Italian Competition Authority conditionally clears a merger between two pharmaceutical distribution companies

Thanks to Arianna Daveri for collaborating on this article

On July 29, 2025, the Italian Competition Authority (or ‘AGCM’ or ‘Authority’) issued a decision^[1] imposing conditions to a merger between ‘La Farmacia dei Farmacisti S.p.A’ (‘UNICO’) and ‘Cooperativa Esercenti Farmacia S.c.a.r.l’ (‘CEF’), resulting in the creation of QFarma Srl (‘QFarma’), Italy’s largest pharmaceutical distribution group.

The parties and the transaction

CEF is a cooperative company consisting of 2,300 members, all pharmacy owners, primarily engaged in the wholesale of pharmaceutical and para-pharmaceutical products, as well as related articles, for its members’ pharmacies and third parties. Moreover, it manages – through its subsidiaries Holding Farmacie, Farcom and CEF Top Holding – forty pharmacies located in Lombardia, Lazio and Campania.

Similarly, UNICO is a wholesaler of pharmaceuticals and medical products for pharmacies. It was created by the merger of the distribution branches of multiple Italian cooperative companies, which are its actual shareholders (including Unione Farmaceutica Novarese S.c.p.a., or “UFN”, which owns 73.8% of UNICO’s shares). UNICO also has its own line of para-pharmaceutical products under the ‘Unidea’ brand and holds a minority stake in UNICA S.r.l., which owns eleven pharmacies and a para-pharmacies.

The transaction consists of a merger by incorporation of Unico into QFarma, a newly established company to which CEF had previously transferred all its distribution activities.

Following the transaction, CEF owns 51% of QFarma’s share capital, while UNICO shareholders own the remaining 49%. According to the governance rules, in certain strategic matters – including the approval and amendment of the annual budget and business plan – the favorable vote of at least two directors appointed by CEF and two appointed by UFN is required. Therefore, CEF and UFN have joint control over the new company.

The transaction was notified with the AGCM on April 18, 2025. On May 13, 2025, the AGCM subsequently initiated the second phase of its in-depth investigation. According to the contractual agreements, the transaction was subject to the Authority’s approval, but the parties waived this condition precedent for business reasons, to be able to start the project while the investigation was ongoing. This was possible because the application of the Italian merger control regime does not entail an automatic standstill obligation.

The relevant markets affected by the transaction

The Authority’s preliminary investigation found that the transaction mainly affects the wholesale distribution markets for pharmaceuticals. These include prescription and non-prescription medicinal products and over-the-counter products, as well as a range of para-pharmaceutical products such as cosmetics, dietetic foods, hygiene products and veterinary products. In particular, the Authority considered that there was a risk of the creation or strengthening of dominant positions in eleven local markets for the wholesale distribution of pharmaceutical and para-pharmaceutical products.

Regarding the characteristics of pharmaceutical distribution, the Authority notes that the wholesale distribution of medicines is an essential public service. This service must ensure that medicines and related products are available throughout the country within a few hours. The location of warehouses is particularly critical for pharmaceutical distributors because distance affects costs, delivery times, and logistical efficiency. This issue is further intensified in areas with challenging geography. Distributors primarily use price and speed of delivery to attract pharmacies.

The investigation’s findings show that CEF and UNICO are the second and third largest intermediate distributors at national level, although their positions vary between areas depending on the locations of their warehouses. CEF has branches in Lombardia, Veneto, Lazio, Toscana, Campania and Puglia, while UNICO has logistics platforms in Lombardia, Veneto, Friuli-Venezia Giulia, Lazio, Piemonte and Emilia-Romagna.

In previous rulings, the AGCM identified two separate product markets: one for full-line wholesalers, and one for short-line wholesalers. The former supply the full range of prescription drugs with rapid delivery, while the latter focus on high-volume products and offer less frequent deliveries. The Authority’s analysis and market research have shown that most purchases are made through full-line wholesalers, which account for over 60% of the total sale of wholesalers. There is also limited substitutability between purchases made from full-line and short-line distributors. Given the activities of QFarma and of the parties involved, the relevant market affected by the proposed transaction is the wholesale distribution of medicinal products (both prescription and over-the-counter) and para-pharmaceuticals (including cosmetics, dietary products, hygiene products and veterinary products) that are managed exclusively by full-line wholesalers.

Geographically, and in line with previous European Commission rulings, the Authority considered the relevant markets for the wholesale distribution of medicinal products in Italy to be local, due to the need for frequent deliveries to pharmacies. More specifically, the Commission outlined local markets within a certain travel time from each warehouse, known as isochrones. For Italy, these have been identified as either 90 or 171 minutes of driving time^[2]. However, the Authority deemed it more appropriate to use road distance in kilometers as a measure for the size of the catchment areas, because of the need to deliver to pharmacies quickly (normally within 2-2.5 hours of departure from the warehouse). Exogenous factors relating to the territory’s characteristics and endogenous factors deriving from individual companies’ choices (linked to the distances covered by each operator based on the number and location of its warehouses) influence the distances travelled. The investigation revealed that, normally, it takes 70–76 km of road travel to reach 70% of customers in terms of turnover, and 130–135 km to reach 90% of the customers.

