1. INTRODUCTION
The pharmaceutical service and distribution are among the objectives of markets opening and developing competition pursued by the Law no. 124 of August 4, 2017.
Up to now, the Italian legislation on the distribution and marketing of the drug has managed to oppose a justified, although criticized, resistance to the principles of the EU Treaties on the free movement of people, professionals and capital and on the freedom to settle economic and business activities in Italy.
In particular, the resistance opposed to the introduction of rules that allow non-pharmacists natural persons and legal persons with a corporate structure not composed exclusively by pharmacists, has been that of overriding reasons of public interest for the protection of public health. These reasons were deemed worthy of consideration to justify our system's restrictions on the freedom of movement guaranteed by the EU Treaty.
Before the law 124/2017, in Italy the members of a pharmacy could only be pharmacists registered in the professional register and could also operate through partnerships but not through corporations and provided that the same pharmacist was not a member of more than one legal entity. In addition, the pharmaceutical management companies could not be holders of more than four pharmacies located in the Region where the company had its registered office.
With the law 124/2017, supported and interpreted by the recent opinion of the Council of State, no. 01962 of December 22, 2017, published on January 3, 2018, the pharmaceutical distribution sector is being innovated in accordance with the principles of the EU Treaties, from which the Italian national pharmaceutical market defended itself in the name of the protection of public health.
2. AN OVERVIEW OF THE ITALIAN PHARMACEUTICAL MARKET
The pharmaceutical expenditure around the world has reached and exceeded the 1,100 billion dollars in 2016 and the growth will bring by 2021 the global market value of around 1,400 billion dollars.
For our country, a more favorable trend is expected in the next few years compared to some of the top 5 EU (France and Spain in particular with the uncertainty of the Brexit effect on the United Kingdom) thanks to the introduction of the possibility for corporations to become owners of pharmacies.
Currently, according to the sectoral studies published by the Ministry of Economy and Finance concerning the incomes of 2015, a pharmacy, understood as business, earns a gross yearly rate of 116 thousand Euros.
The figure of the Ministry of Economy and Finance concerns the profit that a private pharmacy achieves in a year, a value from which the taxes due to the tax authorities must be deducted and then will be divided among the various shareholders who participate in the management company of the pharmacy.
To this very important figure corresponds an equally important figure concerning the pharmaceutical expenditure registered in our country.
In fact, according to the 2016 OSMED1 report, the total pharmaceutical expenditure (public and private) amounted to 29.4 billion Euros, of which 77.4% was reimbursed by the Italian national health service.
The net subsidized pharmaceutical expenditure of the Italian national health service, which as mentioned above represents the largest percentage of expenditure, increased by +0.7% in the first half of 2017, compared to the same period of 2016.
In this period the prescriptions were over 298 million, an average of 4.9 prescriptions for each citizen. More than 576 million of drugs were delivered and each Italian citizen withdrew at a pharmacy an average of 9.4 packages of drugs to be paid by the Italian national health service.
Net expenditure trend and number of prescriptions for the first half of 2017
The following diagram, correlates, Region by Region, the trend of net expenditure and the number of prescriptions in the first half of 2017 compared to the same period of 2016. The increase in expenditure concerns most of the Regions, with the exception of Sardinia, Sicily, Emilia-Romagna, Campania, Veneto, Puglia, Liguria, which register a decline.
The above data come from the National and Regional Pharmaceutical Expenditure Monitoring periodically drafted by the Italian Medicines Agency (AIFA), to which reference should be made for a more detailed analysis of the distribution of the drug in Italy2.
3. LAW 124/2017. AND THE OPINION OF THE COUNCIL OF STATE, NO. 01962 OF DECEMBER 22, 2017, PUBLISHED ON JANUARY 3, 2018
The new legislation instead:
- allows the entry of corporations in the ownership of the private pharmacy;
- removes the limit of the four licenses for an identical company;
- prohibits the control, directly or indirectly by a single person, of a share more than 20 percent of the pharmacies of the same Region or autonomous Province, pursuant to art. 2359 of the Italian Civil Code.
- suppresses the subjective requirements for the shareholding in companies that manage pharmacies, with the consequence that now the shareholding is also allowed to non-pharmacist members;
- allows that the management of the pharmacy managed by a company is also entrusted to a pharmacist who is not a member;
- establishes that it is incompatible to have shares in companies holding a pharmacy if the medical profession is exercised.
- changes the rules on the competition for the assignment of pharmaceutical locations in partnership among pharmacists, in relation to the obligation to maintain the partner’s joint management of the pharmacy, from ten to three years.
In concrete terms, the new legislation opens new scenarios for the reorganization of the drug distribution in Italy, through the adoption of corporate organization instruments both by the current pharmacy owners (thus encouraging their aggregation), and by foreign investors who are already successfully operating in this sector, in other countries.
The intervention was aimed at removing in the short term the unjustified constraint to the freedom to organize the business activity while in the medium to long term it aims at modernizing the pharmaceutical distribution, the differentiation of the offer and, finally, the reduction of prices for customers.
