CD Pharma has abused its dominant position by increasing their price by 2,000 percent
On 31 January 2018, the Danish Competition Council (“DCC”) ruled in a case concerning CD Pharma’s (a pharmaceutical distributor) abuse of dominant position by charging unfair prices for the drug Syntocinon. Syntocinon contains oxytocin, which is an active substance given to pregnant women in connection with childbirth.
From 28 April 2014 until 27 October 2014 CD Pharma increased the price on Syntocinon from DKK 45 (EUR 6) to DKK 945 (EUR 127) corresponding to a price increase of 2,000 pct.
CD Pharma was dominant on the Danish market for sale of oxytocin in at least the period of 1 April 2014 – 31 March 2015, but also from 1 April 2015 – 31 March 2016. This is primarily because CD Pharma had a special position on the market due to an exclusive distribution agreement with the producer of the product.
CD Pharma has thereby exploited their dominant position making Amgros (a wholesale buyer for hospitals) pay an unfair price on the drug Syntocinon. Amgros ended up paying a little less than DKK six million (approximately EUR 780,000) more than the price in the original contract with the parallel importer, during a period of six months.
CD Pharma has not been able to explain the increased price with for instance increased costs or special considerations for research and development. Consequently the DCC has ordered CD Pharma to refrain from similar abusive behavior in the future.
Amgros had a tender on Syntocinon for the period of 1 April 2014 – 31 March 2015, which Orifarm – a parallel importer and competitor to CD Pharma – won. However, Orifarm was not capable of providing Amgros with the full amount of Syntocinon; therefore Amgros had to buy the residual amount from CD Pharma who was the only alternative supplier of Syntocinon on the Danish market. During the period Orifarm tried to provide Syntocinon in accordance with the contract, but it was not possible for Orifarm to get enough Syntocinon to cover Amgros’ full demand. Due to CD Pharma’s exclusive distribution agreement with the producer of Syntocinon CD Pharma was guaranteed supply, contrary to parallel importers such as Orifarm.
The drug Syntocinon, which is used by public hospitals in Denmark, has existed since the 1950’s, and the patent expired long ago. During 2007-2014 the price was stable around DKK 44 (EUR 5.9).
CD Pharma’s behavior can furthermore raise the price levels on a more permanent basis in the post-abuse period. When a supplier subsequently bids on a contract, which obliges the supplier to cover loss in case of delivery failure, the supplier must take into consideration that there is a risk of a significant claim for compensation. Parallel importers are at greater risk of delivery failure because they usually don’t have a stable source of delivery e.g. in the form of an exclusive agreement with the relevant producer or own production. Summarized this causes bids from parallel importers being less competitive. The case is thus of fundamental importance for the regions' (Amgros’) procurement of medicine.
The DCC has also decided to submit the case to the Danish State Prosecutor for Serious Economic and International Crime.
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