Aspen pricing commitments accepted by European Commission – an outlier or the ‘new normal’?

16.02.2021

The European Commission has accepted Aspen’s commitments to reduce its prices in Europe for six cancer medicines by 73% on average. These reduced prices will be the maximum that Aspen can charge in the EU and the UK (as the investigation was started prior to 31 December 2020) for the coming 10 years. Aspen has also committed to the continued supply of these off-patent medicines for the next five years, and to either continue to supply the medicines or authorise other suppliers to market them, in the five years after.

These commitments stem from the Commission’s investigation into Aspen’s pricing practices in relation to its cancer medicines which was announced in May 2017 (see our previous posts here and here). After Aspen acquired the medicines, which treat leukaemia and other haematological cancers, in 2012, it progressively increased prices to the point that the prices exceeded costs by almost three hundred percent on average.

The Commission was concerned that the price increases were unjustified and amounted to excessive pricing in breach of Article 102 TFEU. Its press release announcing the acceptance of the commitments notes that Aspen was only able to achieve its price increases because patients and doctors had almost no alternative to using these particular cancer treatments. Indeed, when national authorities attempted to resist Aspen’s request for price increases, Aspen threatened to withdraw the medicines from the market. This gave rise to serious concerns that Aspen had abused its dominant position.

While the Commission’s decision adopting the commitments has not yet been published, it will need to have carried out a preliminary assessment and reached provisional conclusions. In this case, it has provisionally found that there was no legitimate reason for Aspen’s price hikes and very high profit levels, particularly given that the medicines had been off-patent for 50 years and so any R&D investment had long been recouped.

However, as other competition authorities (such as the CMA with its Pfizer/Flynn case – see our report here) have found, reaching a final infringement decision which would survive appeal was likely to be far from straightforward. When Aspen first proposed commitments, the investigation had already been running for over three years. The United Brands line of case law on which excessive pricing cases rely has never been easy to apply, given its reliance on broad concepts of “excessive” and “unfair” profits. It is also not at all obvious that any decision and remedies imposed on Aspen could have led to it being required to respect maximum prices across a large number of territories for a period of 10 years. By contrast, the Commission’s Vice-President Margrethe Vestager has stated that “Aspen’s commitments will save the European health system many dozens of million and will ensure these crucial medicines remain available”, and that the “decision gives a strong signal to other dominant pharmaceutical companies not to engage in abusive pricing practices to exploit our health system”.

This is not the first time that the Commission has used a commitments decision to forge preferred legal outcomes in areas where the law is uncertain (see, for example, the 2014 Samsung commitments in relation to SEP licensing). Commitments decisions are less likely to be challenged, although the recent successful appeal of Paramount’s pay-TV commitments by Canal+ (see our report here) is a counter example which may result in more challenges in future where third party contracts are affected. (In this case, Aspen is required to use its ‘agents’ to apply the price reductions, so it is not impossible that those contractors could seek to challenge the decision.) It is likely that the full decision, once published, will be informative about what the Commission perceives to be an appropriate way to apply the United Brands test.

Competition authorities as price regulators?

By intervening in “pure” pricing cases, the Commission and other competition authorities risk having to act as price regulators, something which is in principle undesirable as a competition authority is not always ideally situated to determine what is a competitive price. Commitments that are agreed with the party under investigation are therefore an attractive way to partially sidestep that concern, as the price levels are effectively set by the party rather than the competition authority. In Aspen’s case, its offer of commitments has meant that it has not needed to pay any financial penalty. Interestingly, the Commission has also not asked for any direct payment to affected health authorities in compensation for the higher prices charged by Aspen between 2013 and 2019 (although rebates will be issued for sales made after 1 January 2019, where these were made at prices above the level stipulated in the commitments). This is in contrast to the CMA’s Aspen commitments package (in relation to fludrocortisone, which was not one of the products under consideration by the Commission), which included an £8 million compensation payment to the NHS. While the Commission clearly wishes to remove barriers to effective compensation for harm caused by competition law infringements, it remains to be seen whether it will accept direct compensation as a remedy in the future.

Looking to the future

It is unclear whether this will be the first of more such commitments packages agreed between competition authorities and alleged infringers designed to combat excessive pricing. While this case has been investigated by the Commission, it is more likely that future cases will fall to national competition authorities (within or outside the EU). The Commission is likely to see the commitments decision as establishing a framework which others can then go on to apply. The different national regimes for pricing of medicines and the varying freedom available to pharmaceutical companies in setting prices means national regulators will often be better placed to investigate specific pricing issues. Although such cases are not straightforward, national regulators may continue to prefer to pursue resolutions which result in compensation for the health services as well as reduced prices.

They will also be alive to the risk that resolving cases by settlement could create an undesirable incentive for companies to price at a high level until a competition authority intervenes, at which point it will make commitments to reduce its prices. Such a course of action by pharmaceutical companies clearly cannot be recommended. Even leaving aside the discretion of competition authorities to adopt a stricter line than in this case, such commitments come at considerable cost: 10 years is a long period to be subject to a direct pricing restriction and the supervision by a monitoring trustee can be onerous and costly.

For both regulator and regulated, pharmaceutical excessive pricing remains a complex and difficult area, but this decision shows a potential way through.

Sophie Lawrance

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Helena Connors

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Cosima Lumley

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