Case M.7818 – Mckesson / UDG Healthcare (Pharmaceutical Wholesale and Associated Businesses)
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Case M. 7818 – McKesson / UDG Healthcare (Pharmaceutical Wholesale and Associated Businesses) Only the English text is available and authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 9(3) Date: 03.03.2016 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are shown thus […]. Where possible the information omitted has been replaced by ranges of figures or a general description. EUROPEAN COMMISSION Brussels, 3.3.2016 C(2016) 1474 final Public Version COMMISSION DECISION of 3.3.2016 relating to Article 9 of Regulation (EC) No 139/2004 referring to case M. 7818 – McKesson / UDG Healthcare (Pharmaceutical Wholesale and Associated Businesses) (Only the English text is authentic) COMMISSION DECISION of 3.3.2016 relating to Article 9 of Regulation (EC) No 139/2004 referring to case M.7818 – McKesson / UDG Healthcare (Pharmaceutical Wholesale and Associated Businesses) (Only the English text is authentic) THE EUROPEAN COMMISSION, Having regard to the Treaty on the Functioning of the European Union (the "TFEU")1, Having regard to the Agreement on the European Economic Area, and in particular Article 57 thereof, Having regard to Council Regulation (EC) No. 139/2004 of 20.1.2004 on the control of concentrations between undertakings2 (the "Merger Regulation"), and in particular Article 9(3) thereof, Having regard to the notification made by McKesson Corporation on 14 January 2016, pursuant to article 4 of the Merger Regulation, Having regard to the request of the United Kingdom of Great Britain and Northern Ireland’s Competition and Markets Authority of 22.01.2016, Whereas: (1) On 14 January 2016 the Commission received notification of a proposed concentration by which McKesson Deutschland GmbH & Co. KGaA, an entity ultimately owned by the McKesson Corporation ("McKesson", United States) acquires certain businesses ("the Target") from UDG Healthcare plc (“UDG”, Ireland), by way of purchase of shares. (2) The United Kingdom of Great Britain and Northern Ireland’s (UK’s) Competition and Markets Authority ("CMA") received a copy of the notification on 14 January 2016. (3) By letter dated 22 January 2016, the United Kingdom of Great Britain and Northern Ireland requested the referral to the CMA of the proposed concentration with a view to assessing it under national competition law, pursuant to article 9(2)(a) of the Merger Regulation (“the Referral Request”). 1 OJ C115, 9.8.2008, P.47. 2 OJ L 24, 29.1.2004, p.1. With effect from 1 December 2009, the Treaty on the Functioning of the European Union ("TFEU") has introduced certain changes, such as the replacement of "Community" by "Union" and "common market" by "internal market". The terminology of the TFEU will be used throughout this decision. 2 1. THE PARTIES (4) McKesson operates in the distribution and delivery of pharmaceuticals and medical equipment; medical supply products; and the delivery of healthcare information technology to healthcare organisations. (5) McKesson acquired the sole control over Celesio AG ("Celesio") in February 2014. The wholesaling subsidiary of Celesio in the UK, AAH Pharmaceuticals Limited ("AAH"), supplies prescription-only medicines, pharmacy-only medicines and other medical products,3 while Lloyds Pharmacy Limited4 ("Lloyds"), also a subsidiary of Celesio, operates retail pharmacies in the UK and the Republic of Ireland ("ROI"). (6) UDG is a provider of sales and marketing services, wholesaling, medical equipment, packaging and specialist healthcare delivery services. (7) The Target includes UDG's pharmaceutical wholesaling business in Ireland and the UK, comprising the United Drug Supply Chain Services business ("UDSCS") operating in ROI and the United Drug Sangers business ("UDS") operating in Northern Ireland ("NI"); TCP Group ("TCP"), a healthcare services provider in the ROI; and MASTA Business ("MASTA"), a travel healthcare business in the UK. 2. THE OPERATION AND THE CONCENTRATION (8) On 18 September 2015, the Parties entered into a Share Purchase Agreement, which provides for the sale and purchase of the entire issued share capital of the companies comprising the Target from the various sellers within UDG. (9) The operation therefore constitutes a concentration pursuant to Article 3(1)(a) of the Merger Regulation. 3. EU DIMENSION (10) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (McKesson: EUR 141 207 million, the Target: EUR […]).5. Each of them has a Union-wide turnover in excess of EUR 250 million (McKesson: EUR […], the Target: EUR […]), but neither of the undertakings concerned achieves more than two-thirds of its aggregate Union-wide turnover within one and the same Member State. (11) The notified operation therefore has an EU dimension pursuant to Article 1(2) of the Merger Regulation. 