Excessive pricing, sham patents and private actions, please find below the antitrust enforcement developments in healthcare that caught our eye this summer.
Three excessive pricing decisions and a statement of objections
Are excessive pricing cases like London buses? You might think so after waiting for one for months only for four to appear practically at the same time this summer. For a long time, the received wisdom in competition law was that agencies would not (or should not) take on exploitative abuses like excessive pricing. However, exploitative cases have become more common: consider for example the investigations of the European Commission and the Italian competition authority against Aspen for excessive pricing or the German Bundeskartellamt’s decision against Facebook (finding a non-pricing exploitative abuse). There are also a number of open private damages actions in the UK that allege excessive pricing, including against British Telecom, Apple, and Google. This summer saw the adoption of not one but three excessive pricing decisions in the pharma sector as well as one statement of objections.
- In Hydrocortisone, the CMA found that Auden Mckenzie and its successor Actavis UK (today known as Accord-UK) abused their dominant position by charging excessive and unfair prices for 10mg and 20mg hydrocortisone tablets, a drug long off-patent which is an essential treatment for patients who suffer from adrenal insufficiency (including the autoimmune disease Addison’s). The CMA also found that the companies had entered into anti-competitive agreements with two potential competitors (Waymade and Advanz Pharma) to keep them from entering the market. Several current and former parent companies, including Allergan, private equity house Cinven and Intas were held jointly and severally liable for parts of some of the infringements. A number of parties have indicated they will appeal the decision.
- In Liothyronine, the finding was that Advanz Pharma had abused its dominant position by charging excessive and unfair prices for liothyronine tablets, another generic product. The CMA noted in its press release that the drug had eventually been placed on the NHS ‘drop list’, which led to patients facing the prospect of having their treatment stopped or having to purchase liothyronine tablets at their own expense. Cinven and HG Capital, another private equity house, were held jointly and severally liable for parts of the infringement.
- The CMA also issued a statement of objections in the long-running Phenytoin investigation. This case was launched in the early 2010s and led to a decision in 2016 that found that Pfizer and Flynn Pharma had abused their dominant position by charging excessive and unfair prices for phenytoin sodium capsules. That decision was however successfully challenged by Pfizer and Flynn in the Competition Appeal Tribunal in a judgment that was subsequently overturned in part by the Court of Appeal. The case went back to the CMA which has now issued a further statement of objections, demonstrating that it is proceeding with the case despite the initial setback in the Tribunal. Pfizer and Flynn can now respond.
But that wasn’t enough for one summer. The Dutch competition authority ACM also issued an infringement decision against Leadiant for excessive and unfair pricing of chenodeoxycholic acid (CDCA)-Leadiant, which is used for the treatment of patients with the rare hereditary metabolic disorder cerebrotendineous xanthomatosis (CTX). In the Netherlands, approximately sixty patients suffer from this disease. These people need to use the drug for the rest of their lives.
Leadiant’s product benefitted from an orphan designation (a designation for medicines used in rare diseases), which means that from the moment Leadiant obtained its marketing authorisation for its orphan product, no new marketing authorisations could be granted for the same active substance and the same indications for a period of 10 years.
However, when Leadiant obtained the orphan designation, CDCA was not a new product. Leadiant had been supplying CDCA under the brand name Xeniblox at around €885 per pack, but the marketing authorisation under which it did so did not include CTX as a licensed indication even though it had been used for treating CTX for about forty years. After obtaining its orphan designation for using CDCA to treat CTX, Leadiant applied for a marketing authorisation for this ‘CDCA-Leadiant’ product and withdrew Xeniblox from the market as soon as the authorisation for CDCA-Leadiant was granted. Following this, Leadiant increased the selling price for CDCA-Leadiant to €14,000 per pack, even though Xeniblox and CDCA-Leadiant according to the ACM do not differ in efficacy, safety, and form, and Leadiant had already recouped the costs of the orphan application by 2017.
To constitute an abuse of dominance under EU and Dutch competition law, a price must be both excessive and unfair. It can be unfair ‘in itself’ or ‘when compared to competing products’. The ACM met these tests by finding that Leadiant’s prices were “exorbitantly high because the price in combination with the low costs and the low risks resulted in an exorbitant return for Leadiant.” Its prices were unfair “because the drug, under a different trade name, had already been on the market for years at a much lower price, while patients benefited very little from the registration as an orphan drug.”
