EU Competition Law under Ordoliberalism - A case study of Excessive Pricing in Pharmaceutical Sector

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EU Competition Law under

Ordoliberalism

- A case study of Excessive Pricing in

Pharmaceutical Sector

Ngoc Nha Tinh Tran

One-year Political Science MA programme in Global Politics and Societal Change Dept. of Global Political Studies

Course: Political Science Thesis ST632L 15 credits thesis Thesis submitted: Spring Semester 2020

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Abstract

The purpose of this study is to conceptualize the ideational influence of Ordoliberalism on EU Competition Law while addressing a problematic social issue that has been witnessing a surge in the number of cases, which is excessive price abuse under Article 102(a) of the Treaty on the Functioning of the European Union (TFEU) within the spectrum of pharmaceutical sector. By utilizing Nedergaard (2020)’s analytic framework for Ordoliberalism’s operationalization, the study successfully proves the impacts of five characteristics of Ordoliberalism, including Politics by rules, Economic Constitution, Market Construction, Role of Consumers and Role of the states towards consumers, on the practices of EU Competition Law, using the empirical data collected from two excessive pricing examples: Aspen in Italy and Pfizer/Flynn in the United Kingdom. The study also highlights the unique features of the pharmaceutical market due to its significant impacts on public healthcare and medicine assessment. At the end of the study, some recommendations are provided for further investigations.

Keyword: Ordoliberalism; European Union; EU competition policy; excessive pricing;

pharmaceutical industry; public health; pricing regulation; abuse of dominant positions

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Acknowledgment

“Graduation is a time of completion, of finishing, of an ending, however, it is also a time of celebration of achievement and a beginning for the new graduate.”

– Catherine Pulsifer

This thesis is conducted for my research work at Malmö University. First and foremost, I would like to express my sincere gratitude to my supervisor – Corina Filipescu, for the supports, patience, and immense knowledge she has given me. During this uncertain and difficult time of 2020, the conversations and supervisions I had with her, despite being limited, are extremely valuable. Secondly, I would like to thank my family and my peers for all the academic consultations and the moral supports.

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Abbreviations

AGCM CAT CMA EC ECJ EEC EGC EU IPR NHS OL

Autorità Garante della Concorrenza e del Mercato UK Competition Appeal Tribunal

Competition and Markets Authority European Commission

European Court of Justice European Economic Community National Health System

European Union

Intellectual Right Property National Health System Ordoliberalism

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List of Figures

Figure 1: Elements of OL and their operationalization……….18 Figure 2: Conceptual Framework………18

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Chapter 1: Introduction

1.1. Research Background

Over the last few years, the European authorities have witnessed a considerable increase in excessive pricing cases performed by many business sectors, including the pharmaceutical industry. Various warnings have been made by national authorities and the European Competition Network (ECN) to help states stay alert to such behavior (European Competition Network, 2020). For instance, in April 2020, multiple statements from the Italian Competition Authority (AGCM) were published, promising stronger intervention in order to prevent pharmaceutical companies from attempting to maximize their profits by abusing their dominant position in the industry (Autorità Garante della Concorrenza e del Mercato, 2020). Although it is agreed that ‘excessive pricing’ is considered as a violation of the European Union (EU) Competition Law, how to decide a pharmaceutical product’s economic worth and what makes a price ‘unfair’ or ‘excessive’ are still controversial. Since pharmaceutical companies depend intensively on Intellectual Property Rights (IPR) and innovations from Research and Development (R&D), regulating and intervening pricing strategies made by these companies demand extremely careful consideration. It is undeniable that this particular industry has a tight connection with public expenditure due to its significant impacts on public healthcare and medicine assessment. Therefore, any increase or decrease in the prices of medicines is anticipated to create social consequences and affect National Health Systems (NHS) directly.

Given the significance of this particular sector, the European Commission (EC) and the European courts, consisting of the European General Court (EGC, former European Court of First Instance) and the European Court of Justice (ECJ), have been actively prioritizing the enforcement of competition law, ensuring fairness in the free market. However, due to the complexity of the subject, implementing constraints on excessive prices falls into one of the most problematic topics in the field of EU Competition Law as it raises the question: Are competitive authorities suitable bodies to monitor and regulate price sets in a free market, since in the long term, excessive price is expected to be self-correcting? For this reason, many economists, called ‘non-interventionists’ (Liyang Hou, 2011), argue that competition enforcement is unnecessary since ‘the invisible hand’ in the free market has already played the role of a price regulator (Rothschild, 1994). In this context, any actions regarding the price control method made by the EU will be considered as an

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intrusive solution, therefore, contradicting the institutional foundation of the EU, which guarantees an open and cogent internal market. In contrast, many researchers and lawmakers oppose to non-interventionists’ arguments, stating that in case of excessive price abuse, consumer welfare, which is now also linked with public healthcare assessment due to the unique nature of the industry, will be harmed. According to World Health Organization (WHO), the right to health includes entitlements covering “the right to a system of health protection that gives everyone an equal opportunity to enjoy the highest attainable level of health” (WHO, 2017). With that being said, when it comes down to healthcare and medical assessment, competition authorities are required to intervene and assure consumer rights, which are now parts of human rights.

The EU’s stance on this subject has been fairly straightforward, starting with the introduction of Article 102 of the Treaty on the Functioning of the European Union (TFEU). It was originated as an application to prevent exploitative abuses in pricing strategies and after more considerations, due to the complexity of the matter, Article 102 finally covered exclusionary abuses. In short, exclusionary abuses are business practices that use a dominant position to restrict market competition and establish entry barriers in order to weaken potential competitors. The EU and its Economic Community (EEC) have had a tendency to implement stronger responses towards these exclusionary abuses, especially in the pharmaceutical sector. Playing the role of ‘market police’, the EU and EEC establish what is so-called “order in a free market” (Jessop, 2019). Rustow (1942) also suggested, in order to make the free economy work, there must be ordered-economic freedom, provided by strong governments. Only by doing so do fairness and freedom go hand-in-hand together. The idea of the state playing as a market regulator stems from Ordoliberalism (OL), whose one of the main characteristics would be Ordnungspolitik, with the literal translation as ‘politics by rules’ (Nedergaard, 2020). It is considered to be a policy paradigm with normative foundations, a mode of social organization, and “a way to embed the market economy in a market society” (Jessop, 2019: 968). OL is believed to have an ideational influence of some importance for European integration processes (Joerges, 2017). Ordoliberals look for an orderly stable market economy under a legal framework and suggest a constitutional framework that protects the competition from distortion. Dullien and Guerot (2012) suggested that ordoliberal thoughts might have given influences on how EU policies were constructed and have developed over the years. Here, this study takes interest in investigating to what extent ordoliberal ideas are the basis for EU regulations, especially its competition policy.

