Catching Up: Recent Developments in Pharma Sector Competition Law Across the Baltics

2024 - 02 - 22
Article by: Elo Tamm, Uģis Zeltiņš, Rasa Zaščiurinskaitė

Welcome to our latest newsletter focusing on the dynamic landscape of competition law within the pharmaceutical sector across the Baltics. In this edition, we provide a general overview of the pivotal developments that have unfolded throughout this year, tailored to pharmaceutical sector players. From regulatory shifts to emerging trends, we aim to shed light on and give a general overview on the key areas demanding attention and scrutiny. Join us for a 10-minute read as we explore the intricacies of competition law and its impact on the pharmaceutical industry in the Baltics. For more detailed information or specific questions related to your business, please contact Partners Elo Tamm (Estonia), Uģis Zeltiņš (Latvia), and Rasa Zaščiurinskaitė (Lithuania).


Main competition law developments in the pharma sector for the manufacturers and other market participants



The Lithuanian Competition Council has identified the health sector, including pharmaceuticals, as one of the four priority areas of activity in 2024. This sector has remained a priority for the institution over the years, with the Competition Council establishing a violation of the Competition Law in 2022 and currently pursuing another investigation. According to the Competition Council, greater attention is needed due to the sector’s significance for consumers, as well as the legal regulations applied and proposed within this sector, especially the Pharmaceutical Law of the Republic of Lithuania and other associated legal acts.

Key Messages to the market participants:

  • Last month, the Competition Council also shared the European Commission’s report on ensuring competition in the pharmaceutical field. From 2018 to 2022, national competition authorities issued a total of 26 decisions on actions violating competition law in the pharmaceutical supply sector. Violators were fined almost €780 million or required to assume mandatory obligations to remove established restrictions. These decisions underscore the need for greater attention to compliance rules and procedures among companies operating in the pharmaceutical sector. The decision of the Competition Council in 2022 is no exception, as it demonstrated that company communication rules, including lobbying, should be assessed more conservatively. Through this decision, it was determined that the Lithuanian Pharmacy Association and eight pharmaceutical companies entered into an agreement on compensatory drug markups, thereby violating the Competition Law and the Treaty on the Functioning of the EU.
  • The European Commission’s report also notes that higher prices, market concentration, and limited choice or research and development opportunities can result from pharmaceutical company mergers. The Competition Council has also announced plans to enhance its concentration supervision procedures proactively. It is worth noting that the Competition Council can initiate the concentration supervision procedure within 12 months of the transaction’s conclusion, even if the established gross revenue thresholds for mandatory notification on concentration are not exceeded. This is applicable when there is a likelihood that a dominant position will be created or strengthened after the concentration, or when competition will be severely limited in the relevant market. Therefore, parties to a transaction in pharmaceutical sector should carefully assess the potential impact on the relevant market before proceeding with a concentration.



Availability of medicines

The principal concern affecting both the wholesale and retail sectors of the Latvian market remains the significant shortages in the availability of medicines. This widespread issue has had a detrimental effect, impacting both patients and healthcare providers. The lack of certain medications has resulted in compromised treatment plans, delayed medical interventions, and increased vulnerability for those in need.

The underlying causes of these shortages are varied, including disruptions in the global supply chain, manufacturing difficulties, unexpected spikes in demand, and parallel trade.

Manufacturers are notably cautious when determining supply volumes for specific markets, largely due to concerns about parallel exports.

Selective and exclusive distribution regimes

The adoption of selective and exclusive distribution regimes is causing concern over their impact on competition at the retail level.

These strategies, often utilised by manufacturers to limit the distribution of their products to a select number of retailers, could potentially suppress market competition. By restricting the number of wholesalers authorised to distribute certain products, these regimes may erect barriers for new market entrants and reduce patient choice, thereby delaying access to medicines.

Early entries

The early introduction of generic products, regardless of relevant patent expiry dates, is becoming more prevalent.

This trend has significant repercussions, not only for inclusion in reimbursement lists. The expedited introduction of generic alternatives disrupts the traditional timeline of patent expiration and subsequent market competition.

