Issued by: Competition and Markets Authority

The Court of Appeal has upheld the CMA’s finding of cartel infringement relating to an illegal market sharing agreement in the supply of an essential medicine.

The Court of Appeal (CoA) has today ruled in favour of the Competition and Markets Authority (CMA)’s appeal of the Competition Appeal Tribunal (CAT)’s decision to overturn its finding of a market sharing agreement on procedural grounds.

In July 2021, the CMA found that pharmaceutical firms Auden Mckenzie and Actavis UK had charged excessive and unfair prices for hydrocortisone tablets. It also found that to protect its position as sole supplier of the drug, Auden/Actavis UK paid another pharmaceutical firm called AMCo (now called Advanz) to stay out of the market.

Tens of thousands of people in the UK depend on hydrocortisone tablets to treat life-threatening conditions such as Addison’s disease. The inflated prices Auden/Actavis UK charged, and sustained through buying off its competitors, resulted in NHS spending rising from around £500,000 a year to over £80 million. The CMA imposed over £260 million in penalties to reflect the seriousness of this conduct and its impact on the NHS.

Despite upholding the CMA’s findings of excessive and unfair pricing and the existence of a “flagrantly anti-competitive” market sharing agreement in September 2023, the CAT issued a further judgment in March 2024 which found that the CMA had failed to observe due process by not fully putting its case on the market sharing agreement to former CEO of Advanz John Beighton in cross-examination at trial.

Following an appeal by the CMA, the CoA has today overturned that judgment and endorsed the cross-examination by CMA counsel as demonstrating “precisely how a case of anti-competitive conduct can and should be put to a recalcitrant witness”.

The CoA further decided that the procedure adopted by the CAT, in making findings and then engaging in “an entirely fresh examination and analysis of the CMA’s case” leading it to reverse those findings, was “inappropriate” and “unjust”.

Sarah Cardell, Chief Executive of the CMA, said:

"The CMA imposed significant penalties on these firms after finding that they engaged in a market sharing agreement that denied the NHS the potential savings from firms competing for this essential medicine.

"When the CAT decided the CMA’s decision should be set aside despite being correct on the merits, we remained determined to see the case through and took the fastest route to correct this.

"We’re delighted that the Court of Appeal recognised that the CMA’s case was consistent, clear and fairly defended on appeal."

Background on the case

- The case follows a CMA investigation into the conduct of several pharmaceutical firms (https://www.gov.uk/cma-cases/hydrocortisone-tablets-alleged-excessive-and-unfair-pricing-anti-competitive-agreements-and-abusive-conduct-50277): Auden Mckenzie and later Actavis UK (now known as Accord-UK); Waymade; and AMCo (now known as Advanz Pharma).

- In 2021, the CMA found that Auden/Actavis UK charged the NHS excessively high prices for hydrocortisone tablets from 2008 until 2017 (for the 20mg strength) (https://www.gov.uk/government/news/cma-finds-drug-companies-overcharged-nhs) and until 2018 (for the 10mg strength). The CMA’s findings that these prices were excessive and unfair were upheld in the CAT’s ‘Hydro 1’ judgment of September 2023 (https://www.gov.uk/government/news/cma-decision-upheld-in-major-drug-price-abuse-case). The fines were reduced from £155 million to around £130 million.

- In its decision, the CMA found that in order to maintain its monopoly position, Auden agreed to make substantial monthly payments to Waymade in exchange for Waymade agreeing not to enter the market independently with its own 20mg hydrocortisone tablets between 2011 and 2015. The findings on liability were not appealed. Auden appealed its penalty of £2.8 million. The penalty was upheld in the CAT’s April 2024 ‘Hydro 4’ judgment (https://www.catribunal.org.uk/sites/cat/files/2024-04/Hydrocortisone (1407;1411-1414) - Judgment (Penalties) 29 Apr 2024.pdf).

- The CMA also found that Auden/Actavis UK agreed to make substantial monthly payments to AMCo in exchange for AMCo agreeing not to enter the market independently with its own 10mg hydrocortisone tablets between 2012 and 2016. These findings were appealed.

- In its September 2023 ‘Hydro 2’ judgment (https://www.catribunal.org.uk/sites/cat/files/2024-03/Hydrocortisone (1407;1411-1414) - Judgment (Cartel Infringements) 29 Sep 2023 (2).pdf), the CAT found that the CMA’s decision on the existence and anti-competitive nature of the 10mg agreement had been correct on the merits, but expressed doubt about whether the CMA had fairly put its case to Mr Beighton at trial.

- A further hearing was held in October 2023. In its March 2024 ‘Hydro 3’ judgment (https://www.catribunal.org.uk/sites/cat/files/2024-03/Hydrocortisone (1407;1411-1414) - Judgment (Due Process) 8 Mar 2024.pdf), the CAT found that the CMA had not fairly put its case at trial and therefore allowed the companies’ appeals in relation to the 10mg agreement.

- The CMA brought an expedited appeal (https://www.gov.uk/government/news/cma-to-appeal-hydrocortisone-ruling) to the CoA against the Hydro 3 judgment and against the CAT’s decision in the Hydro 2 judgment not to finally determine the companies’ appeals. The companies also sought permission to appeal the finding in the Hydro 2 judgment that the CMA’s decision was correct on the merits.

The judgment

The CoA has today decided that:

(i) the CMA’s appeal from the Hydro 3 judgment should be allowed

(ii) the CMA’s application for permission to appeal from the Hydro 2 judgment should be granted and its appeal should be allowed

(iii) the companies should not be granted permission to appeal from Hydro 2

(iv) the CAT’s provisional findings in Hydro 2 that the companies’ appeals from the CMA’s decision should be dismissed, should be finalised and reinstated

(v) the CAT’s additional findings in Hydro 2 going beyond the CMA’s decision as to dishonesty and other matters should be overturned.

Notes to editors:

1. For media queries, please contact the press office on press@cma.gov.uk or on 020 3738 6460.

2. The companies’ appeals against the penalties imposed for the 10mg agreement were not determined by the CAT. They will be subject to a further CAT judgment.

3. Previous action taken by the CMA in relation to the pharma sector and the fines imposed:

- Paroxetine (2016) (https://www.gov.uk/government/news/cma-fines-pharma-companies-45-million): £45 million in fines for anti-competitive agreements and abuse of dominance (reduced to £27.1 million on appeal).

- Fludrocortisone (2019) (https://www.gov.uk/government/news/cma-levies-fines-of-23m-and-secures-8m-for-nhs-in-pharma-probe): £2.3 million in fines and £8 million redress to the NHS for market sharing.

- Nortriptyline (2020) (https://www.gov.uk/government/news/over-3m-in-fines-and-1m-for-nhs-in-cma-pharma-probe): £3.4 million in fines and £1 million redress to the NHS for illegal arrangements including market sharing and information exchange (upheld on appeal).

- Prochlorperazine (2022) (https://www.gov.uk/cma-cases/pharmaceuticals-suspected-anti-competitive-agreements): £35 million in fines for an illegal arrangement that restricted competition in the supply of prescription tablets (overturned on appeal).

- Phenytoin (2022) (https://www.gov.uk/cma-cases/investigation-into-the-supply-of-pharmaceutical-products#non-confidential-infringement-decision): £70 million in fines for excessive and unfair pricing. Judgment from the CAT in the appeals is awaited.

- Liothyronine (2021), upheld by the CAT in August 2023) (https://www.gov.uk/government/news/cma-defeats-legal-challenge-in-medicine-pricing-case): £101 million in fines for excessive and unfair pricing (reduced to £84 million on appeal). The case is currently on appeal to the CoA.

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