UK Competition and Markets Authority Fines Two Drug Companies More Than £260 Million for Drug Overcharging and Market-Sharing Practices

Since 2017, the United Kingdom (UK) Competition and Markets Authority (CMA) has been investigating the UK pharmaceutical sector for possible anticompetitive agreements and concerted practices in relation to pharmaceutical products.  A recent action by the CMA provides some clarity regarding the CMA’s core concerns under the Competition Act 1998 (CA98).

On July 16, the CMA announced that it had imposed fines totaling more than £260 million on two UK pharma firms, Auden Mckenzie and Actavis UK (now Accord-UK) for two sets of CA98 violations.  First, the CMA reported that both firms had charged the National Health Service (NHS) “excessively high prices for hydrocortisone tablets for almost a decade.”  Accord-UK (and, for their respective ownership periods, its parent companies Intas and Accord and its former parent firm Allergan) were fined £155 million for charging the NHS excessive and unfair prices for hydrocortisone tablets for nearly 10 years, from 2008 to 2018.  Although Auden Mckenzie sold hydrocortisone tablets from 2008 to 2015, the CMA stated that Actavis UK (now Accord-UK) took over the business in 2015 “and is held liable for Auden Mckenzie’s conduct before that date.”

The CMA found that Auden Mckenzie and Actavis UK increased the price of 10mg and 20mg hydrocortisone tablets by more than 10,000 percent, compared to the original branded version of hydrocortisone, which the drug’s previous owner sold prior to April 2008.  As a result, the amount that the NHS had to pay for a single pack of 10mg hydrocortisone tablets rose from 70p in April 2008 to £88.00 by March 2016, and for a single pack of 20mg hydrocortisone tablets rose from £1.07 to £102.74 per pack over the same period.  Even after competitors entered the market and prices fell gradually, “Actavis UK continued to charge high prices and higher prices than its rivals.”

The financial impact on the NHS (and, by extension, UK taxpayers) “was significant. Before April 2008, the NHS was spending approximately £500,000 a year on hydrocortisone tablets. This had risen to over £80 million by 2016.”

These actions, in the CMA’s view, violated Chapter I of the CA98, which prohibits anti-competitive agreements and concerted practices between businesses that have as their object or effect the prevention, restriction, or distortion of competition within the United Kingdom.

Second, the CMA fined Accord-UK and Allergan (as former parent) an additional £66 million for paying two would-be competitors to stay out of the market.  According to the CMA,

Auden Mckenzie paid pharmaceutical companies Waymade and AMCo (now known as Advanz Pharma) not to enter the market with their own generic versions of hydrocortisone tablets. Waymade was set to enter with 10mg and 20mg versions and AMCo with a 10mg version. In exchange for staying out of the market, Auden Mckenzie paid the companies on a monthly basis – paying AMCo £21 million and Waymade £1.8 million in total over the duration of the relevant agreement. After taking over sales of hydrocortisone tablets in 2015, Actavis UK continued to pay off AMCo.”

The CMA also fined Advanz and its former parent Cinven a total of £43 million, and Waymade £2.5 million.

These actions, in the CMA’s view, violated Chapter II of the CA98, which prohibits the abuse of a dominant position by one or more companies which may affect trade within the United Kingdom or a part of it.

In its announcement, the CMA did not specify how it had calculated the fines.  Under the CA98, the CMA may impose a financial penalty on any business found to have infringed either the Chapter I or Chapter II provisions of up to 10 percent of its annual worldwide group turnover.  In these cases, the CMA explained only that “[i]n calculating financial penalties, the CMA takes into account a number of factors including seriousness of the infringement(s), turnover in the relevant market and any mitigating and/or aggravating factors.”

Antitrust and competition law compliance teams at pharmaceutical firms – not only in the United Kingdom – should include the details of these CMA actions in briefings to senior executives and in internal training sessions.  While pharma firms have often sought to blame the high costs of drugs on “middlemen”, future actions such as those highlighted in the CMA’s decision are certain to attract the attention of competition enforcement agencies.

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