ACM and European Commission step up action against abuse of dominant position of pharmaceutical companies

The Netherlands Authority for Consumers and Markets (ACM) and the European Commission (the Commission) are increasingly focusing their attention on abuse of a dominant position in the pharmaceutical sector. In 2021, ACM imposed a fine (of EUR 19.5 million) for the first time on a pharmaceutical company for charging excessive prices. On 11 February 2022, ACM reprimanded Pfizer for an anti-competitive discount system. Before that time, on 24 September 2020, after an investigation by ACM, AbbVie undertook to cease the use of a similar discount system. On 20 June 2022, the Commission reported that it had launched an investigation into abuse of a dominant position by Vifor Pharma. Vifor Pharma had allegedly spread misleading information about a medicine of competitor Pharmacosmos, which, partly as a result, was allegedly unable to operate effectively on the market.

This focus on the pharmaceutical sector has not come out of the blue. Competition authorities have been paying attention to the pharmaceutical sector for many years already. Dominant positions within the pharmaceutical sector have been a source of concern in society for years. In this blog we address the investigations by ACM into the practices of Leadiant, Pfizer and AbbVie. We also discuss the Commission’s investigation into Vifor Pharma, followed by an explanation of the lessons that can be learned from these cases.

Leadiant fined for excessive pricing

Leadiant, an Italian pharmaceutical company, developed the drug CDCA. That drug was initially intended for the treatment of gallstones. It later became apparent that CDCA may also be used for the treatment of CTX, a rare and serious metabolic disease. Leadiant acquired a CDCA-based drug from another manufacturer in 2008. The price of the drug was EUR 46 for 100 capsules at the time. The following year, Leadiant changed the name of the drug to Xenbilox and increased the price of that drug to EUR 885 for 100 capsules. In 2014, the drug was granted orphan status and the price was increased to EUR 3,103 for 100 capsules. Marketing authorisation was furthermore obtained in 2017, which gave Leadiant the exclusive right to market CDCA-based drugs in Europe for a period of ten years. That same year, the manufacturer increased the price of CDCA to EUR 14,000 for 100 capsules. That amounted to EUR 150,000 in costs for CDCA per patient per year. Despite commotion in the media, Parliamentary questions and an enforcement request by Stichting Farma ter Verantwoording to ACM, Leadiant did not lower its price for CDCA. Not until the Amsterdam UMC was able to prepare an alternative medicine in January 2020 did Leadiant lower its price for CDCA.

After an extensive investigation, ACM found in 2021 that Leadiant had a dominant position on the Dutch market for CDCA-based medicines for the treatment of CTX between 2017 and 2019. No alternatives for CDCA were available to patients during that period, according to ACM.

ACM found that Leadiant had abused its dominant position by charging an excessive price for CDCA. A price is excessive if it is disproportionately high and unreasonable. According to ACM, the price charged by Leadiant for CDCA was excessive because Leadiant had incurred limited costs and made limited investments in order to obtain orphan drug status and marketing authorisation for Leadiant. At the same time, Leadiant generated an extremely high return on the price charged for CDCA. According to ACM, the price charged for CDCA was also unreasonable because Leadiant did not arrange for innovation. CDCA had been prescribed to CTX patients safely and effectively for years, at much lower prices. ACM further pointed out that Leadiant had not negotiated expeditiously and seriously with health insurers and the Ministry of Health, Welfare and Sport to arrive at lower reimbursement for CDCA. Leadiant stated that it “fundamentally disagreed” with the allegations. It also stated: “We are convinced that we have always acted correctly and in accordance with all applicable regulations.” ACM believes, however, that Leadiant’s actions constitute a very serious violation of the Competition Act, because the medicine is vital for patients and Dutch society ultimately pays an excessive price. With a view to general and special prevention, ACM subsequently imposed a fine of over EUR 19 million on Leadiant. Zorginstuut Nederland (the National Healthcare Institute) regarded ACM’s fine a “boost to good, affordable care.” ACM’s full decision has not yet been published. Leadiant has announced that it will appeal the fine.

Pfizer puts an end to Enbrel discount system after ACM investigation

On 11 February 2022, ACM reprimanded drug manufacturer Pfizer for possible anti-competitive agreements between Pfizer and hospitals in the Netherlands. Pfizer owned a patent on active ingredient etanercept. Pfizer used that substance in its Enbrel drug, which is prescribed to patients suffering from rheumatism and psoriasis, among other things. Pfizer’s etanercept patent expired in 2015. Before the patent expired, Enbrel was the second largest medicine in the Netherlands in terms of turnover.

