Live revision! Join us for our free exam revision livestreams Watch now

In the News

Anti-competitive behaviour - CMA fines pharma firm over pricing of crucial thyroid drug

Geoff Riley

29th July 2021

The Competition and Markets Authority has the pharmaceutical sector firmly in their sights judging by news that they have levied a fine of £100 million on the owners and manufacturers of thyroid tablet packs for rampant price hiking of a key drug.

Advanz (£40.9 million), together with HgCapital (£8.6 million) and Cinven (£51.9 million) – two private equity firms which were previously owners of the businesses now forming part of Advanz have been hit with the fines after hiking the price of the drug from £20 in 2009 to £248 in 2017 – an increase of 1,110%.

They took advantage of very limited competition to drive prices higher, leading to higher costs for the UK's NHS which eventually placed the drug on their 'drop list' because of increasing cost.

Quite why the owners of the company do not also face criminal charges remains a mystery.

Price gouging by pharmaceutical companies is essentially fraud by another name and has damaging consequences for people unable to afford the treatment when it ie no longer available via the NHS.

The NHS does now have the opportunity to seek legal redress and compensation.

The report found that

"In 2007, Advanz developed a ‘price optimisation’ strategy, identifying genericised drugs with limited or no competition and high barriers to entry. By ‘de-branding’, it removed them from price regulation, only applying to branded drugs, so it could set whatever prices it chose."

The CMA report found that there was little economic justification for the scale of price rises seen over a number of years. "Price increases were not driven by any meaningful innovation or investment, production volumes remained broadly stable, and the cost of producing the tablets did not increase significantly."

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

© 2002-2024 Tutor2u Limited. Company Reg no: 04489574. VAT reg no 816865400.