The pharmaceutical sector has long attracted the scrutiny of antitrust authorities in many jurisdictions, mainly over major patent holders' alleged abuse of market power. As a manifestation of such scrutiny, the European Commission ("Commission") initiated an inquiry into the pharmaceutical sector in January 2008 to find out whether anti-competitive behavior had been responsible for a perceived decline in innovation and delays in the market entry of generic products. At the end of a commotion-filled inquiry lasting about a year and a half, the Commission published its Final Report in July 2009.
During the same period, the Turkish Competition Board ("CB") – influenced by the EC Inquiry and examples from other countries – launched its own inquiry into the pharmaceutical sector with a decision adopted on 20 January 2009. Although the CB has not yet shared official results or interim findings with the public, officials have occasionally presented – on an informal basis – the main objectives and scope of this inquiry, as well as the framework and tools they are using to conduct it.
The main motives behind the inquiry have been declared as:
- collecting intelligence on the sector and competition problems therein,
- thorough examination of the entire sector;
- determining which structural arrangements in the sector prevent effective competition and, if possible, proposing alternatives; and
- evaluating the sector in line with changing circumstances and the evolving market structure.
The CB inquiry focuses on competition issues in the pharmaceutical sector on two levels: (1) production (competition in R&D, competition among originators, and competition among originators and generics); and (2) distribution (wholesale and retail). To secure a functioning competitive process in the pharmaceutical sector, the CB deems that competition problems should be solved on both these levels. Through the inquiry, the CB aims especially to increase competition and variety in the active ingredients for which protection has expired, and to eliminate conditions which distort competition among pharmaceutical distributors. The CB will be looking into legal obstacles restraining the growth of competition as well, which means that by the end of the inquiry, the state may also be identified as a party responsible for some of the sector's problems.
To achieve its objectives, the CB intends to carry out an in-depth examination into pricing and repayment, entry conditions, distribution channels and tender procedures. The CB is paying particular attention to the issue of market entry, and has marked out difficulties faced in entering the market and the unnecessary extension of protection terms as paramount among hindrances to competition in the sector. In this regard, as part of its inquiry, the CB intends to tackle the question of how to encourage the entry of generics upon expiration of legal protection.
Further, the CB aims to assess the effects on competition of the reference pricing system and other pricing regulations. To that end, the effects of the Decree on Pharmaceutical Prices (in force since 4 December 2009) are also of interest to the CB as part of the inquiry. In addition, the repayment mechanism stands out as one of the main elements of competition in the sector, and its capacity to affect competition between sector participants is also covered. In this regard, the CB poses the question of whether the selective repayment lists have any positive impact on competition between companies and between pharmaceutical products, and whether this system is applicable in Turkey.
With regard to competition law infringements in the sector, the distribution channel has been the area that has kept the CB busiest. Through the inquiry, the CB will in particular be looking for answers to how competition and efficiency can be enhanced at the retail level, and what kind of financial adjustments should be made in the retail sector to increase competition in the manufacturing sector. The inquiry's agenda also includes the question of how pharmacy associations should be positioned in the sector.
Tender procedures are also of concern to the CB, as tenders are the procurement method of hospitals, which, though accounting for only 10% of total purchases, host a significant degree of promotional activity. Not surprisingly, therefore, ways to improve the competitive environment in tenders feature among the inquiry's topics.
In sum, the CB inquiry is multidimensional and does not focus solely on market entry. Rather, it aims to tackle all factors, including regulatory, which may negatively affect competition among pharmaceutical brands. Turkey's inquiry thus seems more comprehensive than its EC counterpart, which has focused primarily on market entry issues, and in particular on the entry of generics.
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