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Questions about the tie between Ordoliberalism and competition law have appeared in surprisingly few studies. In many ways, there are resemblances between the transnational order of the EU and OL. Over the last years, OL has become more apparent in the politics of austerity in the EU (Biebricher & Vogelmann 2017; Nedergaard & Snaith 2015). It can be briefly described as an economic and political philosophy based on Germany’s post-World War II beliefs in state’s responsibilities to regulate the economic market, therefore, to protect its independence and freedom from being distorted by companies with dominant positions. Discovering a gap in existing literature analyzing the relationships between OL and the implementations of EU Competition Law, especially towards an industry that is significantly contingent upon investments and innovations, this dissertation focuses on finding ordoliberal traits in the political set-up of the European Union, particularly its competition law enforcement, with the data collected from two empirical cases of unfair pricing occurred in the EU. The first case of the study is the market distortion made by Aspen pharmaceutical group, who acquired the Cosmo-drugs from GlaxoSmithKline in 2009 and engaged in combative negotiations leading to a considerable surge in the drug price in Italy, ranging from 300% to 1500%. By the fall of 2016, the AGCM imposed the group for the infringement of Article 102 TFEU with a fine of over five million euros (OECD, 2018). The second case provides the insights of ‘United Kingdom’s Competition and Markets Authority (CMA) v Flynn Pharma Ltd’ and the Court’s decisions, concerning the CMA’s discovery of anti-epilepsy drug unfair pricing committed by Pfizer and Flynn Pharma (Flynn), and its infringement decision to the group in 2016. However, unlike the first case, this example showcases the difficulty in reaching final decisions whether Flynn breached Article 102 or not since on March 10th, 2020, the UK Competition Appeal Tribunal (CAT) decided to overturn the £89.7 million fine that CMA imposed against Flynn (Calcagno, Chapsal and White, 2019). 1.2. Research Objectives and Question

The main purpose of this study is to analyze the main concepts of OL that involve in EU competition policy and discover its implications by examining the outcomes of the AGCM and the CMA case law against two pharma groups, Aspen and Flynn, respectively. This research expects to deeply discuss the materialization and operationalization of OL reflecting in EU Competition Law towards regulating common costs and pricing policies in such a unique featured market. It aims to shed a light on relevant scholarly research in EU Competition Law, contributing to Political Science, especially the Political Economics of Health studies. It also presents a framework for

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investigating the influences of OL on EU policies, while filling the gap of previous literature with a more detailed analysis on exploitative price abuse, which is the practices imposing unfair selling prices or other unfair conditions (according to Article 102 TFEU), in order for states to avoid unwarranted excessive pricing discoveries, while upholding an open and free market. Due to the lack of specific understandings of OL (Blyth, 2013), this article intends to achieve a comprehensive knowledge of OL and its effects on social, economic, and political issues.

In order to complete the objectives mentioned above, this dissertation concentrates on answering one main question: Through its pricing intervention in the pharmaceutical sector, how does EU Competition Law embody Ordoliberalism?

As the research aims to answer the main question methodically, it divides the question into five operational sub-questions, covering five key analytic elements of OL based on the work of Nedergaard (2020), including ‘politics by rules’, Economic Constitution, Market Construction, Role of Consumers and Role of the states towards consumers, all of which will be further elaborated in Chapter 2. The questions are:

1. Does the EU utilize the practices of ‘politics by rules’ in its competition law? 2. Does the EU competition policy embody the character of an economic institution? 3. Is the pharmaceutical market constructed under EU competition law?

4. Is the role of consumers acting as a raison d’être of EU competition policy? 5. Are the consumer rights protected by the state within the pharmaceutical market? 1.3. De-limitations

This dissertation positions itself in the area of Global Politics, within the sphere of Political Science. The center of this study is to look into the argument of how the EU competition policy has been institutionalized strongly by the concept of OL during these last few years, filling in the gap of political science literature. Strictly following the operationalization of OL designed by Nedergaard, 2020, which consists of five constitutive factors: politics of rules, economic constitution, market construction, Role of consumers, and lastly, Role of the states in relations with firms and consumers, the study gathers data from the EU case law against Aspen and Flynn, then, groups them into the five categories in order to map out the appearance of OL in the enforcement of Article 102 TFEU, and answers the research question. With that being said, this

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work does not see itself in the category of Economic academic field. It aims to highlight the theoretical framework underlying ordoliberal governance that has become a significant factor in EU’s political decisions, which, by every mean, falls into the study of Politics.

1.4. Relevance to Political Science

This part of the study is designed to emphasize its relevance to Global Politics literature, therefore, highlighting its contribution to Political Science. Politics concerns the roles of nation-states, political systems, ideology, social movements, geopolitics, nationalism, political participation, and political philosophy (Halperin, 2012). The definition of politics and the presence of global factors, such as intergovernmental organizations, non-governmental organizations, and so on, in political practices, are the main scientific disciplines for the academic field of political and economic patterns in a globalized world. Concentrating in the study of OL’s impacts at regulative levels on EU competition policy, this research is an investigation of policy dynamics of health and global political economy in the healthcare system which exists under the spectrum of Global Politics.

OL originated from the classical liberal paradigm of the 19th century. Lošonc and his colleges claim that OL is an expression of liberalism mutation (2019: 360). It is committed to the establishment of an institutional framework for the free market. As mentioned above, ordoliberals suggest that a market economy must be embedded in a market society. A market society, according to Polanyi, 2001, consists of juridical and political forms, with socio-cultural institutions, norms, and values. Observing European economic and political developments, ordoliberals have used the basic values of liberalism for guidance, while adding new elements to OL that altered the liberal tradition (Gerber, 1994). This research uses critiques of liberalism resulting in events and crises that provoked ordoliberal school of thought. Looking at OL as a doctrine of social philosophy, the research bases its study on the conceptualization from Walter Eucken, Franz Böhm, Wilhelm Röpke, Alfred Müller-Armack, Alexander Rüstow, and other ordoliberals. OL is also related to laissez-faire concepts, promoting the existence of a strong state governing economic activity. Ordoliberal approach to competition can be seen in European competition policy, which differs from the Harvard, Chicago, and Post-Chicago schools (Anchustegui, 2015). Choosing competition as the focal point, the research hopes to continue the study of OL theory, which is believed to play a significant part in Liberal Politics. It also suggests a vision of a political order balancing

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economic factors and social justice considerations. The research, therefore, contributes to the understanding of ordoliberal competition policy with the traditional OL as the foundation.

