The life sciences sector, a continued priority at EU and national level

Given the importance of good and affordable healthcare for consumers, the life sciences sector continues to be on the top of the list of the European Commission and national competition authorities. This is evidenced by continuous enforcement activities in this field.

European Commission: shift in focus towards excessive pricing

Since the pharmaceutical sector inquiry the Commission’s primary focus has been on patent settlements between originator and generic companies, resulting in high fines in Lundbeck and Servier.

However, in the framework of a meeting with Maureen Ohlhausen, acting chairman of the US Federal Trade Commission, EU Competition Commissioner Vestager alluded to a shift in focus from patent settlements towards excessive pricing. The Commissioner pointed out that excessive pricing issues in the pharmaceutical sector are a uniform interest from the national competition agencies in Europe to the EU and US competition regulator. At the same time, she stressed the importance of maintaining a balance as companies need to be rewarded for investing in innovative drugs. This is in particular an area of concern in relation to orphan drugs.

Whereas the Italian and UK competition authority (see below) already fined pharmaceutical companies for charging excessive prices, the European Commission has not yet formally launched a case. However, it has been hinted that the first case is in the pipeline.

UK: CMA targets online sale of medical equipment and excessive pricing of medicines

On 12 April 2017, the Competition and Markets Authority’s (CMA) launched an investigation into suspected breaches of competition law in relation to the supply of medical equipment in the UK. The investigation relates to suspected anti-competitive agreement(s) or concerted practice(s) which restrict the prices at which retailers may advertise or sell medical equipment online. The CMA is currently undertaking its initial investigation and a decision whether to proceed with the investigation is estimated to be taken by the CMA in July this year.

On 07 December 2016, the CMA imposed a record £82.4m fine on Pfizer, and a £5.2m fine on Flynn Pharma, after finding that both companies had abused a dominant position by charging excessive and unfair prices for phenytoin sodium capsules. The CMA found that before September 2012 Pfizer manufactured and sold phenytoin sodium capsules to wholesalers and pharmacies in the UK, under the brand name Epanutin, which meant the price of the drug was regulated. In September 2012, Pfizer sold the UK distribution rights for Epanutin to Flynn Pharma. Flynn Pharma proceeded to de-brand/genericise Epanutin, which meant that it was no longer subject to price regulation. Pfizer then continued to manufacture phenytoin sodium capsules and supply them to Flynn Pharma, but at prices between 780% and 1,600% higher than it was previously charging to distributors in the UK. The CMA notes that these prices were significantly higher than Pfizer’s prices for the same drug in other European countries. Flynn Pharma then sold the capsules to pharmacies and wholesalers in the UK at prices between 2,300% and 2,600% higher than previously.

The CMA has also opened investigations against other companies in relation to alleged excessive prices of pharmaceuticals. For example, on 3 March 2017, drug makers Actavis UK and Concordia were sent a Statement of Objections in respect of signing an allegedly illegal agreement that kept prices for a "life-saving" medication artificially high for a prolonged period.

Belgium: focus on pharmaceutical wholesale distribution

In November 2016, the Belgian Competition Authority (BCA) carried out inspections at several companies active in the wholesale distribution of pharmaceutical and para-pharmaceutical products to pharmacies. The BCA suspects them of having engaged in illegal price fixing and market partitioning. The investigation is still pending.

The BCA started its investigation after having received suspicious responses from industry players during its market investigation of the acquisition by the McKesson group of Belmedis, Espafarmed, Cophana, Alphar Partners and a controlling shareholding in Sofiadis. The transaction brings together two "full-line" wholesalers of pharmaceutical products in Belgium. It was submitted to the BCA for review after the parties requested a referral from the European Commission. By decision of 21 April 2017, the BCA cleared the transaction subject to conditions. The parties committed to divest one of their depots with all relevant related assets. Further, they offered other commitments to protect the competitive opportunities of smaller players among the full-line wholesalers.

Spain: a sector inquiry and an investigation

On 17 March 2017 the Spanish Competition Agency (CNMC) launched a sector inquiry into the drug wholesale supply market in Spain. From the CNMC’s preliminary views, it appears that there would be potential restrictions of competition in relation to market access and the exercise of wholesaler’s activities as a result of the structure of the market and existing regulations. In order to bring more competition into the drug wholesale supply market, the CNMC is exploring alternative mechanisms such as centralized purchasing and public tenders.

By decision of 19 January 2017, the CNMC closed its investigation against Pfizer for alleged dual pricing (S/DC/0546/15 PFIZER/COFARES). The case was opened in 2005 after a complaint of the wholesaler Spain Pharma. According to the CNMC, Pfizer’s pricing mechanism did not amount to dual-pricing because there was no voluntary setting of two different prices for the same drug depending on its destination with the purpose of restricting parallel trade.

In the wake of the Pfizer case, the CNMC opened on 21 March 2017 proceedings against six pharmaceutical companies - including again Pfizer - regarding alleged dual pricing in the drug supply market. The other companies under investigation are Janssen-Cilag, Merck Sharp & Dohme Spain, Lilly, Sanofi-Aventis and Novartis Farmacéutica. This case is still pending.