In yet more bad news for pharmaceutical manufacturer Actavis UK, the Competition and Markets Authority (“CMA”) has issued a statement of objections alleging that it entered into anti-competitive agreements with another market player, Concordia. The fresh accusations also relate to the supply of hydrocortisone tablets – a separate CMA investigation in December 2016 accused Actavis UK of excessive price rises amounting of a 12,000% increase over a number of years.
The statement of objections makes a provisional finding that both Actavis UK (formerly Auden Mckenzie) and Concordia (formerly Amdipharm) infringed EU competition law by entering into anti-competitive agreements between January 2013 and June 2016. Actavis UK is also alleged to have abused its dominant position contrary to the rules of the single market.
Hydrocortisone tablets are generally prescribed to those suffering from hormone deficiencies such as sufferers of Addison’s disease. In 2016 the NHS issued around one million prescriptions for the drug.
Actavis UK has only been directly involved with the alleged infringements since May 2015 when it acquired Auden MacKenzie. However the statement of objections is seeking to hold Actavis UK liable for the infringements over the whole period stemming back to January 2013. As in its other investigation in relation to hydrocortisone tablets, the CMA has applied the concept of the “economic successor” to attach liability to Actavis UK for Auden MacKenzie’s infringements. Essentially this means that where a corporate entity has acquired liability for competition law breaches these can remain live and transfer to the new parent or successor company. The CMA is also seeking to hold Actavis UK’s parent company, Allergan plc, jointly and severally liable.
Anti-competitive agreement and abuse of dominant position
Actavis UK was the sole suppliers of hydrocortisone tablets in the UK between 2008 and 2015 when they purchased the branded version of the drug from another manufacturer. This resulted in the drug becoming de-branded meaning that it was no longer subject to NHS price controls and that other companies were permitted to produce competing ‘generic’ varieties. Concordia received marketing authorisation to distribute the 10 milligram hydrocortisone tablets, fixing them as the first potential challenger to Actavis UK’s monopoly.
However, instead of pressing ahead with its own independent entry into the market Concordia reached an agreement with Actavis UK whereby they supplied Concordia with a limited supply of their own tablets for a low price which Concordia would then sell on to UK customers. Therefore Actavis UK remained the sole UK supplier for the majority of this period. Concurrently, the price charged to the NHS increased by over 80% from £49 to £88 per pack.
The CMA has provisionally concluded that the purpose of the agreements was to induce Concordia to delay its own entry into the market for hydrocortisone tablets, thereby allowing Actavis UK to prolong inflated price levels and deny the NHS price drops that would have accompanied genuine market competition. On this basis the CMA alleges that the agreement was anti-competitive and also constituted an abuse of dominant market position by Actavis UK.
There is currently a substantial amount of CMA activity in the pharmaceutical sector. As well as the other ongoing investigation into Actavis UK, in December 2016 Pfizer and Flynn Pharma received a record fine totalling almost £90 million for excessive pricing of a generic anti-epilepsy drug. The two Actavis UK investigations highlight the importance of due diligence in relation to competition law liabilities. One might note that the potential fines now facing Actavis UK and Allergan plc could potentially be substantially greater than the original price paid in acquiring Auden McKenzie.
If you would like to discuss any of the issues covered in this article or require any advice about competition law issues, please contact Rod Lambert or Charles Livingstone in the Brodies’ Public Law and Regulatory Team.
On March 6, 2017