Furthermore, it is worth mentioning health governance definition, which is “the use of formal and informal institutions, rules, and processes by states, intergovernmental organizations, and non-state actors to deal with challenges to health that require cross-border collective action to address effectively” (Fidler, 2010: 3). From the situation’s overview addressed above, it is undeniable that health governance concerns all political, economic, social, and environmental aspects. It requires a strong institution of national administrations while demanding intergovernmental operations and nonstate actors’ cooperation. The political and economic features of health now shift its emphasis to transnational policies (Fidler, 2010), expects better regulations from states, international governments (IGOs), and non-state actors to protect healthcare assessments, intellectual property rights, etc., while performing strong macroeconomics, economic development, and social determinants (WHO, 2001). With that being said, scholarly studies regarding global health governance will significantly contribute to the Global Politics field.

1.5. Brexit and its possible effects on the chosen empirical case

It is necessary for the research to address Brexit situation, whether or not there are fundamental changes in UK’s competition law post-Brexit and if that alters the outcomes of the study, as the chosen case of CMA v Flynn Pharma Ltd situated in the UK, which, due to its complex nature, has not yet reached final infringement decision and currently been reopened for further investigation. Moreover, regarding the event of the UK leaving the EU officially on February 1st, 2020, the UK government released a statement confirming no fundamental changes would be implemented in its competition law framework, including concurrency arrangements. It is claimed that the government's commitment to “a rigorously enforced competition law regime post-Brexit”, independently regulated by the Competition and Markets Authority (CMA), will be in accordance with EU competition rules and regulations (Griffiths, 2018).

“Alongside being a global leader in the field of competition law and enforcement, with one of the strongest competition regimes in the world, the UK also has a reputation for consistent adherence to EU State aid rules […] the UK will continue to apply the EU State

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aid rules and that the European Commission will continue to be responsible for approving and monitoring aid”

(Andrew Griffiths – Minister Minister for Small Business, Consumers & Corporate Responsibility, 2018, cited from ‘Government response to the house of Lords EU Internal Market Subcommittee’, 2018) Both of the UK and EU competition law share the same set of rules and regulations due to the application of Article 101 and Article 102 of TFEU, protecting the economic market from any violations or distortions made by business practices, which lead to drawbacks and unfairness in trading within the UK and the EU. The UK authorities came to an agreement with the EEC that the importance of UK and EU cooperation on competition investigations and enforcement should be the foundation of further development in negotiating mechanisms among both sides (Pinsent Mason, 2018). With all of the above, the data collected from ‘CMA v Flynn Pharma Ltd’ case law are still valid; therefore, the research outcomes are expected to be reliable.

1.6. Structure of the Study

The research structure contains five main sections shown as five following chapters:

Chapter 1: Introduction

This section first gives the background information and a brief overview of EU Competition Law, stating the lack of literature regarding the OL’s operationalization within the EU Competition Law, particularly when it is applied to the pharmaceutical sector, which is uniquely characterized by the interplay between Public Healthcare and the complete dependence on Research & Development and Intellectual Rights. It urges the researcher to conduct this study with the interest of deeply understanding the essence of ordoliberal governance by aiming to answer the question: Through its pricing intervention in the pharmaceutical sector, how is the EU Competition Law consistent with OL?

Chapter 2: Literature Review

This chapter reviews all the existing literature analyzing EU Competition Law under ordoliberal governance, accompanied with excessive pricing studies in the pharmaceutical industry. In particular, previous studies and findings of the definitions and the operationalization

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of five OL’s constructive elements, consisting of ‘politics by rules’, Economic Constitution, Market Construction, Role of Consumers, and Role of the state vis-à-vis firms and consumers are cited. This information acts as the foundation of the study. The conceptual framework is shown at the end of this chapter.

Chapter 3: Methodology

A detailed description of the chosen method and data collection for the study is stated in this section while explaining the research’s epistemological and ontological stance. This thesis utilizes qualitative research methods for data collection with the application of a multiple case study method.

Chapter 4: Analysis

The research examines the collected data from two exploitative pricing cases handled by the AGCM and the CMA against Aspen and Flynn, respectively, by applying the OL’s operationalization framework proposed by Nedergaard, 2020 to discover its connections with the practice of the EU Competition Law in the pharmaceutical market. This chapter takes into account the data analysis that produces answers to the research question.

Chapter 5: Conclusion

This section concludes with the summary of answers for the research question, and a discussion emphasizing the importance of the findings. Based on the results found in chapter 4, suggestions are provided for further research whereas limitations of the study are also discussed.

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Chapter 2: Literature Reviews

In order to cover basic premises of the topic, this chapter introduces and examines existing literature related to the influence of OL on EU competition policy and the study of Excessive Prices within EU Competition Law, particularly in the Pharmaceutical Sector. It is divided into three parts. Firstly, the origin of OL is discussed briefly, as the research refrains from focusing on the history of OL. Rather, after the brief introduction of OL’s origin, the researcher concentrates on providing theoretical backgrounds of the five key elements of OL (‘Politics by rules’, Economic Constitution, Market Construction, Role of Consumers and Role of the state vis-à-vis firms and consumers) and their operationalization by utilizing Nedergaard’s hypothetical framework for OL analysis (2020). The second part of the chapter discusses EU Competition Law and its pricing regulation in the pharmaceutical markets. Finally, the last section summarizes and proposes a conceptual framework answering the research questions, enabling the researcher to cover all aspects of the research puzzle.

2.1. Ordoliberalism (OL): The Origins, Key Elements, and their operationalization

2.1.1. The Origins of OL and basic concepts

With a German origin, ordoliberalism shares its root with classical liberalism. It was introduced during the 1930s, when Germany was in need for a market innovation, after suffering the Weimar Republic crisis in the 1920s (Bonefeld, 2013). It was the theory behind the German social market economy (Nicholls, 1994), and has become one of the most fundamental market and social paradigms in the 21st century, helping the EU develop its social and economic constructions. Walter Eucken, Franz Bohm, Alexander Rustow, Wilhelm Ropke, and Alfred Muller-Armack were seen as the founding fathers of this philosophy, contributing to the diversity of politically legal and economic aspects of OL, according to Bonefeld (2013). Additionally, he also argued that ordoliberals saw the state as the political authority (which can also be understood as a regulator) of a free economy. In short, its fundamental purpose is the achievement of a human economy (ibid: 108). Rustow (1998) called human economy Vitalpolitik. He stated that Vitalpolitik considers policies for intervening in a free market are justifiable in order to sustain society as an enterprise society. As mentioned in Chapter 1, the states need to draw a line between perfectly regulating without being intrusive and manipulating the markets. This is where Nedergaard (2013) developed his argument. OL is believed to be the standards of state involvements, as states are required to be

