Competition law enforcement in the pharmaceutical sector in Romania

There is no specific regulatory framework that deals with competition regulation in the pharmaceutical sector in Romania. Hence, the general framework on competition law regulated under Law No. 21/1996 on Competition (the “Competition Law”) and related Implementing Legislation and Law No. 11/1991 on Unfair Competition (the “Unfair Competition Act”) regulate competition in the pharmaceutical sector in Romania.

In addition, the general pharmaceutical regulatory legal framework contains various rules which are relevant for the application of competition rules in the pharmaceutical sector, such as:

• the obligation of marketing authorisation holders (the “MAHs”) to ensure that distribution of pharma products is carried out through a minimum of three wholesalers;
• centralised national tenders organised by the Ministry of Health (the “MoH”);
• the clawback tax and calculation method;
• rules on the promotion of medicines, pricing and reimbursement.

The main regulatory framework in the pharma sector includes:

1. Law No. 95/2006 on Healthcare Reform;
2. Order No. 895/2006 approving the regulation on marketing authorisation and supervision of medicines for human use;
3. Order No. 368/2017 approving the norms for calculating the price of medicines for human use;
4. Order No. 861/2014 regarding approval of criteria for health technology including criteria and methodology for inclusion on the list of reimbursed products in the social healthcare security system;
5. Government Emergency Ordinance No. 77/2011 and Order No. 735/976/2015 regulating cost control by the Government, including clawback, cost volume agreements, etc.;
6. Government Decision No. 720/2008 for approving the list of non-proprietary names corresponding to medicines from which patients benefit, with or without a personal contribution, based on prescription in the social healthcare security system.

The Romanian Competition Council (the “RCC”) is the competent authority for enforcing competition law provisions in Romania.

The Romanian judicial courts are also competent to rule on claims of unfair competition based on the provisions of the Unfair Competition Act, as well as on claims for damages brought by natural or legal persons harmed pursuant to an infringement of competition rules.

The main authorities in charge of enforcing the pharma regulatory rules are:

1. the MoH;
2. the National Agency for Medicines and Medical Devices (the “NAMMD”), in charge of regulating and supervising various areas such as marketing authorisations, clinical trials, marketing, promotion and advertising activities regarding medical products, etc.;
3. the National Health Insurance House, in charge of the social healthcare insurance system in Romania.

Pursuant to the Competition Law, the RCC, which is responsible for enforcing competition rules, can levy fines and make or ask for behavioural or structural remedies (e.g. interim measures and commitments) to tackle anticompetitive conduct in the pharmaceutical sector.

Interim measures can be applied in urgent cases, before the RCC makes a final sanctioning decision. This could be the case if there is a risk of serious and irreparable harm to competition, when the RCC ascertains after an initial evaluation that there is anticompetitive conduct which must be eliminated without delay. The RCC usually rules on interim measures at the request of complainants.

The RCC can issue a sanctioning decision imposing a fine. The RCC may impose fines up to 10% of the global turnover of the undertakings in the financial year preceding the infringement decision.

In addition, the RCC could also accept behavioural or structural measures to address the competition law infringement. Structural measures apply when there is no behavioural remedy that would be equally effective or when the behavioural remedy would be more onerous than the structural remedy. To date, no structural remedy was used for a breach of competition rules by undertakings in the pharmaceutical sector.

Under the Unfair Competition Act, either the RCC or the judicial court notified of a claim of unfair competition may adopt a sanctioning decision against the undertaking in breach of the provisions of the Unfair Competition Act. Only behavioural remedies (not structural) can be ordered, including fines up to approx. EUR 10,000 (for legal entities), as well as interim measures.

Exceptionally, anti-competitive conduct can also be incriminated and the relevant perpetrators subject to prosecution which could result in fines and imprisonment enforced by a judicial court. For example, the following could constitute a criminal offence:

1. under the Unfair Competition Act, using results, experiments or other related confidential information for commercial purposes, which has been communicated to competent authorities for the purpose of obtaining a marketing authorisation for pharmaceutical products which contain new chemical ingredients. This is subject to a fine or imprisonment up to two years;
2. under the Competition Law, managers and company representatives who intentionally create or organise certain prohibited practices, which is subject to imprisonment up to five years or fines and the prohibition of rights;
3. under the Romanian Criminal Code, to remove a bidder from a public tender, by coercion or corruption, or to engage or collude with other bidders to distort the bidding price, which is subject to imprisonment from one to five years. 

