Following a four-year investigation that began in 2017, the European Commission (the “Commission”) adopted on 10 February 2021 its long-awaited decision in the Aspen case. However, unlike the Italian Competition Authority, which had sanctioned Aspen 5.225 million euros in 2016 for having imposed significant price increases to the Italian national health system for six critical cancer drugs with no market alternatives, the Commission traded the opportunity of conducting a full-blown probe against Aspen for a commitment procedure, leading to the first investigation at the European level concerning excessive pricing in the pharmaceutical sector being closed with no finding of infringement.
In May 2017, the Commission opened an investigation against Aspen Pharmacare Holdings Ltd and Aspen Pharma Ireland limited (together “Aspen”) for an alleged abuse of dominant position in the form of excessive pricing, covering all Member States except Italy. During its investigation, the Commission expressed concerns that, following its acquisition of a portfolio of off-patent oncology drugs from GlaxoSmithKline, Aspen would have devised a pan-European strategy to impose, without any objective justification, significant price increases to national health systems for these medicines. Such strategy would have revolved around three pillars:
- first, a sequenced implementation throughout the European Union (“EU”) in order to circumvent the purpose and functioning of the external reference pricing system which, by way of reminder, allows national health authorities to fix the price of a given drug by taking into account the price of that same drug in other Member States;
- second, retaliation measures to overcome the potential resistance of national health authorities, including threats of or, in some cases, actual de-listings and withdrawals of the concerned drugs from the market; and
- third, the implementation of a stock allocation system that prevented, or at least limited, parallel trade between Member States.
Although the Commission’s decision is far less detailed than it would have been had a sanction for an abuse of dominant position been imposed on Aspen, it nonetheless contains interesting guidance for pharmaceutical companies on the assessment of excessive pricing as an infringement of competition law.
According to the Commission’s preliminary findings, Aspen would have derived unusually large profits from the price increases it managed to impose, achieving margins ranging between 70 and 90% while, prior to 2012, they reached a maximum of 40-50% and the median of profitability comparators (i.e., companies selling drugs having a similar profile to that of the product concerned) was on average less than 50%. In addition, the Commission reached the preliminary conclusion that there were no legitimate reasons justifying the price increases imposed by Aspen, since the latter reflected neither any specific risk-taking on the part of the company, nor innovation, investment or any material improvement brought to the products. The Commission also took into account the fact that Aspen, which was perfectly aware of the critical nature of the drugs for the patients and the absence of any alternative, used this as a leverage against health authorities to unduly impose price hikes that may otherwise not have been obtained.
The above assessment was conducted using as a reference the standard two-limb test set by the European Court of Justice (“ECJ”) in the United Brands case,1 which consists of determining 1) whether the difference between the costs actually incurred and the price actually charged is excessive, and 2) if so, whether the price is unfair within the meaning of Article 102 of the Treaty on the Functioning of the European Union (“TFEU”), either in itself or in comparison with competing products, these two conditions being alternative. The Commission however acknowledged that several methods may be used to characterize the imposition of an unfair price in the form of excessive pricing, and that it is for the competition authority to select the most appropriate method in each case.
Aspen offered a series of commitments to remedy the Commission’s concerns, which the latter accepted and made binding pursuant to Article 9§1 of Regulation 1/2003. Such commitments consist of:
- reducing the net prices for each of the products concerned in all Member States by, on average, 73%, with the new prices corresponding to maximum prices for the next ten years; it is worth noting that the price reductions will apply retroactively as from October 2019, with Aspen having to reimburse national health systems the difference in price for the transitory period between October 2019 and the actual implementation of the price decrease; and
- supplying the products for at least five years and then, for an additional period of five years, either continue to do so or, should Aspen decide to discontinue the commercialization in one or several Member States, give a 12 months’ notice to health authorities and make the marketing authorization available for sale to any interested third party.
By accepting these commitments rather than adopting an infringement decision that would have most certainly been appealed, the Commission has avoided a long legal battle before the European courts, which will miss an opportunity to set a detailed framework for analyzing the potentially excessiveness and, hence anticompetitive nature, of drug prices. Yet, the Commission’s decision still sends a strong signal to both pharmaceutical firms and national health regulators, which have exclusive jurisdiction to set the prices of medicines, that any behavior that may impair patients’ access to affordable medicines and increase the pressure on health systems will be carefully scrutinized.