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Aspen denies market abuse

As Italian authority slaps on €5 million penalty

Global pharmaceutical firm Aspen has been fined €5 million (R72.2 million) by Italy’s competition authorities for market abuse.

Specifically it has been found that it inflated the prices of anti-cancer drugs by up to 1 500%, since acquiring the right to commercialise these drugs from GlaxoSmithKline (GSK). This is according to an article in the online edition of the National Law Review.

Artificially inflating the prices of drugs is in violation of Article 102 of the Treaty on the Functioning of the European Union.

The products concerned are chemotherapy drugs Alkeran, Leukeran, Purinethol and Tioguanine. Aspen acquired the rights to commercialise these drugs, internally referred to as the ‘Cosmos’ drugs, from GSK in 2009. In the same deal, the UK-based firm acquired a 16% stake in Aspen, which it has subsequently divested of.

According to the National Law Review, Aspen achieved the price increases by adopting an aggressive negotiating strategy with the Italian Medicines Agency, including threatening to stop the supply of the medicines on the Italian market. At the time, Aspen was the only company supplying these medicines in Italy. 

Aspen was able to achieve price increases of between 300% and 1 500% (over the prior price).

To achieve its finding, the competition authority applied a two-phase test:

  • it assessed whether there was an excessive discrepancy between the manufacturing costs of, and the prices applied by Aspen for, the products; and 
  • it assessed whether the prices applied by Aspen were excessive and unfair, taking into account a range of other factors, including the change in the prices over time, the lack of economic justification for the increases, the absence of any ‘extra economic’ benefits for patients, the nature of the ‘Cosmos’ drugs, the characteristics of the Aspen group and the damage (as a result of the increased cost) to the National Health Service.

In both tests the authority concluded that Aspen had indeed transgressed the bounds of what was acceptable.

However Aspen Italy plans to appeal the finding of the Italian Competition Authority on the grounds that the finding is flawed both procedurally and substantively. “These drugs had not been subjected to any price increases in Italy for more than fifty years prior to the price increase in question. Reference to the percentage price increases is misleading given the exceptionally low base prices,” the company’s GM Giovanni de Vico said in a statement.

For a pack of 25 tablets in respect of each of the four products concerned, the weighted average price is of the order of €2 per tablet which is both affordable and sustainable. This pricing remains significantly below alternate treatment in each particular therapeutic class, he added.

Other ‘predatory pricing’ cases

The pharmaceutical industry and so-called ‘predatory pricing’ tactics are under the spotlight globally.

This follows the outcry around Canadian company Valeant Pharmaceuticals, which perfected the art of acquiring pharmaceutical companies or their drugs, incorporating these drugs into Valeant’s sales and supply chain and then raising the prices of these medications to levels equivalent with similar pharmaceutical products. 

This resulted in investigations by the US Securities and Exchange Commission and the US Attorney’s Offices for the Southern District of New York. The company’s accounts were restated in 2015 and a new CEO appointed in April this year.

However Valeant, it would appear, is not alone. The National Law Review reports that a number of other excessive pricing investigations by national competition authorities are currently on-going. For example, the UK’s Competition and Markets Authority (CMA) has recently pushed back for a second time the expected date of its final decision in its Pfizer/Flynn Pharma investigation (to November 2016).  The CMA is investigating whether Pfizer and Flynn abused their dominant positions in various UK markets by charging ‘excessive and unfair’ prices for phenytoin sodium capsules. 

Pfizer allegedly charged between eight and 17 times more for the drugs (at wholesale level) than it had charged for those same drugs at retail level before the deal, while Flynn charged between 25 to 27 times more for the products than Pfizer had charged at retail level.

Aspen’s executive directors Stephen Saad and Gus Attridge declined to comment further on the matter.

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