Dutch fine issued over excessive drug pricing

Leadiant’s pricing of its product chenodeoxycholic acid-Leadiant (CDCA) from June 2017 through December 2019 constituted an abuse of a dominant market position under competition law, according to the Autoriteit Consument & Markt (Authority for Consumers and Markets, ACM).

Leadiant has said it “fundamentally disagrees with the allegations” in the ACM’s announcement and plans to challenge the regulator’s decision.

CDCA-Leadiant is used for treating patients suffering from cerebrotendinous xanthomatosis (CXT), a rare genetic metabolic disorder. CDCA-Leadiant has been available in the Netherlands since 2008, though it has undergone two name changes in that time. The most recent name change came in June 2017 after Leadiant was granted marketing authorisation for selling CDCA-Leadiant as an orphan drug for treating CXT.

An orphan drug designation is only granted where a drug meets strict criteria, but in essence it is only granted if the product is intended for combatting a rare chronic or life-threatening disease for which no other treatment is available.

Despite the need for such products, the fact they are only relevant to a tiny proportion of people can undermine the commercial case for investing in their development. An orphan drug designation is a tool for incentivising research and development because it confers a number of benefits on businesses whose drugs are granted such status. Benefits can include support in navigating regulatory requirements, subsidies and extended market exclusivity, meaning manufacturers of those drugs will not face competition from developers of copycat products even if they do not own a patent for those medicines.

According to the ACM, the price of Leadiant’s CDCA-based drug has risen since 2008 when the maximum price it charged for a pack of 100 capsules was €46. By July 2014, after beginning the process of applying for orphan designation and marketing authorisation, the price of CDCA-Leadiant had risen to €3,103, inclusive of distribution fees, and its price rose again to €14,000. ACM said this means it cost more than €150,000 a year to prescribe CDCA-Leadiant to each Dutch patient with CXT.

The ACM considered that, from June 2017 through December 2019, there were “no alternatives” to CDCA-Leadiant in the Dutch market for treating CXT and that it had enjoyed a “100% share” of the market in that period. Leadiant disputes the ACM’s finding that it held a dominant market position during that time.

The ACM said that the prices set for CDCA-Leadiant from June 2017 through December 2019 could not be justified. It said Leadiant had not shown that it was “wishing to negotiate effectively and seriously in order to agree on a price that is not excessive”.

“ACM has assessed whether the price of €14,000 charged by Leadiant is excessive (minus the distribution fee for wholesalers),” the regulator said. “A price is considered to be excessive, and, as such, an abuse of a dominant position, if that price is exorbitantly high and unfair. This is also the case if that price is charged for an orphan drug in a situation of market exclusivity, such as in this case. It is not this market exclusivity that is under discussion, but rather the way in which Leadiant uses this exclusivity. A higher price can be justified if the manufacturer must recoup high costs or if the product offers many benefits or is innovative. ACM’s investigation reveals that neither is the case with CDCA-Leadiant.”

Antonio Gama da Silva, chief executive of Leadiant Biosciences, said: “We are committed at Leadiant to making a difference in the lives of patients with rare diseases. We believe that patients suffering from rare diseases deserve a treatment with the same safety, efficacy and quality as other patients, with products that are specifically authorised for the treatment of their disease after a thorough assessment by the competent authorities. We are convinced that we have always acted correctly and in compliance with all applicable regulations.”

Amsterdam-based Machteld Hiemstra, who specialises in life sciences regulation at Pinsent Masons, the law firm behind Out-Law, said: “The ongoing debate between need for access to medicines for rare diseases, costs for society, need for ongoing innovations and investment in the field of orphan diseases balanced against return on investment is fuelled by this decision of the ACM.”

Nienke Kingma, also of Pinsent Masons in Amsterdam, said: “In 2018, ACM put ‘prescription drug prices’ on its agenda, due to the public debate about drug prices and the pressure on health care costs. It is in that context that ACM launched its investigation into Leadiant.”

London-based expert in competition law in the pharmaceuticals sector Robert Vidal of Pinsent Masons said: “Excessive pricing cases used to be extremely rare as competition law regulators preferred to leave pricing to the market; however, we’ve recently had a flurry of these cases in the pharma sector across the EU and UK with very significant fines imposed.”

“These cases highlight that pharma companies need to be mindful of the potential risks when raising the price of products that may hold a dominant position and carefully consider the potential transfer of liability for competition law infringements when acquiring products,” he said.