Excessive Pricing, ‘Pay-For-Delay' And Rebates: A New Era Of Enforcement In The Pharmaceutical Industry

The European Commission (EC) and other national competition authorities (NCAs) have traditionally shied away from investigating allegations of excessive pricing and appearing as price regulators. Commissioner Vestager warned that such investigations should only be commenced with caution. The pharmaceutical sector, however, has recently seen an uptick in excessive pricing investigations, both across Europe and worldwide. Since the EC's 2008 pharmaceutical inquiry and corresponding inquiries of NCAs, regulators have also instigated other abuse of dominance and anti-competitive agreement probes in the industry.

Resurgence of Excessive Pricing

There is an inherent difficulty in identifying the point at which a price becomes 'excessive.' Traditionally, the EU courts proposed a two-step test, identifying whether: (i) a difference between costs incurred and prices charged was excessive; and (ii) whether prices were unfair in themselves, or by comparison to other products.1 The Court of Justice of the European Union (CJEU)'s judgment in AKKA has confirmed that although there is not a single method to determine whether prices are excessive, the comparison of prices between member states is a valid method of doing so, provided any differences are significant and persistent and can therefore be regarded as appreciable.2

In May 2017, the EC commenced its first pharmaceutical excessive pricing investigation against Aspen,3 alleging price increases of cancer drugs following the expiration of their patent protection, as well as threats by Aspen to remove such drugs from multiple markets. The medication was old, cheap to produce and little investment had been made on its improvement. In instigating the investigation, Commissioner Vestager commented that although entities should generally be rewarded for producing such medication "when the price of a drug suddenly goes up by several hundred percent, this is something the Commission may look at."4 All four of the drugs subject to the EC's investigation together with another drug had been considered in a corresponding investigation against Aspen by the Italian competition authority; fines of €5.2 million were imposed in September 2016, upheld by national courts in August 2017. In October 2017, South African authorities withdrew excessive pricing investigations against Aspen, and the company announced a probe had been commenced against it by the U.K. Competition and Markets Authority (CMA).

The U.K. has also...