Can high-priced medicines constitute an abuse of a dominant position in the EU?

high cost medicinesThe price of medicines has inevitably always been, and is likely to remain, a long-standing matter of contention between originator companies, governments and patients. It has however become more acute since the launch of some very innovative but very highly priced medicines in recent months, says FTI Consulting’s Darren Kinsella.

 

Never mind that these drugs are curative (and therefore definitely meet the definition of innovation). Also it does not seem to matter that these medicines are actually cost effective, i.e. they will save the public payer money in the long term: it is the price itself which is the focus of debate. Unsurprisingly, some MEPs have renewed calls for the European Commission to undertake actions against such high prices of medicines and the perceived monopolistic advantage they give to the pharma companies that develop them.

This enduring issue was highlighted during a European Parliament plenary debate in Strasbourg last September on access to life-saving medicines in Europe. The discussion showed a rare convergence of views among MEPs from various sides within the hemicycle, from the left to the right.

Trying to take a new approach to push the Commission into action on this matter, two MEPs, one from the Greens and the other from the centre-left S&D, recently suggested that the Commission applies Article 102 of the Treaty on the Functioning of the European Union (TFEU) to such cases. Article 102 deals with the abuse of dominant positions within the EU’s internal market. In the question, tabled to the Commission for a written answer, the two MEPs asked whether ‘a company with a highly innovative medicine, charging a high price represented behaviour which breaches Article 102 TFEU and thereby constitutes abuse of a dominant position’.

By the time the MEPs tabled their question, the possibility of using Article 102 as a means to control excessive prices had already been discussed elsewhere, notably in The Law and Economics of Article 102 (O’Donoghue, Padilla 2014) which claimed that theoretically, the Article could, in fact, be applied as excessive prices constitute exploitative abuse and therefore a loss in consumer welfare.

The European Commission, however, appears adamant to uphold Article 168 (7) TFEU which stipulates that it is the responsibility of the Member States to manage their own healthcare systems: the Commission therefore argues that it is for Member States to ‘take measures to regulate or influence the prices’ of medicinal products. Despite this, these recent interventions show that MEPs are actively seeking ways to convince the Commission to involve itself in the pricing debate.

Potential Outcomes

TFEU nonetheless allows the EU shared competence in the area of ‘Common Safety Concerns and Public Health Matters’ as well as a competence to act in order to carry out actions supporting, coordinating or supplementing the actions of the Member States in the ‘protection and improvement of human health’. Considering the hands-off approach which the new College of Commissioners, which took office on 1 November, is committed to pursuing, leaving as much to the Member States as possible, it can be expected to keep a low profile on matters where it has no exclusive competence.

That being said, the new Commission has also declared that it will maintain better relations with the Parliament and assured MEPs that it will be more attentive to their concerns. With this in mind, MEPs have acknowledged the reaction of the Commission and have begun to look at alternative avenues it could take, such as through changing the rules on patents (the technicalities of the Unitary Patent Package are currently under review by the Member States). Other possible measures to regulate the uptake of innovative medicines include cooperating on health technology assessment and price transparency, recommending the use of generics and biosimilars in the EU’s annual budgetary control exercise (the Council is provisionally planning a discussion on the ‘European Semester: an enhanced involvement of the health sector’), creating new rules on public procurement on medicines other than for cross-border health threats (already discussed in Council) and revising certain drug-specific regulations (orphan drugs, paediatrics) which could, for example, affect some of the incentives available under the current system – or indeed create new ones.

The pricing debate is one which sees agreement from all positions along the political spectrum, and as discussed, MEPs are exploring various routes through which the EU could act. Despite this, it seems as though MEPs have not yet found a solution, and once they have, it will need to be one upon which they can all agree. Should MEPs be able to find enough support for the Commission to act, we may hear more about this topic in the coming months. We should also bear in mind that, as the Commission will propose less legislation, Parliamentarians will have more time to develop their own initiatives.

Darren Kinsella is Consultant at FTI Consulting Brussels.

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