The Competition and Market Authority's continued focus on violations of competition law in the pharmaceutical industry has in one single month resulted in fines collectively amounting to billions in DKK.
On 15 July, the UK Competition and Markets Authority ("CMA") imposed fines on the pharmaceutical company Accord for multiple violations of EU competition law, including for introducing excessive pricing in relation to hydrocortisone tablets.
The fines were imposed as a result of in-depth investigations of the pharmaceutical industry performed by the CMA. Based on the investigations, the CMA found that, during an eight-year period from April 2008 to April 2016, Accord had increased the price of 10mg tablet packs from 70 pence to GBP 88. During the same period, Accord had also increased the price of 20mg tablet packs from GBP 1.07 to GBP 102.74.
Thus, during an eight-year period, the prices increased by more than 10,000%. The investigations performed by the CMA showed that the increase in price was not a result of innovation, nor of specific investments.
In addition to this violation, the CMA found that Accord had also paid two potential competitors GBP 21m and GBP 1.8m, respectively, over a four-year period to keep them from entering the market, whereby Accord maintained its position to further increase prices. The two potential competitors were otherwise prepared to introduce competing products in the form of 10mg and 20mg tablets, respectively. The CMA characterised this as a restrictive trade agreement in the form of market sharing, and the agreement resulted in Accord remaining the only undertaking in the market, which allowed Accord to further increase prices of 10mg tablets from GBP 49 to GBP 88.
Fines amounting to GBP 155m were imposed on Accord for the excessive pricing violation, and fines amounting to GBP 66m were imposed for the restrictive trade agreement.
On 29 July, the CMA imposed a GBP 101.4m fine on the pharmaceutical company Advanz for excessive pricing.
Based on in-depth investigations, the CMA determined that, over an extensive period from 2009 to 2017, the pharmaceutical company Advanz charged excessive prices for liothyronine tablets. Liothyronine tablets are used for treating thyroxine deficiency. Advanz increased tablet prices from GBP 20 in 2009 to GBP 248 in 2017, which constitutes a price increase of 1,110% in only eight years.
Excessive pricing became possible because liothyronine tablets have been one among several medicinal products for a long time which, despite their generic character, were subject to limited or no competition, which meant it was possible for Advanz to maintain the price increase. Accordingly, the increase in price was not driven by any meaningful innovation or investment, just as it was not attributable to other considerations since supplies remained stable and the production costs did not increase considerably.
The fines were imposed on Advanz itself (GBP 40.9m), HgCapital (GBP 8.6m) and on Cinven (GBP 51.9m), the latter two being private equity funds which were the former owners of the companies presently making up part of Advanz.
Also in the Netherlands, focus has been on excessive pricing of medicinal products. On 1 July, Autoriteit Consument & Markt ("ACM") imposed a fine amounting to approx. EUR 20m on the pharmaceutical company Leadiant for abuse of dominance by increasing the price of a chenodeoxycholic acid capsules pack to EUR 14,000 over a period of several years. From 2009, the price was increased multiple times, among other things, by 1,800% in 2009 to EUR 886, by 250% in 2014 to EUR 3,103 and finally by 350% in 2017 to EUR 14,000. Only the price increase in 2017 was subject to ACM's decision.
ACM found, among other things, with reference to Leadiant's costs and investments in connection with the medicinal product, that the production was characterised by low costs as compared to the revenues and that the risk of the product was very low. Consequently, ACM found that the price increases were "exorbitant and unreasonable".
Comments by Bech-Bruun
The decisions follow several other cases on pricing of medicinal products, including the Danish case of CD Pharma from 2018.
The decisions emphasise the increased focus of the European competition authorities on pricing of medicinal products and, therefore, pharmaceutical companies or other operators in the distribution chain should be cautious not to increase prices if a dominant position is unexpectedly obtained in the market, for example in the event of absence of competing substitutable medicinal products.
Whether prices are excessive and unreasonable depends on a specific assessment relying on several factors, including the initial price, R&D costs and the risk of producing defective products. In addition, storage expenses should be taken into account together with a reasonable return on investment. In practice, it will, however, mainly be considered important whether the price is comparable with, for example, an initial price or the price in other markets and, hence, appears unreasonable from an objective perspective.
The size of the fines imposed clearly show that national competition authorities consider abuse of a dominant position in the market to be a very serious violation of the competition rules. The size of a fine in a Danish context depends on a myriad of factors and may total considerable millions (DKK). The criminal proceedings against CD Pharma have not yet been decided, but in 2019 a fine of DKK 30m was imposed on Falck for having abused its dominant position in the ambulance services area.