(by Farasat Bokhari & Bruce Lyons) Last week the UK Competition and Markets Authority (CMA) imposed a fine of approximately £90 million on Pfizer and a generic manufacturer Flynn Pharma, on the grounds that each abused a dominant position by charging excessive and unfair prices for phenytoin sodium capsules, an anti-epilepsy drug (brand name Epanutin). The price of a pack of 84 capsules of 100MG increased from £2.83 to £67.50 in October 2012. This came about as part of a deal where Pfizer sold the distribution rights in the UK to Flynn Pharma, who in turn ‘de-branded’ the drug, and sold the generic at an inflated price. The drug in question is not protected by any patents, so other generics are available and further generic entry is possible, yet the branded original drug was replaced by a higher priced generic. The CMA’s case is a rare example of an abuse of dominance finding (under Art. 102 and/or Ch.2 of CA98) in relation to exploitative pricing. While we await the full published decision, it is worth looking at industry price and quantity data to contextualise the CMA’s case. We also try to understand how this price hike was possible and ask whether the CMA should pursue more exploitative pricing cases. Read the rest of this entry »
Pfizer and Flynn: How are ‘excessive’ prices for generic drugs possible and should competition authorities do more about exploitative pricing?December 16, 2016
(by Farasat Bokhari) In a new development surrounding the controversy of price hikes of Mylan’s lifesaving drug EpiPen, the manufacturer announced that it will introduce a generic version, and sell the new drug at half the price of its branded version. Mylan has increased the price of its EpiPen injections from about $100 in 2009 to over $600 this year and will sell the generic at $300, and has come under scrutiny and strong criticism from public and government officials alike. Mylan are not alone in increasing drug prices in recent times. For instance, Martin Shkreli increased the price of Daraprim by 5000 percent in 2015. However, that was to do with a hit-and-run opportunity that arose out of its orphan drug status, and the speed with which a rival generic could gain approval to enter the market (see my earlier post, ‘The Economics of a $750 Pill’).
Leaving aside the issue that the generic is still three times more expensive than the original 2009 price, this announcement has left some puzzling over why, or rather how, such a move makes any sense. To paraphrase the incredulity expressed by Richard Quest of CNN, why would anyone pay $600 for a drug when the exact same product by the same company is also available for $300? How does Mylan stand to gain anything from this move? Read the rest of this entry »
(by Bruce Lyons) The CMA has recently published its annual report and associated impact assessment. Its performance management framework commits the CMA “to achieving direct financial benefit to consumers of at least ten times our cost to the taxpayer.” [Annual Report 2015-16, p.66]. Target setting and performance measurement are an important part of performance management. However, the precise way that the government requires the CMA to justify its funding is dangerously distortionary. Read the rest of this entry »
(by Andreas Stephan) The UK’s decision to leave the European Union has come as a shock to markets, politicians and indeed to many ‘Brexiteers’. Although protests demanding a reversal of the outcome and legal wrangling over Art 50 (the process for leaving the EU) continue, mainstream politicians have almost universally accepted the result (the obvious exception being in Scotland) and there is little evidence of public perceptions having shifted towards ‘Remain’ since the vote, despite accusations of a dishonest and misleading campaign by the ‘Leave’ camp. It is therefore almost certain that the UK will cease to be a full member of the EU. Bruce Lyons wrote about the (limited) advantages and (greater) disadvantages of Brexit for competition policy in an earlier blog, but here I suggest that much may remain the same regardless of what the UK’s new relationship with the EU ends up being. Read the rest of this entry »
(by Richard Cadman) On 20th April 2016, the European Commission (EC) sent a Statement of Objections to Google outlining its view that Google had breached EU antitrust rules by imposing restrictions on Android device manufacturers and mobile network operators (MNOs). This post briefly discusses the economics of this case and draws a parallel with the EC case against Microsoft (Case COMP/C-3/37.792), but also identifies two key differences. Read the rest of this entry »
(by Farasat Bokhari) On Friday 12 Februrary 2016, the UK’s Competition and Markets Authority (CMA) issued drug manufacturer GlaxoSmithKline (GSK) a £37.6 million fine with an additional £7.4 million imposed on partner drug manufacturers for engaging in a so-called ‘pay for delay’ or ‘pay to delay’ deal that lasted from 2001 to 2004 for its antidepressant drug Seroxat. As discussed in a recent blog by my colleague, Sven Gallasch, GSK have not admitted wrongdoing and may challenge the findings by arguing the arrangement was pro-competitive. Between 2000 and 2010 there were 57 pay to delay deals in the EU, and 66 just between 2008 and 2010 in the US. The US Federal Trade Commission (FTC) says these deals cost US consumers $3.5 billion a year, but have attempted to challenge them with mixed results.[i] Pay to delay cases are relatively new in Europe and the GSK case is the first fine for the practice to be imposed by the CMA.
This blog discusses some of the key issues and incentives surrounding pay to delay deals and is aimed at stimulating further discussion. Read the rest of this entry »
(By Sven Gallasch) On 12 February 2016 the Competition and Markets Authority (CMA) issued its first infringement decision concerning so-called pay for delay settlements in the UK pharmaceutical market, imposing a fine of £ 44.99 million on the branded pharmaceutical company GlaxoSmithKline plc (GSK) and a number of generic pharmaceutical companies including Generics (UK) limited and Alpharma Limited. This blog post considers whether drug companies’ claims that this practice is actually beneficial to customers have any merit. Read the rest of this entry »