DA wants Aspen anti-competitive actions probed

Cape Town – The Democratic Alliance asked the Competition Commission and the Medicines Control Council to investigate claims of anti-competitive behaviour by pharmaceutical firm Aspen.

Aspen [JSE:APN] shares dropped by over 4% on Tuesday after UK reports claimed it secretly planned to destroy life-saving cancer medicines as a threat to force countries in Europe to allow price hikes. The company is already in an ongoing legal process with European regulators as well as the court in Italy.

According to an exclusive report in The Times on 14 April, staff at Aspen discussed “destroying supplies of life-saving cancer medicines in a battle to impose massive price rises across Europe”.

“The proposal was raised at Aspen Pharmacare during a dispute with the Spanish health service in 2014 over attempts to increase the price of the medicines by up to 4 000%.”

“The price rises meant that the cost of busulfan, used by leukaemia patients, rose from £5.20 (R87.32) to £65.22 (R1095.17) a pack in England and Wales during 2013.”

Serious allegations need SA investigation

DA health spokesperson Wilmot James said "these are serious allegations about the business ethics of a reputable and proudly South African company and must be investigated immediately".

“The World Bank has already highlighted that the South African pharmaceutical industry is controlled by cartels and operates in an uncompetitive manner, which would have the effect of increasing the cost of medication for South Africans," he said in a statement on Wednesday.

“Given the reports about how the cost of cancer drugs in Europe have been inflated, an investigation by the Competition Commission and the Medicines Control Council must, therefore, look into whether the same tactics are being used in our own country.

“It appears to be an effort to manipulate the market for drugs that effectively will put them out of reach for many if not most.

“The DA will also seek clarity from the Competition Commission as to whether they are currently investigating the South African pharmaceutical industry for uncompetitive behaviour and if so, to make public the findings thereof.”

What the allegations claim

According to the Mail Online, the cache of documents released by The Times revealed that Aspen “threatened to stop supplying drugs” to Italy in 2013 if authorities did not agree to price rises, and a year later “threatened to destroy stocks” should Spanish health bosses not do the same.

“It is understood Italian authorities subsequently agreed to the rises following a period of medicine shortages that were 'allegedly orchestrated to increase pressure'.”

In a confidential email, an Aspen employee appeared to write: “We’ve signed new reimbursement and price agreement successfully: price increases are basically on line with European target prices (Leukeran, a bit higher!)... Let’s celebrate!”

Aspen won't comment on public allegations

In response, Aspen said the content of the reports concern matters that are sub-judice.

“Out of respect for the integrity of ongoing legal processes with European regulators, as well as the court in Italy, Aspen will not comment on these public allegations,” it said in a statement on Tuesday.

“Instead, Aspen looks forward to the opportunity to demonstrate the integrity and legality of its practices in the context of these legal processes.

“The oncology portfolio in question generated revenue in the European Union in Aspen’s financial year ended 30 June 2016 of €60m (R963m).

“The majority of the revenue was from the sale of tablets which have an average price of approximately €2 per tablet.”

The fine no one knew about

In 2016, the Italian Competition Authority (ICA) fined Aspen $5.7m for raising the prices of off-patent cancer drugs by up to 1 500%, the Regulatory Affairs Professionals Society revealed in October 2016.

“Aspen bought the drugs from GlaxoSmithKline before going on to take a hard line in pricing negotiations with the Italian Medicines Agency (AIFA).

“ICA accuses Aspen of adopting a negotiating position that amounted to a threat to disrupt the supply of the five products.

“As the sole supplier of the medicines, Aspen was in a strong position going into the negotiations and used this to seek price increases ranging from 257% to 1 540%.

“During this time, some of the drugs became hard for patients to find, prompting a consumer group and, later, the antitrust regulator to look into the matter.

“ICA imposed the fine after concluding the prices charged by Aspen were out of proportion with the cost of making and marketing the drugs.

“Aspen never made much money from the drugs - ICA puts sales at approximately $5m to $11m - but officials chose a fine commensurate with the size of its organisation, not just the aspect of its business being investigated.”

Shareholders in SA query Aspen's lack of transparency

Shareholders in South Africa are now querying why Aspen never issued a statement on the fine, Business Day reported on Tuesday.

"Asief Mohamed of Aeon Investment Management said that when he asked Aspen management why it had not issued a Sens statement, he was told it was because it was an insignificant amount," it reported.

"Even at that stage it was apparent the important issue was not the sum involved but the potential damage to Aspen’s reputation," Mohamed said.

The paper said British and European authorities might also launch their own investigations into the "price-gouging" allegations.

The Aspen Group’s total revenue for the year ending 30 June 2016 was R35.6bn. Its share price declined by 17.65% in the last year and closed trading at R261.01 a share on Thursday.

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