- Introduction
The Argentine government has implemented price and supply controls over health-related and mass consumption products to protect consumers in the wake of the COVID-19 pandemic.
Said measures have gone hand in hand with a strong enforcement of competition laws, aimed to prevent and/or sanction abuses of dominance. In line with this, in 2020 the Argentine government entrusted to the competition authority the opening of an in-depth investigation to analyze potential exploitative abuse in the pharmaceutical industry on the grounds of “excessive pricing.” In addition, the government has recently agreed with the pharmaceutical industry on a fully-fledged price freeze over medications.
II. The Measures Adopted by the Argentine Government to Manage the New Normality: Price and Supply Controls in Argentina
Since March 2020, the Argentine government has been taking numerous measures against the COVID-19 pandemic. To mitigate the economic effects of the crisis on consumers, price and supply-levels controls have been put in place. These types of measures have also been adopted in other parts of the world in light of the pandemic (e.g. Canada, United States, Germany, Greece, Italy, France, India, Japan, among others), with different scopes and modalities.[1]
To protect consumers, price and supply controls include essential products linked to public health (e.g. medical supplies, face masks) and others of an essential nature (food, hygiene, personal care). These measures have been in-force since March 2020 to date, and a new set of price freezing measures spanning over more than 1,400 mass consumption products, have been recently adopted in October 2021 (Resolution SCI 1050/2021).
III. Price and Supply Controls in the Pharmaceutical Industry
On June 30, 2020, the Domestic Trade Secretary (“SCI”) issued Resolution 202/2020, which applied price and supply control over a product commercialized by Biogen Argentina, which is an important player in the pharmaceutical industry and is also a supplier to the National State.
The measure set the maximum sale price of an active ingredient (“Nusinersen (Spinraza®) 12mg/5mL,” at a value equivalent to USD 27,000. In practical terms, this is a discount of about USD 100,000 from the price suggested by the company. In addition, the resolution also requested the company, in its capacity as importer of the active ingredient, to ensure the provision and marketing of "Nusinersen (Spinraza®) 12mg/5mL.”
The SCI entrusted the local competition authority (National Commission for the Defense of Competition (“CNDC”), to open an in-depth investigation into this market, to rule out possible violations of the Competition Law No. 27,442 (“LDC”).
Furthermore, this week the newly appointed Secretary of Domestic Trade (Mr. Roberto Feletti), has agreed with the pharmaceutical sector to implement –effective immediately- price freeze measures over medications commercialized in Argentina.[2] It is worth noting that initially the sector fought back against the controls[3], but eventually it has decided to yield to reach a consensus with the government.
Strong enforcement policies and inspections are expected from the authorities going forward. Furthermore, new investigations into the industry and requests for information to key stakeholders are likely to become the norm, as a tool to gather cost-component and logistic data to conclude whether the price of medications are reasonable.
IV. What can be Expected from the Argentine CNDC Regarding Price Controls?
Price and supply control measures have been, in their great majority, issued by the SCI. This Secretary acts under the orbit of the Ministry of Productive Development, which is part of the National Executive Power.
The SCI contains the CNDC within its organizational chart. The CNDC is a technical body that lacks decision-making power (for the application of sanctions), which corresponds to the Secretary to whom it reports.
This is not the first time that the SCI entrusts the CNDC to carry out market investigations, even in the wake of the pandemic (e.g. beef market and liquid oxygen market investigations). What is interesting, though, from a competition law perspective, is the expectation that the SCI could have out of the analysis to carried out by the CNDC in the Biogen case.[4]
The resolution issued by the SCI that orders the CNDC to open the investigation lays down the following: (i) this is a concentrated market, dominated by Biogen; (ii) the price of the product would have been unreasonable and abusive for not responding to its structure of costs or at comparable prices in the region; and (iii) that “disproportionate profits” would have been obtained from sales of the product.[5]
This appears to be a new case of “abusive” or “excessive” pricing, which immediately brings to our memory the recent CNDC case-law In re “SADAIC” (2019).[6] In that case, the CNDC sanctioned, for the first time, the imposition of abusive prices.
Although the decision was partially set aside by the Court of Appeals, it provided valuable insights as to when the competition authority may consider an abusive price as anticompetitive. In other words, what particularities could legitimate “price controls” measures from the competition authority.
V. Conclusions
The Argentine government is resorting to all kinds of economic legislation tools to mitigate the effects of the economic crisis, and to assure consumers reasonable and equitable levels of prices and supply of essential inputs to live through the pandemic.
Emergency regulations have empowered the government to set maximum prices and dictate measures to guarantee supply. This especially includes access and affordability of those goods or services that involve the population´s health.
Legal counsels should be aware that competition law enforcement in Argentina, in the wake of the pandemic, remains very strong. Notably, if the matter has to do with prices and involves pharma products. Political sentiments may ignite competition law investigations. It remains to be seen whether the CNDC constructs a proper legal test for excessive pricing, that could eventually be upheld at a court level.
