On 13 and 18 October 2017 the Competition and Markets Authority (CMA) announced that it had launched four separate antitrust investigations into alleged anti-competitive practices regarding generic products in the pharmaceutical industry.

The four investigations cover alleged anti-competitive agreements, concerted practices and, in some cases, abuse of dominance. The first investigation has been launched under the Chapter I prohibition in the Competition Act 1998

(CA 1998) and Article 101 of the Treaty on the Functioning of the European Union (TFEU). It relates to suspected anti-competitive agreements and concerted practices in relation to generic pharmaceutical products. In the second, third and fourth cases, the CMA is examining these types of potential breaches alongside alleged abuse of dominance under the Chapter II prohibition in the CA 1998 and Article 102 of the TFEU.

The parties under investigation

At this stage, two pharma companies have confirmed that they are amongst the parties being investigated in these new probes. Concordia International Corp., a Canadian-based specialty pharma company said on 11 October 2017 that “certain of its products” formed part of the CMA’s inquiry. Concordia, which focuses on off-patent drugs, added that it would “work constructively” with the CMA to resolve matters, noting that the investigation included matters that pre-date its ownership of the business. Concordia is already the subject of two CMA investigations relating to excessive pricing and ‘pay-for-delay’ agreements.

Similarly, the South African pharma company Aspen Pharmacare confirmed on 13 October 2017 that it was under investigation by the CMA. Aspen said that the investigation related to alleged anti-competitive conduct in the supply of two drugs, Fludrocortisone Acetate and Dexamethasone, in the UK. Aspen described the investigation as being “at an early, information-gathering stage” and said that it was not currently able to comment further. Aspen is also being investigated by the European Commission for alleged excessive pricing, after it was fined by the Italian competition authority for excessive pricing in October 2016.

Wider context

The CMA and the Commission have carried out various investigations into generic drugs markets over recent years, focussing on ‘pay-for-delay’ agreements to prevent the entry of generic drugs into the market and excessive pricing. The CMA has also investigated a potentially unlawful discount scheme allegedly designed to impede competition from ‘biosimilars’.

‘Pay-for-delay’ cases

The Commission informed Teva (Actavis’ parent company) in July 2017 of its preliminary view that an agreement between Teva and Cephalon, another drug manufacturer, breached EU antitrust rules. It was alleged that under the agreement, Cephalon paid Teva not to sell a generic alternative to Cephalon’s sleep disorder drug, modafnil, in the EEA. This follows on from a $1.2 billion settlement between Teva and the US Federal Trade Commission in May 2015 in relation to a series of ‘pay-for-delay’ agreements.

In March 2017 the CMA alleged that Concordia and Actavis UK Ltd (now known as Accord Healthcare) had entered into an anti-competitive agreement. The CMA claims that Actavis, the sole supplier of generic hydrocortisone tablets in the UK between 2008 and 2015, incentivised Concordia not to enter the UK market with its own version of the generic drug by providing it with a fixed supply of the tablets at a very low price to resell in the UK. The CMA issued a Statement of Objections which provisionally found that both parties entered into anti-competitive agreements, and that Actavis abused its dominant position by inducing Concordia to delay its entry into the UK market.

Excessive pricing cases

In December 2016 the CMA imposed an £84.2 million fine on Pfizer and a £5.2 million fine on its distributor Flynn Pharma after finding that both companies had abused their dominance by charging excessive prices in the UK for phenytoin sodium capsules, an anti-epilepsy drug. Pfizer had sold the rights to distribute the drug to Flynn, which subsequently made the drug an unbranded generic, meaning that it was no longer subject to price controls. The price that the NHS was charged for 100mg packs of the drug rose from £2.83 to £67.50, meaning that overall NHS expenditure increased from around £2 million in 2012 to approximately £50 million in 2013. The CMA found that the parties had abused a dominant position in the market for the manufacture and supply of phenytoin sodium capsules by charging excessive and unfair prices. The decision is currently under appeal at the Competition Appeal Tribunal.

The CMA launched investigation into Concordia in October 2016, relating to allegations of excessive pricing in the supply of certain pharmaceutical products, including to the NHS. Concordia confirmed that the investigation related to “generic and legacy” pharmaceutical products which it has acquired as a result of its purchase of Amdipharm. The CMA expects to decide whether it will proceed with the investigation later this month.

Additionally, the CMA accused Actavis of excessive pricing of hydrocortisone tablets in a Statement of Objections issued in December 2016, noting that the amount the NHS was charged for 10mg packs of the drug rose from £0.70 in April 2008, when the drug was branded, to £88.00 for the unbranded generic drug by March 2016. The CMA is currently considering the written and oral representations that the parties have made in response to its Statement of Objections.

The Commission announced in May 2017 that it had opened an Article 102 investigation into concerns that Aspen had abused a dominant market position by engaging in excessive pricing concerning five cancer drugs. The Commission plans to investigate information suggesting that Aspen has imposed price increases of several hundred per cent. The ongoing investigation covers all of the EEA apart from Italy, where the national competition authority has already completed its own investigation into Aspen, resulting in a €5 million fine for excessive pricing.

Unlawful discount case

In May 2017 the CMA issued a Statement of Objections which provisionally found that Merck Sharp & Dohme (MSD), a subsidiary of US pharma giant Merck, had operated an anti-competitive discount scheme for its branded drug Remicade. Remicade is MSD’s brand name for the drug infliximab, which treats autoimmune conditions such as Crohn’s disease and rheumatoid arthritis. The CMA alleged that the discount scheme was structured to restrict competition from ‘biosimilar’ versions of infliximab, similar but not identical drugs produced using cheaper methods. It is currently receiving written and oral representations in response to its Statement of Objections.

Investigation process

The CMA has published case timetables for each of the four new investigations. These indicate that the CMA will conduct an initial investigation, involving information gathering, analysis and review between now and April 2018.

Once the investigations have been completed, there is a range of potential outcomes. These include the CMA finding that there are no grounds for further action, agreeing to bring the investigation to a close in return for commitments from a business regarding its future conduct, or issuing a Statement of Objections setting out a provisional view that the conduct under investigation amounts to an infringement. If the CMA does issue a Statement of Objections, the parties will be able to make representations prior to a final infringement decision. The infringement decision will include details of any financial penalty imposed on the relevant parties.

Excessive pricing of generic drugs is highly controversial, and has received scrutiny from antitrust authorities and government in the UK, Europe and the US, especially where price rises have increased costs for public health authorities. In the UK, the Health Service Medical Supplies (Costs) Act 2017 received Royal Assent in April 2017, which gives the Secretary of State for Health broad powers to limit the price of unbranded generic drugs, which were previously not subject to price regulation. 

These new investigations again demonstrate that the CMA is unafraid to take a robust approach to investigating anti-competitive conduct relating to generic drugs.