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as neutral as possible in the free market. It is necessary to stress that ordoliberal ideas encourage economic-political decisions to be “principally be removed from democratic, political decision-making, instead of being executed through legal instruments and by unelected economic experts” (Young, 2010: 56). This is what so-called depoliticization, a method that has been used by the EU extensively in the last decades (ibid: 57). Ordoliberal governance sees free markets as unequal and conflictual (Nedergaard, 2020). To ensure equality among players in the economic market, it requires depoliticization in basic EU economic-political decisions (Young, 2010). The depoliticization means that the EU is recommended, by ordoliberals, to look at individuals as entrepreneurs playing in the market, not as political actors. Nedergaard (2013) also stated it can be observed that OL justifies a free market as an economic order, which acts as our interpretation of market design and decision-making. Moreover, Kamecke (2001) concluded, as ordoliberals, they deny “the notion of a centrally planned economy because it was inefficient and restricted individual freedom”. In Anchustegui’s work called ‘Competition Law through an Ordoliberal Lens’ (2015), she mentioned Foucault’s view on OL as the establishment of orders for “the basis of a space of freedom for economic partners” (Foucault, 1978, citing from Anchustegui, 2015: 146). In this context, ordoliberal ideas aim to reinstate the law and economic policy by using clear rules, therefore, regulate the competitive order of market freedom. Ordoliberals do not believe the invisible hand of the free market. The main belief of OL is the suitability and effectiveness of the economic constitution’s rules (Vanberg, 1998). The economic efficiency will be ensured when the states merge economic and legal theory into legal regulation. This study follows the aforementioned philosophy to conduct the analysis.

2.1.2. OL’s characteristics and their operationalization

This sub-section demonstrates Nedergaard’s theoretical framework as it describes the operationalization of Ordoliberalism, which the study is mainly based on in order to deepen the knowledge of OL as a social philosophy paradigm within Political Science. OL consists of two factors, including constitutive and regulative principles. These two principles take the practices of law as their primary technology (Foucault, 2008). According to Nedergaard, 2020 and Euken, 1952, the constitutive principles are presented as ‘an economic constitution’ (Wirtschaftverfassung), whereas the regulative ones are means to sustain the functioning of the competition policy. Cited from Anchustegui (2015), Ordoliberalism enables states to set up orders and legitimation for economic cooperation, as it is inevitable that some conflict of interests will

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occur in a capitalist world, where not everything is equal. Unlike pure laissez-faire and classical liberalism, OL proposes a full competition within the market, while offering a suitable political structure with formal properties (Oksala, 2017). Furthermore, OL targets to reestablish law and economic policies by prioritizing clear and straightforward sets of rules, inserting an order, and legitimizing the rules upon the protection of freedom of economy. These perform as the underpinnings of EU Competition Law, which will be further elaborated in the next few sections. The essential characteristics of OL entail five features: Politics by Rules, Economic Constitution, Market Construction, Role of Consumers, and Role of the state vis-à-vis firms and consumers, all of which are introduced thoroughly in the next sub-sections. This research develops its conceptual framework around these five features, based on the work from Nedergaard, 2020.

1) Politics by rules

The term ‘Politics of Rule’ was a translation from its German word for Ordoliberalism: Ordnungspolitik. Nedergaard considered the literal American translation: ‘Politics of Ordering’ too totalitarian, hence, the chosen translation: ‘Politics by Rules’. In order to legitimize an appropriate policy, the authorities are in need for a formation of a strong legal and institutional framework. This is where OL becomes useful for lawmakers, with its feature of based upon ‘politics by rules’ (Eucken 1940; Bonefeld 2017). Politics by Rules is not intended to directly and intrusively arbitrate the market. It is for signifying the meaning of a constitution that directs and guides the market into the right paths of freedom for all, including consumers and firms (Biebricher and Vogelmann, 2017). Meanwhile, according to Anchustegui, the state participates market as a Marktpolizei (market police), ensuring that every stakeholder of the market act accordantly to the established order (2015). By doing so, the authorities have the power to protect individual economic freedom (Bonefeld, 2017). OL suggests a holistic perspective of orders and law while distinguishing economics and politics. Here, the law acts as the implementation to ensure the model of complete competition. This demands a normative translation for economic knowledge, which Bohm claimed, “the doctrine of classical economic philosophy had to be translated from the language of economics into the language of legal science” (Bohm, 1937). It results in a statute that recognizes deviations from the competitive model as violations of legal norms (Garber, 1994). The state is required to provide a basic level of "legal security" (Rechtssicherheit) by assuring that law is knowable, dependable, and not subject to manipulation, which the pillar of Politics by Rules.

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In general, Politics by Rules represents a strong state with an evidently set of law, hence, providing stability in society.

2) Economic Constitution (Wirtschaftsverfassung)

The next analytic element of OL is the Economic Constitution. In the perspectives of ordoliberals, Eucken and his peers suggested separating the term into multiple features, which he called ‘constitutive principles”. By doing so, it is now more doable to detect the characteristics of the economic order influenced by OL. Economic Constitution consists of protection of private property; freedom of contract; complete liabilities for those causing economic harms; open markets, domestically and internationally; monetary stability centered upon anti-inflationism; and economic policy consistency (Kasper and Streit, 1993). All of these principles serve as the background of the economic constitution in the sense of the rules of the game upon which economic market systems are based (Vanberg 2004). Here, it is alleged that the construction of the EU Competition Law itself obtains the constitutive principles of an economic constitution. In short, Economic Constitution operationalizes as the core of the economic order, where its policies made by states and its regulative principles should dedicate an all-encompassing set of principles and construction of the market and its stakeholders (Nedergaard, 2020).

The main goal of ordoliberal competition law is the protection of economic freedom, facilitated by ensuring that the competitive process and market structure are not distorted. This entails setting positive and negative limits on the freedom to compete in accordance with the rule of law and the economic constitution. As suggested earlier, such a law should foster performance competition and preclude undertakings from entering into prevention competition, focusing on exclusionary abuses.

3) Market Construction

Ordoliberals analyze economic phenomena in a political and legal context. Under the eyes of ordoliberals, the market should be constructed. This results in a debate with laissez-faire liberals as they interpret the market as “a natural economic reality” (Walters and Haahr, 2005: 49). To sum up, a market is a construction, built by a variety of participants and stakeholders which resulting in a deliberate political and legal construction. Unlike other classical liberalism lenses, OL contributes to the EU version of competition policy differently than laissez-faire or interventionism. To comprehend the term ‘Market Construction’, it is necessary to mention the

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concept of the ‘Single Market program of the 1980s’. According to Nedegaard, 2013, this specific market type was established and put into practice with a set of ‘manners by order’. It can also be interpreted that the Single Market implied not only negative integration (deregulation) but also much positive integration (re-regulation) initiatives (ibid: 25). The specific balance point for this has been used by the EU policies, balancing between positive and negative integration elements. Monopolization and cartelization are the reason causing imbalances in the market mechanism. This is where legal institutionalization of rules is used to prevent unlawful anti-competitive market conduct (Bohm, 1937). Ordoliberal ideas prohibit any business practices that can form market power, such as cartelization or monopolization. Ordoliberals suggest control by a state agency for de-concentration in case of disturbing influences from market power. In this matter, Nedergaard stated: “A sole undertaking may significantly impede performance competition or unduly restrict the freedom to compete by either creating or strengthening a dominant position” (2013: 20)

4) Role of Consumers

The fourth objective was to ensure a secure supply for European consumers. According to Nedergaard, (2013 and 2020), the competitive market protection approach was originated and has been developed to emphasize the interests of consumers since competition allows prices will be driven down to marginal cost due to the number of market players (Abbott, 2018). Hypothetically, in a standard situation, this basic philosophical ideology would work, but its utility is ‘limited in cases where the market is not designed to fluidly adjust’ (Abbott, 2016). One thing for sure is that, besides the fundamental freedom it promises, at the rhetorical level, the EU’s competition policy has been completely based its ideology on consumer interests’ right from the beginning.

