EU phar­ma­ceu­ti­cal in­dus­try in the dock

Ex­ces­sive drug pric­ing un­der probe

The Star Early Edition - - BUSINESS REPORT | INTERNATIONAL - Foo Yun Chee and Ben Hirschler

THE FIRST ever EU an­titrust probe into ex­ces­sive drug pric­ing is tak­ing the Euro­pean phar­ma­ceu­ti­cals in­dus­try into un­charted ter­ri­tory, un­nerv­ing some com­pa­nies and lawyers wor­ried about the reach of mar­ket in­ter­ven­tion.

It comes as drug mak­ers face global pressure over the high cost of pre­scrip­tion medicines, with par­tic­u­lar anger fo­cused on mak­ers of older generic prod­ucts who ex­ploit lim­ited com­pe­ti­tion to force through big price rises.

The Euro­pean Com­mis­sion’s move last month to in­ves­ti­gate if Aspen Phar­ma­care made “un­jus­ti­fied” hikes of up to sev­eral hun­dred per­cent in the cost of five old cancer drugs puts the EU ex­ec­u­tive in the van­guard of such en­force­ment.

In the past, the com­mis­sion has acted on spe­cific mar­ket abuses, such as agree­ments be­tween man­u­fac­tur­ers of branded drugs and gener­ics firms to de­lay the en­try of cheaper copies. The lat­est broad charge of ex­ces­sive pric­ing, also de­scribed by Brus­sels as “price goug­ing”, po­ten­tially sets a prece­dent for more di­rect ac­tion, es­pe­cially if of­fi­cials rely on a for­mula for what is a rea­son­able or jus­ti­fied profit mar­gin.

“It’s a huge threat to the in­dus­try and com­pa­nies should be watch­ing this closely,” said Gianni De Ste­fano at law firm Ho­gan Lovells.

“Nor­mally, in Europe, drug com­pa­nies just have to ne­go­ti­ate with a na­tional reg­u­la­tor on pric­ing. Now there is the prospect of ad­di­tional Euro­pean-level over­sight and that is scary for the in­dus­try.”

South Africa-based Aspen, which says it is com­mit­ted to fair and open com­pe­ti­tion, could be fined up to 10 per­cent of its global turnover, or some $290 mil­lion (R3.74 billion), if found guilty by EU an­titrust reg­u­la­tors. Adrian van den Hoven, di­rec­tor-gen­eral of the Medicines for Europe in­dus­try group rep­re­sent­ing generic drug mak­ers, is wor­ried about the im­pli­ca­tions of the EU probe, while stress­ing that he in no way con­dones any anti-com­pet­i­tive be­hav­iour.

“The in­ves­ti­ga­tion may be needed to stop bad be­hav­iour,” he said. “How­ever, this should not lead to a set of fixed prin­ci­ples that are not adapted to dif­fer­ent sit­u­a­tions, which then cre­ates ad­di­tional risks and which could in­crease the pressure on com­pa­nies to with­draw im­por­tant older medicines that pa­tients need.”

Con­tro­versy

EU law bans “un­fair” prices, and the Aspen case fol­lows con­tro­versy over US mar­ket price hikes by the likes of Valeant and Tur­ing Phar­ma­ceu­ti­cals, pre­vi­ously headed by Martin Shkreli.

Shkreli, now on trial for fraud, was pil­lo­ried in 2015 for in­creas­ing the cost of an anti-par­a­sitic medicine by more than 5 000 per­cent.

Maarten Meu­len­belt, part­ner at law firm Si­d­ley Austin, said the Euro­pean Com­mis­sion might be try­ing to fire a warn­ing shot to make drug firms more cau­tious, rather than want­ing to ex­tend its re­mit into price reg­u­la­tion.

There cer­tainly ap­pear to be grounds for con­cern. A study by Bri­tish aca­demics in Jan­uary found Euro­pean prices for sev­eral off-patent cancer drugs had risen by more than 100 per­cent in the past five years.

Na­tional au­thor­i­ties have also been tak­ing a more ag­gres­sive stance, with Italy’s com­pe­ti­tion au­thor­i­ties fin­ing Aspen $5.5m last year over its cancer drugs and Bri­tish reg­u­la­tors im­pos­ing a record fine of $107m on Pfizer for steep price in­creases for an old epilepsy medicine.

But Miguel de la Mano, a former Euro­pean Com­mis­sion com­pe­ti­tion econ­o­mist who now works at con­sul­tancy Com­pass Lex­e­con, said price in­creases even of sev­eral mul­ti­ples were not nec­es­sar­ily ev­i­dence of mar­ket abuse.

Ex­ces­sive pric­ing

“The Com­mis­sion should pro­ceed with ex­treme cau­tion,” he said.

The fo­cus on ex­ces­sive pric­ing comes at a time when there are also con­cerns about oc­ca­sional short­ages of some hos­pi­tal drugs, due to pro­duc­tion prob­lems, un­ex­pected spikes in de­mand and a lim­ited num­ber of sup­pli­ers. The Aspen case cen­tres on five drugs used in hos­pi­tals that are no longer pro­tected by patents, which the firm orig­i­nally ac­quired from Glax­oSmithK­line.

Some lawyers be­lieve the same prin­ci­ples could in future be ap­plied to patented drugs, al­though Fiona Car­lin, part­ner at Baker McKen­zie, doubts the Aspen probe sig­nals more in­ter­ven­tion on in­no­va­tive medicines, since of­fi­cials will not want to take ac­tion that could un­der­mine in­no­va­tion in­cen­tives.

Any move to an­a­lyse a medicine’s price based on cost plus a mar­gin would go against the grain of the in­dus­try’s drive to tie drug prices to clinical value. – Reuters

PHOTO: BLOOMBERG

South Africa-based Aspen, which says it is com­mit­ted to fair and open com­pe­ti­tion, could be fined up to 10 per­cent of its global turnover if found guilty by EU an­titrust reg­u­la­tors.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.