CMA decision upheld in major drug price abuse case
19 Sep 2023 01:47 PM
Firms which raised prices for key medicine by over 10,000% from 70p to £72 have had their appeal against a CMA finding of excessive pricing rejected by the Competition Appeal Tribunal (CAT). The firms must now pay almost £130m in fines.
- Record fines for suppliers of hydrocortisone tablets
- The CMA found prices rose by over 10,000% at NHS’s expense
- Court finds prices ‘well in excess of what was fair’ and infringements committed intentionally
In a judgment published yesterday, the CAT unanimously upheld the CMA’s finding that pharmaceutical suppliers charged excessive and unfair prices over a decade for hydrocortisone tablets, a generic medicine used in the treatment of Addison’s disease and funded by the NHS.
The Competition and Markets Authority (CMA) welcomes the Tribunal’s finding that the prices Auden/Actavis UK charged for this lifesaving medicine between 2008 and 2018 amounted to an abuse of a dominant position, resulting in fines of almost £130 million. Yesterday’s judgment comes five weeks after the Tribunal upheld the CMA’s finding in another case involving excessive pricing of medicines supplied to the NHS, which itself resulted in fines of £84m.
The NHS spent hundreds of millions of pounds on these drugs and the judgments now pave the way for the NHS to seek compensation.
Michael Grenfell, Executive Director, Enforcement at the CMA, said:
“This is another important step forward in our fight against abuse of the NHS through the pricing of so-called “niche” generic drugs, whose suppliers exploit weak competition and regulation to hike prices. This infringement was serious and – in its effects on the NHS, on the cost of patient care, and on taxpayers - shocking. Tens of thousands of people rely on hydrocortisone tablets to treat life-threatening conditions, such as Addison’s disease, and following the actions of these companies, NHS spending on this essential medicine rose from around £0.5 million a year to over £80 million.
“When we announced our decision to fine these firms in 2021, we said that these were some of the most serious abuses we had uncovered in recent years. The Tribunal has reached the same conclusions as the CMA, finding ‘an illegitimate exploitation of market power to leverage prices well in excess of what was fair’, and that the businesses involved committed the abuses intentionally.”
The appeal follows an infringement decision issued by the CMA in July 2021, which found that several pharmaceutical firms had breached competition law in relation to the supply of hydrocortisone tablets.
The CMA found that Auden Mckenzie and Actavis UK (which took over the Auden business in 2015) had abused their dominant position by charging excessive and unfair prices for hydrocortisone tablets, that Auden had colluded with its potential competitor Waymade to buy off competition on 20mg and 10mg hydrocortisone tablets, and that Auden and later Actavis UK had colluded with another potential competitor, AMCo, to continue buying off competition on 10mg hydrocortisone tablets.
The CMA imposed fines totalling £266.5 million for these infringements covering its abuse of dominance and its collusion findings.
Yesterday’s judgment deals only with the abuse of dominance findings, which accounted for £155.2 million of that total original CMA fine. The Tribunal has reserved its judgment in relation to the appeal against the CMA’s findings on collusion.
While upholding the CMA’s findings on liability throughout the relevant period, the Tribunal found that Actavis UK’s former parent Allergan should not have to pay a penalty for the period when it owned Actavis UK subject to ‘hold separate’ commitments as these meant that Allergan did not exercise control over its subsidiary.
The Tribunal upheld the CMA’s penalties in all other respects. The result is that the total penalties for the abuses will be reduced by approximately £26 million, to almost £130 million. These are the highest ever CMA penalties upheld by the Tribunal.
Background on the case:
The CMA’s investigation showed that prices of hydrocortisone tablets rose by over 10,000% compared to the original branded version of the drug – meaning the prices paid by the NHS for a pack of 10mg tablets rose from 70p in April 2008 to £72 by March 2016. The CMA found that Auden/Actavis made an illegal profit of at least £145 million from the excessive prices. The Tribunal agreed with the CMA that there was no justification for these price increases or for the high prices Actavis UK continued to charge after competitors began to enter the market.
The CMA imposed financial penalties (fines) for the excessive pricing abuses on Actavis UK (now known as Accord-UK), its current parents Intas/Accord and its former parent Allergan.
For more information, visit the Hydrocortisone tablets page.
Notes to Editors
- Previous action taken by the CMA in relation to the pharma sector and the fines imposed:
- Paroxetine (2016): £45 million in fines for anti-competitive agreements and abuse of dominance (reduced to £27.1 million on appeal).
- Fludrocortisone (2019): £2.3 million in fines and £8 million redress to the NHS for market sharing.
- Nortriptyline (2020): £3.4 million in fines and £1 million redress to the NHS for illegal arrangements including market sharing and information exchange.
- Prochlorperazine (2022): £35 million in fines for an illegal arrangement that restricted competition in the supply of prescription tablets.
- Phenytoin (2022): £70 million in fines for excessive and unfair pricing.
- Liothyronine (2021, upheld by the CAT in August 2023): £101 million in fines for excessive and unfair pricing (reduced to £84 million on appeal).
- Previous press release: CMA finds drug companies overcharged NHS (July 2021).
- While upholding the CMA’s findings of excessive and unfair pricing, the Tribunal decided to reduce the penalties imposed by the CMA on Allergan. The precise amount of the reduction is to be determined in a further order.
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