Under OL, competition law acts like a system that protects competition, therefore, ensures the consumer’s freedom to make choices in the market. Consumer’s sovereignty (or Consumer’s freedom) is only guaranteed when there is a variety of suppliers. This links back to the de-concentration mentioned in the Market Construction section. Only with the low degree of decentralization of production do consumers have more substitutions of products or services (Behrens, 2014).

5) Role of the state vis-à-vis firms and consumers

Anchustegui (2015) has reached to the conclusion that the center of OL contains two outlooks. First, in theory, a competitive market economy provides opportunities to maximize the

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profits of production, hence, ordo liberalists believe that is the most effective way to tackle the scarcity of goods. Second, and at a more basic philosophical or even moral level, such a system is seen as granting people maximum freedom to live their lives as they see fit and thus enhances human dignity. In a free market, it is inevitable to encounter monopolists or cartel members, who seek for private power structures by using its dominant positions (Anchustegui, 2015). The right to free contracting is considered critical (Eucken, 1989). However, this gives opportunities in favor of the creation of cartels or the nuisance of contract terms by a dominant undertaking. Market power now consists of transactions between market tyrants, eliminating economic freedom by agreeing on a contractual basis, reducing the likelihood of other market participants to gain fairness in the economic market. Without being oversight by an authority body, economic market power would result in consumers being considered as commodities. Competition policy ensures competence between society and the state while being a solution for potential conflicts between individuals in using their liberties of action (Möschel, 2001). Ordoliberalism promotes the liberty of action of the citizens as well as of the governments. It suggests a separation of power in the state’s relations ‘with society and within the society’ (Mestmarker, 1973: 191). The role of the states is to provide government policies that prioritize transactions between individuals, accompanied with the efficiency of an economic system. These policies help the states protect “the process of reaching an individual decision rather than alter the results” (ibid: 416, citing from Möschel, 2001).

2.2. EU Competition Law and Pricing Regulation in Pharmaceutical Markets

According to Akman and Kassim (2010), throughout the years, EU competition policy has become considerably institutionalized, leading to its identification with “European integration that its precariousness for much of the lifetime of the Communities is easy to overlook” (2010: 113). Given birth in the United States, competition law and its regulatory framework were familiar in post-war Europe (ibid). As mentioned in Chapter 1, due to the significance of authorization in the free market, the founding treaties of the ECSC and EEC paid extra attention in order to monitor and set up suitable competition policy (Haas, 2004: 75). This raises debates as it is believed to be opposed to the definition of freedom in an economy which was, and still is, a basic foundation of the EU (Goyder, 1993; Norberg, 2007).

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Under the competition policy within the EU, there are concepts of ‘excessive’ and ‘unfair’ pricing, which are considered as an unlawful act (Bailey and Whish, 2018). Nevertheless, ‘unfairness’ is not a well-defined term in competition economics (Calcagno, Chapsal & White, 2019), whereas, ‘excessiveness’ requires a calculation between competitive pricing and monopoly pricing, which demands a tremendous amount of market research in order to find the perfect profit-maximizing price point. Consequently, the lack of clear definitions forms a dilemma in pricing provisions. Taking advantage of the unclear classification, excessive pricing is one of the most controversial subjects for the Commission to carry in-depth and accurate investigations, although preventing exploitative pricing is the central objective of EU competition law. Regarding Akman’s argument (2007), it is undeniable there is a common similarity between a law against excessive pricing and the all-embracing objectives of competition policy, specifically Article 102 of TFEU. The Commission and the EU Court of Justice, as mentioned in Chapter 1, acknowledge the significance of the matter, hence, act very carefully when initiating investigations of excessive pricing cases.

The EU landmark judgment in this area called United Brands, dating back to 1978, was the most well-established conduct and has helped modify the explanation of price exploitation. It says when there is no correlation between manufacturing costs and ‘the economic value of the product supplied’, we can expect a price abuse in that product (United Brands v Commission of the European Communities, 1978). Moreover, Calcagno and his peers suggested a more precise definition for an alleged excessive price (Calcagno et al, 2019: 168), which can be observed as a price point where it can be proved to be higher than the competitive level in the market for the specific products. Additionally, the costs that cover the R&D process and the advertisement, accompanied with the price negotiation procedures imposed by the sector-specific can formulate a framework for the EC’s determination on pricing abuse.

Here the study introduces EU competition law and its two most significant features. They act as guidelines for two main types of anti-competitive activity:

▪ Anti-competitive agreements (under the Chapter I / Article 101 prohibitions)

▪ Abuse of a dominant market position (under the Chapter II / Article 102 prohibitions). (citing from European Commission, 2020).

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EU case law states that a dominant firm’s price must be proven to be both ‘excessive’ and ‘unfair’ at the same time for it to be unlawful. This becomes problematic as there are loopholes that pharma companies can exploit. In order to standardize the process of competition law enforcement, it is crucial to specifically examine both Articles of the TFEU. In particular, Article 102 TFEU contemplates that: “Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between the Member States”. These kinds of abusive behavior can be observed through these actions:

▪ directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions.

▪ limiting production, markets, or technical development to the prejudice of consumers. ▪ applying dissimilar conditions to comparable transactions with other parties. This

places them at a competitive disadvantage.

▪ making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.’

