Pharmaceutical companies fined €13.4 million by the European Commission for price fixing

Five pharmaceutical companies have been fined a total of €13.4 million by the European Commission (the “Commission”) for participating in a price-fixing cartel regarding an important active pharmaceutical ingredient. The cartel was revealed to the Commission by a sixth participating company, which escaped fines under the Commission’s leniency programme. This is the first time that the Commission has issued fines for cartel formation in the pharmaceutical sector and regarding an active pharmaceutical ingredient.

Background – Legal Framework

Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the EEA Agreement prohibits anti-competitive agreements between undertakings. This means inter alia that fixing sale or purchase prices, dividing markets or restricting the production, supply or technical development (by for example agreeing on when a new product or technical solution is to be released on the market) is prohibited. Furthermore, under these rules the exchange of non-public commercially sensitive information between competitors may be prohibited. Information that is generally regarded as commercially sensitive includes information regarding prices, customers, market shares, research and development activities, bid strategies and other strategic plans.

Any company that is in breach of the prohibition against anti-competitive agreements risks a fine of up to 10% of the group’s global turnover in the preceding fiscal year. However, any company that discloses a secret cartel to the Commission can avoid a fine, or have a fine significantly reduced, under the Commission’s leniency programme. The Commission’s leniency programme thus enables companies to disclose their participation in a cartel and cooperate with the Commission throughout an investigation.

The Commission’s Investigation and Findings

The Commission opened an antitrust investigation after being informed of a cartel by one of the participating companies, C2 PHARMA, under the leniency programme.

The investigation concerned manufacturers and distributors of the active pharmaceutical ingredient N-Butylbromide Scopolamine/ Hyoscine (‘SNBB’) which is used as an input product to produce the abdominal antispasmodic drug Buscopan and its generic versions. The Commission’s investigation found that six pharmaceutical companies (Alkaloids of Australia, Alkaloids Corporation, Boehringer, Linnea, Transo-Pharm and C2 PHARMA) had agreed to fix the minimum sales price of SNBB to customers, i.e. distributors and generic drug manufacturers. In addition, the companies allocated quotas and exchanged commercially sensitive information. The Commission found that the infringement covered the EEA and lasted from November 2005 to September 2019.

The six companies admitted their participation in the cartel and entered into a settlement agreement with the Commission. In return, the Commission applied a reduction of 10% to the fines imposed on the companies. Two companies (Transo-Pharm and Linnea) also benefited from a reduction of their fines under the leniency programme for their cooperation with the Commission’s investigation. Since C2 PHARMA revealed the cartel to the Commission, C2 PHARMA was awarded full immunity and escaped fines entirely. The Commission imposed fines totalling €13.4 million on the participants in the cartel.

A seventh company, which allegedly participated in the cartel, did not agree to settle and is therefore subject to an ongoing infringement procedure.

Conclusion

The Commission currently has several ongoing antitrust investigations against pharmaceutical and medical device companies. This case is an example of the increasing focus of the Commission (and several national competition authorities) on the pharmaceutical and healthcare sector and highlights how important it is for companies in this sector to implement internal policies and educate their employees to ensure compliance with competition law.