Antitrust: Commission seeks feedback on commitments offered by Aspen to reduce prices for six off-patent cancer medicines by 73% to address Commission’s concerns over excessive pricing
The European Commission invites comments from all interested parties on commitments offered by Aspen to address the Commission’s concerns over excessive pricing. Aspen proposes to reduce its prices in Europe for six critical cancer medicines by 73% on average. In addition, Aspen proposes to ensure the continued supply of these off-patent medicines for a significant period.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “Pharmaceutical companies often bring innovative medicines to the market and they should be rewarded for that. However, they sometimes also use their dominant position to increase prices of old but critical medicines by several hundred percent without any real justification. The Commission has concerns that Aspen’s conduct in this case amounts to excessive pricing by a dominant firm, which is prohibited by EU competition rules. To remove these concerns Aspen proposes to radically reduce its prices and to guarantee the supply of six critical cancer medicines. We now reach out to the stakeholders to hear their views on whether the commitments adequately address our concerns and benefit patients and health budgets across Europe.”
Following a formal investigation opened on 15th May 2017, the Commission has serious concerns that Aspen has been abusing its dominant position in numerous national markets by charging excessive prices for critical off-patent cancer medicines. After acquiring the cancer medicines from another company, Aspen started to increase their prices in Estonia, Germany, Latvia, Lithuania, Poland, Sweden and the UK in 2012 and then implemented the same strategy in all other countries in Europe where Aspen sold the medicines.
Aspen’s practices concern a number of cancer medicines mainly used in the treatment of leukaemia and other haematological cancers. They include medicines sold under the brand names Alkeran, Leukeran and Purinethol.
The Commission’s preliminary analysis of Aspen’s accounting data on revenues and costshas shown that, after the price increases, Aspen has consistently earned very high profits from its sale of cancer medicines in Europe, both in absolute terms and when compared with the profit levels of similar companies in the industry. Aspen’s prices exceeded its relevant costs by almost three hundred percent on average, including when accounting for a reasonable rate of return, although differences did exist between products and countries.
In certain cases, high profit margins can be explained by, for example, the need to reward significant innovation and the commercial risk-taking. However, the Commission’s investigation has not revealed any justifications for Aspen’s very high profit levels. Aspen’s medicines have been off-patent for 50 years, which means that any R&D investment on the medicines has already been fully recouped. In addition, the Commission’s preliminary assessment shows that although Aspen’s unit costs have risen slightly in the period 2013-2019, the price increases imposed by Aspen were clearly disproportionate to any additional costs incurred.
Aspen’s practices cover the entire European Economic Area (EEA), although not every medicine is sold in each country. The Commission did not include Italy in its investigation, because Italy’s competition authority adopted a decision for the Italian market in 2016, ordering Aspen to reduce its prices.
To achieve the price increases, often by several hundred percent, Aspen relied on the fact that patients and doctors had mostly no alternatives to using these particular cancer medicines. When national authorities tried to resist Aspen’s requests for price increases, Aspen went as far as threatening to withdraw the medicines from the national list of reimbursable medicines and in some cases was ready to even withdraw from normal supply in the market.
Aspen’s behaviour may be in breach of the EU’s antitrust rules (Article 102 of the Treaty on the Functioning of the European Union (TFEU) and Article 54 of the European Economic Area (EEA) Agreement, which forbid the imposition of unfair prices or unfair trading conditions on customers.
EU competition rules do not apply in all situations where there may be concerns about the high prices of medicines. However, in certain specific circumstances a pricing conduct can be in breach of competition rules. In such case, competition enforcement is one additional way to contribute to more affordable medicines.
The proposed commitments
Aspen has offered the following commitments to address the Commission’s competition concerns:
a) Aspen will reduce its prices across Europe for the six cancer medicines by, on average, approximately 73%;
b) These prices will be the maximum that Aspen can charge for the coming ten years. They will start taking effect already as of October 2019; and
c) Aspen guarantees the supply of the medicines for the next five years, and, for an additional five-year period, will either continue to supply or make its marketing authorisation available to other suppliers.
The Commission invites all interested parties to submit their views on Aspen’s proposed commitments within two months from their publication in the Official Journal. Taking into account all comments received, the Commission will then take a final view as to whether the commitments sufficiently address competition concerns.
If this is the case, the Commission may adopt a decision making the proposed commitments legally binding on Aspen under Article 9 of the EU’s antitrust Regulation (Council Regulation 1/2003).
Such a decision would not conclude that there is an infringement of EU antitrust rules but legally binds the committing companies to respect the commitments they have offered.
If a company breaks such commitments, the Commission can impose a fine of up to 10% of the company’s worldwide turnover, without having to prove an infringement of the EU antitrust rules.
Background
Aspen is a global pharmaceutical company headquartered in South Africa, with several subsidiaries in the EEA.
In the EU, national health authorities are free to adopt pricing rules for medicines and to decide on treatments they wish to reimburse under their social security systems. Each country has different pharmaceutical pricing and reimbursement systems, adapted to its own economic and health needs. Prices of pharmaceuticals are typically negotiated at national level between pharmaceutical companies and national pricing and reimbursement authorities. In cases of critical medicines that have no or few therapeutic alternatives, the negotiating power of authorities is rather small.
Article 102 TFEU prohibits the abuse of a dominant market position, including the imposition of unfair pricing in the form of excessive prices. The implementation of these provisions is defined in the EU’s Antitrust Regulation, (Council Regulation No 1/2003), which is also applied by national competition authorities.
Article 9(1) of the Antitrust Regulation 1/2003 enables companies investigated by the Commission to offer commitments in order to meet the Commission’s concerns and empowers the Commission to make such commitments binding on the companies. Article 27(4) of Regulation 1/2003 requires that before adopting such decision the Commission shall provide interested third parties with an opportunity to comment on the offered commitments.
A summary of the proposed commitments will be published in the EU’s Official Journal. The full text of the commitments will also be available on the Commission’s competition website in the public case register under the case number AT.40394.
