The UK Competition and Markets Authority imposes record fines for excessive pricing and anti-competitive “pay-for-delay” agreements for hydrocortisone tablets
Browse this blog post
Related news and insights
Blog Post: 21 November 2023
Blog Post: 23 October 2023
Blog Post: 20 October 2023
Blog Post: 12 October 2023
The UK Competition and Markets Authority (CMA) has imposed over GBP260 million in fines on several drug makers for two breaches of competition law: (i) charging excessive and unfair prices, in breach of the Chapter II Competition Act 1998 (CA) prohibition on abuse of a dominant position, and (ii) entering into “pay for delay” market sharing agreements, in breach of the Chapter I CA prohibition on anti-competitive agreements.
The CMA found that Auden Mckenzie and its economic successor, Actavis UK (now known as Accord-UK), overcharged the National Health Service (NHS) for hydrocortisone tablets (used by tens of thousands of UK patients to treat adrenal insufficiency) between 2008 and 2018, exploiting the fact that de-branded drugs are not subject to NHS price regulation. During that time, the price of the tablets rose by over 10,000%, from less than GBP1 per 10mg pack for the original branded version to over GBP80. NHS spending on hydrocortisone tablets meanwhile rose from around GBP500,000 a year in 2008 to over GBP80m a year in 2016. Although prices fell gradually after competitors entered the market, Accord-UK continued to charge higher prices than its rivals.
Pay for delay
The CMA also found that Auden Mckenzie and Accord-UK were able to raise prices so dramatically because they were the sole provider of the tablets during much of that period. Auden Mckenzie initially engineered this by entering into “pay-for-delay” agreements with two potentially competing generic manufacturers - AMCo (now Advanz Pharma) and Waymade. The generics agreed to stay out of the market between 2011 and 2015, in exchange for payments totalling GBP21m and GBP1.8m (respectively). After Accord-UK took over sales of hydrocortisone tablets from Auden Mckenzie in 2015 it continued making payments to Advanz Pharma.
The CMA imposed total fines of GBP266.4 million. Auden Mackenzie and Accord-UK were fined the lion’s share of this: GBP221.1m, of which:
- Accord-UK is solely liable for GBP65.6m;
- Allergan (the former parent company of Accord-UK) is solely liable for GBP109.1m;
- Accord-UK and Allergan are jointly and severally liable for GBP2m; and
- Accord Healthcare and Intas (both current parent companies of Accord-UK) are jointly and severally liable for GBP44.4m, along with Accord-UK.
The CMA has held Accord-UK liable for Auden Mckenzie’s conduct before it took over the business in 2015. Liability between Accord-UK’s former owner (Allergan) and its current owners (Accord Healthcare and Intas) has been attributed according to their respective ownership periods.
Fines were also imposed on the potential generic competitors – Advanz Pharma group (GBP42.8m) and Waymade (GBP2.5m) – for their parts in the pay-for-delay infringement.
Tough CMA enforcement in the pharmaceuticals sector
The total fines are, by some way, the largest ever imposed by the CMA. They follow a series of recent infringement decisions in the pharmaceuticals sector, with the CMA last year concluding two pharmaceutical investigations resulting in total penalties of GBP10.3m and GBP4.3m being imposed for market sharing and information exchange (notably, the latter case also resulted in fines being imposed on Accord-UK). The CMA currently has a number of live investigations in this sector, including an excessive pricing investigation related to Liothyronine tablets and a market sharing investigation related to Prochlorperazine tablets.
Andrea Coscelli, the CMA Chief Executive, described the case as involving “some of the most serious abuses we have uncovered in recent years” which have “cost the NHS – and therefore taxpayers – hundreds of millions of pounds”. Emphasising how seriously the CMA takes anti-competitive conduct in the sector, Coscelli stated that the fines serve as a “warning to any other drug firm planning to exploit the NHS.”
The fines are also not necessarily the end of the story for the companies involved. The CMA’s infringement decision will enable the NHS to seek potential damages through the courts with a follow-on damages claim.
A spokesman for Accord Healthcare has reportedly defended its actions, declaring that it only inherited the drug in January 2017 and that it has continually reduced the price since then in the face of significant competition. The drug maker is understood to be considering its options and intending to appeal. Waymade and Advanz Pharma have also indicated that they intend to appeal.