Belgian Competition Authority fines pharmaceutical wholesalers for their participation in a cartel
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The BCA imposed a fine of EUR 29.8 million on Pharma Belgium-Belmedis SA, as the legal and economic successor of Pharma Belgium NV and Belmedis NV. Febelco CV was not fined, as it had denounced the cartel and received immunity from fines under the BCA’s leniency regime. Both companies admitted their participation in, and acknowledged their liability for, two infringements of the competition rules, in return for a 10% reduction in the fine under the BCA’s settlement regime. Another company, CERP SA, was also covered by the BCA’s investigation, but did not wish to engage in settlement discussions. Consequently, the normal investigative procedure continues against it. This decision is the ninth settlement decision, since the settlement regime was introduced in Belgium in 2013. It is, in principle, not subject to appeal.
According to the BCA, the cartel consisted of two separate infringements of competition law: one concerning so-called “Transfer Orders” and one concerning flu vaccines. Both infringements were committed between April 2003 and October / November 2016.
Infringement concerning “Transfer Orders” – agreements on pricing and nature of service offering
Typically, the distribution of pharmaceutical products involves three distinct steps: (i) pharmaceutical laboratories develop and bring their products to market; (ii) pharmaceutical wholesalers buy these products and sell them to pharmacists; and (iii) individual pharmacists sell the products to patients. In some instances, however, pharmaceutical laboratories may decide to sell their products directly to pharmacists, thus cutting out the ‘middle men’ and taking over the role of wholesalers in managing the logistics, payment and supervision of the sale themselves.
Alternatively, laboratories can use an intermediate system, the so-called “Transfer Orders” system, which enables them to offer pharmacists the possibility of ordering large quantities of products under certain (favourable) conditions, after which these orders are effectively managed by wholesalers.
In this case, certain wholesalers, including Pharma Belgium-Belmedis SA and Febelco CV, had agreed to apply the same commercial terms for the distribution of pharmaceutical products through such “Transfer Orders” system. In particular, the companies agreed to apply the same pricing to pharmaceutical laboratories and to offer identical services. In doing so, the wholesalers aimed to limit any direct sales by pharmaceutical laboratories to pharmacists, and to fix their margins in the context of the distribution of products via “Transfer Orders”.
Infringement concerning flu vaccines – agreements on pricing and transaction conditions for pre-sale
Flu vaccines are pharmaceutical products with specific characteristics – in particular, some indeed have a different composition each year to counteract the natural evolution of the flu virus. As a result, “new” flu vaccines are developed and produced by annually, and, for these vaccines to be effective, they must be administered in the autumn. In light hereof, customers of pharmaceutical wholesalers, including pharmacists, can order a certain quantity of vaccines via a pre-sale system each year before they are brought to the market.
In this case, certain wholesalers, including Pharma Belgium-Belmedis SA and Febelco CV, had agreed to apply the same commercial terms for the sale of flu vaccines to pharmacists during this pre-sale period. In particular, the companies agreed not to grant discounts to pharmacists and not to accept returns of unsold vaccines ordered during the pre-sale period. They also agreed on the duration of the pre-sale period.
Procedure and outcome
This investigation was triggered by Febelco CV’s leniency application, which enabled the BCA to carry out inspections at the premises of the relevant wholesalers. In return for denouncing the cartel arrangements, Febelco CV received full immunity from fines under the BCA’s leniency regime. Pharma Belgium-Belmedis SA also cooperated with the BCA in the context of the leniency framework – by providing evidence which facilitated the establishment of the infringements – in return for which it received an initial 40% reduction in its total fine. In addition, both companies admitted their participation in, and acknowledged their liability for, the cartel. Pharma Belgium-Belmedis SA received a further 10% reduction in its total fine under the BCA’s settlement regime.
Consequently, while no fine was imposed on Febelco CV, a fine of EUR 29.8 million in total was imposed on Pharma Belgium-Belmedis SA.
The BCA press release can be found here, and the full decision will be made available on the BCA website in due course.