Background – Landmark Case Against an International Pharmaceutical Company
The Israel Competition Authority (ICA) recently published a draft consent decree signed with the international pharmaceutical company Bristol-Myers Squibb (BMS) and the Israeli pharmaceutical distributor Neopharm. Under the agreement, the companies committed to pay over ILS 44 million to the state treasury, while a senior executive at Neopharm will pay over ILS 200,000 personally, due to indications of monopolistic abuse and restrictive arrangements (without the companies admitting to any violation).
This is a rare and significant enforcement action by the ICA against an international company, and the first under Israeli competition laws against a foreign pharmaceutical company. The ICA is thus signaling its readiness to take strong enforcement measures against international corporations, and not just local partners, and its intention to tighten enforcement in the pharmaceutical sector.
The Violation: Imposing Unreasonable Supply Conditions for a Life-Saving Drug
Imnovid, produced by BMS and distributed in Israel by Neopharm, is used to treat multiple myeloma, a type of blood cancer. As the registered distributor, only Neopharm is authorized to supply the drug in Israel.
Another company sought to register a competing generic drug, which requires a clinical comparison with the registered originator drug. To do so, the generic company must obtain samples from the originator. Any delay in providing these samples can prevent or postpone market entry of the generic drug, potentially maintaining higher drug prices.
According to the ICA, BMS and Neopharm, which hold a monopolistic position in supplying the originator drug, imposed unreasonable and unjustified conditions for providing samples to the generic drug company. These included requiring a USD 10 million insurance policy, demanding the disclosure of sensitive financial and business information, and delaying supply even after the generic drug company met these conditions, despite availability in stock.
Under Israeli law, a monopoly holder (with over 50% market share or significant market power) may not abuse its position, including by unreasonably refusing to supply a product. According to existing legal interpretation, even imposing unreasonable conditions for supply of the product may constitute such a refusal and thus violate competition law.
Additionally, the ICA claimed the companies were party to an agreement that unduly restricted supply in Israel, effectively creating a barrier to market entry for competitors.
Initially, the ICA announced its intention, subject to a hearing, to rule that Neopharm abused its monopolistic position and was party to a restrictive arrangement, and to impose a fine of ILS 64 million. Separately, an agreement with BMS would have it pay ILS 10 million. However, following the hearing, the ICA confirmed the consent decree with both BMS and Neopharm.
Legal Implications – A Trend of Stricter Enforcement
This case signals a trend toward expanded enforcement by the ICA in several key areas:
- Continued enforcement against monopolies – Whether through findings of monopolistic abuse or consent decrees, the ICA is actively pursuing such cases.
- Sanctions on foreign corporations – This rare case signals to international companies operating in Israel that the ICA will not hesitate to act against them, as opposed to only targeting their local partner.
- Increased use of consent decrees – The ICA is increasingly using consent decrees to reach settlements with violators outside court, imposing significant fines with relative efficiency and saving judicial resources.
- A focus on the pharmaceutical sector – The ICA is now paying growing attention to violations within the pharmaceutical sector, an area in which it has not taken enforcement actions for some years. This is the second recent case involving monopolistic abuse by a pharmaceutical company. In the previous case, the ICA determined the Israeli drug marketing company MBI Pharma had abused its monopolistic position by charging an excessive price and imposed a multimillion-shekel fine. However, it did not act against Leadiant, the international company thought to be involved in the violation. In this case, though, the ICA took enforcement actions against both the local distributor and the international company.
As a result, it is increasingly important that international companies operating in Israel, especially those potentially holding monopolistic positions, regularly review their policies and conduct, both toward potential competitors (especially commercial supply conditions) and business partners, ensuring their agreements do not violate Israel’s Economic Competition Law.
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