The entry of the corporations in the control of pharmacies, completely in line with the scenario widespread in other countries, will allow the market to open up to the chains of pharmacies managed through the organization and the means of large companies. The legislator, therefore, allowing sector partnerships with leading foreign investors and facilitating aggregations and acquisitions among existing professionals, makes a choice, dictated by the desire to increase the efficiency of pharmaceutical distribution which, in the long term, could also lead to a reduction in product prices.
The innovative scope of the new legislation, therefore, favors the opening of the market, also at a national level, to the great giants of the pharmaceutical distribution.
Interpretive doubts following the entry into force of the new regulation
The legislator, introducing the innovative legislative changes in the pharmaceutical sector, consciously made the decision not to intervene on the aspects of the discipline not directly linked to the ownership of the pharmacy and this has generated certain difficulties in coordination with the rules that have not been changed.
The resulting problems of interpretation derive from the lack of clear distinctions between the different types of companies, partnership or corporations, involving the application of the same new provisions. In particular, the interpretative problems occurred concern:
- if the legislator has made reference to all types of corporations to provide for the ownership of the exercise of a pharmacy also in relation to corporations;
- if pharmacists who are winners in partnership form of the extraordinary competition ex art. 11 of the Decree Law of January 24, 2012, no. 13 may constitute a corporation pursuant to the amended article 7 of law no. 362/1991;
- if the corporate structure of a partnership established for the management of a pharmacy can also be composed of non-pharmacist members;
- If the incompatibilities referred to in Article 7, paragraph 2, and referred to in Article 8, paragraph 1, of Law no. 362 of 1991, must be applied to all members and if they have general scope, applying, therefore, both to the ordinary competition and the extraordinary competition.
The Council of State, Special Commission of December 22, 2017, intervened to clarify the interpretative doubts that arose as a result of the entry into force of the 124/2017 law and of the amended article 7 of the law n. 362/1991, which, at the request of the Ministry of Health’s opinion, as well as following a number of questions received from private citizens, federations of professional associations and bodies of the National Health Service, issued the opinion n. 01962/2017 of December 22, 2017, published on January 3, 2018, with which it clarified the scope of the legislative provisions in question, providing an authoritative interpretation, although not binding.
The ownership of a pharmacy within corporations.
The Council of State stated that the owner of a pharmacy can be any of the Italian type of companies: “S.p.A. – Società per Azioni”, “S.a.p.a Società in accomandita per azioni”, “S.r.l. – Società a responsabilità limitata”, thus expanding to all types of partnership and corporations the access to the pharmaceutical company.
In support of this interpretation, the Council of State provided a triple order of opinions.
Firstly, the generic literal reference made by article 7, paragraph 1, of the law n. 362/1991, to "corporation", without any distinction between types of corporations.
Secondly, the rationale for the 2017 reform, recognizable in the removal of regulatory obstacles to the opening of the markets and in the promotion of competition, which would be contradicted where the ownership of the pharmacy was unjustifiably restricted only to certain types of corporations.
Lastly, the verification that municipal pharmacies could already have been established in the three types of forms of corporations and that, although the regulation of the latter differed in several aspects from that of private pharmacies, it would be difficult to reconcile a similar disparity in treatment on this point.
The possibility for pharmacists winners of extraordinary competition to set up a corporation.
In this regard, the Council of State has been able to provide clear indications for balancing the right to set up a corporation with the prescription contained in art. 11 of the law decree January 24, 2012, No. 1, stating the legitimacy of the management of the pharmacy in the form of corporations, provided that the binding prescription of the equal co-management, for at least three years, between the special competition winners is respected.
The purpose must be pursued by adopting the corporate model of the S.p.A or S.r.l., but not S.a.p.a., where the presence of two different categories of shareholders makes the management on an equal basis not configurable.
The adoption of the corporate models indicated should then be strengthened and, above all, not weakened by appropriate corporate statutes, which, as act of set up of the corporate governance, can preserve the implementation of associated management on an equal basis from elusive mechanisms.
For this reason the S.r.l. form seems preferable, as its typical discipline, guarantees more respect for equal management.
The possibility for partnerships to be established also by non-pharmacist members.
The Council of State has considered legitimate the constitution of a partnership for the management of a pharmacy also by non-pharmacists, given that the current art. 7, paragraph 2 of law 362/1991 refers to all "companies referred to in paragraph 1" of the same article and therefore also partnerships.
From the analysis of the law the Council of State seems to have no doubts about the possibility of participation in partnerships even from non-pharmacist persons.
However, it is important to clarify that from what just stated derives the necessity to make a clear distinction between the pharmacy management, which by law must now be attributed to a pharmacist (even non-member), and the economic management of the same, which it can also belong to a company as owner.
Through this distinction, it is avoided the risk of involving in the conduct of the pharmacy those partners who are not pharmacists.
