In the last couple of years, the UK competition authority has investigated the conduct of several companies in the pharma sector, leading in some cases to significant fines. Indeed, the Competition and Markets Authority (CMA) has stated in its 2017 annual plan that enforcement in the pharma sector remains a focus for this, and next, year. In this article, we provide a quick overview of the investigations in the sector and their current status.
- On 12 February 2016, the CMA imposed a fine of nearly £50 million on GlaxoSmithKline (GSK) and a number of generic companies for entering into so called ‘pay-for-delay’ agreements. In the early 2000s, GSK’s Seroxat (paroxetine) was one of the company’s best-selling products. A number of companies took steps to enter the UK paroxetine market with a generic version of the drug. GSK responded by bringing patent infringement proceedings. These patent disputes were resolved by settlement agreements, pursuant to which GSK provided significant benefits, including cash payments, to the generic companies. In return, the generics agreed to distribute limited quantities of GSK’s paroxetine and promised not to enter the UK market independently for the duration of the agreements. The CMA found that these agreements infringed EU and UK prohibitions on anti-competitive agreements. It held that the agreements had both the “object” and the “likely effect” of restricting competition in the UK. The CMA also found that GSK had abused a dominant position by making payments to the generic companies to “induce” them to postpone their efforts to enter the UK paroxetine market with their own products. An appeal of the CMA’s decision was heard by the Competition Appeal Tribunal (CAT) earlier this year – the outcome of that appeal is awaited.
- On 25 October 2016, the CMA announced that it was investigating Concordia International RX (UK) Limited for charging excessive prices in the supply of certain pharmaceutical products, including to the National Health Service (NHS). The CMA has not yet reached a view as to whether there is sufficient evidence of an infringement of competition law for it to issue a statement of objections in this case. The investigation remains open.
- On 7 December 2016, the CMA imposed a fine of nearly £90 million on Pfizer and Flynn Pharma for charging excessive and unfair prices in the UK for phenytoin sodium capsules, an anti-epilepsy drug. This is the CMA’s highest ever fine. The CMA found that the companies infringed competition law, when Pfizer transferred the marketing of the drug to Flynn Pharma in late 2012 and the price increased by up to 2,600%. The CMA noted that as a result of this price increase, the NHS expenditure on phenytoin sodium capsules increased from about £2 million a year in 2012 to about £50 million in 2013. The CMA also ordered the companies to reduce their prices within 4 months, but did not specify the exact price level for future sales. Both Pfizer and Flynn Pharma have appealed, and the case is due to be heard by the CAT later this year.
- On 16 December 2016, the CMA issued a statement of objections alleging that Actavis UK has breached EU and UK competition law by charging excessive and unfair prices in relation to the supply of hydrocortisone in the UK. That investigation is looking at whether Actavis UK has abused a dominant position by charging excessive prices to the NHS for the drug following a 12,000% price rise over the course of several years. On 9 August 2017, the CMA issued a statement of objections in relation to the same conduct to other companies, Intas Pharmaceuticals Limited and Accord Healthcare Limited, who recently acquired Actavis UK. The investigation is continuing.
- On 23 May 2017, the CMA issued a statement of objections alleging that Merck Sharp & Dohme Limited (Merck) operated an anti-competitive discount scheme for its branded version of a biological medicine, Remicade (infliximab). The CMA has provisionally found that Merck broke competition law by abusing its dominant position through a discount scheme that was likely to restrict competition from ‘biosimilar’ versions of infliximab that were new to the market. This CMA investigation is continuing.
- On 3 March 2017, the CMA issued a statement of objections alleging that Concordia and Actavis UK entered into anticompetitive agreements under which Actavis UK incentivised Concordia not to enter the market with its own competing version of hydrocortisone tablets. Under the agreements, Actavis UK instead supplied Concordia with a fixed supply of its own 10mg tablets for a very low price for Concordia to resell to customers in the UK. Actavis UK remained the sole supplier of the tablets in the UK during most of this period, when the cost of the drug to the NHS rose from £49 to £88 per pack. The CMA has also provisionally found that Actavis abused its dominant position by inducing Concordia to delay its independent entry into the market. This CMA investigation is continuing.
In addition to these cases which were actively pursued by the CMA, two cases in the pharma sector have been closed over the past couple of years:
- On 26 June 2015, the CMA closed an investigation into a suspected breach of competition law by the offering of discounts and rebates in the pharmaceutical sector on the grounds of “administrative priority”. When it closed the investigation, the CMA sent a warning letter to the party involved and prepared general guidance to businesses and their advisors on potential concerns that may arise in the context of discounts and rebates (see here).
- On 15 February 2017, the CMA closed its investigation into suspected abusive tying in the medical devices sector on the grounds of “administrative priorities”. The party which was involved in this investigation is unknown.
Update: In October 2017, in the course of just three weeks, the CMA launched a total of four new investigations relating to the supply of certain generic pharmaceutical products. Three of these investigations are looking into suspected anticompetitive agreements and abuse of dominance, whilst the other investigation relates only to suspected anticompetitive agreements. The CMA has not yet announced which companies are under the spotlight but both Aspen and Concordia have announced that they are under investigation. The initial investigations are set to continue until April 2018. These developments demonstrate the CMA’s continued focus on the pharmaceutical sector – the competition authority is now conducting ten separate investigations into the conduct of pharma companies, which remarkably makes up half of their ‘open’ cases.