The wholesale trade of pharmaceuticals is changing on the industry's own initiative; the FCA will not intervene with single channel distribution
The exclusive rights' agreements on the wholesale trade of pharmaceuticals to be notified to the European Commission?
On the basis of a complaint, the FCA again investigated the competitive effects of the single channel distribution of pharmaceuticals. In its recent decision, the FCA refers to its 1997 decision in which the wholesale trade of pharmaceuticals and the single channel distribution were extensively examined during 1992–1997. The FCA did not take up any legal measures against single channel distribution at that time, since its restrictive effects did not appear bigger than the increase in efficiency.
In its current decision, the FCA now appraises the competitive effects of single channel distribution, taking into consideration the changes that have taken place since then. Of the EU member states, only Sweden applies single channel distribution, and in a slightly different form.
The economies-of-scale and scope sought in the wholesale trade of pharmaceuticals are not in themselves dependent on distribution rights. The pharmaceutical wholesales do not offer retail customers any value-adding services. Elsewhere in Europe, where pharmaceuticals are distributed on a multi-channel basis, the share of the wholesale of the division of labour of the whole value chain is bigger, and the wholesales have a need to contribute to the sales and marketing of the services. The single channel distribution of pharmaceuticals does not serve to improve delivery security or medicinal safety either.
The FCA saw that neither the regulatory system in the pharmaceutical industry nor its 1997 decision prevent the operators from applying less restrictive business models. It is the FCA's view that the wholesale trade of pharmaceuticals is currently undergoing a period of transition and the operators therein are coming to conclusions, which point to major structural changes in the field. Consequently, the FCA will not take measures to change the single channel distribution.
In this context, the FCA did not take a stand to the proposed individual competition restraints but examined the single channel system as a whole. There may be restrictive practices in the pharmaceutical field, which may be estimated by the national or EU authorities or courts. The FCA assesses that the exclusive rights' agreements in the wholesale trade of pharmaceuticals may require a notification to the European Commission, since the FCA finds that the new Commission Regulation on the Application of Article 81(3) of the Treaty to Categories of Vertical Agreements and Concerted Practices cannot be applied to it.
Further information: Senior Advisor Topi Johansson, tel. +358 9 7314 3380; Assistant Director Martti Virtanen, tel. +358 9 7314 3338.
last modified 12/22/2003