While this development could benefit wholesalers and pharmacies by offering more affordable medication options, it also raises concerns about the integrity of patent protection mechanisms and the potential for early dilution of brand exclusivity.

The practice of stockpiling and selling generics to pharmacies before the expiration of patents introduces complexities into the pharmaceutical landscape, necessitating a reassessment of potential liability issues related to assisting with the early entry of generics.

Training of HCP’s and lack of specialists

The rapidly evolving pharmaceutical landscape is placing an increasing burden on pharmacists, significantly affecting pharmacies that are struggling to keep up with the constant introduction of new products.

As essential intermediaries between patients and medications, the sheer volume of new pharmaceuticals, along with evolving treatment methods, requires pharmacists to continually update their knowledge and skills.

Given the complexity of drug interactions, potential side effects, and the ongoing introduction of advanced therapies, many pharmacists have highlighted the need for further training to ensure they can provide accurate and current information to patients. Addressing this need for continuous education is crucial to ensuring that pharmacists are adequately prepared to navigate the ever-changing pharmaceutical landscape and deliver optimal care to their customers. This indicates that greater involvement from all stakeholders, including wholesalers, could be advantageous.



The Estonian Competition Authority released its follow-up analysis of the pharmacy reform on January 29, 2024, providing insights into potential enforcement actions, legislative recommendations, and regulatory changes. This analysis also includes the Authority’s assessment of the pharmaceutical wholesale and retail markets, as well as wholesale pricing.

The pharmacy reform, which came into effect in 2020, mandates that pharmacies must be owned and controlled by pharmacists, while also prohibiting pharmaceutical wholesalers from controlling pharmacies through vertical integration.

Key Messages to Wholesalers and Pharmacies:

  • The Authority identified that the market share of the two largest pharmaceutical wholesalers exceeds 30%, and highlighted the operation of four local pharmacy chains utilizing franchise systems.
  • It urged larger pharmaceutical wholesalers to conduct individual exemption analyses of their franchise agreements, as these agreements often contain competition restrictions that fall outside the scope of vertical group exemption regulations.
  • While not condemning the use of franchise systems outright, the Authority emphasized the importance of ensuring that decision-making authority regarding budget, business plans, profits, and investments remains with the pharmacy as the franchisee.
  • The Authority proposed measures to promote fair treatment of all general pharmacies by wholesalers, including changes to pharmaceutical ordering systems to allow pharmacies to source from multiple wholesalers, and suggested exploring a centralized national pharmaceutical ordering system.
  • Analysis of the franchise system revealed potential control exerted by wholesalers over franchise pharmacies, indicating a deviation from the objectives of the pharmacy reform. Overall, the Authority concluded that the reform measures have not effectively ensured pharmacy independence from vertical market relations.
  • A concrete recommendation included prohibiting interlocking directorates among pharmacies and pharmacy franchisors to prevent the illicit sharing of commercially sensitive information.

Message to Commercial Premises Owners:

  • The Authority emphasized to commercial premises owners the importance of avoiding dissimilar conditions in equivalent agreements, particularly in situations where pharmaceutical wholesalers operate other businesses within shopping centers. The Authority warned that preferential terms granted to such lessees over independent pharmacies could lead to competitive disadvantages and potential enforcement action.

Pricing of Pharmaceuticals:

  • The Authority highlighted concerns with the current pharmaceutical pricing regulatory model, particularly regarding wholesale and retail margins and price negotiations between the Estonian Health Insurance Fund and pharmaceutical manufacturers.
  • Noting a disparity between discounts granted to wholesalers and actual retail prices, the Authority stressed the need for a functional model to promote price competition among wholesalers and ensure that manufacturers’ discounts benefit patients.

Request for New Enforcement Tools:

  • The Estonian Competition Authority expressed the need for expanded enforcement capabilities, advocating for the ability to enforce structural or behavioral remedies on market participants following market studies, beyond its current authority limited to issuing recommendations.