August 10, 2023

CAT upholds CMA decision finding that excessive and unfair drug prices violated competition law

On August 8, 2023, the Competition Appeal Tribunal unanimously upheld a Competition and Markets Authority (“CMA”) decision finding that Advanz Pharma, the current owner and sole supplier of liothyronine tablets in the UK, and two of its former owners, Hg Capital and Cinven, had abused their dominant position in the UK market by charging excessive and unfair prices for the drug, in violation of competition law.  Liothyronine is an essential medication used to treat thyroid hormone deficiency.  The CMA accused Advanz Pharma, Hg Captial and Cinven (“Advanz”) of deliberately raising the prices of the drug by more than 1,000 percent between 2009 and 2017, the infringement period, during which time the price rose from £20 to £248 per pack.  As a result, the National Health Service (“NHS”), which paid approximately £600,000 per year for liothyronine tablets in 2006 (before the infringement period), paid more than £2.3 million for the drug in 2009 and over £30 million in 2016 despite volumes remaining stable.

In 2016, the CMA formally commenced an investigation into the price increases, and, in July 2021, the CMA issued an infringement decision finding that Advanz’s pricing strategy for liothyronine tablets between January 1, 2009 to July 31, 2017 was abusive and violated of section 18 (“the Chapter II prohibition”) of the Competition Act 1998.  Based on a review of Advanz’s internal documents, the CMA determined that they were “deliberately raising prices for a niche drug that was ‘below the radar’ of DHSC/NHS attention.”  As a result, the CMA imposed a total financial penalty of more than £101 million upon Advanz.

Advanz responded by appealing to the Tribunal to challenge the CMA’s decision, the imposition of penalties, and the penalty amounts.  More specifically, Advanz challenged the CMA’s conclusion that the prices were excessive and unfair and argued that the CMA made errors in its cost plus assessment and its “fair price” assessment for the drug.  Advanz also claimed that the prices of liothyronine tablets were the product of an agreement between Advanz and the NHS, as evidenced by NHS’s explicit approval of the price notifications and its payment of the quoted price even though it could have objected.  Advanz argued that the NHS’s acquiescence provided them with a defense to the violation of the Chapter II prohibition.

In its judgment, the Tribunal unanimously agreed with all of the CMA’s conclusions.  The Tribunal found that the evidence did not support the NHS acquiescence theory but supported the CMA’s assertion that Advanz abused its dominant position during the infringement period.  The Tribunal also agreed with the CMA that the price increases were part of a deliberate pricing strategy to exploit the lack of regulatory or competitive constraints.  However, the Tribunal decided to reduce the penalties imposed upon Hg Capital and Cinven after finding that it was not necessary for the CMA to apply a deterrence lift to the penalties to further deter them from breaching competition law in the future.  The Tribunal reduced HgCapital’s penalty from £8.6 million to £6.2 million and reduced Cinven’s penalty from £51.9 million to £37.1 million.

CAT Judgment | CMA Press Release | CMA – Liothyronine Case Timeline | CMA Decision – July 2021