Following our policy of supporting our current and potential clients on every stage of their activity in Ukraine, we would like to draw your attention to the following:

— News of the national and international pharmaceutical market;
— Main legislative initiatives in the field of antitrust regulation;
— Report of the Antimonopoly Committee of Ukraine (the AMCU) for 2012;
— The AMCU's practice in the pharmaceutical market.

NEWS OF THE PHARMACEUTICAL MARKET

Round Table on Issues of Competition Protection in the Market of Medicinal Products

On April 25, 2013 the AMCU held a round table meeting on issues of competition protection in the market of medicinal products. The participants pointed out the fact that the AMCU started a comprehensive investigation into the market of medicinal products used to treat cardiovascular diseases, tuberculosis, and cancer diseases of the endocrine system.

According to the AMCU's State Commissioner Mykola Barash, AMCU investigates the market in the following areas:

1. Medicinal product manufacturing

2. Import

3. Public procurement at both the national and the local level.

Moreover, the AMCU contemplates investigating the state of competition in the regional medicinal product retail markets, with stakeholders having features of enjoying dominant position.

The issue raised at the meeting was the development of legislation in the area of drug interchangeability to increase the level of competition in the pharmaceutical market and put new generic drugs into circulation. The round table participants noted the reasonableness of considering a range of aspects when determining whether medicinal products are interchangeable, in particular in terms of their therapeutic, pharmacological, toxicological, and biological equivalence. Another priority is taking account of long-term effects of medicinal products, as therapeutically active medicines bring quick results, but often have a negative impact on the health of patients.

INVESTIGATION INTO CONCERTED ACTIONS OF NOVARTIS AND JOHNSON&JOHNSON

The European Commission has filed a complaint against Novartis and Johnson&Johnson for an alleged conspiracy violating the antitrust regulations.

Thus, the European Commission established that Johnson&Johnson paid to Novartis for delay in introduction in the Netherlands of generic Fentanyl belonging to Johnson&Johnson. As a result, patients in the Netherlands obtained access to the generic drug only a year later.

In should be noted that a similar violation was found in the course of EC's global investigation into the pharmaceutical market.

FEDERAL ARBITRATION COURT OF THE RUSSIAN FEDERATION CONCERTED ACTIONS OF "ROSTA" AND "PHARMSTANDART"

On April 18, 2013 the Federal Arbitration Court of Russia upheld the antitrust claim of the Federal Antimonopoly Service (FAS) about the companies' conspiring to participate in the bidding for the medicines' procurement.

In the course of proceedings it was established that the companies had entered into an agreement which led to price maintenance at an open public auction for the procurement of medicines for public use. The initial lot price was more than 670 million rubles.

The fine imposed by FAS of Russian Federation on "Rosta" CJSC and "Pharmstandart" OJSC amounted to over 400 million rubles.

POSSIBLE CHANGES IN ANTITRUST REGULATIONS IN THE AREA OF MEDICINAL PRODUCTS CIRCULATION

BILL OF UKRAINE "ON STATE AID TO BUSINESS ENTITIES"

On April 4, 2013 the Cabinet of Ministers agreed on the Bill of Ukraine "On State Aid to Business Entities" (hereinafter the Bill) as of March 21, 2013 developed by the Antimonopoly Committee of Ukraine.

According to the explanatory note the Bill is aimed at facilitating Ukraine's performance of obligations under the EU-Ukraine Cooperation and Partnership Agreement.

Among other things, the Bill defines the legal framework for the AMCU's monitoring of state aid provided to business entities.

Under the Bill, state aid to business entities is any form of support provided to business entities with the state or local resources, which distorts or threatens to distort competition by creating benefits for the production of certain goods or doing certain types of business.

The Bill introduces a principle under which any state aid to business entities shall be impermissible for competition, unless otherwise provided by the law.

Providing such aid shall be prohibited. Moreover, if provided, it should be returned to the State Budget.

Under the Bill, State aid shall be deemed permissible, if rendered:

1. to provide consumers with important social goods;

2. to compensate persons affected by man-made emergencies and natural disasters for damage.

In addition, state aid may be deemed permissible under the AMCU's separate resolution, if rendered:

1. to provide the social and economic development of regions with low living standard or high unemployment;

2. to implement national programs or solve social and economic problems state-wide;

3. ensure the development of certain economic activities or business entities operating in selected economic zones;

4. to support and preserve the national cultural heritage.

In accordance with the Bill, state authorities providing aid to business entities are required to give an appropriate notice thereof to the AMCU. After that, the AMCU will analyze the permissibility of such aid.

Therefore, the Bill complicates the procedures for obtaining state aid, which, in turn, may have a positive impact on the development of competition in the market.

POSSIBLE AMENDMENTS TO THE LAW OF UKRAINE "ON PROTECTION OF ECONOMIC COMPETITION"

On March 19, 2013 the Parliament of Ukraine registered a bill on amending the Law of Ukraine "On Protection of Economic Competition" No. 2570 (hereinafter the Bill).

