Excessive Pricing in Pharmaceutical Markets: A Review of the Legal Test for Competition Authorities

Abstract

The intervention against excessive pricing of dominant undertakings has generated significant competition policy debates. The last few years have nevertheless seen a sudden increase in enforcement against high prices of pharmaceuticals by competition authorities of the EU Member States and the Commission. The basis for assessing whether excessive prices constitute an abuse of a dominant position remains the ECJ judgment in United Brands. Despite being an authoritative starting point, the legal test developed in this judgment leads to various questions concerning its application in practice. Some of the major complications have become explicit in the Phenytoin litigation concerning sodium capsule prices in the UK. This article seeks to assess the extent to which the United Brands test is sufficiently capable of forming the basis of legally justified findings of abusively high prices, in particular from the perspective of pharmaceuticals in light of the two Phenytoin judgments. The three main themes of the United Brands test that have been under debate concern the appropriate methodology to find excessiveness, the extent to which the unfair limb elements are alternatives, and the role of economic value in the competition analysis. This contribution will assess the implications of the Phenytoin litigation on these three issues and will argue that the United Brands test is sufficiently flexible to remain the authoritative precedent for enforcement against excessive pricing.