Chancellor Philip Hammond could turn CMA drug price gouging probe into a big political win

Concordia has been accused of abusing its position by massively boosting the price of a thyroid treatment after taking it off brand and out of a pricing agreement coverinh branded NHS drugs. The CMA has several such cases active

Tuesday 21 November 2017 12:14
Chancellor Philip Hammond: Is there a victory for him through CMA price gouging probe?
Chancellor Philip Hammond: Is there a victory for him through CMA price gouging probe?

Drug company Concordia uses for its name a Latin word that translates as ‘of one heart’ and its website is splattered with smiling patients from around the world.

“More than 200 products reaching a diverse population in over 90 countries. We are Concordia International,” the Canadian outfit declares in one of those mission statement things big money grubbing corporations like to use to pretend that they’re something other than thoroughly awful.

Thoroughly awful is a good way to describe the price gougning the Competitions & Markets Authority has accused it of.

Concordia used to have a dominant market position in the supply of liothyronine tablets.

They are used to treat people with under active thyroid glands, a condition that can lead to tiredness, weight gain, and depression.

As often seems to happen with these cases, for a subset of the two in every 100 affected patients it is the only suitable treatment and Concordia was the sole supplier for over a decade.

During that time it hiked the 2006 price per pack of £4.46 to a staggering £258.19 by July of this year, despite broadly static production costs. That meant the bill to the NHS mushroomed from about £600,000 to £34m.

Thoroughly shabby behaviour that the CMA alleges was an illegal use of a dominant market position.

But how was this accomplished?

In 2006 the drug was taken “off brand”. De-branding a drug takes it out of the voluntary price capping agreement between the NHS and suppliers that covers branded treatments. If they are the sole supplier they can thus turbo charge the price.

This loophole (and the practices used to take advantage of it) has long been one of the pharmaceutical industry’s dirty secrets and was only closed this year via the Health Service Medical Supplies (Costs) Act.

There are currently seven similar cases involving its past use being brought by the CMA that are at various stages. More may follow.

Most of the companies concerned reacted as Concordia has by denying any wrong doing when the CMA levelled its accusations.

That shouldn’t come as a surprise. The watchdog can fine a company up to 10 per cent of its global turnover. Compared to that the costs of fighting are relatively small.

Where it gets interesting is where the fines go if they eventually get levied (it should be stressed that at the moment the accusations levelled against Concordia are only provisional).

Currently what could prove to be a very significant windfall will end up with the Treasury, although the NHS can launch actions of its own to recover any losses if and when the CMA wins its cases.

It would make sense to do that. However, given the cash strapped state of the service, and the fact that the Brexit dividend (falsely) promised by Michael Gove, Boris Johnson and their chums, is never going to materialise, funnelling the cash to the NHS to make up for the losses now would probably go down rather well with the public.

There is precedent: Chancellor Philip Hammond’s predecessor George Osborne kicked over some of the mega-fines levied against banks for misdeeds over Libor interest rates to military charities.

A similar move to benefit the NHS with drug company fine money wouldn’t cost the Chancellor Philip Hammond anything but the profits in terms of political capital might be considerable.

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