Last week, the Czech Competition Authority concluded its two year review of the distribution of pharmaceuticals in Czechia.

The Authority’s investigation focused on the impact of direct-to-pharmacy (DTP) and direct-to-hospital (DTH) distribution models on pricing and availability. DTP/DTH distribution models differ from so-called “traditional” distribution models as ownership of the medicine does not move down the supply-chain. Manufacturers instead supply “direct to” pharmacies and hospitals with the help of a logistics partner.

The Authority found that these types of distribution models are not an a priori competition concern, concluding that the use of DTP/DTH models is in the public interest as:

• the benefits of the models – in the form of increased availability of medication, resulting from manufacturers’ greater oversight and control over the distribution of medicines under DTP/DTH;
• outweigh any potential disadvantages from competition concerns (e.g. as competition between wholesale distributors takes place only when manufacturers are deciding their logistics partners), which can be addressed through targeted solutions (e.g. manufacturers using more than one logistic partner).

The Authority’s conclusion demonstrates clear engagement with economic evidence and the arguments we helped formulate with the Association of Innovative Pharmaceutical Industry (AIFP) during the Authority’s investigation. We look forward to reading the full decision (which is expected soon).

Frontier Economics regularly advises clients in competition investigations, including sector inquiries.

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