Unfair pricing of cancer drugs - Italian Supreme Administrative Court confirms the abuse of dominant position by the Aspen Group

By Federico Marini Balestra, Lucia Antonazzi

06-2020

On 13 March, the Italian Supreme Administrative Court ("Consiglio di Stato") rejected the appeal lodged by the multinational Aspen Group against the decision of the Regional Administrative Court of Lazio (“TAR”), which fully upheld the decision adopted by the Italian Competition Authority (“ICA”) on 29 September 2016. 

In September 2016, the ICA, having ascertained the dominant position of the Aspen Group (“Aspen”) as it was the only company holding the authorisation required for the commercialisation in Italy of four off-patent anticancer drugs (i.e., Alkeran, Leukeran, Purinethol and Thioguanine, hereinafter "Cosmos Drugs"), found that Aspen had abused its dominant position in Italy by imposing unfair prices for Cosmos drugs, increased between 300% and 1500%. According to the ICA's decision, the prices of Cosmos drugs - which, due to their life-saving and irreplaceable nature, were included in the category of drugs fully reimbursable by the National Health System - were negotiated by Aspen with the Italian Medicines Agency in a "distorted and instrumental" way with an aggressive strategy. Aspen's application of these new prices for Cosmos drugs was without any economic justification, resulting in a more than proportional increase in the company's profits as well as an increase in public and private pharmaceutical expenditures for the purchase of these life-saving drugs. The prices were therefore considered unfair by ICA under Article 102(a) TFEU. 

Firstly, Aspen appealed the ICA’s decision complaining both of procedural violations (including the participation of the Italian officials in the investigations at Aspen’s headquarters in Ireland, which were carried out by the Irish Competition Authority on behalf of the ICA under Article 22 of Regulation (EC) no. 1/2003, and violations of the company's rights of defence) and of the substantial assessments made by the ICA with reference to (i) the definition of the relevant market and the dominant position attributed to Aspen, (ii) the assessment of the abusive conduct and (iii) the quantification of the penalty imposed. Nevertheless, all claims were rejected in the first instance by the TAR. 

In view of the above, in the subsequent decision under examination, the Supreme Administrative Court confirmed the conclusions already reached by the TAR. 

In this regard, it was found that claims relating to alleged procedural violations were unfounded. In addition, with reference to Aspen's complaints concerning the assessment of the abusive conduct, the Consiglio di Stato based its argument on the following preliminary considerations: (i) the abuse of a dominant position in the form of excessive prices within the meaning of Article 102(a) TFEU has rarely been found at an EU level and must be carefully calibrated in line with the principles of reasonableness and proportionality; (ii) the alleged abuse of a dominant position resulting from the increase in prices occurred in this case within a regulated market and in relation to products already on the market and no longer protected by any patent coverage; (iii) an undertaking in a dominant position may justify conduct which falls within the scope of the Article 102 TFEU by demonstrating that the resulting effect can be balanced, or even overcome, by advantages that also benefit consumers. 

Under an in-depth analysis of the assessment of the substitutability of Cosmos drugs, the Supreme Administrative Court dismissed Aspen’s claims concerning the market definition as identified by the ICA without finding any failure or deficiency in the investigation carried out. "Once a drug has been shown to be irreplaceable from a therapeutic point of view, there is no need to verify whether there are 'comparable' products from a price point of view. The analysis of competitive aspects in the pharmaceutical sector must take into account mostly qualitative criteria ('non-price competitive factors') […]".   

Additionally, in view of the special nature of the products involved, the Supreme Administrative Court confirmed the analysis of the TAR by excluding that Aspen was subject to any competitive pressure given the lack of actual and/or potential constraints in the market and considering that the undertaking was a de facto monopolist, representing the only producer to which the National Health System could refer for acquiring the Cosmos drugs. In this scenario, the overall negotiating strategy implemented by Aspen to obtain new prices for Cosmos drugs, enacted through the credible threat to the Pharma Regulator that if the required price increase was not accepted, Aspen would have stopped supplying the Italian market, was correctly assessed as aggressive behaviour aimed at obtaining unfair pricing by exploiting its market power. 

In light of this, the Supreme Administrative Court found the unilateral abuse of a dominant position for unfair pricing by the company to be very serious. It accordingly also confirmed the sanction imposed by the ICA.

Please find the official press release and the ICA decision (A480 – Price increase of Aspen's Drugs) can be found here.

Please find the Supreme Administrative Court’s decision in Italian here.  

Please find the Regional Administrative Court of Lazio decision in Italian here.

For more information contact Federico Marini Balestra and Lucia Antonazzi.