The Recommendation Clarifications on the Application of Discounts on Pharmaceutical Markets

01 Березеня 2019

On 21 February 2019, the Antimonopoly Committee of Ukraine (the "AMC") adopted the Recommendation clarifications on the application of the laws on the protection of economic competition by participants of pharma markets in vertical agreements as to supply and promotion of medicines (the "Recommendation Clarifications").

The Recommendation Clarifications summarize approaches and practices that AMC applies to legal relations between producers/importers and distributors of medicines as to the sale of medicines. In particular, the Recommendation Clarifications focus on practices related to promoting sales by granting discounts and bonuses. Below you will find a general overview of the Recommendation Clarifications and respective approaches applied by the AMC.

Determination of interchangeability of medicines and boundaries of the product market

The AMC applies the following approaches:

  • In the case of vertical agreements between producers/importers and distributors regarding the sale of medicines through public procurement procedures and/or the sale of prescribed medicines – the AMC takes into account the active substance, form and dose.

  • In other cases – starting from ATC 3 classification.

Use of discounts and anticompetitive effect

The AMC notes that discounts may have an anticompetitive effect. In particular, the introduction of non-transparent pricing mechanisms through providing discounts, bonuses, credit notes, which purpose or effect is to restrict, eliminate, and prevent competition. Under certain circumstances, the AMC may treat payments under marketing services agreements and non-refundable financial aid as granting discounts.

Assessment of the anticompetitive effectof granting discounts

The anticompetitive effect of granting discounts depends on several factors, in particular:

  • The shares of the producer/importer and distributor on the relevant product markets.

  • Time dimension of the discount (retrospective or prospective). Retrospective discounts bear higher risks compared to prospective ones.

  • Type of the customer (individual discounts which are provided for particular customers or standard discounts which are provided for all customers meeting certain thresholds/conditions). Individual discounts bear higher risks than standard ones.

  • The threshold for granting discounts. The threshold denominated in value indices bear higher risks than the threshold denominated in quantitative terms.

  • Mixing several types of discounts or making discounts conditional on purchase of other medicines – such arrangements may create additional risks.

The risks of an anticompetitive effect also depend on the percentage of discount, time period and threshold being triggers for receiving a discount.

In addition, distributor’s obligations on submitting reports to producers/importers may bear additional antimonopoly risks (if the scope and frequency of information provided are not in conformity with the principle of reasonableness).

General recommendations on granting discounts

In order to prevent violations of the laws on the protection of economic competition, the AMC considers it appropriate:

  • to set up sales thresholds being triggers for granting discounts in quantitative terms rather than in value indices;

  • not to grant retrospective discounts for the sale of medicines through public procurement procedures;

  • to create separate marketing policies for unique medicine (according to INN) and for medicines that have substitutes;

  • to prevent mixing of unique and non-unique medicines in one list for discounts;

  • not to make discounts from the purchase of one medicine conditional on purchase of other medicine (i.e., to avoid conditions under which the discount from the purchase of one medicine is granted for the purchase of another).

We also consider reasonable to pay a particular attention to the percentage of discounts, time period and thresholds being triggers for granting discounts as well as to issues related to submitting reports by distributors to producers/importers.

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