By Dan McCrum in London and David Crow, Financial Times, New York| May 1, 2016
The National Health Service has been stung by a Canadian drugs group that
has heavily increased the prices of some generic medicines in a move
reminiscent of the price gouging plot employed by the US’s “bad boy of
pharma” Martin Shkreli.
Concordia Healthcare’s dramatic price rises in the UK include a surge of
more than 14-fold in the cost of eyedrops for bacterial conjunctivitis, for
which it is the sole manufacturer.
The steep prices the NHS is being forced to pay highlight a potential flaw
in the UK healthcare system, which normally secures drugs at much lower
prices than those paid in the US. While the price of branded medicines is
tightly controlled in Britain, there is less regulation in the market for
generic off-patent drugs as competition between drugmakers generally keeps
However, AMCo, a British division of Concordia that had UK sales of about
£250m last year, specialises in niche generic medicines where it faces
little or no competition from rivals, allowing it to push through sharp
price rises. For example, after fusidic acid eyedrops were acquired by
AMCo, the price rose from £2.09 in May 2013 to £29.06 in April 2016,
according to the NHS tariff book.
When Concordia bought AMCo for £2.3bn last September from private equity
group Cinven, John Beighton, AMCo chief executive, boasted to analysts that
the UK was “a prime market [for] being able to move prices”.
Other price rises include the cost to the NHS of an AMCo-manufactured ear
drop and a treatment for hyperthyroidism, both of which have risen fivefold
in the past three years.
NHS England on Sunday said it was essential that drug companies “price
their products responsibly”, adding that recent price gouging “underlined
the need for continuing vigilance on this issue”.
The UK’s Competition and Markets Authority has previously investigated
cases of drug pricing. In August, it said it had reached a provisional view
that Pfizer and UK company Flynn Pharma had charged “excessive and unfair
prices” for phenytoin sodium capsules in breach of UK and EU competition
Concordia’s strategy has echoes of the scheme played out by Mr Shkreli, the
founder of Turing Pharmaceuticals who became an international pariah last
year after he increased the price of an Aids medicine by 5,000 per cent.
Valeant, another Canadian drugs company that has dominated the headlines in
recent months, has also implemented large price rises while growing through
constant dealmaking. Mark Thompson, Concordia’s chief executive, previously
worked for Biovail before its 2010 merger with Valeant.
Concordia said prices quoted for many medicines include payments to
pharmacists, and “AMCo’s last annualised weighted average selling price
across all the medicines it sells in the UK was just £4.90”, below the
standard adult prescription payment of £8.40, and the company “provides
many medicines offering very significant savings to the NHS”.
Concordia is the product of repeated acquisitions: it purchased UK-focused
AMCo last September; Cinven had itself bought and merged two niche pharma
companies in 2012 to form AMCo; and in April, Concordia bought drugmaker
Covis for $1.2bn.
Cinven still owns 13 per cent of Concordia. It last week prompted
speculation of a sale by announcing it would consider “strategic
Concordia has also sharply increased the prices of many of the medicines it
sells in the US, according to figures compiled by Rx Savings for the
It increased the price of two blood pressure drugs, Dibenzyline and
Dyrenium, by 174 per cent and 152 per cent, respectively, last year, while
doubling the price of several of its other medicines.
“These types of price increases are eroding the American economy.
Consumers, employers and health plans simply cannot keep up with the
unsustainable trajectory,” said Michael Rea, chief executive of Rx Savings,
which sells software to employers to help them cut the cost of buying
medicines for workers.
The price for Dibenzyline jumped from about $100 a pill at the start of
2015 to $287 a pill, according to one person in the pharmacy industry, who
asked not to be named as pricing contracts are confidential.
At this price of $287 per 10mg tablet, the cost for a year’s supply for
patients on the lowest recommended dose would be $200,000, rising to more
than $1m for those taking the highest dose.
Acquisitions and price rises have helped Concordia achieve blistering
growth: last year, revenues jumped 276 per cent to $394m, while adjusted
earnings before interest, tax, depreciation and amortisation jumped 347 per
cent to $266m.
However, investors appear to have turned sour on a strategy that involves
price hikes and persistent dealmaking, after other companies have come
unstuck. Shares in Concordia, listed on the Toronto stock exchange, are
down more than a third this year.
The group, which listed via reverse takeover in December 2013, has a market
capitalisation of $1.6bn, and net debt of $3.2bn.