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On May 15, 2017, the European Commission opened a formal investigation into Aspen for a possible abuse of a dominant position in several Member States (Estonia, Germany, Latvia, Lithuania, Poland, Sweden and the United Kingdom, among others) consisting of maintaining excessive prices regarding six important cancer medicines since 2012. In January 2017, the Spanish National Commission of Markets and Competition (“CNMC”) opened sanctioning proceedings against Aspen for similar practices in the Spanish market, although it closed the case to allow the European Commission to take over in July that year.
The practices investigated by the Commission affected a series of drugs mainly used to treat leukemia and other blood cancers, marketed under the trade names Alkeran, Leukeran and Purinethol. The Commission’s investigation showed that, as a result of the increased prices applied since 2012, Aspen obtained profits exceeding the manufacturing costs of the medicines in question by almost 300% on average.
In its investigation, the Commission did not identify any circumstance that could justify the excessive prices applied by Aspen, particularly since Aspen’s medicines were not patent protected, which led the Commission to infer that the whole R&D investment had been recouped in its entirety long ago. The Commission also considered that, to maintain such high prices, Aspen had taken advantage of the fact that most Member States did not have a substitutive medicine. Finally, the Commission criticized Aspen for threatening to withdraw its drugs from the national lists of reimbursable medicines or even withdraw them from normal supply in the market, in response to national health care authorities’ objections to the constant price hikes.
As reported in this blog on July 9 last year, Aspen offered the Commission some commitments to resolve the competition problems identified on a preliminary basis, which suggested a possible infringement of Article 102 of the Treaty on the Functioning of the European Union (TFUE), which expressly prohibits imposing unfair pricing or other commercial terms.
After the relevant public consultation period, the Commission considered that the commitments offered by Aspen resolved the competition problems noted, and so it decided to make those commitments legally binding, which allows the Commision to close the investigation without formally declaring an infringement of competition law or sanctioning the investigated companies.
The definitive commitments that will bind Aspen are, in general terms, the same as those initially offered by the company, available here. The Commission’s decision making Aspen’s commitments binding is to be published in the public case register on the Commission’s competition website soon.
We describe the main commitments accepted by the Commission below:
1. Price reduction. First, Aspen agrees to reduce the price of the six medicines in all the Member States in which it markets them by 73% on average. Hence, the price of some of these drugs will fall to levels lower than 2012.
2. Maintainance of price ceilings. The new prices will constitute the maximum prices for selling these drugs, which Aspen must respect for ten years. The new prices will also apply retroactively from October 2019 through a reimbursement system.
The Decision envisages the possibility of Aspen reviewing those price ceilings after the first five years if the costs associated with manufacturing the six drugs in question have risen significantly (by at least 20%).
3. Long-term guaranteed supply. Finally, Aspen agrees to guarantee the supply of the medicines in the 2021-2025 period in all Member States (except Italy, whose competition authority already adopted a decision in 2016) in which Aspen markets them. With regard to the 2026-2030 period, Aspen can opt to maintain the supply or assign the marketing authorization for the drugs to other suppliers.
Under the Commission’s supervision, a trustee will verify the application of and compliance with Aspen’s commitments. If Aspen breaches the commitments, the company could be fined up to 10% of its total annual turnover.
Excessive pricing can constitute an abuse of dominance under Article 102 of the TFEU, which states that directly or indirectly imposing unfair purchase or sale prices, that is, prices that do not reasonably match the real economic value of the goods or services in question, is a practice contrary to the internal market. The European Commission’s strategy in this matter shows a clear preference for dealing with these practices by imposing commitments on the companies in question rather than sanctioning them for an infringement.
This preference is echoed in the Commission’s commitments decisions in the Rambus (2009), German electricity wholesale market (2009), Standard & Poor’s (2011), IBM (2011) and Gazprom (2018) cases, among others, and the rejection decisions closing the investigation into alleged excessive tariffs applied by the Port of Helsingborg in 2004 (accessible here and here). These cases show that the Commission does not tend to intervene in cases of excessive pricing unless the prices are truly exorbitant.
With regard to national authorities, the investigations on excessive pricing in the pharmaceutical sector in countries like Italy (where Aspen was investigated and sanctioned in 2016), the UK (Pfizer case) or Denmark (CD Pharma, where the company had increased the price of drugs by 2000%) are noteworthy.
Moreover, the current COVID-19 crisis has brought strict supervision of these practices. As a result, in 2020, the CNMC announced the opening of investigations on possible excessive pricing practices in various sectors. In the sphere of health sciences, we would highlight the investigations announced into the price rises of hand sanitizers and the raw materials used for their production (ethanol).
The press release published by the Commission can be consulted here.
This post is also available in: Español