French Competition Authority publishes its opinion on the distribution of medicines and medical biology sectors

​This opinion, published yesterday, is the result of several months of investigation and a broad public consultation. It will be followed by a second publication, dedicated to the process of setting drug prices, expected next summer.
The French Competition Authority (the FCA) initiated in 2017 a sector-specific investigation into the distribution of medicines and medical biology. A mid-term assessment was published in October 2018.

The FCA has issued recommendations on seven topics, including pharmacies, distribution intermediaries and biomedical laboratories.

Promoting the online sale of prescription drugs and parapharmacy

Following on from its opinion of 2016, the FCA recalls that European law authorises the online sale of medicinal products subject to optional medical prescription but notes that the French regulatory framework remains particularly restrictive and limits the development of this activity.

Other Member States, in particular Belgium and the Netherlands, have more appropriate legislation that has enabled the emergence of e-commerce players in this sector1.

In order to improve the competitiveness of French pharmacies in this area, the FCA suggests further easings.

Allowing pharmacists to use storage facilities separate from their pharmacies and located at a certain distance would enable pharmacies located in urban centres to acquire facilities of a sufficiently large size to develop their online sales activity.

The FCA suggests facilitating Internet advertising by allowing the use of referencing and paid comparators on the Internet and product enhancement, for example by allowing the use of certain advertising means such as using bold, large or flashing characters.

It further recommends relaxing the obligation to recruit an additional pharmacist for every €1.3m total pharmacy sales and proposes to refer to sales of medicines alone so that this regulatory constraint does not weigh on the activity of selling products outside the monopoly.

Simplifying advertising on certain products and services offered in pharmacies

The FCA notes that pharmacists are, in practice, prevented from advertising all their products, while supermarkets and parapharmacies have the possibility to use them for the products they market.

In order to ensure a level playing field, the FCA suggests that pharmacists should be allowed to offer promotions and fidelity programmes on parapharmacy, hygiene and cosmetic products.

In addition, the FCA considers that pharmacists should be able to highlight the prices of non-reimbursable medicines they sell in pharmacies or online, including, for example, through "low price" displays, so that competition can be effective on those medicines whose prices are not regulated.

Finally, the FCA would like pharmacists and pharmacy groups to be able to promote the services offered in pharmacies, by broadening the use of communication tools and allowing advertising on social networks or on television, for example.

Enhancing the role of the pharmacist

The FCA strongly supports the expansion of the tasks entrusted to the pharmacist as a health professional.

The FCA notes that the absence of texts specifying the procedures for implementing the new pharmacist services constitutes a major obstacle to their development and calls for rapid intervention by the public authorities.

But the FCA also encourages pharmacists to develop new services on their own initiative, without waiting for government intervention, by individually setting their own prices. The development of these services could be facilitated by the creation of pharmacy chains, which would have the appropriate financial and human resources, and the negotiating capacity to conclude cooperation agreements with other health professionals.

Opening up the capital of pharmacies

The current regulatory framework allows only limited and minority stakes to be taken by assistant and titular pharmacists.

The FCA considers that this model is too rigid and does not allow the profession to finance its development and new activities (telemedicine, telediagnosis).

Following on from its 2013 opinion, the FCA reiterates its call for a liberalization of the rules on the ownership of pharmacies' capital. It details several possible ways, ranging from increasing the number of pharmacists' holdings (minority or majority) to opening up the capital to investors not belonging to the profession.

According to the FCA, the opening of the capital would make it possible to improve the cash flow and financing capacities of pharmacies, to achieve economies of scale and scope with the creation of pharmacy chains in order to better face competition from mass retail chains. This measure would also allow vertical integration with wholesaler distributors.

The FCA specifies that the opening of capital should in any event be regulated, by providing guarantees as to the independence of the pharmacist and by establishing rules to prevent conflicts of interest.

Liberalizing the pharmacies’ monopoly

While affirming the essential nature of the pharmaceutical monopoly, the FCA is in favour of an adjustment of the pharmacies’ monopoly. Certain health products (medicines subject to voluntary medical prescription, in vitro diagnostic medical devices intended for use by the public: self-tests, blood glucose meters, etc.) could thus be marketed outside pharmacies, and in supermarkets and medium-sized stores and parapharmacies.

The FCA accompanies its proposal with several safeguards. These products should always be delivered by a pharmacist, present at the point of sale in a dedicated area. The pharmacist could not be subject to commercial objectives for the sale of these products. Establishments wishing to market these products could also be subject to control by health authorities.

Review the intermediaries’ model

Following on from the 2013 opinion, the FCA notes that intermediaries in urban drug distribution are confronted with an unbalanced competitive environment and struggle to exercise real purchasing power against pharmaceutical companies, at least over certain product ranges. Intermediaries are particularly vulnerable due to the development of direct sales between laboratories and pharmacies.

In particular, it highlights the situation of wholesaler-distributors, who are subject to particularly heavy public service obligations, which represent a significant cost for them.

The FCA notes that the strategy of wholesalers to diversify their activities to reduce their dependence on the sale of reimbursable medicines has proved to be insufficient to ensure the sustainability of the sector.

It calls for a reform of the rules on the remuneration of wholesalers, for example by providing for remuneration based on the volumes distributed, or according to a flat-rate amount modulated according to the specific features of the product concerned (for example, for products subject to the cold chain and narcotic products).

However, the FCA notes that an increase in the remuneration of wholesalers could lead to an increase in the direct sale of certain reimbursable medicines, which would become more attractive to pharmacies.

Towards a liberalization of the rules applicable to biomedical laboratories

The FCA is in favour of liberalising the medical biology sector and points out regulatory constraints that hinder its development and generate inefficiencies.

Therefore, it advocates the opening up the capital of biology laboratories to non-biologist investors and recommends relaxing the rules governing subcontracting and cooperation between biomedical laboratories.

It also proposes a revision of the territorial grid by allowing laboratories to extend their implantation over larger areas. Finally, it suggests authorising price discounts granted by private laboratories in the context of calls for tenders.

The press release of the FCA is available here.

1Speech by the President of the FCA, Isabelle De Silva, at a press conference on 4 April 2019, to present opinion 19-A-08.

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