) fined the Russian subsidiary of Novo Nordisk (Novo Nordisk), a major international pharmaceutical company, for abuse of its dominant position in the market (Article 14.31 of the Law on Protection of Competition).
 
Prior to this, on 23 September 2010, FAS Russia’s Commission found Novo Nordisk in violation of Article 10.1.5 and 8 of the Law On Protection of Competition (unjustified refusal to contract and setting discriminatory terms by a dominant subject).

According to the FAS Russia, Novo Nordisk was groundlessly refusing from to contract with Biotech, BCC, PROTEC, SIA INTERNATIONAL, Imperia-Pharma, Pharm-Trade, Pharmaimpex, Pharm-Sib, and Euroservice which would allow them to distribute Novo Nordisk’s pharmaceuticals. Novo Nordisk has also contracted with Norbert, Pharmatsevt, North-West, Fortuna Plus Inc, and Sanda-Pharm at more beneficial terms than Novo Nordisk is willing to offer to other potential distributors.

It should be noted that Novo Nordisk’s pharmaceuticals, distributed in Russia, are included in the list of vital medicines.

According to Michael Fedorenko, a deputy-chief of the FAS Russia’s sub-division, this is the first working capital penalty imposed by the FAS Russia on a dominant pharmaceutical company in the Russian pharma market. The FAS Russia believes this matter will be a test case for all pharma companies operating in Russia.
Through this decision, the FAS Russia deprives dominant pharma companies in Russia of the opportunity to choose a distributor based on corporate technological and anti-corruption standards. The FAS Russia’s decision is also a precedent for other industries: from now on if a dominant party decides not to contract with a potential distributor because of corporate standard requirements then could be considered unjustified and a violation of the law.

As for the pharma industry, there is a new proposed law in progress, which aims to minimise the number of distributors in the logistics chain from pharmaceutical manufacture to pharmacy. One of legislative innovations it suggests is to stop manufacturers from having their own logistic companies, as well as to increasing the charter capital requirements and long term existence requirements of professional logistic companies.

At this stage it is unclear whether the measures suggested would mitigate the risk of sanctions against pharma companies for refusing to contract with distributors.

Authors

Maxim-Boulba
Maxim Boulba
Partner
Moscow