Cape Town – South African company Aspen [JSE:APN], one of the world’s largest drug companies, responded on Tuesday to UK reports, which claim that it secretly planned to destroy life-saving cancer medicines as a threat to force countries in Europe to allow price hikes.
UPDATE: By 10:50 on Tuesday, Aspen shares had dropped by 4.26% following the news, which broke on Friday in the UK after markets closed ahead of the Easter weekend.
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.”
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 has declined by 16% in the last year and is currently trading at R280.09 a share.Read Fin24's top stories trending on Twitter: Fin24’s top stories