This presentation from Italy was made during the discussion “Excessive Pricing in Pharmaceuticals” held at the 130th meeting of the OECD Competition Committee on 28 November 2018. More papers and presentations on the topic can be found out at oe.cd/exph.

1. Excessive pricing in pharmaceutical
markets: the ICA’s experience
11
Gabriella Muscolo
Commissioner – Italian Competition Authority
OECD Competition Committee
Paris, 28 November 2018

2. • ICA has generally been cautious to intervene against
allegedly excessive prices.
• Case-by-case identification of interventions focusing on
markets (i) unable to self correct, (ii) without effective
regulation, (iii) without risk of distorting innovation.
• ICA recently particularly active in pharma (economic
importance, access to healthcare and medicines, impact on
public expenditure) prioritizing cases also on the basis of
fairness considerations.
• Focus on a recent excessive prices case where ICA’s
intervention has complemented the regulator’s action
leading to substantial price reductions.
2
Preliminary remarks

3. • In September 2016, ICA fined Aspen for abuse of dominant
position for excessive prices concerning some essential off-
patent drugs.
• The case involved a group of anti-cancer drugs (“Cosmos
package”) acquired in 2009 from GlaxoSmithKline by Aspen
which, through aggressive negotiations with the regulator,
obtained in 2014 sharp price increases.
3
The Aspen case: the conduct (1)
Product name Active
ingredient
% price increase
Alkeran tab. Melphalan +1,540
Alkeran inj. Melphalan +257%
Leukeran Chlorambucile +1,166%
Purinethol Mercaptopurine +465%
Tioguanina Tioguanina +306%

4. • Two classes of drugs: “Class A” (essential drugs, negotiation
with the regulator, totally reimbursed by NHS), “Class C”
(companies free to set prices, drugs on charge of patients).
• At the end of 2013, Aspen submitted a request for
reclassification from “Class A” to “Class C” that the
regulator rejected considering the drugs essential.
• As 2013 prices dated back to the ‘50s/’60s, in March 2014,
the regulator accepted the prices increases submitted by
Aspen.
• In ICA’s view, the outcome of the negotiation was influenced
by the credible threat of leaving the Italian market if the
regulator had not accepted the prices increases.
4
The Aspen case: the conduct (2)

5. • Market definition: four relevant product markets at the
molecule level.
• Dominance:
– lack of effective competition (Aspen was the only
supplier);
– lack of potential competition (no patent barriers, but
absence of economic incentive to entry);
– asymmetric bilateral monopoly (weak countervailing
buyer power).
• Conduct: imposition of excessive and unfair prices, through
the adoption of an aggressive negotiation strategy.
5
The Aspen case: the analysis (1)

6. • Excessiveness: ICA reinforced its analysis by using two
different measures of the excess of prices (gross margin,
cost plus)
• Unfairness: variety of economic and legal considerations
(intertemporal comparison of prices, absence of any
economic justifications, absence of any non-cost related
factor in terms of quality, nature of the drugs and
characteristics of Aspen).
• Cease and desist order leaving to Aspen to define how to
comply with the infringement decision, defining prices
compatible with competition law.
6
The Aspen case: the analysis (2)

7. • ICA’s decision was upheld by the First Instance Administrative
Court in July 2017.
• As Aspen did not comply with the cease and desist order, ICA
opened, in March 2017, a non-compliance proceedings.
• It was only in April 2018, after having received ICA’s SO, that
Aspen reached an agreement with the regulator, leading to
substantial price reductions.
7
The Aspen case: the non-compliance proceedings
Prices pre-
increases
Unfair prices New prices % difference
Alkeran t. 5.8 95.1 19.24 - 80
Alkeran i. 69.21 247.35 116.68 - 53
Leukeran 53.99 219.44 156.39 - 29
Purinethol 16.82 95.1 33.62 - 65
Tioguanina 7.5 95.95 17.34 - 82

8. • According to ICA, the specific facts of the Aspen case
warranted an antitrust intervention: the market was not likely
to self-correct, the regulator did not have the ability to curb
the significant and unjustified price increases, as well as the
need to remunerate R&D did not arise.
• As the drugs considered had been developed in a distant
past and were since a long time off-patent, there was no
risk of distorting dynamic competition.
• If cases are well screened, agencies intervene only when
the stringent conditions identified to justify intervention arise,
ensuring that the potential of innovation is fully realized.
8
Conclusions