UK regulator doubles down on pricing in war on drugmakers' abuses
11 August 2017. By Simon Zekaria.
UK antitrust regulators' war on abuses by drugmakers is gaining momentum and looks to be succeeding in making pharmaceutical companies increasingly watchful.
The main battlefront for the Competition and Markets Authority is excessive pricing — an issue normally treated with caution by regulators — as the agency adopts a more consumer-focused approach to enforcing competition law.
On Wednesday, Aug. 9, the CMA dragged Intas Pharmaceuticals and its subsidiary Accord Healthcare into a long-running probe into hydrocortisone pricing by Actavis UK, which they acquired in January.
It follows a raft of other interventions by the CMA into suspected excessive drug pricing over the past couple of years.
This has included both investigations and charges across a variety of medicines, including autoimmune disorder, antidepressant and epilepsy drugs.
One notable inquiry ended with a landmark fine last year of 90 million pounds ($117 million) against drug giants Pfizer and Flynn Pharma, over the price of phenytoin sodium capsules.
It was the first UK competition decision resulting from excessive pricing by a pharmaceutical company since 2001.
Shift in focus
Competition authorities, both in the UK and Europe, have traditionally shown a reluctance to act as price regulators.
First, they are wary of taking the place of normal market mechanisms, including pricing, which often fairly reflect consumer demand for products and thus business success. This makes it hard to determine when prices can be seen as anticompetitive.
There are also high barriers of evidence to overcome to prove pricing abuse, given data-collection requirements.
Thirdly, an antitrust investigation into pricing normally flows from complicated inquiries into the legality of the use of drug patents, which are at the center of normally aggressive competition in pharmaceuticals.
On this basis, it is no surprise that the CMA currently finds itself defending a challenge to its decision against Pfizer and Flynn Pharma in the courts.
There is another reason for the traditional approach.
For years, when antitrust watchdogs ran their rules over the pharmaceutical sector they tended to focus on cases involving so-called pay-for-delay — a drugmaker is accused of abusing its market position by paying to delay or restrict the sale of a cheaper drug or paying to keep a copycat medicine off the market, giving it longer to profit from its own version.
These offenses, known as reverse-payment patent settlements, often result in excessive pricing that harms consumers, but the main focus for regulators in these cases has been elsewhere, typically on how they represent illegal attempts to curb competition.
The combination of these four reasons has kept pricing out of the spotlight, but shifting attitudes among European regulators and an increasing focus on value in the UK's state-funded health service have changed that.
The CMA's approach echoes that of its European counterparts. Several pricing investigations are in progress across the European Competition Network, which comprises EU countries' national competition authorities along with the European Commission.
Last November, EU Competition Commissioner Margrethe Vestager suggested that regulators could make greater interventions into drug-pricing abuses. "There can be times when competition rules need to do their bit to deal with excessive prices," she said.
Vestager also noted drugmakers' power to exploit often vulnerable consumers over pricing, making scrutiny on their behalf a key mission for regulators. Patents, she says, exist to protect drugmakers but can also stimulate anticompetitive behavior.
"There can be times when prices get so high that they just can't be justified. After all, people rely on these medicines for their health, even their lives," she said.
In the CMA's probes, the common victim is the UK's National Health Service.
The service — which has been increasingly weighed down in recent years by stretched budgets caused by both rising costs and funding cutbacks — is the front line for consumer service and therefore firmly on the agenda for regulators.
Safeguarding the interests of the NHS, and therefore of UK taxpayers, fits the CMA's narrative of taking a consumer-led approach to its antitrust enforcement under the leadership of Andrea Coscelli, newly appointed as chief executive, who has been acting head for a year.
It is not just companies that the CMA wants to be wary about pricing abuses, but also their executives. And it has demonstrated its resolve here too.
At the end of last year, the CMA secured the first disqualification of a director of a company found to have infringed competition law. The company was Trod, an online poster store. The illegal practice was over-pricing.
Finally, consumer-rights laws from 2015 also encourage "follow-on" private damages claims brought by consumers against businesses committing antitrust infringements. This would appear to open the door to a consumer fightback for compensation for overpayment for drugs.
Combined with the muscle that the CMA can bring to punish pricing abuses, this potential avenue of redress gives a powerful sense that consumers have might on their side.
MLex and our LexisNexis Legal & Professional group companies may contact you with details about our products, services and events.
You’ll be able to update your communication preferences any time by clicking here or via the unsubscribe link provided within our communications.