The Office for the Protection of Competition has recently published the results of a sectoral investigation in the pharmaceutical sector. The sectoral investigation is a tool used by both, national competition authorities and the European Commission to comprehensively investigate competition rules in a given sector, especially if they suspect that competition rules are being violated.
This time, the competition authority's investigation was focused on drug distribution issues, probably in response to a number of initiatives raised by small pharmacies or their associations. However, practical issues, for instance related to pay-for-delay agreements (i.e. agreements between manufacturers of original medicines and producers of generics not to enter the market for a specific period of time), were not covered by the investigation this time.
The Office for the Protection of Competition also addressed potential problems causing shortages of certain medicines on the market. One of its proposals to resolve this problem was to adopt an active ingredient prescribing system. In other words, doctors should prescribe an active substance instead of a specific drug to patients. This system has already been implemented in countries such as Slovakia, Spain, France, Portugal, Canada, New Zealand and the USA.
It has been pointed out, however, that such a newly created legal regulation of an active ingredient prescribing system would need to be quite complex, as there are approximately 9,600 registered active substances in the Czech Republic. It would need to specify in a detailed way whether prescribing a medicine by brand name in addition to the active ingredient name would be preferrable in some circumstances, for clinical reasons and/or patient safety. It would also need to set the rules for high-risk medicines such as insulin. Moreover, it is not only the active substance that is decisive for the patient, but also its amount, dosage and possible side effects. Such a "newly created" system would in most cases leave the final decision on which drug to issue to pharmacists instead of doctors. This could raise concerns as to whether it would lead to a more intensive pharmaceutical lobby.
In addition, the competition authority suggested to prioritise the prescription of generics and biosimilars. This recommendation can be disputable in situations where a producer of an original drug devotes years to expensive clinical research. The high investment often does not return even within the patent protection period. Should the generics be prescribed preferentially in such cases? Does such a recommendation really promote free competition on the market?The Office for the Protection of Competition also suggested fixing the cap of the trade margin for reimbursed medicines for certain levels of the distribution chain. If we thought about harmonizing the prices of medicines across Europe, then a fixed cap on the trade margin would certainly be a step in the right direction. Nevertheless, part of the price of the drug also includes VAT, which varies from country to country. Will determining the maximum cap of the trade margin contribute to uniform drug prices on a global scale to avoid, for example, parallel exports of medicines to neighbouring countries? In any case, it could be a tool to motivate pharmacies and hospitals, which are often in a worse position because they are dependent on the "remaining" part of the surcharge.
The Czech competition authority also recommends introducing online sales of prescription drugs to make them available even in small villages or remote places with less infrastructure.
Reimbursement of drug prices is one of the most important items of the state budget and the availability of pharmaceuticals on the market is undoubtedly a public interest of the highest priority. Therefore, the investigation of particular levels of drug distribution chains deserves adequate attention. The increased level of cooperation between the national competition authority, the State Institute for Drug Control and the Ministry of Health is certainly useful. It remains to be seen how many practical questions the sectoral investigation in the pharmaceutical sector actually answered.
By Tomas Dolezil, Partner, and Vladena Svobodova, Senior Associate, JSK, PONTES
