South African firm Aspen Pharmacare is claimed to have ‘plotted to destroy supplies of life-saving cancer medicines’ over a battle to drive up prices in Europe.
The Daily Mail reports that Aspen is understood to have proposed the wastage during a row with the Spanish health service in 2014, while it is also said to have threatened to stop supplying medicine to Italian authorities a year earlier.
The price drive began after the firm, whose European headquarters is based in Dublin, bought the rights to five cancer medicines from British firm GlaxoSmithKline.
According to an investigation by The Times in the UK, the company wanted to impose rises of up to 4,000% after purchasing the ‘portfolio’ of drugs from GSK for more than £270m in 2009. It was reported that in 2013 the cost of leukaemia drug busulfan rose from £5.20 to £65.22 in England and Wales, a 1,100% jump, while blood cancer medicine chlorambucil went from £8.36 per pack to £40.51.
It is understood Aspen was able to impose the price rises by taking advantage of a loophole that allows increases if a brand name is dropped, the report says.
The investigation claims a “cache of documents” revealed 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”.
Dennis Dencher, CEO of Aspen Pharma Europe, is quoted as saying that price rises were at “appropriate levels” to “promote long-term sustainable supply” and added the previous prices were “unsustainable”. The firm also denied any shortages of medicine were deliberate but did not address questions on the destruction of drugs from the paper.
The report says the price increases in the UK were not approved by the Department of Health because they were “unbranded”, with prices for such products usually controlled by competition in the market. It is understood a lack of competition enabled the increases to be implemented and the UK government has pledged to bring in new laws to end “excessive rises”.
A UK Department of Health spokesperson is quoted in the report as saying: “No pharmaceutical company should exploit the NHS. We are working closely with the Competition and Markets Authority on unwarranted price rises of unbranded generic medicines, and where companies have breached competition law, we will seek damages and invest that money in the NHS. “We are also bringing in new laws this year so we can take action against excessive price rises on unbranded generic medicines.”
The report says Aspen had been approached for comment.
In a now-leaked email, a senior executive at Aspen discussed destroying supplies of generic cancer drugs as part of a pricing battle with health authorities in Spain. Medscape reports that the idea was floated in 2014 in an exchange with another staff member at Aspen Pharmacare, which has a market valuation of $10bn.
At the time, Aspen was in negotiations with the Spanish health service about the price of five generic cancer drugs. The report says the situation deteriorated so far that Aspen stopped direct supplies of the five drugs starting in May 2014. About half a year later, in October, a staff member in Aspen’s Dublin office asked about what to do with the leftover cancer drugs that were created and packaged for the Spanish market. A senior executive replied that the drugs could not be sold because of the pricing dispute and that if the Spanish health ministry did not agree to higher prices, “the only options will be to donate or destroy this stock.”
Dr Andrew Hill, senior research fellow from the department of pharmacology and therapeutics at the University of Liverpool, called some of the price increases outrageous, the report says. He explained that companies are getting away with the price spikes because they have a monopoly with a certain product. Cited in the report was busulfan, which is made in India, where it costs £0.03 per tablet.
Aspen shares had dropped by 4.26% following the news, reports Fin24. Asked for comment, Aspen responded that the contents 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.
“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.”
Meanwhile, the report says, it was revealed in October 2016 by the Regulatory Affairs Professionals Society that the Italian Competition Authority (ICA) fined Aspen $5.7m for raising the prices of off-patent cancer drugs by up to 1,500%.
“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.”
With speculation now mounting that British and European authorities will launch their own investigations into the price-gouging allegations, local shareholders are querying why the company has never issued a statement on the fine, reports Business Day.
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. “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 report says Aspen justified the price increases on the grounds that there had been no increases for years and that prices had been at very low and unsustainable levels. The Italian authorities argued Aspen was making good returns on the old prices.
Mohamed said that at the time of the GlaxoSmithKline deal Aspen must have known what prices it would need to get a reasonable return on its investment. “Pushing for price increases is an acceptable strategy but this appears to be extortion,” said Mohamed, adding he would definitely be engaging with Aspen management on the issue.
Mohamed drew comparisons between the Aspen case and the public backlash in the US after a 5,000% hike in the price of Daraprim by Turing Pharmaceuticals. Martin Shkreli, CEO of Turing Pharmaceuticals, became the most hated man in the US after he said he regretted not increasing the price of the drug by even more than he had.