Short Reads

ACM issues first excessive pricing fine in pharma

ACM issues first excessive pricing fine in pharma

ACM issues first excessive pricing fine in pharma

05.08.2021 NL law

On 1 July 2021, the Dutch Authority for Consumers and Markets (ACM) imposed a fine of EUR 19.5 million on drug manufacturer Leadiant for excessive pricing of their orphan drug CDCA-Leadiant, which is used for the treatment of the rare genetic metabolic disorder cerebrotendineous xanthomatosis (CTX).

The ACM found that Leadiant was dominant and that the price it charged was excessive and unfair, in violation of the prohibition to abuse of a dominant position. The ACM's decision marks the first time the ACM has taken enforcement action against excessive pricing in pharma, following the path of ongoing European enforcement in the area. The case is one to watch closely, as similar cases on excessive drug prices in the Netherlands may follow. The ACM recently published a summary of the decision and a press release on its website. The full decision is not yet available.

Timeline and key facts:

  • Since 2008, Leadiant has offered a CDCA-based drug in the Netherlands. The drug was acquired by another manufacturer and went by the name Chenofalk. Chenofalk was used to treat CTX patients.
  • In 2009, Leadiant changed the name of the drug to Xenbilox and raised its price to EUR 885, which was roughly 20 times the original price.
  • In 2014, Leadiant applied for orphan designation and market authorisation to treat CTX. The price was raised again to EUR 3,103.
  • In 2014, Leadiant was granted orphan designation.
  • In 2017, Leadiant the market authorisation came through, granting Leadiant the exclusive right for ten years to supply a CDCA-based drug for the treatment of CTX to the European market.
  • Leadiant introduced CDCA-Leadiant on the Dutch market in 2017 and pulled Xenbilox from the market. The selling price of CDCA-Leadiant was EUR 14,000 at that point.
  • Since January 2020 Amsterdam UMC has manufactured CDCA in its own pharmacy, which caused Leadiant to drop the price of CDCA-Leadiant.

ACM decision

The ACM found that Leadiant used an exorbitantly high and unfair price for selling CDCA in the Netherlands during a period in time that Leadiant enjoyed a dominant position.

For its decision on the dominant position, the ACM attributed importance to the orphan drug designation and market authorisation that granted Leadiant market exclusivity. According to the summary of the infringement decision, the ACM found that a lack of therapeutic alternatives for CDCA-Leadiant and patient dependence on the drug also contribute to Leadiant's dominant position.

To support its conclusion that Leadiant had abused its market position, the ACM performed a two-pronged test that is familiar from previous judgments from the Court of Justice of the European Union, such as United Brands.

For its decision on the exorbitantly high nature of the price, the ACM considered it decisive that Leadiant had only made a low-risk investment, but had implemented a large price increase for a drug that had already existed for years. According to the ACM, the high price that was charged was not justified by high costs that the manufacturer must recoup, specific benefits of the drug or its innovative nature.

The ACM held that the price of CDCA-Leadiant was also unfair due to the lack of innovation or added value compared with previous CDCA drugs on the market. The ACM investigation showed that Chenofalk and Xenbilox are biologically identical, while their prices were only a fraction of the price of CDCA-Leadiant.

Finally, the ACM considered it relevant that Leadiant was not willing to negotiate the price. According to the summary of the decision, Leadiant argued that it tried to negotiate a lower price but the Ministry of Health, Welfare and Sport frustrated its efforts. This argument was struck down by the ACM, which concluded that the pharmaceutical company had not done enough – given its responsibilities as a dominant market player – to negotiate in good faith. It is clear that the ACM considers this an important element of the case, as both the summary and the press release point several times to the absence of willingness on the part of Leadiant to engage in good faith negotiations.

Next steps

Following the decision of the ACM, Leadiant can now file an administrative objection and, after the ACM decides on that, appeal to the Rotterdam District Court. Similar investigations into CDCA-Leadiant are pending in Belgium, Italy and Spain.

The ACM decision on CDCA-Leadiant certainly illustrates the political climate across Europe, which is calling for action against excessive pricing by pharmaceutical companies. As far as the Netherlands goes, it seems that the ACM practices what it preaches; already in its 2018-2019 agenda, the ACM indicated that its focus had shifted to the price of pharmaceuticals (see our March 2018 Newsletter). This was followed by a paper in March 2018 concerning the application of competition rules in the pharmaceutical industry (see our April 2018 Newsletter) and more recently the lists of enforcement focus areas by the ACM (see our February 2020 and February 2021 Newsletters). It is now beyond doubt that the ACM will not shy away from pursuing excessive drug pricing cases.

 

This article was published in the Competition Newsletter of August 2021. Other articles in this newsletter:

Are your distribution contracts ready for the revised VBER?

Horizontal cooperation: from the dark side to the light?

Court rules ACM can use accidental evidence found in dawn raids

Netherlands FDI regime protecting national security is getting closer

CJEU clarifies jurisdiction for follow-on damage claims

Amsterdam Court of Appeal rules on the applicable law to air freight

Court assesses threshold for substantiating cartel damage plausibility

Team

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