 It's an honour and a pleasure to be here. I should perhaps explain my status a bit more. I'm at the pre-university of Amsterdam one day a week and the remainder of the week I'm at the Dutch competition authority and officially I'm wearing my Amsterdam hat here today so this is all academic although I will draw time and again I think on experiences at the competition authority. What I do there I'm in the health care division and in a practical sense over the past few years I've been working mainly on pharmaceuticals both on cases which I think I'm not going to name today because there are no public decisions in those yet. We also provide guidance for example we have provided guidelines on collective purchasing of pharmaceuticals and in an attempt to create counter-failing market power there and we've also conducted a sector inquiry into TNF alpha inhibitors which is a class of drugs that are used to fight rheumatism. My talk has been over the long and tight and I thought at first this was the fault of the organiser but when I checked again it turns out this was actually the talk the title of the paper that I wrote together with my colleagues Kies van Zijn and Elon Ucker. So I can't blame the organisers and it's not really a research paper that has been distributed in the materials but it's largely practical and I'll try to explain why we ended up writing it. What it tries to do is something new in that we have already discussed there's such a thing as applying the competition rules to companies that hold intellectual property rights. What we haven't discussed much today but what also exists is applying the rules on excessive pricing to pharmaceuticals and what we wanted to do in this paper is combine them both. So to say you can apply the rules on excessive pricing to patent protected or otherwise benefiting from exclusivity rights undertakings. I'm going to first discuss briefly the Dutch context because I've elatedly realised that you're not fully familiar with that. I will say something then about the EU antitrust rules and intellectual property but some of it has already been discussed today and I'm not going to run in any detail through the case law. I will then say something more about what I assume you're the most interested in which is how would you go about dealing with excessive pricing in this context. I will then say something about other remedies in case our excessive pricing cases fail and or otherwise in the broader context and if there is time I will say a few words about compulsory licensing at the end of a reserve a sliding reserve for that we'll have to see if there's time for that. So the Dutch context is very different from the UK. Our system is not a national health service but it's insurance-based also sometimes called this mark system which I'm not sure is wholly appropriate but that's what people call it anyway sometimes and you have a beverage system by the way. It's insurance-based it's fully private so both the health insurers are all fully private all health care providers are private companies and in addition we have a system where drugs that have a market authorization automatically qualify for reimbursement if they use this part of a hospital treatment so there are no prior negotiations or anything they just enter the market and can claim their reimbursement so perhaps this is already explains a little bit why we have problems with higher prices in the Dutch context. So the first point is that why we start looking at this is that we feel we have a problem with pharmaceutical pricing in the Netherlands it's certainly a political problem it's something that plays out in the media a lot and we see weekly discussions of this both in the newspapers and on television so it's something that has political attention and although we are an independent authority that also means that it has the attention of the competition authority. I realize I'm already slipping into we from being the university for university of Amsterdam so pharmaceuticals are also a problem because it's they account for a growing share of annual health care costs and the way I've written down the figures here probably doesn't allow you to make much sense of them but the idea is basically that pharmaceuticals account for about 10% of the hospital budget they're growing at 10% a year so that means they're adding a percent percentage point every year and that's at a time when we're trying to reduce growth of hospital care funding from 1% to 0 over the course of coming years and that means that effectively pharmaceutical products are displacing other forms of care now you could have different opinions on whether that's a good thing or a bad thing but it's definitely something to think about and we like to think of it as that there is at least a risk of them crowding out other forms of treatment that are equally valid the different types of pricing problems there's repurposing of existing drugs where there has been limited or new research with significant price hikes I think we've heard some of those instances mentioned here some of them problems are with extremely priced new patented and orphaned drugs some of which are sometimes repurposed as well and then as an order of magnitude you have to think about drugs that might be 100 000 euros per patient per year or more going up into the 800 000 euros and higher still there also is another category of drugs and the tnf alpha inhibitors are within that category that's expensive drugs that are not at far side outrageously expensive because they're only between 10 and 20 000 euros per patient per year but there are so many patients that suffer from rheumatism that's high volume in effort for that reason a problem and in addition and more recently we didn't think we'd have a problem with low prices but we're also looking at anti-competitive discounts as well in order to where we think that originator companies may be trying to keep biosimilar drugs for example in the area of tnf alpha inhibitors out of the market there have been some attempts to address this by means of regulation government intervention there's a general price gap that we have which is based on external reference pricing but it's generally considered to be ineffective because it's based on the list prices in a number of neighboring countries