The Catalan Competition Authority launches a consultation on competition restrictions in retail distribution of medicines

On June 22, the Catalan Competition Authority (ACCO) launched a public consultation on competition restrictions in the sector of retail distribution of medicines in Catalonia.

In its preliminary report, the ACCO attributes the restrictions in the sector to its highly regulated nature. The ACCO believes that, although the strong public intervention in that market is justified by clear public health reasons, the Catalan regulatory framework, essentially established by Act 31/1991, of December 13, on pharmaceutical services in Catalonia, excessively restricts competition. In the ACCO’s opinion, the deregulation process in neighboring countries (and other Autonomous Regions such as Navarre) shows that there is room to liberalize the sector without compromising the essential aim of protecting health.

The main competition restrictions identified in the ACCO’s preliminary report stem from the following aspects of the regulations:

• Acces to market. The Catalan Act on pharmaceutical services requires administrative authorization to open (or close) a pharmacy and to transfer it (simple changes of location without ownership changes), to assess its alignment with health planning and the criteria on which it is based (essentially, population density, geographic characteristics of the surrounding area and population distribution). There are limits on the number of pharmacies per Basic Health Area (“BHA”), and there must be a minimum distance of 250 meters between establishments. The possibility of moving is reduced to the specific ABS or another within the town boundaries, subject to additional conditions.

The Association of Pharmacists must be notified in advance to transfer ownership of a pharmacy (transfer or sale), and it is only possible once it has been operating for at least six years. In addition, other pharmacists (different from the owner) employed in the pharmacy are entitled with preemption rights. Last, if the business is sold to a third party not connected with the business, the acquirer must in any case be a pharmacist as well. 

• Ownership reserve and prohibition on integration.  The ownership of pharmacies is legally reserved to people holding pharmacy degrees, who can only (co-)own a single pharmacy. This means that Catalan law does not allow horizontal integration (chains) between pharmacies. Vertical integration is not possible either, as working as a pharmacist is incompatible with any kind of direct economic interests in pharmaceutical laboratories, intermediaries or distributors.

The ACCO is therefore focusing on relaxing regulation and allowing mergers in the sector, always subject to the Spanish National Markets and Competition Commission’s merger control mechanisms. 

• Reverse of Activity. Pharmacies have an exclusive reserve on selling medicines, including online sale of non-prescription medication (prescription drugs can only be dispensed in person), which can be bought on the pharmacy’s website, if it has one. In contrast, the ACCO considers that distribution of non-prescription medicines could also take place through other channels and establishments, such as supermarkets and parapharmacies.

• Prices. Pharmacies’ commercial margins are established by regulation, and the prices of the medicines they sell cannot be modified, with the sole exception of over-the-counter medication (those not subject to prescription and not financed by the National Health Service), for which discounts of up to 10% of the retail price are possible.

• Opening hours and advertising. Since pricing does not generate competition in the sector, the proposal is to relax the regulation of other elements that would allow pharmacies to distinguish themselves from the competition, such as opening hours (which must currently be the same within the same town) and advertising. 

The consultation is open to the economic agents directly involved (pharmacies, distributors and laboratories) and the general population.

Comments on the preliminary report prepared by the ACCO can be submitted until July 5 using this form.

Authors: Cristina Vila and Pablo García.