Earlier this month, the Competition and Markets Authority (CMA) issued an infringement decision that two companies had breached competition laws.
The CMA found that Pfizer (Ltd and Inc) and Flynn Pharma (Ltd and Holdings) both abused their respective dominant positions by imposing unfair prices for phenytoin sodium capsules that they sold in the U.K. This infringed the Chapter II Prohibition of the Competition Act (CA) and Article 102 of the Treaty on the Functioning of the European Union (TFEU).
Chapter II of the Competition Act details the abuse of a dominant position. In particular, section 18 details what kind of abuse constitutes to a breach, which can include, but isn’t limited to:
- Imposing unfair purchase or selling prices or any other unfair trading conditions.
- Imposing unfair limitations, to the prejudice of consumers.
- Applying conditions that would put other trading parties at a disadvantage.
- Irrelevant supplementary obligations outside of the contractual terms.
Article 102 of the TFEU prohibits any abusive conduct by companies that have a dominant position on a particular market. The CMA is interested in investigating companies who are suspected to have breached this provision, as the main role of the provision is to regulate monopolies that may restrict competition and therefore produce worse outcomes for consumers and the market as a whole.
Article 102’s provision reflects section 18 of the CA.
£90 million penalty
As a result of their reported anti-competitive actions, the CMA has fined the pharmaceutical companies Pfizer and Flynn Pharma a combined total of £89.4 million for charging over-excessive prices to the NHS for an anti-epilepsy drug.
The fines were imposed after the companies increased their prices by up to 2,600 per cent overnight when the drug was de-branded in September 2012. The companies charged the NHS £2.83 for a 100mg pack which shot up to £67.50 before reducing it to £54.00.
As well as imposing a financial penalty, the CMA also has the power to impose enforcement actions on the companies. This was the case here as the CMA ordered the companies.
Anti-competitive behaviour
The Chairman of the Case Decision Group for the CMA’s investigation, Philip Marsden, noted that:
“…the companies deliberately exploited the opportunity offered by de-branding to hike up the price for a drug which is relied upon by many thousands of patients. These extraordinary price rises have cost the NHS and the taxpayer tens of millions of pounds.”
As Mr Marsden highlighted, the companies’ anti-competitive conduct directly affected the consumers and the wider public i.e. the taxpayers.
Not looking bright for the pharmaceutical industry
The pharmaceutical industry is often looked at – right now, the CMA has four other ongoing investigations in to their activities.
In February this year, the CMA imposed financial penalties totalling £45 million for anti-competitive agreements in relation to the supply of the anti-depressant drug paroxetine.
Importance of competition laws
Without competition laws and policies, consumers and smaller businesses would suffer under the hands of dominant market players. Competition laws are there to ensure that companies can compete fairly, in turn this’ll create a wider choice for consumers, help reduce prices and improve quality in the marketplace.