The Bill provides for a more detailed procedure for the AMCU's exercise of its powers in conducting inspections of market operators. As stated in the explanatory note to the Bill, the proposed amendments are aimed at increasing transparency in the AMCU's enforcement activities, as well as at strengthening the procedural guarantees for those involved in the proceedings.

First of all, the Bill details the existing rights and powers of the AMCU. Thus, the right to conduct an inspection in accordance with the amendments proposed includes:

  • the right to obtain written explanations from persons in the course of inspections (the current wording of the Law provides only for the AMCU's authority to submit a request for information);
  • the right to freely enter the premises, vehicles or other possessions of inspected entities (currently, there is only the right to inspect premises);
  • the right to require the production or delivery of documents, objects or other media (the current wording of the Law provides for the exclusive right to withdraw such objects);
  • to require the production of proof of a person's identity and position.

In addition, the Bill introduces the AMCU's new powers previously not specified by other legislation, namely the following:

  • the right to use photography or filming, audio or video recording, or other technical software and hardware;
  • the right to seal premises for up to 10 days (it should be noted that this right does not overlap with the AMCU's authority to seize property; seizure applies to objects, documents or other media, but not to premises);
  • the right to forbid persons that stay in the premises during an inspection to move objects, documents or other media, or to work at the computer;
  • the AMCU's right to require certain persons to leave the premises (other than the director or acting director or persons providing legal assistance to them).

Some powers introduced by the Bill raise some doubts. In particular, the AMCU's authority to seal premises for up to 10 days can lead to production stoppage.

THE AMCU'S REPORT FOR 2012

On March 12, 2013 the AMCU held a meeting to approve the AMCU's report for 2012.

In 2012, the AMCU received over 6 thousand applications and appeals concerning competition violations. Having considered the same, the AMCU conducted 1,035 inspections, which is 15 percent less than last year.

Upon the results of the previous year, the AMCU has stopped 5,820 violations, which is 30 percent more than in 2011.

According to the report, the market of medicinal products ranks fifth among all markets by the aggregate number of competition violations. In addition, the pharmaceutical market ranks second in terms of violations in the form of unfair competition, and third in anti-competitive concerted practices and abuse of dominance, respectively.

It should be noted that the AMCU declared the pharmaceutical market a priority market 2012, which was reflected in complex of investigations into the specified market.

During the investigation, the AMCU found that, in most cases, regional retail markets showed signs of an individual or a collective monopoly. In particular, of 138 investigated markets only 28 had signs of a competitive environment, while individual and collective monopoly was found in 94 and 16 markets, respectively.

The AMCU has established that the most common competition violations in the field of medicinal product circulation are as follows:

  • abuse of monopoly (dominance) by setting excessive prices, which would not be possible to set under significant competition in the market;
  • unfair competition in the form of dissemination of misleading consumer information (dissemination of false statements about the lowest prices or current promotional campaigns, etc.).

It is worth mentioning that the AMCU has also determined the pharmaceutical market as a priority market 2013. Therefore, it will continue to examine the specified market closely.

THE AMCU'S RECENT PRACTICE

UNFAIR COMPETITION VIOLATIONS (DISSEMINATION OF MISLEADING INFORMATION)

The AMCU's territorial office has fined a pharmacy UAH 15 thousand for disseminating information about a promotion without specifying the participation terms and conditions, and without providing the list of medicinal products and medical devices it refers to.

ANTICOMPETITIVE CONCERTED PRACTICES

  • The AMCU's territorial office fined two distributors of medicinal products and medical devices UAH 73 thousand for anticompetitive concerted practices, which resulted in the distortion of bidding results. The AMCU established that the concerned entities agreed the prices for the procurement of vitamins, hormones, alkaloids and antibiotics.

To participate in the bidding, the companies submitted documents with identical titles and uniform in appearance and style. Moreover, both of them submitted the documents on the same day.

In the course of investigation, the AMCU established that both distributors were registered at the same address.

Due to the found concerted actions of the participants the bidding procedure was cancelled.

In should be noted that the concerned companies had already been fined for anticompetitive concerted actions in the procurement of narcotic drugs.

  • Two pharmacies were fined by the AMCU's territorial office for bid rigging in the procurement of vitamins, hormones, alkaloids and antibiotics by an oncological clinic.

INFORMATIONAL VIOLATIONS (NON-PROVISION OF INFORMATION AT THE AMCU'S REQUEST)

  • A pharmacy - UAH 1,400;
  • A major distributor of medicinal products - UAH 34 thousand;
  • A distributor of medical devices and medicinal products - UAH 56 thousand;
  • A pharmaceutical company - UAH 999.

As a matter of fact, according to Article 52 of the Law of Ukraine "On Protection of Economic Competition" market operators may be fined up to 1% of income (revenue) from the sale of goods (works or services) for the last financial year preceding the year in which the fine is imposed for failure to provide or for providing incomplete or false information to the AMCU.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.