(Cited from Striling, 2020: 3) The price set determined for products distributed in the EU is heavily regulated at the national level. Since there is no universal pharmaceutical pricing framework, the price can fluctuate dramatically among Member States. This creates a gap in price comparison investigations, as the fact that one medicine is cheaper in one country than in another does not immediately imply greater competition in the former, but could simply be the outcome of greater regulatory focus on that drug. (Calcagno, Chapsal and White, 2019). Additionally, based on Danieli’s (2020) work, EU national antitrust bodies have to deal with deliberate pricing adoption rules for medicines and treatments they wish to reimburse under their social security systems. Within the EU, different pharmaceutical pricing and reimbursement policies are adapted to its own national economic and health needs, resulting in different price sets for the same product line in different countries. The pricing of original medicines that are protected by patents is highly regulated. For off-patent medicines, Member States may directly influence prices of generic entrants, but also encourage competition to achieve lower prices. As a result, prices drop drastically

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when medicine goes off-patent. However, in the present investigation, the Commission has indications of significant price increases for off-patent medicines (ibid: 2)

The researcher notices unique features of the Pharmaceutical Industry (which will be further elaborated in the next chapters) since it is known for its dependence on the R&D process and IPR. If the price is too low, it will jeopardize future investment, which provides new product development and innovations conducted by pharma companies. In contrast, hypothetically, if a medicine is overpriced, social consequences in terms of medical assessments, public healthcare expenditure, and so on, will take place. This creates the demand for better understandings in regulatory networks which design for cooperation among governments and private sector actors (Majone, 1999). The research specifies in public-private policy networks and the institutionalization of relationships between private actors, in this case, Pharmaceutical Companies, and public authorities, which are the Member States of the EU, including their competition bodies. To sum up, the researcher restates the core of this study, which is the influences of OL on EU policies, particularly on its enforcement of Article 102 TFEU. Consequently, the dissertation aims to shed a light in the study of transnational policies and governance, at the same time, emphasizing that the sensitivity of some specific industries should be considered when public authorities oversight a policy implementation.

2.3. Summary and Conceptual Framework

2.3.1. Summary

This part summarizes all major concepts within the scope of the research topic, which consist of Ordoliberalism, EU Competition Law, and the Excessive Pricing cases within the Pharmaceutical Industry. The focus of the research is to use OL and EU Competition Law as variables whose relationships will be observed via the empirical data collected from two excessive pricing examples, Aspen and Pfizer/Flynn. Therefore, the chapter of Literature Review covers the existing scholarly literature and research within the scope of the study, categorizing them into groups, with a detailed illustration for five OL elements, which includes Politics by rules’, Economic Constitution, Market Construction, Role of Consumers and finally, Role of the state vis-à-vis firms and consumers.

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In the study, Ordoliberalism acts as a political mean in order to examine the practices of EU competition policy. It interprets the European perspective when it comes to designing a coherent competition policy, as it was originated in Europe. This enhances the OL’s accordance with European integration and policy-making process. As this study reviews social market dynamics, OL also provides analytic elements to deeply look into the EU competitive process and economic constitution. Ordoliberal ideas have, historically and conceptually, ‘been highly influential in terms of EU competition rules and their interpretation by the EU judiciary’, according to Nedergaard (2020). The research aims to answer the question of to what extent the ordoliberal philosophical paradigm takes place in shaping the EU’s antitrust authority and its regulatory framework for pricing strategies.

The table below is cited from Nedergaard (2020) as he proposed the operationalization of OL. This research follows the proposal to conduct its conceptual framework, which will be demonstrated after this section.

Figure 1: Table of OL’s elements and their operationalization. Source: Nedergaard, 2020.

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Figure 2: Conceptual Framework. Source: Researcher’s Illustration The conceptual framework is used as a guideline for the research data interpretation (Baxter ad Jack, 2008). Figure 2 depicts all variables regarding the relationships between EU Competition Law and the operationalization of OL. Q1, Q2, Q3, Q4, and Q5 are 5 operational questions for the research question: ‘Through its pricing intervention in the pharmaceutical sector, how does the EU Competition Law embody OL?’. The operational questions are:

Q1. Does the EU utilize the practices of ‘politics by rules’ in its competition law? Q2. Does the EU competition policy embody the character of an economic institution? Q3. Is the pharmaceutical market constructed under EU competition law?

Q4. Is the role of consumers acting as a raison d’être of EU competition policy? Q5. Are the consumer rights protected by the state within the pharmaceutical market? By answering those questions chronologically, using the collected data from two empirical cases, the research discourses the existence of indices for an underlying connection between the OL and the investigated policy via its constitutive principles. This strictly follows Nedergaard’s (2020) framework mentioned earlier. To conclude the chapter, the research proposes that there will be some manifestations proving the influence of OL on EU Competition Law practices and their connection corresponds to each other.

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Chapter 3: Methodology

3.1. Ontology and Epistemology of the Study

This part of the study states the researcher’s ontological and epistemological stance chosen particularly for the research topic. According to Crotty (1989: 9), different ontological and epistemological positions lead to different approaches for the chosen phenomena, affecting the research’s outcomes. Prior to identifying the chosen ontology and epistemology, it is necessary to define both terms. Ontology is described as “the study of being” (Crotty: 2003:10), raising a question of: “What kind of world are we investigating, with the nature of existence, with the structure of reality as such?”. Ontological assumptions are human’s attempts to answer a set of questions such as: “What is there that can be known?’; “What is the nature of reality?”, and so on (Ahmed, 2008: 2). Epistemology, on the other hand, based on Crotty’s definition, acts as “a way of understanding and explaining how we know what we know” (2003: 3) while stressing on providing “a philosophical grounding for deciding what kinds of knowledge are possible and how we can ensure that they are both adequate and legitimate” (ibid, 8). As a qualitative research, this study attempts to solve the research puzzle by collecting data from two excessive pricing cases in Pharmaceutical Sector, therefore, examining the involvement of OL in constructing and shaping EU’s antitrust policies, utilizing a constructionism lens.

Miller and Crabtree (1999: 10) claimed constructionism enhances the clarity in the human’s creation of meanings and objectivity. Searle (1995) also stated constructionism is defined based on human construction of reality, therefore, deepens the scientific knowledge coming from generating a social construction. Husserl (1931) and Schütz (1932) argued it can be used as a phenomenological translation of social sciences. This philosophical paradigm helps strengthen research in a way that provides deeper understandings of how individuals interpret settings within their society. Crotty also described social constructivist ontology and epistemology as “the view of that all knowledge and therefore all meaningful reality as such is contingent upon human practices, being constructed in and out of the interaction between human beings and their world and developed and transmitted within an essentially social context” (2003: 42). The social construct paradigm consists of Narrative Study, Case Study, Ethnographic Study, Grounded Theory, Descriptive Study, and Phenomenological Study (Kim, 2005). As the research evaluates the results of EU Competition Law enforcement on Aspen and Pfizer exploitative price practices

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and acquires a framework of commonality in both cases, constructionism appears to be the most suitable philosophical underpinning to carry out the study. Furthermore, social constructionism is believed to enable scholars to analyze phenomena with such complexities occurring in our world, especially in the 21st century (Adom, D., Yeboah, A. and Ankrah, A.K, 2016: 9). It is claimed that researchers with the intention of “comprehending the practices of a group or society and its implications towards their attitudes” can use constructionism approach as their interpretation (ibid, 7), which further explains why this particular study chooses constructionism in order to demonstrate comprehensive research of EU Competition Law, especially towards pharmaceutical companies since its main purpose is to put EU Competition Law within pharmaceutical sector under a microscope, therefore, discover the roles of OL in its decision-making process.