Having examined and considered all these data and factors, the AGCM concluded that the geographic dimension of the relevant market should consist in isochrones within a 100 km radius around each of the parties’ warehouses.

Substantive assessment of the merger’s impact on competition

The Authority deemed that the merger in question was likely to significantly impede effective competition, as it involves the main operators in the sector at national level, who are the closest competitors, and takes place in a highly concentrated market. The preliminary order identified 11 local markets in which the merger appeared likely to have a significant impact on effective competition; however, following the investigation, the Authority found no significant overlaps between the parties in four of these markets.

The AGCM’s analysis shows that there is scarce competition in the catchment areas centered on the following warehouses: CEF 3 – Lallio (Bergamo); CEF 4 – Brescia; CEF 6 – Erba (Como); CEF 12 – Bolzano Vicentino (Vicenza); UNICO 1 – Novara; UNICO 2 – Lainate (Milano); and UNICO 8 – Nogarole Rocca (Verona). Their combined market share in these local markets is consistently above 30%, and in particular:

• above 40% for the CEF 12, CEF 3 and UNICO 8 catchment areas;
• between 35% and 40% for the CEF 4 and UNICO 2 catchment areas;
• between 30% and 35% for the CEF 6 and UNICO 1 catchment areas.

Further, the Authority found these local markets to be highly concentrated, considering that the HHI index was consistently above 2500. This is confirmed by the fact that 70% of pharmacies use CEF or UNICO as their main distributor. This trend is particularly marked in Friuli-Venezia Giulia (79%), Lombardia (74%), and Veneto (66%). On average, pharmacies that use CEF as one of their suppliers purchase 52.8% of their needs from CEF, while pharmacies that use UNICO as one of their suppliers purchase 42.3% of their needs from UNICO. In addition, the Authority emphasized the importance of customer loyalty dynamics: the investigation has shown that pharmacies that are either shareholders of CEF or affiliated with the CEF network purchase more than 65% of their total supplies from CEF, which is approximately 15-26% higher than the rate of purchases from CEF by non-affiliated pharmacies. Therefore, the Authority concluded that the merger would have eliminated the competitive pressure between the first two distributors with respect to the largest share of purchases by pharmacies in the local markets in question.

The remedies imposed by the AGCM

To resolve the competition issues detected during the investigation, the Authority – also considering proposals from the parties – has identified and imposed a mix of structural and behavioral measures as obligations and conditions to authorize the transaction.

As structural measures, the Authority imposed the divestment of two warehouses (corresponding to the UNICO 8 – Nogarole Rocca and CEF 5 – Cremona), together with the related business assets, under conditions and to buyers that guarantee full operational autonomy and effective competition vis-a-vis QFarma. The divestiture procedure involves two phases: first, the appointment by the parties (subject to AGCM’s approval) of an independent monitoring trustee to oversee the identification of suitable buyers and the divestiture of the business units by the parties within a certain timeframe; second, if the parties fail to complete the divestment within the first phase, they will have to give an irrevocable and exclusive mandate to an independent divestiture trustee (subject to AGCM’s approval), which in turn will have to complete the sale within four months (on a “whatever it takes” basis) and report with the Authority on the process.

Furthermore, the divestment agreements must be submitted to the Authority so that it can approve the identity of the buyer and the agreements themselves.

As complementary behavioral measures, the Authority imposed the following:

• elimination of preferential purchasing restrictions at QFarma for pharmacies that are members of CEF and UFN;
• reduction to 40-50% of the quantitative purchasing restrictions at QFarma in the affiliation contracts of pharmacies that are not members of CEF;
• obligation to sign only annual affiliation contracts and not to impose penalties or sanctions on pharmacies in the event of early termination of such contracts;
• elimination of all purchasing restrictions for pharmacies affiliated with CEF currently served by the two business units subject to the disposal.

Impact of the decision

This decision is of particular interest and relevance to the pharmaceutical sector as it provides an in-depth, recent analysis of the entire pharmaceutical distribution chain and the competitive dynamics driving it, from the upstream production industry to the downstream pharmacies. The investigation also provides essential information on the methods and criteria used to define the relevant product and geographic markets. This information is necessary for pharmacies and companies in the sector to carry out appropriate competitive assessments, allowing them to predict the antitrust risks they may encounter with greater certainty when developing plans and forming partnerships in the Italian market.

Additionally, the decision offers valuable insights into the Authority’s latest practices in merger control, particularly regarding structural characteristics of the market that could result in the imposition of remedies in sectors involving highly regulated essential public services. It also sheds light on the type and extent of remedies that the Authority might consider appropriate to address competition concerns.

[1] AGCM Decision n. 31648 in Case  C12722 – COOPERATIVA ESERCENTI FARMACIA/UNICO LA FARMACIA DEI FARMACISTI/NEWCO, published in the AGCM Official Bulletin N. 32/2025 of August 18, 2025 and on the AGCM website at this link.

[2] Cfr. European Commission Decision M.10404 – Phoenix/McKesson, dated March 30, 2022. The two alternatives refer to two different methods of determining the customer base. One method (90 minutes) considers the location of 80% of customers served by a certain distributor’s warehouse. The other method (171 minutes) is based on the maximum time within which the distributor must supply customers according to their delivery requirements.