When a patent expires, a drug manufacturer can no longer prevent other companies from selling new, competing medicines (such as “biosimilars”). This increases competition, which in turn can lead to lower prices (see also this blog). In the Netherlands, two biosimilars containing the substance etanercept are on the market. An investigation by ACM has shown that Pfizer included a clause in agreements with hospitals that allowed it to reduce its discount on the price of Enbrel if a hospital purchased less of it. According to ACM, this clause created a financial impediment for hospitals to switch from Enbrel to a biosimilar: if a hospital switches from Enbrel to a biosimilar, there will always be a group of patients who are unable or unwilling for medical reasons to switch to the biosimilar. As a result of a switch to a biosimilar, the price of Enbrel could be approximately four times as high for the group of patients who are dependent on Enbrel. According to ACM, this would mean that at the end of the day the hospital would achieve no or too little cost savings by switching to a biosimilar and would have no incentive to do so.

After its first investigation results, ACM informed Pfizer that the discount system used appeared to be in breach of the competition rules (see also this blog). Pfizer disagreed, but opted to immediately remove the discount system from the agreements and from pending bids with hospitals regarding Enbrel. Pfizer also promised ACM that it would no longer use these clauses in the future. Hospitals can therefore switch to a biosimilar during the current contract period while retaining the discount they received from Pfizer for Enbrel. Because Pfizer adjusted its working method, ACM saw no reason to conduct any further investigations into Pfizer’s discount system and possible abuse of a dominant position.

AbbVie discontinues Humira discount system, but is held liable nevertheless

Pharmaceuticals manufacturer AbbVie previously tried to safeguard its position on the Dutch market in a similar manner. The patent on active substance adalimumab, which AbbVie uses in its Humira drug, expired in 2018. This drug was initially prescribed for patients with rheumatic disorders. The drug is also successfully prescribed to patients with numerous other conditions, such as psoriasis and Crohn’s disease. Until the patent expired, Humira was the largest selling drug in the Netherlands. After the patent’s expiry, AbbVie offered discounts to hospitals for adalimumab in 2018. Hospitals would receive that substantial discount only if all existing patients continued to use the Humira drug and did not switch to an alternative drug. As in the case of Pfizer’s Enbrel drug, this discount system of AbbVie created a financial barrier to switching to biosimilars, according to ACM (see also this blog).

ACM started a sector study into rheumatology medicines, including Enbrel and Humira, in 2018 already. It later launched an investigation into AbbVie’s discount system for Humira. Based on the findings of the study, ACM found that AbbVie used that discount system to make it more difficult for drug manufacturers to enter the biosimilars market. In light of ACM’s investigation results, AbbVie informed ACM that it would drop the discount system for Humira and similar clauses. As in the case of Pfizer’s discounts for Enbrel, ACM decided to close the investigation into AbbVie, since AbbVie had changed its working method. According to ACM, this ensures that there is more room for new competitive medicines.

The above did not prevent Stichting Farma ter Verantwoording from holding AbbVie liable at the end of 2021 for the loss resulting from AbbVie’s Humira discount system. According to Stichting Farma ter Verantwoording, AbbVie acted wrongfully by making use of its dominant position and charging an excessive price. This conduct was allegedly in breach of both the Competition Act and international human rights. AbbVie was faced with such proceedings not only in the Netherlands: in the United States, the pharmaceutical company was summoned before the civil courts for impeding the market entry of biosimilars.

ACM extra alert to dominant positions in pharmaceutical sector

These past few years ACM has increasingly focused on companies that have a dominant position in the pharmaceutical sector (see also here for our earlier blog). It was nevertheless not until 2021 that ACM fined a pharmaceutical company for abuse of a dominant position. Pfizer and AbbVie were able to avoid a sanction procedure at ACM by changing their practices in such a manner as to create more room for (new) competitive products. ACM thereby appears to be following the approach taken by the Commission, which has been investigating cases of abuse of a dominant position in the pharmaceutical sector for many years (see also here for our earlier blog).

