CMA are investigating alleged anti-competitive and abusive conduct in relation to the hydrocortisone tablets
First published by Admin on May 11, 2017 in the following categories: Price Hikes and tagged with cma
The price of a “lifesaving” NHS drug has dramatically increased due to two companies allegedly agreeing not to compete with one another.
The competition watchdog, Competition and Markets Authority (CMA), has set up an investigation into an alleged anti-competitive agreement and abusive conduct in respect of hydrocortisone tablets. There’s a suspected breach of Chapters I and II of the Competition Act (CA), and Articles 101 and 102 of the Treaty of the Functioning of the European Union (TFEU) – competition laws.
Essentially, the companies involved are being accused of forming agreements that prevent competition as well as abusing a dominant position in the market.
Alleged anti-competitive agreement
The CMA has come to a preliminary view that Concordia (formerly known as Amdipharm) and Actavis UK (formerly known as Auden Mckenzie) arranged an agreement that Concordia wouldn’t enter the market with their own version of the hydrocortisone tablets. Although the CMA are yet to find that Actavis paid Concordia to not enter the market with the tablets, it’s believed that this was the case.
Actavis was the sole supplier of the tablets from 2008 until 2015 and held a dominant position in the market. In 2015, Actavis bought the drug from another company, and the purchase meant that the tablets became de-branded and were no longer regulated under NHS pricing. This then meant that other companies were allowed to produce ‘generic’ versions.
As a result, Concordia were authorised to sell their own version of the lifesaving hydrocortisone tablets to the NHS and were therefore the first direct competitors to Actavis as no one else had manufactured the tablets before.
It’s then believed that the two companies set up an agreement; Actavis allegedly provided Concordia with a supply of its own tablets under a “mates’ rate” agreement. This then allowed Concordia to resell the tablets to patients in the UK. The agreement was allegedly in force between January 2013 and June 2016. During this time, Actavis remained the sole supplier of the hydrocortisone tablets and, unsurprisingly, the price of the tablets to the NHS rose from £49 to £88 per pack.
In a statement of objections issued to Concordia and Actavis on the 3rd March, the CMA identified that both pharmaceutical companies broke competition laws (under the CA and TFEU), when they entered into these agreements. It also suggests that Actavis used and abused its dominant position by encouraging Concordia to delay introducing the tablets into the market.
Price rise as a result of a dominant position
The CMA have also previously investigated Actavis for a significant price rise as a result of a dominant position. In December 2016, the competition watchdog accused Actavis of overcharging the NHS. This claim had substantial grounds as the price of the 10mg hydrocortisone tablets rose from 70p in April 2008 to £88 in March 2016.
Impact of anti-competitive agreements
Anti-competitive agreements can have a long-lasting impact on UK citizens. The CMA’s Senior Responsible Officer, Andrew Groves, explains that the same:
“…anti-competitive agreements can cost the NHS, and ultimately the taxpayer, by stopping competition bringing down the cost of lifesaving drugs like hydrocortisone tablets.”
Andrew Groves notes that Actavis had the intent to act as the sole supplier of a drug that thousands of patients heavily relied upon. To put this into context, around 943,000 packets of the tablets were distributed in the last year.
Actavis remained in a dominant position for 7 years, which reportedly allowed them to “dictate and prolong high prices”. This also has an adverse effect on patients who are reliant on the drug namely, when their adrenal glands don’t produce sufficient amounts of natural steroid hormones.
No conclusions drawn yet
The CMA reiterates that no conclusion should be drawn as to whether or not the pharmaceutical companies have breached competition laws. The watchdog has given a period of time for the companies to respond to these allegations. However, Concordia said it doesn’t think there was a breach of competition law.
After considering the formal representations, the CMA will make a final decision of whether there has been a breach.
Sources:
https://www.gov.uk/government/news/cma-alleges-anti-competitive-agreements-for-hydrocortisone-tablets
https://www.gov.uk/cma-cases/pharmaceutical-sector-anti-competitive-agreements
http://www.bbc.co.uk/news/business-39150672
https://www.theguardian.com/business/2017/mar/03/uk-pharma-firms-accused-of-illegal-deals-to-hike-price-of-life-saving-drug
http://www.independent.co.uk/news/business/news/actavis-uk-concordia-nhs-drug-price-drive-up-pharmaceuticals-cma-illegal-dealing-hydrocortisone-a7608941.html