Competition law enforcement in the pharmaceuticals sector in Hungary

There is no specific competition law related regulatory framework concerning the pharmaceutical sector in Hungary. Act LVII of 1996 on the Prohibition of Unfair Trading Practices and Unfair Competition (the “Competition Act”) provides the general competition law regulatory framework, which of course also applies to the pharmaceutical sector.

Besides that, consumer protection related provisions are included in Act XLVII of 2008 on the Prohibition of Unfair Business-to-Consumer Commercial Practices (the “Consumer Protection Act”).

The general regulatory framework of the pharmaceutical sector is regulated by Act XCVIII of 2006 on General Provisions Relating to the Reliable and Economically Feasible Supply of Medicinal Products and Medical Aids, and on the Distribution of Medicinal Products (the “Medicines Thrift Act”) and Act XCV of 2000 on Medicinal Products for Human Use and on the Amendment of Other Regulations Related to Medicinal Products (the “Medicinal Products Act”). While the Medicinal Products Act implements EU and international pharma-related regulations, the Medicines Thrift Act covers among others regulations of pharma-relevant commercial practices. It also contains clear references to the above referred Competition Act and Consumer Protection Act in this regard.

In general, the Hungarian Competition Authority (the “HCA”) investigates anticompetitive conduct, thus the HCA is entrusted with the enforcement of competition law.

In unfair commercial practices involving consumers, the consumer protection authorities (including the local governmental offices) are entrusted with the enforcement of the relevant provisions. However, if the commercial practice has a substantial effect on competition, the HCA has the power to carry out an investigation. The substantial effect on competition is determined by the extent of the commercial practice applied and the size of the undertaking concerned on the basis of the volume of net sales.

Based on the Competition Act, in order to tackle anticompetitive conduct, the HCA:

• may initiate proceedings ex officio or on a complaint to investigate anticompetitive conduct;
• may impose provisional measures, e.g. prohibiting the further continuation of the infringing conduct;
• may oblige the infringing undertaking concerned to implement commitments;
• may impose a fine of up to 10% of the turnover generated in the preceding business year.

Based on the relevant consumer protection regulation, in order to tackle unfair commercial practices, the consumer protection authority:

• may monitor compliance with provisions related to consumer protection;
• may initiate proceedings to investigate the questionable commercial practice;
• may order the termination of infringing practice;
• may prohibit the continuation of the illegal conduct;
• by setting a deadline, it may oblige the undertaking to eliminate the discovered errors and deficiencies;
• may ban, restrict or impose conditions regarding the supply and offering of goods until the infringement is eliminated;
• may order the temporary closure of the commercial establishment affected until the infringement is eliminated;
• may impose a consumer protection fine.

Remedies for damages suffered due to anticompetitive conduct can be sought through a private damages action before the civil courts. Anyone who suffers damage due to anticompetitive conduct may claim full compensation for that damage, regardless of their position in the production and distribution chain.

The Competition Act includes a special provision applicable to damages arising from price distortions resulting from an infringement of competition law. This special provision is called the “10% presumption”, pursuant to which, in the case of an infringement of competition law caused by a cartel, until proven otherwise it must be presumed that the infringement affected the price charged by the infringing undertaking by 10%. Otherwise, the Hungarian regulation is in line with the EU Private Damages Directive.

Based on publicly available information and press releases by the HCA, the HCA has not conducted a sector inquiry or market analysis of the pharmaceutical sector in the last 15 years. However, in our experience the HCA pays special attention to the pharma sector concerning public procurements, especially for procuring medicinal products for hospitals. The HCA initiates one or two sector inquires per year.

Based on the HCA’s last three published annual reports (for 2017, 2018 and 2019) and its press releases on open investigations from 2020, the rate of enforcement in cases related to the pharmaceutical sector is about 10-15%, which is not considered to be a high proportion compared to other sectors, but does mean that the sector is constantly monitored by the authority.

Based on the publicly available data on the HCA’s case law, public procurement cartels and misleading consumers are the most common anticompetitive conducts in the pharmaceutical sector. Other than that, there are many cases related to prohibited RPM and tying and bundling practices in the framework of abusive conducts.

Anticompetitive conduct

Case No. Vj/28/2013

The HCA established that three pharmaceutical wholesalers, with the active collaboration of two consultant companies, committed a cartel infringement. The wholesalers influenced medicine public procurement by harmonising their prices before submitting their offers and shared the market among themselves. The HCA imposed total fines of almost HUF 2.5 billion (EUR 7 million) for the infringement. In the review court procedure, the Curia (highest court) established in its decision that the evidence seized in criminal proceedings could be used in competition supervision proceedings, provided that the guarantees of fair trials were secured. The rules of using such evidence in competition supervision proceedings were also introduced at the legislative level under an amendment to the Competition Act that entered into force on 1 January 2021.

Case No. VJ/19/2016

The HCA established that several undertakings producing and distributing diagnostic imaging products (MRI, CT and X-ray equipment) engaged in unlawful conduct related to an EU tender for the public procurement of diagnostic imaging equipment. Their single and continuous anti-competitive conduct was one of the most serious infringements of competition law. The HCA imposed fines amounting to a total of HUF 1.6 billion (approx. EUR 4.5 million) on the undertakings. The case was also investigated by OLAF because of the EU relevance of the tender.

Case No. Vj/79/2013

The HCA established that, in order to influence the tender notice, share the market and fix prices, the companies under investigation had coordinated their bids concerning four public procurement projects for hospitals. One of the companies under investigation submitted a successful leniency application. Total fines of HUF 270 million (approx. EUR 750,000) was imposed on the remaining three undertakings for the infringement.