The Competition Appeal Tribunal (CAT) has recently upheld the Competition and Markets Authority's (CMA) finding that pharmaceutical suppliers charged excessive and unfair prices over a decade for hydrocortisone tablets, a generic medicine used in the treatment of Addison’s disease and funded by the NHS.

The CMA’s investigation showed that prices of hydrocortisone tablets rose by over 10,000% compared to the original branded version of the drug – meaning the prices paid by the NHS for a pack of 10mg tablets rose from 70p in April 2008 to £72 by March 2016.

The CMA found that Auden/Actavis made an illegal profit of at least £145 million from the excessive prices. The CAT agreed with the CMA that there was no justification for these price increases or for the high prices Actavis UK continued to charge after competitors began to enter the market.

The CMA concluded that Auden Mckenzie and Actavis UK (which took over the Auden business in 2015) had abused their dominant position by charging excessive and unfair prices for hydrocortisone tablets. The investigation also revealed that Auden had colluded with its potential competitors, having paid pharmaceutical companies Waymade and AMCo (now known as Advanz Pharma) not to enter the market with their own generic versions of hydrocortisone tablets. 

By colluding with AMCo and Waymade to keep them out of the market, Auden and later Actavis UK, denied the NHS the potential savings that could have resulted if the companies had been competing against each other. For their part in the collusion, the CMA has fined AMCo – and its former parent Cinven – a total of £43 million and Waymade £2.5 million.

The CAT found that Actavis UK’s former parent Allergan should not have to pay a penalty for the period when it owned Actavis UK. During this period, the former parent company had ‘held separate’ commitments, meaning that it did not exercise control over its subsidiary Actavis UK. Nevertheless, the CAT upheld the CMA’s penalties in all other respects, resulting in fines of £130 million and paving the way for the NHS to seek compensation. 

These are the highest-ever CMA penalties upheld by the tribunal.

The investigation was conducted under:

• Chapter II of the Competition Act 1998 (CA98) and Article 102 of the Treaty on the Functioning of the European Union (TFEU) which prohibits the abuse of a dominant position by one or more companies which may affect trade within the UK or a part of it; and
• Chapter I CA98 and Article 101 TFEU which prohibits anti-competitive agreements and concerted practices between businesses which have as their object or effect the prevention, restriction or distortion of competition within the UK.

Suppliers are reminded of the need to make strategic decisions independently of their competitors, whether operating in the private sector or bidding for public contracts. 

Contracting authorities should be alive to the very real risks of collusion and market dominance. This can be mitigated by regularly engaging with the market to understand purchasing options, price trends and new suppliers to the sector. Contracting authorities should also take care when there are only a few bids submitted in response to a tender opportunity: was the opportunity not attractive to the market, or did a few players influence their competitors?