Excessive pricing and what can we learn from Aspen’s commitments

On 10 February 2021, the EU Commission (hereafter "Commission") has put an end to its first excessive pricing case in the pharma sector by making the commitments offered by Aspen legally binding¹. In doing so, the Commission follows a path already taken by several national competition authorities and gives a red flag alert to other pharmaceutical companies not to engage in abusive pricing practices.

The full commitments decision has yet to be published by the Commission, but the Commission's press release and the public version of Aspen's commitments already provide interesting food for thought.

Excessive pricing: a "hot topic" in the pharma sector

Seeing the Commission ruling on an excessive pricing case in the pharma sector is not self-evident. First, even though the ECJ has set an early precedent for abuses of dominance in the form of excessively high prices in 1978², excessive pricing cases are rare due to the existence of a heavy burden of proof.  Second, assessing the adequate level of prices in the pharmaceutical sector leads to practical hurdles since, on a country by country basis, prices may be negotiated with public authorities and/or regulated³.

Indeed, as the Commission underlines in a Q&A⁴, national health regulators and authorities already play an important role regarding medicine prices and reimbursement. It is therefore only in exceptional circumstances that competition rules may in addition apply, for instance when an abuse of a dominant position has been committed.

Excessive pricing cases have however come back to the enforcement table of competition authorities, especially at national level with several investigations and fines imposed by national competition authorities⁵. The Aspen case is representative of that increased interest since three competition authorities have had a look at the important price increases imposed by Aspen since 2012 regarding six off-patent cancer medicines.

The Italian Competition Authority imposed a €5.1m fine on Aspen in 2016 (the decision was confirmed in last instance in March 2020). Then, the Spanish Competition Authority started an investigation into the same practices but the case was eventually closed due to the EU Commission's opening an investigation on the same facts in 2017. 

The investigation then lasted for several years. Aspen proposed a first set of commitments on 1 October 2019, but it is not until July 2020 that the Commission invited comments on a new set of commitments submitted by Aspen.

The legal test: how do you know that prices are excessive?

The 1978 United Brand case stated that prices may be excessive when they have "no reasonable relation to the economic value of the product". But what is the economic value of a product? No clear answer is available and, in that context, practitioners may regret the absence of an infringement decision which would have set a clear precedent. Nonetheless, by adopting a commitments decision, the Commission avoided the hurdles of an infringement decision, which would have required additional time and resources, with in addition the risk of a subsequent appeal procedure. Relevant experience can be drawn from the Pfizer/Flynn case⁶.

Here, the Commission used several benchmarks to assess whether Aspen's prices were excessive:

• Aspen's accounting data in order to compare the profits that Aspen had made before and after the price increases;
• the profit levels of similar companies in the industry; and
• the absence of any justification for such increases of profits especially for products which have been off-patent for 50 years.

Other elements of context have justified an increased scrutiny. Aspen was the only possible supplier for the products and went as far as to threat to withdraw its medicines from the list of reimbursable medicines. Moreover, its products were considered as essential medicines.

Aspen's commitments: how do they remedy the Commission's competition concerns?

The commitments undertaken by Aspen have an important practical value:

• Aspen will immediately reduce its net prices across Europe by an average of 73% and agrees to retroactively amend its prices from 1 October 2019. The reductions are calculated country by country on the basis of Aspen's different costs;
• Aspen commits to apply net prices ceilings for a period of ten years. After a first period of five years, Aspen will however be able to demand a review of these prices ceilings if its costs increase significantly (more than 20%);  and
• Aspen also commits to the continued supply of the medicines for a guaranteed minimum period of five years. In the following five years, Aspen commits to either continue supplying the products or help continued supply by (i) giving a 18-months' notice to national authorities (against one year in the July version of the commitments), (ii) making the medicines' marketing authorisations available for sale to any third party that is interested in taking over supply and (iii) maintaining the registration of the marketing authorisations until their transfer to another supplier.

An interesting point to note is that the net price reductions start to apply retroactively from 1 October 2019, when Aspen proposed a first set of commitments.  A "retroactive" commitment is quite rare in practice⁷ since it is very difficult to implement. Despite these practical hurdles and a lengthy negotiation process with the Commission, Aspen commits to actively make payments to the victims of its price increases :

• the payments amount to the difference between Aspen's actual net sales and its hypothetical net sales in the absence of the increase deemed excessive;
• these payments are calculated on the basis of Aspen's sales in each relevant country; and
• the determination of the identities of the appropriate beneficiaries (ie hospitals, clinics, public health insurance fund, national governments, patients, etc.) has been assessed on a country by country basis.

It could be said that, for the period between 1 October 2019 and 10 February 2021, Aspen commits to do what would have happened if a massive pan-EU private enforcement case was successful. BEUC, a consumer organization, regrets that the retroactive effect does not start from May 2012, when the price increases started, since it would better compensate the victims of Aspen's practices⁸.

However, we should underline that decisions taken by competition authorities are not the normal tool for the compensation of victims of anticompetitive practices. For the period between 2012 and 2019, it is still up to victims to initiate stand-alone proceedings  before national courts in order to be compensated. With that respect, even though the Commission has not issued an infringement decision, the commitments undertaken by Aspen still offer relevant food for thought for potential claimants.

¹Commission, Antitrust: Commission accepts commitments by Aspen to reduce prices for six off-patent cancer medicines by 73% addressing excessive pricing concerns, Press release IP/21/524, 10 February 2021, case AT .40394.

²ECJ, case 27/76, United brand v. Commission, 14 February 1978.

³For instance, in France, a 2019 act and a decree adopted in November 2020 allows the French ministry for health to set price ceilings for certain products used in hospitals in exceptional circumstances (price increases or very expensive products). See article L. 162-16-4-3 of the French Social Security Code and decree n°2020-1437 dated 24 November 2020.

⁴Commission, Questions and Answers - Antitrust: Commission accepts commitments by Aspen to reduce prices for six off-patent cancer medicines by 73% addressing excessive pricing concerns, 10 February 2021.

⁵See out article dated 17 February 2020, available here

⁶See our article dated 10 March 2020 on this decision, available here

⁷Commision, case AT.39816 - Upstream gas supplies in Central and Easern Europe (2018), para. 156.

⁸BEUC, Commitments offered by Aspen in case AT.40394, available at here