including the uk and those are not actually the prices that anyone pays so as a price cap it's not very stringent because it doesn't take account of the discounts that are applied in practice we have only limited centralized price negotiations about which i'll say a little bit more later on it doesn't play a very important role because we have those competing health insurers who in principle have to negotiate themselves and sometimes they manage in the area of outpatients so non-hospital treatments they're selected purchasing by the health insurers and generally they managed to get a fairly good deal but it doesn't really work that way for intramural so hospital treatment patients various things have been tried there a system of add-on pricing which means the hospital bills separately for the medications so at least the insurers know what the price tag is which is already something we have tried as an authority the competition authorities try to promote more collective purchasing by indicating what scope there is for that within the competition rules if anyone is interested we can discuss that perhaps separately and on the menu for today's what we're trying to do is pursue a more active competition policy and the question is to what extent that would be compatible with intellectual property rights so essentially i think i already gave the gateway right at the beginning there is simply parallel application of the intellectual property and competition rules that's not something that we started out with when we wrote the paper because we wanted to look at past pharmaceuticals and ran into a lot of opposition from strangely enough especially economists both within an outsider organization who are pointing towards things like innovation and also insisting that the highest value imaginable is that of property and here you're combining both so you couldn't possibly want to infringe on that by applying the competition rules so they basically framed intellectual property rights as an absolute bar to antitrust i think that's a question mark but and even the place there any more in view of what we've already discussed today at the same time we also encountered a very cautious approach by the EU antitrust authorities i think i'm not disclosing any secrets when i'm saying there's an ongoing dialogue between the different authorities at the different levels and the EU doesn't always at the community level lead the way in every aspect sometimes they're more comfortable taking a backseat and following on at a later stage and perhaps a more impressive scale i think what we ended up setting out in the paper is perhaps not that innovative at all what we essentially said was the intellectual property rights and competition rules apply in parallel going back to the constant case one of the early competition cases where it was held that intellectual property rights should not be used to frustrate the cartel prohibition there's a directive on intellectual property rights enforcing which although only in a recital clearly states this does not prejudge the application of the competition rules on the other hand it's also clear that patent is not always a relevant market so therefore it doesn't always imply a dominant position let alone abuse of a dominant position and what we're effectively working towards and if we look at EU competition law and industrial and intellectual property is a coexistence of the relevant principles i'm not going to run through the case law in detail but what we've seen is several phases initially there was case law to do with with blocking parallel trade parallel imports and there was ruled that the existence of an intellectual property right doesn't mean there is firstly dominance at the same time even the exercise of intellectual property right may constitute abuse and using or abusing the patent system as we've also heard today can form an abuse so these are just some general principles that confirm that coincidence coexistence and this phase which is more to my mind about exclusion is rounded off with the pay for delay case as i'm citing here lundberg survey and the recent generics case where essentially it was held that restrictive agreements are possible even within the scope of a patent and that generics are potential competitors which is an important principle that was confirmed at the highest level in the generics or peroxidine case which is an interesting case in many aspects also because it emphasized that anti-competitive effects should be balanced against proven pro-competitive effects which i think is one of the the most interesting aspects of the case but from the perspective of a competition authority it's a very welcome case i'm sure the cma will be very happy with it as well because it seems to confirm that as we've heard this morning from chris stothers as well um essentially pay for delay is not um something you should do and is something that can clearly be caught by the competition rules now for something slightly more controversial so far it's been about exclusion so keeping competitors out of the market and then the other half of competition law at least conceptually if not in practice is exploitation countering exploitation and there the question arises what is a fair price that's the the the way that advocate general neils vile started his opinion akala case asking that question eventually he did see scope for a methodology to determine such a fair price but it's something that's rarely done and that's very difficult so competition laws are preference for enforcing the provision on exclusion for several reasons one is a practical one competition authorities like to stay out of price regulation because it's messy and they don't have the resources to do it more ideologically you would say that you would prefer markets to fix themselves so if you manage to fight exclusion effectively then that will take care of the exploitation because there will be market entry and excess profits will be competed away as we've also heard this morning and that would then be a market fixing itself and anyway what is an unfair price and how do you determine it it's a very complicated question whether there's very little guidance available so far at the same time at the national level there's already been a move away from the bay for delay