Pharmaceutical companies should bear in mind that, when a patent expires, they may try to safeguard their dominant position only by lawful means. ACM and the Commission are critical in this respect. It is not permitted, for instance, to (indirectly) force hospitals to continue purchasing medicines from them by wrongful means, such as high discounts. But also during the term of a patent – as the Leadiant file demonstrates – a pharmaceutical company must take into account that all the rules of competition law apply. If it is up to ACM, the sales price of a drug must then also be in proportion to the investments made and the costs incurred by the pharmaceutical company. It is remarkable that ACM, in the message about its decision on Leadiant, draws attention to “[Leadiant’s] special responsibility to negotiate expeditiously and seriously” with health insurers and the Ministry of Health, Welfare and Sport. ACM holds it against Leadiant that it failed to adopt an “active approach” to achieve a reasonable price for CDCA in the Netherlands. Pharmaceutical companies with an dominant position should therefore be aware that ACM can argue on the basis of the position that they take during negotiations on the price and other supply conditions that a dominant position is being (or has been) abused within the meaning of Article 24 of the Competition Act / Article 102 of the Treaty on the Functioning of the European Union. Moreover, Leadiant has always emphatically denied that it has a dominant position or has abused such a position. Pfizer and AbbVie, on the other hand, promptly changed their working methods, despite informing ACM that they disagreed with its findings. Those undertakings played an important (if not crucial) role in ACM’s decision to close the investigations into Pfizer (Enbrel) and AbbVie (Humira) and not to impose any fines.

Commission – investigation into Vifor Pharma

On 20 June 2022, the Commission announced that it had launched an investigation into abuse of a dominant position by Vifor Pharma. Vifor Pharma allegedly spread misleading information about a medicine of its only competitor Pharmacosmos, which, partly because of this, was allegedly unable to operate effectively on the market. In 2021 already, the Commission started an investigation into pharmaceutical company Teva. Teva produces MS drug Copaxone and was allegedly blocking or delaying the market entry of competing drugs.

The Commission refers to its investigation into Vifor Pharma (in addition to Teva) as its second investigation into a possible abuse of a dominant position by a pharmaceutical company that has such a dominant position as a result of derogatory comments made about a competitor’s product. The fact that unsubstantiated mudslinging and vilification of rival products may constitute abuse of a dominant position has already been established in the pharmaceuticals sector. In this regard, the French Autorité de la Concurrence imposed a EUR 40 million fine for abuse of a dominant position on Sanofi in 2013. Sanofi produced the Plavix drug and, according to the Autorité de la Concurrence, had conducted a smear campaign to prevent prescribers from prescribing competing drugs. Later in 2013, the Autorité de la Concurrence imposed a fine of EUR 15.3 million on Schering-Plough. Schering-Plough’s documentation showed that the pharma company had implemented a plan to prevent a drug of competitor Arrow from gaining a foothold. According to the Autorité de la Concurrence, Schering-Plough disseminated information to prescribers about the medical risks of the Arrow drug without supporting its claims with medical studies.

Lessons learned

Companies with a dominant position have a special responsibility to ensure that their conduct does not distort competition. Practice has shown that, according to the competition authorities, such distortion of competition may take all kinds of forms. According to established case law, abuse is an objective concept in this respect. In sum, various types of behaviour, such as excessive prices or, conversely, too low a prices (as a result of discounts granted by the dominant company), but also unfounded negative statements about competitors and their products, and certain discount systems, may, in themselves or in combination with other behaviour, constitute abuse of a dominant position. What lessons can pharmaceutical companies with an (assumed) dominant position learn from the supervision by ACM and the Commission?

  • Pharmaceutical companies are well advised to check their discount policies (and other terms of sale) for compatibility with competition law before implementing them.
  • Be particularly cautious with provisions whereby a customer, even one that purchases limited numbers of a competing medicine, suddenly receives much less or no discount at all, despite being entitled to such a discount if it purchased exclusively from the dominant company.
  • ACM considers not only the outcome of a negotiation process, but also the actual process and statement made during that process. A dominant pharmaceutical company may be held liable for failure to take adequate steps in relation to customers in order to arrive at serious negotiations.
  • Providing objective information to prescribers or other third parties (on request or on the company’s own initiative) about a new competitor or competing medicine is allowed, but be careful and avoid disseminating information that is based on assumptions or that cannot be factually substantiated.

Please note that a decision of the Commission or a national competition authority not to fine a pharmaceutical company does not mean that that company gets off scot-free. It may also be sued in a civil court. In the Netherlands, Stichting Farma ter Verantwoording sued AbbVie. In 2019, AbbVie was also sued in the USA by a grocery trade union on the grounds of alleged competition-law and consumer-law violations. Health insurer Menzis sued AstraZeneca because Menzis believed it had overpaid AstraZeneca for the drug Seroquel. The court ordered AstraZeneca to pay compensation. AstraZeneca was successful on appeal and the court set aside the fine.

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