One of the world’s leading drug companies is facing a fine of up to £220 million for increasing the cost of cancer medicines after the EU launched an investigation into alleged price hiking.
The European Commission yesterday opened a formal investigation into Aspen Pharmacare following information that the company had “imposed very significant and unjustified price increases” for five lifesaving drugs.
The Europe-wide investigation marks the first time that the commission has investigated a drug company for excessive pricing. It comes after an investigation by The Times which revealed last month that Aspen had aggressively pursued price rises across Europe after buying the rights to the five cancer drugs from the British company Glaxosmithkline (GSK).
After the deal the price of the leukaemia treatment busulfan rose from £5.20 to £69.02 a pack in England and Wales, an increase of more than 1,200 per cent. Chlorambucil, which is also used to treat leukaemia, rose from £8.36 to £42.87, a 400 per cent increase.
During attempts to increase prices in Spain three years ago emails revealed that Aspen staff discussed destroying stocks of the drugs if health officials did not agree to demands for price rises of up to 4,000 per cent. Officials in Brussels said that they would examine evidence that the South African company’s efforts to secure price rises included warnings that they would stop supplying the drugs and in some countries carrying out the threat.
The commission’s announcement is the latest indication of a global crackdown on “price gouging”. Investigations have been carried out by the Competition and Markets Authority in Britain and new legislation has been designed to tackle the problem.
Margrethe Vestager, the EU’s competition commissioner, said that people depended on drugs “to save or prolong our lives” and that “when the price of a drug suddenly goes up by several hundred per cent, this is something the commission may look at. More specifically, in this case we will be assessing whether Aspen is breaking EU competition rules by charging excessive prices for a number of medicines.”
If found guilty Aspen faces a fine of up to 10 per cent of global revenue, which would amount to a maximum of around £220 million based on its current financial results.
The company has already been fined €5.2 million by Italy’s competition watchdog after ruling that it abused a dominant position by raising prices of the cancer drugs by up to 1,500 per cent. Aspen is appealing against that decision. It faces further investigations by competition authorities in Spain and South Africa.
Aspen said that it was not in a position to comment on the commission’s investigation but added that it “reaffirms its commitment to fair and open competition in markets in the EU and around the world”.
It began increasing the price of the cancer drugs after acquiring the marketing rights for the medicines from GSK in 2009. The deal, which included cash and shares in Aspen, made GSK about $2.2 billion.
Aspen was able to impose large price rises in England and Wales by exploiting a loophole in NHS pricing rules. The company avoided a price cap by dropping existing brand names.
In such cases the NHS relies on competition to control prices but, although the drugs were long out of patent, Aspen had no rivals and was effectively free to set the price.
New legislation, which was prompted by a long-running Times investigation exposing this loophole, passed both houses of parliament and received royal assent last month. It gives the health secretary powers to impose lower prices if it is believed that the NHS is being exploited and to demand information from drug companies on the profitability of individual medicines.
Aspen has been accused of threatening to stop supplying the cancer drugs during pricing negotiations in a number of countries including Italy and Spain. In Italy Aspen was accused of deliberately restricting the supply of the medicines while it tried to persuade the health authorities to accept large price increases.
A pharmacist wrote to Aspen to complain that a wholesaler was having to choose which of two families with a child suffering from cancer to give the small amount of medicine available.
In Spain Aspen appears to have carried out its threat and stopped supplying packs for about a year after the health service refused to agree to a price rise in 2014.
Internal emails show that Aspen employees discussed allowing the unsold stock to expire and be destroyed rather than selling it at what it considered to be too low a price.
A GSK spokesman has previously said that the company “has had no involvement in the pricing of these medicines after selling the rights to Aspen”.