Up to now, excessive pricing cases in pharma have related to fully off-patent drugs with no IP-related exclusivity applying. However, the ACM’s case involves an orphan designation: a right granted to the manufacturer of an orphan product that is intended to stimulate investment in relation to rare diseases. The case shows that such a right does not give a supplier a free pass when it comes to pricing. The ACM took the importance of the orphan regime into consideration as well as the costs to Leadiant of applying for the designation. However, it also found that Leadiant’s investments in the product had been limited and concluded that Leadiant had charged excessive and unfair prices.
Interestingly, Leadiant’s high prices prompted the Amsterdam University Hospital to attempt to manufacture the drug themselves (compounding). Leadiant stopped charging its 14,000 euro price when the hospital succeeded in doing so in January 2020. According to a reconstruction published in September, the hospital has successfully started making a second orphan drug, cholic acid, which had been withdrawn from the European market by Retrophin.
A glass half full (or half empty) for AbbVie and the FTC in relation to sham patent claims
In June, AbbVie failed to convince the US Supreme Court to hear its challenge against a lower court’s finding that it had infringed antitrust law by pursuing ‘sham’ patent claims against its rival Perrigo in relation to AbbVie’s blockbuster testosterone replacement treatment AndroGel.
However, this also meant that there was no longer any chance for the FTC’s recovery of $500 million in alleged ill-gotten gains from AbbVie on behalf of consumers, which had been blocked by the lower court. Accordingly, the FTC announced that it had withdrawn its remaining case against AbbVie.
The case finds its origins in a 2014 FTC complaint charging that AbbVie and Besins illegally blocked patients’ access to lower-cost alternatives to AndroGel by filing baseless patent infringement lawsuits against potential generic competitors. The complaint also alleged that AbbVie settled one of its infringement lawsuits with an illegal reverse-payment agreement. The US District Court for the Eastern District of Pennsylvania dismissed the reverse-payment claim, but in June 2018 it found AbbVie and Besins liable for filing sham litigation in violation of antitrust law and awarded the FTC $493.7 million in equitable monetary relief to return to consumers.
The appeal at the Philadelphia-based Third Circuit was a mixed bag for the FTC, with the Third Circuit affirming the district court’s findings on sham patent litigation and reinstating the reverse payment claim but throwing out the order to pay back ill-gotten gains. In particular, the Third Circuit held that the FTC is not entitled to disgorgement under 13(b) of the FTC Act. AbbVie appealed the Third Circuit’s judgment to the Supreme Court, which declined to review the case in June.
The FTC has asked that Congress act quickly to restore Section 13(b) of the FTC act and the FTC’s ability to return to consumers money lost due to illegal anticompetitive behaviour by pharmaceutical companies.
In July the European Commission published its November 2020 infringement decision in relation to the pay-for-delay agreement between Teva and Cephalon in relation to modafinil.
There were also developments in the follow-on actions brought by the NHS in relation to the Lundbeck and Servier pay-for-delay cases in July:
- The Lundbeck claims by the NHS were transferred from the High Court to the Competition Appeal Tribunal. For Brexit geeks, it is interesting to note that the Court applied Regulation 18(3A) of the Civil Procedure Rules 1998 (Amendment) (EU Exit) Regulations 2019 (SI 2019/521), which means permission of the Court is not required, in respect of the defendants based outside the UK in Member States of the EU, to serve the High Court Claim Form out of the jurisdiction.
- The UK Supreme Court confirmed the judgments by the High Court (Mr Justice Peter Roth) and Court of Appeal striking out one of three claims from the NHS against Servier in relation to Perindopril, the drug that was also subject to the European Commission’s pay-for-delay case, which is itself currently on appeal at the EU’s highest court. The judgment is discussed in our ‘other developments’ September update, as the claim that was struck out does not rely on the antitrust prohibitions. The claims under the antitrust prohibitions continue.
Also in the field of damages (but not involving healthcare), the Competition Appeal Tribunal for the first time ever approved an opt-out class action in Merricks v MasterCard. Further collective claims against BT, Apple, Qualcomm, and Google are moving towards the same point where the Tribunal will have to decide whether or not to give permission for the collective proceedings to continue by making a Collective Proceedings Order under section 47B of the Competition Act 1998.
[The author has had different levels of involvement in the three excessive pricing cases at the CMA and two of them may be appealed in the Competition Appeal Tribunal. The blog will therefore refrain from commenting substantively on them until doing so would be appropriate.]