Aspen's NHS payout paves way for novel UK route to restitution
21 August 2019 by Victoria Ibitoye
Aspen Pharmacare's unprecedented offer of a payout to the UK's public healthcare system to resolve competition concerns shows that disputes between drugmakers and the UK antitrust regulator need not always end in a legal quagmire.
It's the first time that the Competition and Markets Authority has secured such a payout for the National Health Service, and it paves the way for a new kind of restitution by cutting short protracted compensation battles. It also gives the CMA a much-needed win in its enforcement around pharmaceutical market abuses.
Aspen's offer came in the CMA’s probe, launched in 2017, over its suspected anticompetitive agreements and abuse of dominance in relation to the supply of fludrocortisone acetate tablets. The corticosteroid drug is used to treat adrenal disorders such as Addison's disease.
The investigation concerns Aspen's acquisition of the only alternative fludrocortisone product and a prior historic "pay-for-delay" agreement under which, the CMA alleges, Aspen paid potential rivals to stay out of the market.
The CMA said Aspen had proposed paying the NHS 8 million pounds ($9.7 million) to address its concerns. It also offered commitments to ensure there were at least two suppliers of fludrocortisone in the UK in the future and to reintroduce cold-stored Fludrocortisone to the UK market.
The regulator is still investigating the suspected historic agreement between Aspen and two other unnamed drugmakers. While Aspen has admitted liability and is in settlement discussions with the CMA, the other companies involved have not made any such admission.
Aspen will pay a maximum fine of 2.1 million pounds if the CMA reaches a formal decision that the law has been broken. The fine is significantly smaller than other penalties levied on the sector after CMA probes, which have reached 90 million pounds, and this highlights the benefits of negotiating a deal around compensation.
The last time a similar hand was played was under the CMA’s predecessor, the Office of Fair Trading, in a probe of information sharing by private schools. Then, the 50 fee-paying schools found to have exchanged information on plans for tuition-fee pricing agreed to pay 3 million pounds into a trust fund to benefit the pupils attending the schools during the infringement period.
The CMA's chief executive, Andrea Coscelli, hailed Aspen's proposals as a new way of resolving its concerns. Certainly it brings an enforcement fillip in a sector that has seen almost as many losses as wins.
Avoiding legal headaches
The CMA’s scrutiny of large drugmakers has seen it open a number of sector probes for infringements such as abusive pricing and pay-for-delay agreements. But not all its interventions have borne fruit.
In December 2016, the regulator imposed a landmark fine of 90 million pounds ($120 million today) on Pfizer and Flynn Pharma for charging excessive prices for phenytoin sodium capsules, only to see its decision quashed by appeal court judges last year.
That decision, currently under appeal, has tempted other drugmakers to challenge the validity of the CMA’s procedure.
And while the CMA maintains that clamping down on antitrust abuses is still a key priority, it does appear frustrated by the challenges of regulating the sector.
In February, CMA Chairman Andrew Tyrie floated proposals to streamline the antitrust appeal process — seemingly with the main aim of responding to the knocks the regulator has taken in its pharmaceutical probes. He accused companies of “gaming the system” and put forward possible tweaks to how the Competition Appeal Tribunal hears companies' appeals against CMA antitrust decisions.
Tyrie suggested moving from the current “full merits" standard — where the CAT reviews the CMA's findings of fact, economic assessment and application of the law — to either a judicial-review standard or to a new standard with specified grounds of permissible appeal. These grounds would be such areas as material errors of law or fact, or procedural breaches.
While Aspen’s payment doesn’t restrict the NHS from seeking additional damages, health authorities are likely to appreciate the reprieve from pursuing costly and time-consuming damages suits to claw back outlay on medicines in suspected pricing abuse.
Such damages claims can take years of legal wrangling to resolve and can go as high as to the Supreme Court — as health authorities saw in a recent bid to secure damages from French drugmaker Les Laboratories Servier over its blood-pressure drug Coversyl.
New way forward
Aspen’s NHS payment shows, then, that a mindful approach can secure outcomes that work for both the regulator and the regulated.
The CMA’s mission in such cases is ultimately to secure redress for the NHS, and compensation-focused agreements address the primary issues without the time-consuming legal battle to get there.
If introduced more widely, moreover, they could even lead to an outcome where Tyrie's controversial measures to reform the appeals process can be shelved.