Show-cause notice to MNCs withdrawn: CCP warns pharma sector against cartelization

Withdrawing a show cause notice issued to association of over 20 multinational pharmaceutical companies, the Competition Commission of Pakistan (CCP) Wednesday warned pharmaceutical sector that the Commission remains vigilant against all forms of collusion and cartelisation that may take place in any manner within the pharmaceutical sector.
According to an order issued by a three-member bench of the CCP here on Wednesday, the CCP observed that the anti-competitive activities affect not only the market players but the general public also. Whenever the Commission becomes aware of any such anti-competitive activity, it spares no effort to take the violators to task.
In light of the above determinations, the CCP bench does not find merit in the show cause notice issued to the Pharma Bureau. Accordingly, the SCN is hereby set aside and disposed of. The Pharma Bureau, registered under the Companies Ordinance, 1984 (Now Company Act, 2017) is an association of undertakings within the meanings Section 2(1)(q) of the Act. The association is the representative body of more than 20 multinational pharmaceutical companies (MPCs or Mcml Undertakings) engaged, inter alia, in the business of manufacturing, distribution and/or marketing of various drugs/pharmaceutical products for therapeutic use across Pakistan.
"We must stress repeatedly the importance of undertakings and associations remaining vigilant as to the threat of potential collusion and other anti-competitive practices," the CCP bench observed.
Based on the above deliberations, the CCP is of the considered view that Pharma Bureau cannot be held to have violated Section 4 of the Act by taking any decision which the object or effect of preventing, restricting or reducing competition within the relevant market.
After going through the entire evidence available on the record, and review in submissions made by Pharma Bureau, the CCP is of the considered view that none of documents/evidence reflect as understanding between undertakings to determine pricing pattern. Most of the evidence contains recommendations by the said company in response to requests made by DRAP on pricing of pharmaceutical products.
Background of the case revealed that in 2016, as a result of the search and inspection, documents/material relevant to Commission's enquiry were impounded. Subsequent to the inspection, the Enquiry Committee examined the impounded documents, collected information/evidence from various stakeholders including Drug Regulatory Authority of Pakistan ("DRAP"), and prepared an enquiry report on the potentially anticompetitive conduct and practices.
Based on the findings of the Enquiry Report, the Commission decided to initiate proceedings under Section 30 of the Act and issued the show cause notice (SCN) to the said association containing the alleged violations.
The association informed the CCP that as regard to the communication of strategic data or sharing of commercial sensitive information among its member undertakings, the CCP Enquiry Report has failed to point out a single instance on the part of the Pharma Bureau or its member undertakings, disclosing their costing or pricing data to their competitors among other things. Any recommendation by the Pharma Bureau to DRAP for across the board price increase has been based on publically known facts such as consumer price index, inflation rate, exchange rate and amount/length of time since the last increase in the price of pharmaceutical products.
As regard to the interaction between the Pharma Bureau and its member undertakings and communication of any collective proposal or demand of the Pharma Bureau to DRAP, the counsel submitted that the principles of competition law do not bar such activities.
As regard to the sharing of strategic data and commercially sensitive information, the counsel contended that throughout the period under consideration, DRAP has been seeking stakeholders' comments on the drug pricing policy. These stakeholders included Pharma Bureau and member undertakings and Pakistan Pharmaceutical Manufacturers Association.
As information sought by the Pharma Bureau from its member undertakings was meant to communicate industry-wide consensus to DRAP to formulate the drugs pricing policy, therefore, any such information stemming from the communication to DRAP does not violate any provision of the law, the association added.
The CCP order added that after going through the entire evidence available on the record, and reviewing submissions made by the association, the CCP bench is of the considered view that none of documents/evidence reflect as understanding between undertakings to determine pricing pattern. Most of the evidence contains recommendations by the association in response to requests made by DRAP on pricing of pharmaceutical products, the CCP bench added.
Hence, after thorough deliberation on every aspect of evidence and submissions of the association and the information relied upon by the Enquiry Committee in the Report, the CCP bench is of the considered opinion that the no commercially sensitive information was shared using the platform of Pharma Bureau. Further, the information available in the evidence relied upon by the Enquiry Commission and the Enquiry Report does not constitute as strategic data or commercially sensitive information. The information exchange appears to have been used to prepare recommendations, suggestions, directions and agreements on increase in prices of various pharmaceutical through the medium of association that too on the insistence of the regulator operating within the relevant market, ie, DRAP.