Reflections On CAT's Prochlorperazine Judgment (And Other Pharma Cases That Got Away...)

Some five and a half years after the CMA's October 2017 dawn raids on a host of UK generics-focussed pharmaceutical companies, the CAT has now handed down judgment in the last of the appeals. This related to the Prochlorperazine decision. Unlike the excessive pricing cases that have been largely upheld by the CAT, the CMA has - with the exception of the Nortriptyline information-sharing decision - had less success with the cases based on anti-competitive agreements.

The judgment reminds me of the four years that I spent supporting a client in the CMA's parallel Nitrofurantoin investigation (also involving an allegation of a breach of Chapter I), which was closed after the oral hearing before the CMA. Both investigations appear likely to have been triggered based on analysis of increases in Drug Tariff prices for the products in question. As the CAT has now clearly observed: "It is inherent in the PPRS and Drug Tariff system that, once an out of patent drug is genericised, there can be a steep increase in its price". Price increases alone are therefore not a sufficient basis for drawing an inference of collusion in this market.

Some initial reflections on these cases and their implications:

• UK generics markets are complex and often concentrated; an appearance of parallel conduct may sometimes be the product of the regulatory/pricing context rather than collusion. The CAT emphasised that the CMA's case in Prochlorperazine was heavily based on inferences. Yet even in the CAT's judgment the initial description of the role that generics play remains focussed on initial generic entry against a branded (usually blockbuster) drug. The incentives and market dynamics for selling a generic product long-term are quite different, and market exit is common, leading to the potential for, or indeed likelihood of, price increases for those remaining on the market.
• The Prochlorperazine appeal involved seven individual directors who appealed in parallel to the corporate entities involved. While it is doubtless efficient for director disqualifications to be pursued in parallel to the competition law infringement case, the six and a half year investigation and appeal will doubtless have had a very substantial impact on those individuals, their careers and families. Particularly where pursuing novel or 'ambitious' case theories, it would in my view be more responsible to pursue any director disqualifications after any appeal.
• For all that the CMA has struggled to establish infringements in these cases, overall it does have a successful track record in pursuing anti-competitive conduct and agreements in the UK pharma/generics markets. The nortriptyline decision is a clear reminder of the risks that arise in relation to unwarranted discussions with competitors, and the Fludrocortisone decision shows the risks of 'pay-for-delay' in this sector of the market; there is no free pass from competition law and compliance remain critical.

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