In addition, any individual person or legal entity harmed by an anti-competitive practice may bring a follow-up or stand-alone action for damages before a judicial court.

Yes, under Romanian law victims of anticompetitive conduct have the right to claim damages in court and any person responsible for infringing competition law has a legal obligation to repair the damage caused. Romania has fully implemented the provisions of the EU Damages Directive (2014/104/EU).

The principle of full compensation is expressly regulated whereby the victim can claim damages for the entire loss suffered (actual loss, loss of profit and interest), due to the anticompetitive conduct.

Damages claims may be filed either before (stand-alone actions) or after the RCC issues an infringement decision (follow-on actions). In both cases, the statute of limitation is five years, which starts as of the date the victim knew or should have known:

1. the existence of the infringement;
2. the damage suffered; and
3. the identity of the infringer.

Representative actions for damages (class actions) may be filed on behalf of consumers by certain bodies with legal standing.

A victim of a competition law infringement may file a claim for damages with the Bucharest Tribunal, which has exclusive competence as first court of jurisdiction to settle damages claims. The decisions of the first court can be appealed before the Bucharest Court of Appeal and a second appeal against the latter decision can be lodged with the High Court of Cassation and Justice.

An infringement of competition law is deemed irrefutable if it is ascertained by a final decision of the RCC or of the European Commission, or if it is finally confirmed by court. Infringement decisions issued in other EU Member States represent the rebuttable presumption of the infringement of competition, which can be overturned.

Although to a large extent Romanian law mirrors the provisions of the EU Damages Directive, there are significant differences on the quantification of a loss:

• first, Romanian law provides for a rebuttable presumption whereby the infringement of competition law in the form of a cartel results in harm, consisting in a 20% increase in the price of goods or services covered by the cartel. If the infringer can demonstrate to the court’s satisfaction that the actual loss was less than 20%, rebutting the presumption, the burden of proof regarding the amount of damages caused by the cartel switches from the claimant to the infringer;
• second, Romanian law also provides for a rebuttable presumption whereby the abuse of a dominant position in the relevant market results in loss; the infringer can rebut this presumption by proving that no loss was incurred.

The law aims to ensure effectiveness of the right to full compensation, irrespective whether the victim is a direct or indirect purchaser. However, compensation for actual loss at any level of the supply chain will not exceed the damage in the form of overcharge caused at the respective level.

The law also provides for the joint liability of the cartel participants for the damage caused and victims can claim full compensation from any member of the cartel, irrespective of their capacity of direct or indirect purchasers, except for SMEs and leniency applicants where liability is limited according to the criteria set forth in the law.

To date, no damages claim has been brought in the pharmaceutical sector and the private enforcement of competition law remains limited in Romania. There has only been one final ruling by the judicial court on damages in a follow-up claim for damages brought against a Romanian state-owned company providing postal services which granted discriminatory rebates. One of the victims claimed damages consisting of the difference between the more favourable tariffs applied by the state-owned company to the victim’s competitors and the tariff granted to the victim in 2005–2009. The court awarded damages including actual loss and loss of profit amounting to approximately EUR 900,000. Another standalone action for damages is currently pending against one of the leading telecom operators in Romania for allegedly restricting a company’s access to the mobile network market.

Yes, to date the RCC has completed two sector inquiries into the pharmaceutical sector.

In 2008, the RCC began a sector inquiry on the Romanian market for the wholesale supply of pharmaceutical products to identify potential market distortions which could trigger competition concerns. In a report published in 2011, the RCC issued guidance on:

1. matters relating to medicine distribution and market entry;
2. public tenders organised by public hospitals;
3. the weak penetration of generics in the Romanian market; and
4. the lack of access to reimbursement lists for new medicines.

Following up on findings in the initial market inquiry, in 2013 the RCC began a new inquiry into the pharmaceutical market in Romania. This investigation was completed in 2016 and the final report was published in 2017. The report focused on the impact of distribution models such as direct-to-pharmacy (DTP) and reduced distribution models, generic penetration and marketing practices and their effects on competition.

