Excessive pricing practice in the pharma market to be investigated by the Italian Competition Authority

Once again, the Italian Competition Authority (ICA) has opened an Article 102 TFEU investigation against a pharma firm into an alleged excessive pricing. This time, in Leadiant (Case A524, LeadiantBiosciences/Farmaco per la cura della Xanatosi Cerebrotendinea), the ICA focused on the pricing of an orphan generics drug, Chenodeoxycholic Acid Leadiant (CAL). This drug, which contains the active principle of chenodeoxycholic acid (CDCA), is produced by Leadiant Biosciences Ltd (LB) and used for the treatment of a very rare disease, CTX. In June 2017 LB applied to the Italian drug authority (AIFA) for a market authorization (MA) for the CAL. The procedure is still to be finalized because no agreement was reached as to the selling price of the drug. The price indicated by LB was considered too high by AIFA and then LB asked for the suspension of the negotiation.

The ICA opened the antitrust investigation against LB following the receipt of a complaint filed by a consumer association. The association reported that the prices proposed by LB were much higher than the prices of other CDCA-drugs previously supplied to Italian patients. As usual, to determine the relevant product market affected by restrictive business practices concerning the pharma industry, the ICA relied on the Anatomical Therapeutic Classification (ATC). Because the CDCA was the only active principle for the treatment of the CTX, the ICA took into consideration the fifth level of ATC (ATC5), which refers to the molecules used for the preparation of drugs. The relevant product market was then identified in the market for the production of drugs that included the active principle of CDCA. LB was the only operator present in this market in which, logically, it had a dominant position. Its strong market position was also protected by entry barriers in the shape of a strict statutory regime for the production of galenic drugs, which might not compete with the large-scale production of CAL by LB.

The ICA feared that LB abused its dominant position with exclusionary and extortionary practices. More specifically, the ICA considered the exclusive contract for the supply of CDCA concluded by LB and PCA whereby PCA would sell the CDCA it produced only to LB. PCA was the previous historical supplier of CDCA in the Italian market where it was the only operator to have the necessary capacity and authorization to start the production of drugs containing CDCA. On the other hand, the exclusive supply contract might prevent potential competitors of LB from having access to the main source of an essential input for their activities, the CDCA active principle.

LB also seemed to have put in practice dilatory tactics while negotiating with AIFA with the objective to force it into accepting the selling price indicated by the dominant firm. As hinted above, this price was viewed by the AIFA as being out of proportion with the production costs. LB also failed to submit detailed data concerning the costs associated to the production of CAL.

In conclusion, the ICA believed that LB might have pursued a complex strategy aimed at preventing the market access of competing producers of CDCA-based drugs and imposing excessive selling prices for its drugs to the detriment of the national health system and those that contracted the CTX. Incidentally, also the national competition authorities of the Netherlands, Belgium and Spain opened antitrust enquiries into similar conducts of LB affecting their respective national markets.