Italian Competition Authority fines Aspen € 5 million for excessive pricing

• 30/09/2016
• Articles

On 29 September 2016, the Italian Competition Authority (“ICA”) issued a decision fining Aspen Pharmacare (“Aspen”) € 5 million for abusing its dominant position contrary to Article 102 TFEU and Article 3 of Law No. 287/90 (the Italian Competition Act) by charging excessive prices for the supply of certain cancer-treating drugs.

The market concerned related to the commercialisation in Italy of drugs containing particular active ingredients considered essential to treat some types of cancer. These so-called “Cosmos” drugs are categorised in the Italian healthcare system in such a way that their prices are regulated by agreement between the rights holder and the Italian Medicines Agency (“AIFA”) while their costs are borne by the Italian health service. Aspen is the sole pharmaceutical firm holding the rights to commercialise these drugs in Italy since acquiring them from GlaxoSmithKline in 2009.

According to the ICA, Aspen took advantage of its position as sole distributor to leverage a favourable deal with AIFA at the expense of purchasers. In this respect, the ICA found that Aspen adopted an aggressive negotiating strategy against the AIFA during 2013-2014. It first requested AIFA to re-categorise Cosmos drugs so that their prices would no longer be regulated by agreement and would instead be set freely by manufacturers, with the costs being borne by patients, as opposed to the national health system. When AIFA refused, Aspen demanded a substantial upward revision of prices as an alternative. To reinforce its bargaining power, it caused a shortage of Cosmos drugs in the Italian pharmaceutical market by preventing their parallel import through the use of a stock/quota allocation system. It also threatened to terminate supply of the drugs to Italy if negotiations were to fail.

The ICA found that AIFA was obliged to accept the unfair price conditions imposed by Aspen due to the irreplaceable and life-saving nature of the Cosmos drugs, and this led to an increase in prices from around 300% to 1500% higher than the “old” prices applied by GlaxoSmithKline.

The ICA applied the two-part test in United Brands, concluding that the difference between the costs incurred and the prices charged was excessive.

First, the ICA analysed the difference between the new prices of the Cosmos drugs and their production costs, and concluded that it was significant. In its analysis, the ICA also took note of the absence of investment costs sustained by Aspen in order to improve the quality and innovation of the products or to promote their commercialisation.

Second, the ICA considered whether the significant difference could be justified. Taking into account: (i) the life-saving nature of the Cosmos drugs; (ii) the characteristics of the Aspen holding; (iii) the dearth of pro-competitive effects; and (iv) the damage perpetrated against the purchasers, the ICA concluded that the difference could not be justified. Aspen’s conduct, therefore, met both of the requirements under the United Brands test.