In terms of marketing practices, the RCC identified as potential areas of concern, among others, the influence exercised by producers on prescribing doctors to recommend a specific brand name and referring patients to pharmacies for a specific medicine (instead of the active pharmaceutical ingredient). To prevent such targeting, the RCC made the following recommendations in its report:

• prohibiting the use of discount cards valid only in specific pharmacies;
• the price of generics should no longer be set by reference to the price of brand medicines;
• new rules on reporting marketing expenses by pharma companies and doctors to NAMMD;
• eliminating tied sales of medicines by distributors;
• capping rebates granted by pharma companies and distributors;
• excluding from the list of compensated medicines products that are not present in sufficient quantities on the market, which were kept for setting the reference price.

The RCC also analysed potential changes to distribution models, including the wholesaler model and the direct-to-pharmacy model (DTP), concluding that:

• potential anti-competitive issues arise in the context of DTP models for products where producers hold a dominant position as the DTP model was conducive to higher prices due to lower competition;
• in terms of supply chains, the RCC considered the following requirements which need to be observed:
  • medicines must be available on the market and for all categories of pharmacies (rural/urban and chain/independent);
  • public service obligations must be met by both producers and distributors (shortage of supplies must be addressed in the shortest period possible for patients’ benefit);
  • restricted distribution systems must use objective selection criteria (possible criteria include the distributor’s creditworthiness, guarantees, level of maintenance offered etc.);
  • the assessment whether a change in distribution systems amounts to an abuse of dominance focuses, among others, on whether the producer in a dominant position transfers advantages at the pharmacy, hospital and patient level, including quality, level of services, financial benefits and availability.

The RCC continues to oversee the pharmaceutical sector and implementation of recommendations made in its previous sector inquiry reports, while continuing pending investigations in the pharma sector on DTP models for products associated with a dominant position on the market.

The enforcement of competition law in the pharmaceutical sector remains an ongoing priority for the RCC. In each year from 2017 to 2020, the RCC either initiated, continued or completed investigations and imposed significant fines on companies in the pharmaceutical sector, as well as for infringement of competition law in the medical services sector.

Therefore, the public enforcement of competition laws in the pharmaceutical sector in Romania registers among the highest rate of enforcement compared to other sectors such as food retail, energy and gas, and financial services.

Relevant decisions and pending investigations in recent years are detailed below.

While the RCC has investigated both anti-competitive agreements and practices, as well as abuse of dominance of pharmaceutical companies, on balance, abuse cases have recently taken the lead. An overview of the RCC’s main decisions and pending investigations confirms this conclusion.

2017

The Romanian subsidiary of a British multinational pharma company: commitment decision following the RCC’s investigation into the potential abuse of dominance through a series of practices related to the supply of two medicines: (a) the implementation during 2009–2012 of a system of supply quotas; and (b) the implementation of a new supply system starting 1 January 2013 involving: (i) the allocation of supply quotas to the Romanian market; (ii) direct-to-pharmacy distribution; (iii) supply quotas at the pharmacy level; and (iv) agreeing to supply over the quotas of each pharmacy only if the pharmacy in question shared information regarding prescriptions.

Investigation into the Romanian subsidiary of a Swiss multinational pharma company: the RCC continued an investigation initiated in 2016 of a potential abuse of dominance for the pharma company’s implementation of a pilot direct distribution system to specific pharmacies, while maintaining its traditional distribution system, which led to shortage of certain medicines on the market.

2018

EU-wide Investigation on immunoglobulins (ongoing): the RCC initiated an investigation into a potential anti-competitive agreement concluded by ten providers authorised to market human immunoglobulins which allegedly adopted a joint strategy of coordination to limit and disrupt the supply of the normal human immunoglobulin with the apparent scope to remove the claw-back tax and obtain a more favourable fiscal framework, improving, implicitly, profit margins.

Infringement decision in the medical services sector: the RCC fined several national and county associations of family doctors for fixing prices for certain medical services which were not contracted to third parties but charged directly to consumers, e.g. consultation fees, fees for issuing medical documents, treatment (different than the ones recommended by the family doctors), and medical tests.

Infringement decision in the medical services sector: the RCC fined five medical centres in Romania and two stem cell banks for concluding vertical anticompetitive agreements distorting competition on the market for medical services provided by private maternities.

