The Italian Competition Authority to investigate into a cartel for the supply of tumour drugs to some regional health agencies

The Italian Competition Authority (ICA) will investigate into bid rigging practices allegedly carried out by Novartis Farma and Italfarmaco with regard to the competitive procedures organized by some regional health authorities for the supply of a tumour drug (CaseI770 Octreotid Supplies).
The ICA decided to open an Article 101 TFEU investigation against Novartis Farma and Italfarmaco upon the receipt of complaint filed by the Arca, the purchase centre in charge for the purchase of drugs on behalf of the health authorities of Lombardy. Arca reported that Novartis Farma and Italfarmaco appeared to have coordinated their conducts with regard to competitive tender procedures to select the supplier of the active substance of octreotid, which is used in drugs for the treatment of tumours, tendered over the 2010-2013 period.
The ICA pointed out that Novartis Farma and Italfarmaco were the only manufactures of drugs incorporating octreotid and marketed with the same dosages Arca intended to buy. Notwithstanding that, the parties did not bid in any of the tender procedures called for by Arca. The parties continue to not bid even after Arca modified the tendered supply quantities according to the suggestions submitted by Novartis Farma and Italfarmaco. The parties also enquired with Arca whether they were allowed to form a joint-venture and jointly bid. The Arca reply was in the negative.
Importantly, the ICA found that Novartis Farma and Italfarmaco coordinated their behavior also with regard to competitive procedure for the supply of octreotid organized by the health authorities of the regions of Veneto and Emilia-Romagna. The health authority Emilia-Romagna awarded two tendered supply contracts, respectively, to Novartis Farma and Italfarmaco which submitted the same bids for each of these contracts.  Incidentally, the price quoted by the parties was identical to that indicated in the Arca tender notice. As they did for the contracts tendered by Arca,  Novartis Farma and Italfarmaco also did not bid in the competitive procedures organized by the health authority of Veneto. Also in this case they requested the authorization to set up a joint-venture and jointly bid. And contrary to Arca the authority of Veneto allowed the parties to submit a joint bid. Unsurprisingly, Novartis Farma and Italfarmaco were awarded a supply contract with an offer similar to the price reported in the Arca tender notice.

In sum, the ICA feared that Novartis Farma and Italfarmaco had put in practice a cartel in the market for the supply of octereotid to the health authorities of Lombardy, Veneto and Emilia Romagna. According to the ICA, the agreement included price-fixing and also market sharing arrangements, as they partied allocated the supply contracts tendered by the public bodies between themselves. Over the past months the ICA seems to have taken quite a strict approach in enforcing competition law in the health sector (see cases A473 and I769). Considering that the health system account for an important shared of public expense, injecting more competition in this sector may help reducing public debt. In that regard, the ICA pointed out that the alleged cartel may have forced the health systems to pay a higher price for the drugs. Because the competitive procedures organized by the contracting authorities were unsuccessful due to the parties conducts, the health authorities bought the drugs individually instead through purchase centres such as Arca in Lombardy. Therefore, in this case the health authorities did not enjoy the price reduction that are normally granted by manufactures when bidding in competitive tenders organized by purchase centres.

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