The rationale of this important clarification of the Council of State is to be found in the fact that in the partnerships, rather than in the corporations, the unlimited and joint liability of the members for the social obligations corresponds to the ex lege attribution of the administration power to the partners, which leads to consider that each member is a co-manager of the pharmacy.
The application of the incompatibilities referred to in Article 7, paragraph 2, and referred to in Article 8, paragraph 1, of Law no. 362 of 1991, to all members, even in case of assignment following an extraordinary competition.
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The incompatibility of the "medical profession" with the ownership of the pharmacy:
The Ministry of Health was doubtful whether the provision in question4 refers expressly to the exercise of the medical profession or even to the mere registration in the register.
The Council of State, noted that the rationale of the regulation is to prevent the occurrence of any conflicts of interest between the provision of pharmaceutical services, typical of the pharmacist, and the prescription of the drug, typical of the doctor. This prevention could hardly be guaranteed by the limitation of incompatibility with doctors practicing the profession because of the difficult to estimate and verify the possibility that a non-practicing doctor, but enrolled in the register, decides to prescribe drugs.
For these reasons, the Council of State considered preferable, the solution that widens the scope of application of the said incompatibility to any doctor, whether he practices the profession or is only registered in the professional register.
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The scope and application of the incompatibilities foreseen for the shareholding in companies that own the pharmacy:
In relation to this form of incompatibility5, the question posed by the Ministry was aimed at verifying (i) whether the application of the provision in question could be limited only to cases where the shareholder plays a similar role in another pharmacy, or even in cases where the shareholding in another pharmacy is that of a mere financial investor; (ii) if the term "working relationship" referred to in letter c of paragraph 1 of article 8, can only be traced back to the exclusively employment relationship.
(i) On the first point the Council of State, in line with what has already been clarified also by the Federation of Italian Pharmacists Association (FOFI)6 , reiterated that the incompatibility of the law in question concerns all members, i.e. all those who have a share in a company that owns a pharmacy, regardless of whether or not it carries out activities within it.The Council of State noted that a different and restrictive interpretation of the rule could not be reconciled with its dual rationale, the first, avoiding that the owners, temporary managers, directors or collaborators of a pharmacy could have restrictions that would prevent them from properly performing work services in favor of the pharmacy in which they operate, as well as playing a similar role in a "business" pharmacy with the emergence of possible conflicts of interest.
Secondly, it would also be in line with what was claimed by the Constitutional Court in the additive sentence no. 275 July 20037, which, after having extended to the municipal pharmacy management companies the incompatibility restriction with any other activity in the production, distribution, intermediation and scientific information of the drug, has established that the incompatibility is a "general principle applicable to all people that, individually or in partnership, are owners or managers of pharmacies".
(ii) On the second point, the Special Commission clarified that bringing back the concept of "working relationship" exclusively to employment assumptions would constitute a form of unequal treatment and the employee would suffer to the detriment of the self-employed, representing a form of discrimination with a doubtful constitutional legitimacy.
Nevertheless, according to the Council of State, the different interpretation would not be coherent with the rationale of preventing the member from contracting restrictions that prevent an adequate performance of work in favor of the company and / or social pharmacy.
According to the Council of State, it is preferable the distinctive criterion aimed at enhancing the continuity of the working relationship developed by the partner with another employer or client whose widens the range of action about the incompatibility in question in addition to working relationships, which already in their essential characteristics present those of continuity, even for those services which, although autonomous, are carried out with a regularity so as to be absorbent.
Furthermore, the opinion reiterated that it was not possible to exclude the application of the same form of incompatibility in the cases in which the participation is based on a mere capital injection.
For both forms of incompatibility envisaged by the aforementioned rules, it should be added that the Council of State confirming what was stated by the Ministry, reiterated that there is no reason for excluding the application of the incompatibility scheme to the pharmacist companies that are winners of the extraordinary competition. In fact, the provisions mentioned do not distinguish between pharmacies acquired as a result of an ordinary competition and pharmacies acquired with an extraordinary competition.
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1http://www.agenziafarmaco.gov.it/content/luso-dei-farmaci-italia-rapporto-osmed-2016
4Paragraph 2 Article 7 Law 362/1991:
The companies referred to in paragraph 1 have as exclusive object the management of a pharmacy. The shareholding in companies referred to in paragraph 1 is incompatible with any other activity carried out in the field of scientific production and information of the drug, as well as with the practice of the medical profession. The provisions of article 8 shall apply to the companies referred to in paragraph 1, as far as compatible.
5Paragraph 1, Article 8 Law 362/1991:
1. Shareholding in companies referred to in article 7, except in the case referred to in paragraphs 9 and 10 of this article, is incompatible:
a) in the cases referred to in Article 7, paragraph 2, second sentence.
b) with the owner position, temporary manager, director or collaborator of another pharmacy;
c) with any public and private employment relationship.
6http://www.fofi.it/ordinego/doc/documento5304468.pdf
7https://www.cortecostituzionale.it/actionSchedaPronuncia.do?anno=2003&numero=275
