Pharma still in the CMA enforcement spotlight

Pharma still in the CMA enforcement spotlight

Parallel trade in medicines - the impact of the Falsified Medicines Directive

The Competition & Markets Authority (CMA) has actively enforced competition law in life sciences sectors in recent years, particularly in relation to supply of pharmaceuticals, with 10 cases in the last six years. Fines imposed have been at record levels with directors being disqualified. It is possible that the CMA’s enforcement could also increase further after the UK’s departure from the EU, as the CMA now will have the ability to investigate cases in parallel with the European Commission’s investigations at EU level.

Indeed, the CMA has promised in its recent Business Plan for 2022/23 that it will continue to progress investigations in the pharmaceutical sector, with a view to “ensuring that the NHS, and ultimately the taxpayer, does not pay more than they should for essential medicines and treatments, and that consumers who depend upon these drugs and treatments do not lose out”.

Many of the CMA’s recent cases have concerned so-called "niche generics". Whilst prices normally fall when generics enter a market, for some generics this does not happen due to market features – e.g., high barriers to entry or low volumes can result in markets being too small to attract further entry. This has been referred to as "niche generics", where the market ends up being very concentrated and sometimes result in significant price increases, which has attracted the CMA’s scrutiny.

As regards the type of conduct that the CMA has cracked down on, recent cases have mostly related to forms of market sharing and exploitation through excessive pricing. Examples include:

  • Entering profit sharing arrangements to would-be competitors, in order for the latter to stay out of a market
  • Suppliers paying would-be competitors to stay out of a market by 'selling' products to the latter and then immediately 'buy back' the products at market price
  • Agreeing with competitors to split downstream supply to a pre-wholesaler, which has been characterised as market sharing
  • Exchanging commercially sensitive information, such as market entry intentions
  • Withdrawing supply of a product solely to force patients having to switch to more expensive similar treatments

As Europe exits the Covid-19 lockdowns, competition authorities – including the CMA – are also carrying out dawn raids again. Given the severe implications of breaching competition law – including fines up to 10% of worldwide turnover; director disqualifications; and damages actions – it is important for businesses to implement robust competition law compliance programmes with focused competition law and dawn raid training.

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