3 The excerpt “prescription-only medicines, pharmacy-only medicines and other medical products” is described at paragraph 14 of the Form CO as “Pharmaceuticals and other OTC products”. 4 Mentioned as Lloyds Retail Pharmacy in the Form CO paragraph 2. 5 Turnover calculated in accordance with Article 5 of the Merger Regulation. 3 4. THE ARTICLE 9 REFERRAL REQUEST (12) By a letter dated 22 January 2016, the CMA, on behalf of the UK, requested the Transaction to be partially referred to CMA with a view to assessing the effects of the Transaction in the UK under national competition law, pursuant to Article 9(2)(a) of the Merger Regulation. (13) In a preliminary assessment, the CMA has identified the following markets in which the Transaction would threaten to significantly affect competition in the UK: (a) The wholesale supply of pharmaceutical and non-pharmaceutical products, specifically in NI; (b) The wholesale supply of pharmaceutical and non-pharmaceutical products to retail pharmacies; (c) The wholesale supply of travel and flu vaccinations; (d) The provision of vaccines and travel healthcare services. (14) The CMA further submits that it would be the best placed authority to review the competition effects of the Transaction in the UK for all such markets, given the fact that potential competition effects are narrower than national […]. In addition, given that the geographic scope of the affected markets may be narrower than national, the case may require investigative efforts at local level. Besides, the CMA is well-placed to assess the Transaction, as it has previously investigated and is currently investigating the markets at stake (for instance, the Commission has recently referred the acquisition by McKesson of Sainsbury's pharmacy business in the United Kingdom.6 5. RELEVANT MARKETS 5.1. PRODUCT MARKETS 5.1.1. Wholesale of pharmaceuticals in the UK (15) The Commission has commonly sub-divided the wholesale of pharmaceuticals on the basis of the following three categories:7 6 See case M.7721 – Celesio / Sainsbury's UK Pharmacy Business 7 See cases M.6044 – Alliance Boots/Andreae-Noris Zahn; M.6033 – Johnson & Johnson/Crucell; M.7323 – Nordic Capital/GHD Verwaltung; M.7526 – G.L. Swarovski/Bilfinger/Proficare; M.7494 – Brocacef/Mediq Netherlands. 4 a. Categories of wholesalers (full-line wholesalers8 and short-line wholesalers);9 b. Categories of products (depending on whether the medicine may be sold with prescription or over-the-counter;10 whether it is an originator, generic or parallel import medicine; and whether the medicine may be sold in retail pharmacies under the supervision of a pharmacist only, or also in other outlets such as supermarkets); and c. Categories of customers (retail pharmacies, dispensing doctors11 and hospitals) due to different purchasing and delivery patterns.12 (16) In previous decisions, the Commission13 and in particular the Irish Competition and Consumer Protection Commission ("CCPC")14 have also considered a separate market for pharmaceuticals pre-wholesale services (including 3PLs),15 ultimately leaving the market definition open. (17) According to the Parties, a number of full-line wholesalers still operate in the EEA but none are active in the UK or Ireland due to the existence of exclusive arrangements for branded pharmaceuticals. The Parties therefore refer to full-line wholesalers in these countries as "broad-line wholesalers".16 (18) For the purpose of this decision, the exact product market definition with regard to the wholesale of pharmaceuticals can be ultimately left open as the Transaction warrants closer scrutiny irrespective of the precise product market definition. (19) The question whether the wholesale of flu and travel vaccines is part of the overall market of wholesale of pharmaceuticals or constitutes a distinct market can be also left open for the purpose of this decision, leaving the CMA to investigate the matter further. 8 A full-line wholesaler undertakes to supply the full complement of prescribable pharmaceuticals. 9 A short-line wholesaler does not carry the full complement of prescribable pharmaceuticals. It often concentrates on a range of high volume products and tends to provide a once daily (or less frequent) delivery service to its customers. 10 "OTC", that is without prescription. 11 A dispensing doctor is licensed to dispense pharmaceuticals to patients who live in areas with few or no retail pharmacies. 12 See cases M.7323 – Nordic Capital/GHD Verwaltung; M.7494: Brocacef/Mediq Netherlands, M.4301 Alliance Boots/Cardinal Health,