Nevertheless, constructivism has its limitations. Bogdan and Biklen (1992) once emphasized the shortcoming of a constructivist paradigm data analysis, which is the examination of the data collected by researchers. Since this approach demands construction of the matter’s full picture, researchers must maintain their awareness of their own influence on the analysis outcomes and prevent their own biases and emotions from altering the construct meanings of the reality and the true state of the chosen cases. Also, since a set of commonality needs to be developed, it requires a great deal of time in order to assure the level of comprehension wanted for the study. Time limitation significantly affects the work of constructivists; hence, scholars need to manage the duration of the study and spend their time resources wisely.

3.2. Research Design

3.2.1. Multiple Case Study

This section is conducted with the emphasis on the suitability of the particular method, guided by the lens of the constructivist paradigm mentioned above. With the hope of delivering an extensive framework that captures the influence of Ordoliberalism on shaping EU Competition Law, resulting in its intervention in medicine unfair pricing cases, multiple-case study method is chosen. Comparisons between cases will be made, as a result, multiple-case studies also give researchers opportunities to predict results across cases, and/or forecast contrasting results based on the investigated theory (Yin, 2003). When the focus of the research is on answering “how” questions, on the boundaries which are not clear between the phenomenon and context, and on the

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purpose of discovering contextual conditions relating to the phenomenon studied, a case-study design represents itself as the most suitable method for the analysis (Yin, 2003), explaining why the qualitative case-study approach is exclusively used for this research’s puzzle. Thus, a multiple-case study can provide researchers suitable data to examine closely within each setting and across setting (Baxter and Jack, 2008), resulting in the objectivity of the experimental design and the interpretation of qualitative studies.

3.2.2. Validity and Reliability

Continuing with Yin’s research in 2018, there are three characters regarding the definition of validity: construct validity, internal validity, and external validity (2018: 87). Firstly, construct validity illustrates the requirements for suitable operational measures, which are accumulated by multiple sources, also called as ‘triangulation of the data’. This is considered to be the core of a case study research, including a multiple-case study, enabling researchers to achieve the required information through various sources (ibid: 197). The dissertation is expected to gain contextual knowledge while offering a detailed and in-depth description of the phenomenon. In order to do so, the importance of multiple sources for the research data collection needs to be prioritized. This study illustrates the practice of ‘triangulation of the data’ by gathering knowledge and information from a variety of sources, subsequently, narrowing down to two best representatives for the study of EU Competition Law under the influence of OL. Other sources such as the case law of the AGCM and CMA against Aspen and Flynn, respectively, will be discussed. Being accompanied with a diversity of data sources enhances construct validity, therefore, ensures an accurate and reliable foundation for the analysis (Yin, 2018). Regarding internal validity, this work elaborates with pattern matching, which guarantees the collaboration among existing studies on the matter and possible research outcomes (Yin, 2028: 195, 252). By following the framework, operational questions act as a guideline and direction for the analysis. Lastly, external validity emphasizes the significance of the research generalization (ibid.). As mentioned in previous chapters, it is clear that there is limited literature exclusively investigating EU Competition Law under OL’s impacts. Being a multiple-case study supports the research to center the similarities between both cases, to explore the common relationships among key analytic variables, which lead to the generalization of the topic itself, deepening the understandings in EU antitrust policies. The conceptual framework is expected to offer valuable outcomes when being applied to other cases, not only

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specifying in the pharmaceutical sector. With all of the above, the researcher assures the research reliability.

3.2.3. Data Collection

As the study approaches the question with qualitative methods, the qualitative data are collected through an examination of existing publications in the Pharmaceutical Industry. More specifically, the case of ‘CMA v Flynn Pharma Ltd’ has been an on-going debate for several years. From 2013 to 2020, the CMA has been prioritizing in the investigation for alleged excessive and unfair prices for phenytoin sodium capsules under Chapter II of CA98 and Article 102 TFEU (UK government, 2020). The study analyzes timeline, press releases, final decisions of the case updated on the UK’s official government web portal, providing the readers with a detailed case description made by all parties participating in the case. This research, however, only examines data of ‘CMA v Flynn Pharma Ltd’ from 2016 to June 2020, since CMA's finding of abuse in Pfizer/Flynn unfair pricing decision has been reopened for appeal and remitted back for reconsideration of “whether Pfizer and Flynn had abused their dominant positions by charging excessive prices for phenytoin sodium capsules” (UK government, 2020). Therefore, a clear time period is necessary for the study’s reliability. On the other hand, ‘AGCM v Aspen’ case law reached the final decision in 2017, as Aspen Pharma Group lost grounds of its appeal against the AGCM decision and the fine of €5.2 million was imposed. This is also provided on Italian Giustizia Amministrativa - Consiglio di Stato - Tribunali Amministrativi Regionali official website, guaranteeing the authenticity and credibility of the collected data. Both chosen texts are considered as the primary material whereas secondary sources such as previous literature and scholarly publications sharing the same topic area are utilized in order to comprehensively answer the research questions.

3.2.4. Data Analysis

After careful considerations, the author believes theoretical propositions are the most suitable method to conduct the research. As a case study, it is recommended by Yin (2008) that using propositions enhances the likelihood of space limitation being in accordance with the scope of the study. Through a selection of empirical cases and materials for the research operationalization, theoretical propositions, which, in this case, the five sub-questions derived from the main research question, assure the feasibility of the outcomes (ibid.). The set of operational questions mentioned in Chapter 2 can also be interpreted as hypotheses of this

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dissertation, consequently, providing the analysis directions it needs to answer the research puzzle comprehensively. Furthermore, the conceptual framework is provided in the interests of clarifying the potential relationship between EU Competition Law and Ordoliberalism that the study aims to prove.

Moreover, it is important for the author to stress that this study does not cover all aspects of Ordoliberalism, which means the focus of the study is only to concentrate on the influence of OL on the specific policy, which, in this case, EU Competition Law. The framework is designed with the hope of emphasizing the OL’s impacts on the EU decision making process and its legislation when it comes to a case law against pharmaceutical companies. Therefore, as ambitious as it is, it does not guarantee to prove all hypothetical questions. Moreover, other than the chosen empirical cases, data materials are also collected and reviewed through scholarly literature, reports, statutes, treaties, political statements, and so on, which associate with the research topic. However, the analysis stays at the linguistic and rhetorical levels with limited solid statistical data.

