Pharma sales survey not exempt from competition regime

The Hong Kong Association of the Pharmaceutical Industry (HKAPI) wanted to gather data on sales of prescription and over-the-counter pharmaceutical products in Hong Kong and Macau and then compile that information into a sales survey report, which would provide "sales figures in different sectors and formulations". It planned to publish the report on a quarterly basis and make it available for purchase. The trade association's members together provide over 70% of the prescription medicines in Hong Kong.

In January the HKAPI applied to Hong Kong's Competition Commission seeking an exemption from rules contained in the Competition Ordinance.

The Ordinance generally prohibits businesses from exchanging commercially sensitive information. The Competition Commission said that information relating to price or price strategies and quantities concerning sales, market shares, sales to particular customer groups or territories is typically considered "the most competitively sensitive".

Under the Ordinance, however, are a number of exemptions which allow activities which would otherwise be classed as anti-competitive to go ahead. One exemption applies to agreements that would enhance overall economic efficiency.

The HKAPI said there were five economic efficiencies that its proposed survey would deliver, including better, more efficient allocation of stock for existing products; easier introduction of new products into the market; enhanced marketing and distribution efforts of pharmaceutical companies; greater investments in other patient welfare enhancing activities; and development of public policy, academic and research and development generally.

However, the Competition Commission said that the submissions and evidence provided by the HKAPI "do not amount to 'convincing' or 'cogent and compelling' evidence of the claimed efficiencies" and that therefore it had failed to satisfy the first of four conditions that need to be met for the exemption to apply.

Hong Kong-based competition compliance expert Mohammed Talib of Pinsent Masons, the law firm behind Out-Law, said that it is just the second decision that the Competition Commission in Hong Kong has ever where an exemption has been applied for from the so-called 'first conduct rule', which sets out a general prohibition against anti-competitive agreements. In both cases the regulator has rejected the exemption application.

"The Competition Commission takes a narrow view of the circumstances in which it would permit competitors to participate in the exchange of competitively sensitive information," Talib said. "Businesses, and especially industry associations, need to review existing practices to ensure that they comply with the Ordinance."

Robert Vidal, also of Pinsent Masons, who specialises in competition law in the life sciences sector, said: "This is an interesting decision from the Hong Kong Competition Commission in terms of its application of the efficiency exemption under local competition rules to the pharmaceutical sector. The assessment was detailed, rigorous and followed the standard approach taken in the EU. The outcome is not particularly surprising given the problematic nature of information exchange between competitors. The burden in terms of proving the required level of efficiency and indispensability under the exemption is always a tough one to satisfy in these cases."