A 2021 ruling by the Competition and Markets Authority (CMA) that Advanz Pharma "abused its dominant position" by charging "excessive and unfair prices for liothyronine tablets" has been upheld by the Competition Appeal Tribunal.
The judgement, hailed as a "landmark" by the CMA, means that the group of companies now face a total combined fine of £84 million.
The CMA's original decision explained that Advanz, at the time the sole supplier of UK-licensed 20mcg liothyronine sodium tablets, had engaged in excessive pricing in breach of the Competition Act 1998 between 1 January 2009 and 31 July 2017.
Liothyronine, used to treat patients with hypothyroidism who do not respond to levothyroxine, was originally developed in the UK by Glaxo in the mid-1950s and
sold under the brand name, Tertroxin. Advanz acquired Tertroxin in 1992,
when the drug was already "long off-patent" and continued to sell it under
the Tertroxin brand until 2007, by which time it was "already one of Advanz's top ten most profitable products".
'Price Optimisation' Strategy Enabled Excess Pricing
At this point, Advanz devised what it called a 'price optimisation' strategy, identifying off-patent drugs with limited or no competition, small market size, and high barriers to entry by other companies.
By 'de-branding' these drugs, it removed them from price regulation, "enabling it to set whatever prices it chose", the CMA said. It noted: "The assumption that market forces will regulate generic drug prices only holds good where competition works." Advanz's strategy facilitated "exploitative prices" that "bore no reasonable relation to the economic value of liothyronine", and this amounted to "abusive conduct".
The price of liothyronine — £4.05 per 28 tablet pack in 2007 — "nearly doubled" overnight when Advanz de-branded it and re-launched the drug as a generic. Within a year, Advanz more than doubled its price again, and by January 2009 average sales price reached £20.48.
Under a series of "corporate restructurings" and name changes, including periods of ownership by two private equity firms, HgCapital and Cinven Entities, also named in the decision, the pack price further increased to nearly £46 by August 2012, approaching £190 by October 2015, and £247.87 by July 2017 – representing an increase of 6021% since September 2007.
Spending on Liothyronine Diverted NHS Resources
As a result, the CMA said, NHS spending on liothyronine increased from around £600,000 annually to more than £30 million in the last full year of the infringement, despite volumes remaining largely stable.
"Advanz used its market power to extract ever-increasing rents from the NHS, diverting constrained NHS resources to the detriment of the NHS and patients," the CMA said. Only in July 2015, when the price had reached £146 — 36 times its 2007 cost — did the NHS identify that it represented "poor value for money" and encouraged prescribers to switch.
Some clinical commissioning groups then amended prescribing guidance to GPs, some of whom withdrew liothyronine prescriptions from some patients. This had "adverse consequences", the CMA said, with some suffering "significant harm as a result".
By 2019, patients were reportedly suffering depression, diabetes, heart problems, weight gain, high cholesterol, or exhaustion as a result of the drug being unavailable or withdrawn. Some paid for expensive private prescriptions or resorted to obtaining the drug on the internet or by travelling abroad. In 2019 prices in Europe ranged from 2p to 26p per tablet, when the NHS was paying more than £9 per tablet.
Company Operated "Below the Radar"
"Advanz's price increases were not driven by any meaningful innovation or investment, and its costs did not change materially at the time of de-branding or afterwards," the Authority noted. Average direct costs ranged between £0.35 per pack in 2009 to £3.23 per pack in 2017, with indirect costs ranging from £0.54 to £1.17.
The CMA added that the company's decision to gradually ratchet up prices over a number of years "avoided attracting scrutiny", and was "managed carefully" to avoid catching the attention of the Department of Health and Social Care. Indeed, one of the private equity firms noted in its internal recommendation to purchase the business that the parent company operated "below the radar".
At the time, Dr Andrea Coscelli PhD, CMA chief executive, said that Advanz's decision "came at a huge cost to the NHS, and ultimately to UK taxpayers". He added that the fine sent "a clear message that breaking the law has serious consequences".
The appeal tribunal this week unanimously upheld the ruling. Michael Grenfell, CMA executive director for enforcement, responded that the CMA would "continue to crack down on companies that abuse their market power in ways that harm people and the wider economy".
The "landmark judgment" reinforced the need for companies to "think carefully" about how they set prices, and "paves the way for the NHS to seek compensation", he warned.