Competition Appeal Tribunal upholds infringement decision for excessive pricing abuse and reduces penalty imposed on Allergan

21/09/23

On 18 September the Competition Appeal Tribunal handed down its judgment in relation to the appeals brought by various pharmaceutical companies, challenging the Competition and Market Authority’s finding that they had charged excessive and unfair prices for the drug hydrocortisone, a steroid medicine, and the decision to impose fines totalling £155.2 million.

In a lengthy judgment, the Tribunal upheld the CMA's findings of infringements, and found that the prices charged for hydrocortisone, by successive pharmaceutical companies between October 2008 and July 2018 were excessive and unfair. The Tribunal differed with the CMA’s reasoning in various respects, but upheld its overall conclusions on all but one point. 

In outline summary, the Tribunal disagreed with the CMA’s conclusions as regards market definition, but agreed with the CMA that each of the relevant appellants (successive owners of the marketing authorisation for hydrocortisone) held a dominant position.

b)     The Tribunal considered that the price of a product that is considerably above cost (and so highly profitable) is excessive and unfair unless the seller can show that the "producer surplus" is justifiable because (1) It is achieving substantial profits as a consequence of its efficiency or (2) it is delivering additional value to the customer, by virtue of product differentiation (or some other means). The Tribunal endorsed the CMA’s conclusion that the prices charged by each of the appellants was excessive and unfair and so an abuse of a dominant position. 

Save in one respect, the Tribunal also confirmed the imposition and level of penalties imposed by the CMA. The Tribunal did not uphold the CMA’s conclusion that it could impose a penalty on Allergan, the parent company of the infringing subsidiary, during the period of time after Allergan had entered into binding commitments with the European Commission not to provide direction or oversight to its subsidiary (as part of a merger control process). As a result, the Tribunal reduced Allergan's fine by £26 million in relation to the abuse infringements alone.

The Tribunal has not yet handed down its judgment in relation to the appeals against the finding that there was an unlawful agreement – on the part of some market participants – to stay off the market in exchange for cash transfers. 

The Judgment is available here.