In a majority of competition cases in the pharmaceutical sector in the last decade the AMCU has accused pharmaceutical companies and their distributors of engaging in anticompetitive concerted actions, which resulted in alleged groundless increases in prices on products supplied for tenders.
The background to this is the effective pricing regulation for medicinal products sold with public funds, introduced during the crisis of 2008–2009. Under this regulation (often heavily criticised), a distributor’s mark-up on the resale of medicinal products procured with public funds has been limited to a specific percentage.
The AMCU alleged that retrospective discounts used in agreements between pharmaceutical companies and their Ukrainian distributors generated additional income for distributors (exceeding the maximum permissible mark-ups under pricing legislation), were not “passed on” to the final consumer, and thus resulted in price increases for medicines in public procurement. According to the AMCU, by entering into agreements with provisions on retrospective discounts, pharmaceutical companies colluded with distributors to have distributors earn revenue on top of that received from maximum permissible mark-ups. In the AMCU’s opinion, pharmaceutical companies were made aware of the pricing policies of distributors and they failed to pass the retrospective discounts to final consumers via reporting provisions in agreements with distributors.
The alleged anti-competitive effects of discounts, according to the AMCU, included evading mark-up regulations and overpricing medicines in public procurement, squeezing out competitors, limiting consumers’ access to substitute medicines, imposing control over markets where distributors resell products (partially related to excessive reporting by distributors), and allocating markets in terms of resale of products through public tenders.
At the same time, in most cases the AMCU assumed the anti-competitive effect of discounts without a description of a clear root-cause link or providing sound evidence, applied a very weak economic analysis and narrow approach to the market definition (based on similarities of active ingredients, dosage forms, administration, formulation, etc.), and failed to apply exemptions effective at the time. A fine was imposed for alleged anticompetitive concerted actions, but was effectively based on dominance abuse reasoning, contrary to EU legislation and practice, which Ukraine is obliged to align its legislation and practice to under the EU-Ukraine Association Agreement.
Additionally, in such cases the AMCU relied heavily on Ukrainian pricing regulations while controlling compliance with pricing regulations is out of scope of the AMCU’s powers.
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