Reading Legal Cases

This part provides the definition of judicial opinions, and how the researcher approaches case law and collects the data needed for this study. Analyzing a controversial issue in antitrust enforcement, this study collects data from two legal cases, ‘CMA v Flynn Pharma Ltd’ and ‘AGCM v Aspen’ by examining the legal opinions in both cases. Legal opinions are written documents explaining the final ruling made by a judge. I explore the history of a particular field of law, which, in this case, is the CJEU judgment in the ‘United Brands Company and United Brands Continental BV v Commission of the European Community’ - one of the most well-known cases that set a precedent in the field of price control using EU Competition Law. This process provides the prerequisites to comprehend the context and significance of the court’s decision (Kerr, 2007). Next, I start the data collecting procedure by gathering the descriptions of the legal principles that the judge will use to decide the case and reach a particular outcome. The applications of both empirical cases are part of and help define the rule (ibid: 7).

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Chapter 4: Analysis

Chapter 4 begins with a detailed description of empirical cases, which are ‘CMA v Flynn Pharma Ltd’ and ‘AGCM v Aspen’, including their timeline and court decisions. Next, the section follows five operational questions guided by the conceptual framework, therefore, provides a comprehensive answer for the research question: ‘Through its pricing intervention in the pharmaceutical sector, how is the EU Competition Law consistent with OL?’. The analysis of the operational questions is arranged according to the framework mentioned in the previous chapter. However, due to the interplay of some OL’s elements, it is expected to have some overlapping results.

4.1. Case Descriptions

4.1.1. AGCM v Aspen

In 2016, the ICA came to the conclusion of imposing Aspen a fine of €5.2 million for its exploitation in pricing strategy on four anti-cancer medications (ICA, 2016). Aspen had shown traits of abusing its dominant position to pump up the medicine price, resulting in a 1500% surge for anticancer drugs ‘Cosmo’. This behavior is considered unlawful under Article 102(a) TFEU, affecting the Italian Medicine Agency - Agenzia Italiana del Farmaco (AIFA) funding for cancer treatment (AGCM, 2016). Due to the insufficient number of alternatives for cancer therapy, infringement had caused considerable damage to certain categories of patients (mostly, elderly people and children). Aspen had exploited AIFA by using extremely aggressive negotiation strategy, creating a substantial price increase since 2013. Its strategy consisted of these actions:

▪ Cornering AIFA into categorizing Cosmos drugs among C-Class medicines. Since C-Class drugs are not classified in the NHS reimbursement agenda, the authority for setting price point was, consequently, belonged to Aspen.

▪ Threatening to exit the Italian market with the range of ‘Cosmo’. According to AGCM, the threat made by Aspen was aggressive as it promised a shortage of products within the Italian market if the price increase was not approved. During the negotiations, a shortage of the drugs indeed occurred in the Italian distribution system. Afterward, Aspen could not prove the presence of production difficulties or other manufacturing problems, which concluded the validity of the accuse AGCM made against Aspen.

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▪ Using a ‘stock allocation mechanism’ to limit parallel imports and create transitory shortages in the Italian markets.

These behaviors from Aspen could not be allowed by AIFA due to the life-saving and non-substitutable features of the investigated medicines. Many researchers claimed Aspen’s final goals were to create a surge in the price point, therefore, to leverage their product prices to other EU Member States (OECD, 2018). From 2014 to 2016, the ICA had pursued a cautious investigation for Aspen’s conduct and finalized it on 29 September 2016 with the final infringement conclusion. This specific case has been closed by the end of 2016 with a 5.2 million Euros fine for Aspen.

4.1.2. CMA v Flynn Pharma Ltd

After several years of conducting a detailed examining process, CMA discovered competition infringements from Pfizer and Flynn, particularly in their pricing strategy with an exploitative set of prices for ‘phenytoin sodium capsules’, an innovative anti-epilepsy medicine. Acknowledging the vulnerable position of patients due to their dependence on the capsules, the CMA decided to intervene. This decision was also built upon the purpose of protecting the NHS, which, of course, funded by UK taxpayers. According to UK Government’s Report (2020), Flynn allegedly installed an enormous rise in the price of the phenytoin capsules starting from September 2012, while being unable to prove a material change in the underlying costs. This action from Flynn is considered to be a particularly serious breach of the law. In December 2016, the infringement decision was issued by the Court, imposing Flynn for a fine of nearly £90m, which was the amount to recover NHS’s expenditure for phenytoin sodium capsules since 2012 (CMA, 2019). Initially, £2 million was spent every year for the capsules before 2012, however, it jumped to £50 million per year only in one year later (UK Government, 2020).

However, after the first decision, the case got more complicated. Flynn Pharma appealed the infringement decision from CMA before the UK Competition Appeal Tribunal (CAT). The CAT approved the appeal due to the lack of proof provided by CMA, which can be linked back to the gap in clear definitions of ‘excessiveness’ (which was also discussed in the previous section) in June 2018 (UK Government, 2019). This outcome is a result of insufficient methodology used for determining price unfairness on the ground, as well as unsuitable benchmark prices based on the relevant EU Court of Justice case law from the CMA side. In short, the CAT put CMA’s infringement decision aside, which the CMA later on appealed. Despite not upholding the entire

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case of the CMA’s appeal, Court of Appeal dismissed Flynn’s plea entirely (UK Government, 2020). However, it was also discovered by Court of Appeal that significant fundamental legal errors in its 2018 judgment were completed by CAT.

“It was quite easy to lose sight of a stark reality, which was that, literally overnight, Pfizer and Flynn increased their prices for phenytoin sodium capsules by factors of between approximately 7 and 27, when they were in a dominant position in each of their markets.” (The Right Honouable - Sir Geoffrey Vos, 2020, cited from Press Release of ‘CMA welcomes Court of Appeal judgment in Phenytoin case’) For instance, one of the wrong investigating approaches made by CAT was to demand the CMA to go beyond a cost-plus calculation so it can prove Pfizer and Flynn committed price abuse, which, of course, made the decision from CAT essentially unwarranted.

“Today’s judgment is a good result. The CMA was right to appeal the CAT’s judgment. We will now get on with the elements of the case against Pfizer and Flynn Pharma that the court has decided to refer back to us.” (The CMA’s Chief Executive Andrea Coscelli, 2020, cited from Press Release of ‘CMA welcomes Court of Appeal judgment in Phenytoin case’) This is an on-going case, however, as stated above, the study only covers the case until June 2020. Nevertheless, the CMA also expressed during the Press Release that there are potentially many more cases unlawfully jumping the prices of certain medicines, committed by companies for several other generic drugs, which might have cost the NHS hundreds of millions of pounds. Hence, their ‘fight’ against excessive pricing is far from over.

EU Competition Law under Ordoliberalism - A case study of Excessive Pricing in Pharmaceutical Sector