1. Strategic pricing and antitrust issues in the European pharmaceutical market: the Glaxo case. EDLE – European Doctorate in Law and Economics University of Bologna
Claudia Desogus

2. Roadmap… The European approach to PT - a change?
The Glaxo case: the dual pricing scheme
Consumer welfare with and without PT
Do savings from PT exist?
How large they are? A numerical drug bargaining game
From static to dynamic efficiency: the link between PT and incentive to innovate
3 dicembre 2018

3. The European approach to PT
Legal doctrine
Freedom of movement of goods (Artt EC)
Regional exhaustion within the EEA of the IPR after the first sale
“PT does not hinder patents’ subject matter” (C-15/74 Centrafarm v. Sterling);
“PT is an important driving force for market integration” (EU Commission, 1998);
“Medicinal products fall within the rules of the Internal Market” (EU Commission, 2003).
3 dicembre 2018

4. Some figures about PT… Importing markets: Germany, UK,
Size
EUR 4.6bn
+11.8%
+2.5% market
Growth
Importing markets:
Germany, UK,
the Netherlands, Sweden, Norway, Finland, Denmark, Belgium, Austria.
market growth
+2.8%
9.1%
Share
Import mkts
3.2%
Share
All EU 27
Notes not yet updated
Source: Data at MAT/JUN/07, IMS Health.
Values are at standard purchase price in importing market. Transaction can be pharmacy sell-in or sell-out.
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5. Dual pricing: international price discrimination or export ban?
Prices in Euros.
Data sourced from EU Commission decision on GlaxoWellcome case, 2001, pp
Calculations are mine.
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6. Exports bans under EU law
Agreements with an anticompetitive objective (hardcore restrictions) ex Art. 81(1) EC
Art. 4(a) and 4(b) Reg. 2790/99
Art. 5 Reg. 2658/00
Art. 5 Reg. 2659/00
Commission practice (Distillers, Gosme-Martell, Moët et Chandon, Pittsburgh Corning Europe, …)
ECJ case law (Consten and Grundig, HAG, BMW, VW, General Motors, Sandoz …)
3 dicembre 2018

7. A new jurisprudential trend in pharmaceuticals?
Glaxo case
Dual pricing is not anticompetitive in its object but only in its effects.
Because drug price controls impedes to presume the existence of a real competitive pressure on prices from PT.
3 dicembre 2018

8. Is the pharmaceutical market specific?
‘The anticompetitiveness of dual pricing has to be assessed in light of the fact that
prices are finally set by Member States;
prices fall outside the play of supply and demand;
prices are established at structurally different levels throughout the Community’.
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9. Price controls and competition
Regulation is in place to remedy market failures (supply-side barriers; no constraints from demand)
Other ‘essential’ services subject to regulation and competition law (i.e. energy) are not exempted
In 14 out 25 MS there is free pricing or price negotiation
Negotiated prices are only maximum prices
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10. Savings from PT on drugs: do they exist?…
Source: P. Kanavos, D. Gross and D. Taylor, Parallel Trading in Medicines: Europe’s experiences and its implications for commercial drug importation in the US, AARP Public Policy Institute, June 2005, as updated by me with information from EAEPC members in 2007.
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11. … and how large they are?
“… unless parallel trade can operate dynamically on prices, it creates inefficiencies because… financial benefits accrue to the parallel trader rather than to the health care system or the patient” (EU Commission, 1998);
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12. Trend of direct savings in 4 importing MS
Estimated direct savings from PI in In Millions €
Source: York study, 2003; Pedersen study 2006; Pedersen ongoing update.
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13. Dynamic effects of competition:
indirect savings
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14. Level of indirect savings
Difficult to measure (hp counterfactual)
Import market dynamics issue
Regulatory issue:
Reference price (DE)
Approval of prices adjustments from financing agency (SW, DK)
Price negotiation
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15. Top 15 PI products in UK before and after the new PPRS
Price cut
Lipitor
42.5
14.6
5-17%
Zoton
37.5
42.7
0-1%
Zyprexa
48.6
35.5
0-19%
Plavix
46.2
25.8 0%
Zoladex
66.5
49.2
0-31%
Efexor
28.9
30.8
0-2%
Cozaar
43.7
45.4
-10-0%
Seretide
16.9
17.5 7%
Aprovel
80.9
34.8
24-30%
Serevent
28.7
27.4
0-7%
Cardura
32.6
6.7
0-55%
Risperdal
48.4
39.4
8-14%
Lipostat
30.0
13.2
Fosamax
27.5
Aricept
62.2
62.1
(!) Reductions in PI are matched with (>7%) price reductions in six cases
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16. The Swedish experience
“Apart from the direct impact on prices, there are instances of potential parallel imports having an indirect impact on prices. Faced with the prospect of competition from an incipient parallel import trade, some original suppliers of drugs have on occasion voluntarily chosen to cut prices by over 10%, which had the effect of eliminating the conditions necessary for parallel imports.”
Swedish Competition Authority
3 dicembre 2018

17. The Cozaar example MSD’ price cut on Cozaar
UK sales (£000)
3/06 - 3/07
Old price
(£)
New price
Price reduction
PI market share
Tabs
25 mg
14.788
18,09
16,18
10,56%
0,00%
50 mg
52.455
12,80
29,24%
75,09%
100 mg
43.565
24,20
33,14%
57,27%
Comp tabs
100/25 mg
1.524
50/12.5 mg
5.912
60,58%
Source: EAEPC, European Assocation of Euro-Pharmaceutical Companies, August 2007
Estimated savings for the UK NHS: £30.2 million per annum
Gain of market share from MSD: 100%
Gained revenue for MSD: £ 30 million per annum
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18. The dynamic efficiency of dual pricing
Dual pricing, by eliminating PT, could increase financial resources to be devoted to R&D.
Is the balancing exercise ex Art. 81(3) backward looking or forward looking?
The shape of the innovation function is crucial to determine the net welfare effect
Possibility or certainty of the causality nexus?
3 dicembre 2018

19. PT and the incentive to innovation
Plethora of factors driving innovation
What is the incremental impact of parallel trade?
Difficult to measure in periods of years needed to develop a drug
The issue is much narrower: do relaxations of restrictions to parallel import will increase the incentive to innovate?
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20. Does more money bring more innovation?
Pharmaceutical expenditures R&D expenditures in Billion Euros
3 dicembre 2018

21. Thank you very much!