U.K. Fines Private Equity Firms Over 1000% Drug Price Hikes
The U.K. fines two private equity companies for raising drug prices more than 1000% over eight years.
(Bloomberg) -- Private equity firms Cinven and Hg have been fined by the U.K.’s competition watchdog after a pharmaceutical firm they once owned was found to have overcharged for crucial drugs.
The Competition and Markets Authority charged Cinven 51.9 million pounds ($72 million) and Hg 8.6 million pounds following investigations into Advanz Pharma Corp., according to a statement Thursday. It said the drug company marked up prices by more than 1,000% over eight years for thyroid hormone deficiency tablets known as liothyronine.
Cinven and Hg, both based in London, previously owned businesses that now form part of Advanz. The penalty is Cinven’s second in two weeks, after the CMA fined the firm and Advanz for allegedly colluding to keep the price of hydrocortisone tablets high.
While the CMA has long focused on pharmaceutical prices, the latest fines mark the first time it’s sought to hold private equity firms liable for infringements by their portfolio companies. The 2017 trial of Martin Shkreli, who’s serving seven years behind bars for defrauding hedge fund investors, helped draw wider attention to the practice of hiking drug prices many times over.
“Cinven is named under the principle of parental liability only as former parent of AMCo and does not believe that any Cinven entity broke the law,” a Cinven spokeswoman said. “Cinven strongly disagrees with the CMA’s findings and will be appealing the CMA’s decision.”
Cinven, which is currently seeking to raise more than $12 billion for a new private equity fund, has made healthcare investments a core strategy. Its portfolio companies currently include generic drug maker StadaArzneimittel AG and scientific measurement company LGC Group.
The price of thyroid tablet packs rose from 20 pounds in 2009 to 248 pounds in 2017, the CMA said. The “excessive and unfair” increases meant National Health Service spending on the drug rose to more than 30 million pounds by 2016 from 2.3 million pounds in 2009, according to the statement.
“We utterly disagree with the CMA’s decision on the pricing of liothyronine tablets and will be appealing,” said a spokesperson for Advanz. “At all times, Advanz acted in the interest of patients, investing significantly to keep this medicine on the market to the specifications required.”
The CMA fined Advanz and Cinven 43 million pounds on July 15, saying that Advanz took payoffs from Auden McKenzie in exchange for agreeing not to compete with the firm. Auden McKenzie, now part of Accord U.K., then jacked up the price of its drug by more than 10,000%, the CMA said.
Cinven, Advanz and Accord have told Bloomberg that they also plan to appeal that decision. Hg declined to comment.
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