2020

The Romanian subsidiary of one of the leading multinational pharmaceutical companies in cancer treatments: the abuse of dominant position on the market of oncological products in Romania, in the context of two investigations opened in 2017:

1. The pharma company adopted a commercial strategy aimed at eliminating competition during tenders where the pharma company competed with its distributors. The price offered by the pharma company to the distributors for medicines which were the subject of the tender was much higher than its offer price, thus eliminating competition from bidder-distributors and amounting to a margin squeeze.
2. The pharma company also implemented a strategy to prevent the selling of competing, cheaper medicines containing the active substance Erlotinib. The pharma company’s strategy consisted in directing patients to their most expensive product, through the pharma company’s Patient Card and the pharma company’s Call Center, and covering the price difference that patients should have paid when purchasing the medical product, incentivising patients not to buy similar medicines (generics) available on the market.

The RCC has investigated a wide range of anti-competitive practices in the pharmaceutical sector, both in terms of abuse of dominance (margin squeeze, refusal to supply, discriminatory pricing), as well as anti-competitive horizontal and vertical agreements. In addition to the cases described in detail above, other significant cases include:

Patent disputes

Following a complaint lodged in 2009 by a global pharma company active in Romania in generic medicines (the “complainant”), the RCC investigated a potential abuse of dominance as well as an anti-competitive agreement allegedly engaged in by German and Swiss  pharma companies (part of a Swiss multinational pharma Group) (the “pharma company”), based on the following background: the pharma company had previously initiated an administrative complaint against two generic companies (the complainant and another Slovak company active in Romania) seeking to cancel their marketing authorisations as unlawful because they infringed the pharma company’s patent. The pharma company subsequently sent a letter to the complainant with a proposal to withdraw the court claim if the complainant agreed to the conditions imposed by the pharma company: to undertake not to manufacture, sell or import products for which the complainant obtained marketing authorisations and not to apply for price decision to be issued by the MoH more than 90 days before the expiration of the pharma company’s patent, an offer which the complainant refused. The complainant filed the complaint with RCC.

At that time, the price mechanism set under Romanian law established a “double referencing rule” (the price of the first generic medicine which obtains price approval for marketing purposes becomes the “generic reference price”), which influences the price for the innovative medicine, despite patent protection still being valid.

The RCC dismissed the complaint based on the following considerations:

• The pharma company’s actions (trying to prevent generic companies from applying for a price decision until 90 days before the patent expiry date) had the aim of preserving its regulated price at the level initially approved by the MoH, at least until the patent had expired; the time limit within which the MoH issued a price decision was 90 days from the date of the application. Thus, in order for the generic to be launched without delay from the patent expiry date, it was sufficient for the generic company to submit the price application 90 days before patent expiry, so the MoH could grant the decision around the date patent expired. Therefore, the RCC considered that such an agreement would not delay market entry.
• There was no evidence of a dominant position on the relevant market due to other substitutable products on the market, and the pharma company had dropped the litigation and had withdrawn its court administrative claims against the complainant before the RCC’s investigation was completed. Hence, the RCC concluded there had been no abuse.

Lobbying actions

In 2012, the RCC completed an investigation into the effects of lobbying (petitioning) concerning a decision by pharmaceutical distributors to cease delivering medicines to pharmacies and hospitals, due to the refusal of the MoH to establish the price of pharmaceuticals by considering changes to the applicable exchange rates. The investigation concerned the possible infringement by members of the Association of Pharmaceuticals Distributors and Importers (ADIM) and the Association of Pharmaceutical Distributors in Romania (ADMR). The MoH subsequently agreed to change the rules, hence the pharmaceutical companies resumed their business and thus ceased the anti-competitive conduct under investigation. Therefore, based on the specific context, the RCC decided not to impose fines.

Although the RCC closed the case without imposing fines, it warned both associations that all competing operators must conduct their activities independently, and subsequently in 2013 issued guidelines on lobbying and petitioning, including the following best practice recommendations:

• the undertakings’ rights to jointly defend their common interest is recognised but needs to observe competition rules and not distort competition;
• the principle of proportionality applies to collective actions against decisions issued by public authorities; such actions cannot harm other undertakings or consumers’ interest and must be limited to proportionate measures;
• although exchanges of information are possible in this context, the communication of strategic information is prohibited. Only in the absence of a viable alternative can such information be exchanged through a third party and provided in an aggregated format.