Excessive pricing

The UK’s Competition and Markets Authority (the “CMA”) imposed a £84.2 million (€99.7 million) fine on Pfizer yesterday. In addition, the CMA also fined distributor Flynn Pharma £5.2 million (€6.1 million).  The CMA found that Pfizer and Flynn Pharma abused their dominant positions by charging excessive and unfair prices for phenytoin sodium capsules, drugs used to treat epilepsy, in the UK.  In addition to the fines, the CMA ordered both entities to reduce their respective prices within timeframes of between 30 working days and 4 months.

In September 2012, Pfizer sold the UK distribution rights for the phenytoin sodium capsules (sold until then under the brand name Epanutin) to Flynn Pharma. Flynn Pharma subsequently de-branded the drug, effectively taking it outside the price regulatory regime.  Pfizer continued to manufacture the drugs.  The CMA found that, after September 2012, Pfizer supplied the capsules to Flynn Pharma at wholesale prices that were between 780% and 1,600% higher than its previous prices to wholesalers and pharmacies.  It also found that Flynn Pharma’s prices to wholesalers and pharmacies were between 2,300% and 2,600% higher than the prices previously paid to Pfizer.  Flynn Pharma’s prices also significantly exceeded the prices charged by Pfizer (after September 2012) for the same products in other European countries.
Continue Reading UK CMA Imposes Record Fine on Pfizer

The Italian Autorità Garante della Concorrenza e del Mercato (“AGCM”) has fined Aspen over €5 million for having abused its dominant position – in violation of Art. 102 of the Treaty on the Functioning of the European Union – by increasing prices of its anti-cancer drugs Alkeran (melphalan), Leukeran (chlorambucil), Purinethol (mercaptopurine) and Tioguanine (thioguanine)

EU competition law imposes significant constraints on the ability of dominant firms in the life sciences sector to freely determine the price of their products. Price cuts and loyalty-inducing rebates can be abusive. So can excessively high or discriminatory prices.  Vertically-integrated firms that control an important input must also ensure that the prices they charge upstream and downstream leave a sufficient margin to downstream competitors that rely on the upstream input.

Although these constraints apply only to firms that hold a dominant position on the relevant market where they are active, the importance of these limitations should not be underestimated considering that competition authorities are adopting very narrow market definitions.

Continue Reading The Limits Imposed by EU Competition Law on Pricing by Dominant Firms in the Life Sciences Sector