CMA discovers more pharmaceutical funny business

Just a week after fining two drug companies £90m, the Competition & Markets Authority has unearthed yet more pharmaceutical funny business.

This time it involves a life-saving treatment, hydrocorisone, that is used to treat people whose adrenal glands don’t produce sufficient amounts of natural steroid hormones.

The CMA alleges that Actavis UK increased the price of 10mg tablets by over 12,000 per cent and 20mg tablets by nearly 9,500 per cent compared to what the NHS had been paying for the branded version of the drug.

It had been sold by a different company prior to April 2008, at which point the treatment was taken out of price regulation.

The NHS’s bill duly exploded, from £522,000 a year to £70m a year.

The CMA’s statement of objections outlining this is, it should be stressed, provisional and the regulator is at pains to stress that “no conclusion should be drawn” that competition law was breached through the company’s actions.

But the figures it has quoted are nonetheless astonishing, shocking enough that I had to look at them two or three times to make sure I’d read them correctly.

The common theme with this case, and the one last week that involved Pfizer and Flynn Pharmaceuticals, is a patented, branded treatment going off brand. Usually this leads to generic drug makers moving in and a consquent fall in the price. Usually. In these two cases, however, the reverse happened.

Now, it is understandable that you might want to put the price of a treatment up if you’re losing money on it, as Pfizer said it was with the epilepsy treatment that led to it and Flynn getting fined. For a price increase (2,600 per cent) that actually looks almost modest by comparison to the ones imposed by Actavis UK.

But the figures detailed by the CMA are extreme. And there may be more to come too, with the watchdog having said that three further cases are being actively investigated.

An uncomfortable fact about the drugs industry is that it makes huge profits by charging high prices for treatments without which people would die.

It has to be that way. The treatments wouldn’t get beyond a twinkling in a pharmacologist’s eye if drugs companies weren’t willing to risk a lot of money to get them developed in the hopes of making a return.

For every treatment that reaches the market, many more fail, and that too has be factored into the price of drugs.

It’s when making a profit turns into profiteering that it becomes a problem.

That’s what these instances look like. The fact that there are still more investigations that might result in similar announcements suggests that there is a systemic problem here and that the industry has been behaving very badly with respect to certain of its treatments. Which makes it very hard to defend it from its critics.

If there’s one thing to be thankful for, it might be this: Assuming that it is proven that some or all of these companies have cheated (Pfizer and Flynn are appealing), they don’t seem to be all that good at it. Price hikes like those discussed are impossible to miss. Usually when companies indulge in anti-competitive practices they try and be a bit more subtle about it. Perhaps the pharma boys and girls would be better off spending a bit more time in the lab?