cases to excessive pricing cases and these are cases where the exploitative abuse of off-paston drugs primarily was prosecuted we've seen the aspen case in italy confirmed that the highest judicial level visor flinnabout which we've heard today where we'll get interesting news on monday there's cd pharma in the uk which i believe has been confirmed that the highest judicial level there and on the back of this the e-competition has started its own aspen case essentially in all EU member states except italy and therefore crossing an important bridge for european competition law enforcement where the convention itself now is willing to prosecute excessive prices so far this is all fairly established practice although you could debate about what exactly the standard would be for an off-paston drug but clearly where there is very little innovation involved and apart from the intellectual property more procedural aspects there's there for no reason to be particularly respectful of the product involved this is a different matter when you move into intellectual property right protected and orphan drugs well a few words about that our approach or the approach that we've taken in the paper and are trying to develop also other competition authorities how to approach a fair price is essentially by taking the incentives to innovate into account so that is the key to reconciling competition law and intellectual property law and that can take a practical that obviously has to take a practical aspect there's there are two phases to an excessive pricing proof in the first place you have to look at at the the margin and where this is excessive and you do this in a cost plus context and next you have to prove that the price is also unfair and this you do it based on comparisons with preferably products that are not just comparable but also in competitive markets so it provides it with a competitive benchmark and there are different degrees of complexity to this and what the competition appeals tribunal and Pfizer Flynn appears have done a set out of particularly demanding and complex tests in this respect and we're about to hear whether that is appropriate or not but in any event it is always going to be difficult because you have to look at the not just because you have to look at the figures but also because you have to find a meaningful comparator limiting ourselves ourselves to the intellectual property protected drugs here what we would propose is to take a life cycle approach so you look at the entire life cycle of the product and the degree of profitability at the various stages you should also look at the probability of success so you cannot assume ahead of time that that the product will will be a success but ideally what you need is what the company itself from an investor perspective thought that the likelihood was at which it was ready to invest in the product so what you look at is the investments in innovation in there then that also means there should be investments in innovation so it's not enough that something would be for example an orphan drug that in itself has improved that it's innovative if it's in a repurposed orphan drug it may well be that very limited innovation was involved in particular if it were to be a case where the same drug had already been used off license for several decades for the treatment for which it was subsequently awarded an orphan status and more technically and I hope there are no accountants in the room because I cannot withstand any serious degree of questioning on this but what you want to do is you want to compare the internal rate of return on the one hand within the company and then look at the weighted average cost of capital and compare those and essentially the next question becomes at what level would you then think an excessive price occurs and this is where the jury is very much still out are you looking at a multiple or are you looking at a percentage that's smaller than 100% and those are questions where the answers may well be different if you're talking about innovative IP protected under orphaned drugs rather than the off fattened drugs found for example part of the drug found in the Pfizer flim case might might be warranted to take it entirely different as standard into account so this I think is the core of the approach that we're proposing and unfortunately I can't give you any examples of successful application thereof although I can assure you that we're working on that and whether it would be successful or whether we'll ever be able to come out with results is an open question and in this context there are also other issues to do with market definition and dominance you have to look at the role of IP regulation in the context of market definition and dominance counterfeeling market power is an issue and then in the Dutch context in particular because we have to deal with the fragmentation on the side of the purchasers who are who are the health insurance companies as private undertakings other issues are whether off label use is part of the market and I think most people familiar with the EU case law and that would think that most likely this and pharmacy preparation is another life issue whether pharmacy preparations which can be relevant in particular to orphaned drugs whether very small patient populations whether that should be seen as a substitute to be taken into account in the context of market definition and dominance determination so that was the core of my presentation I want to just use the remaining time to say a little bit about other possible remedies and the context of the competition law intervention there's several things you might want to look into one is how to avoid over investment in social welfare terms where we found that in some cases drugs that are incredibly expensive in the order of magnitude of almost a million euros per added healthy life here there are actually sometimes pretty good arguments in terms of the underlying costs so we find out that you've got something that exceeds the quality threshold so that is the amount that you would normally be willing to pay for an added healthy life here which in the Netherlands is 80 000 euros and we've found drugs costing 800 000 euros which means that they're displacing for every healthy life here added there displacing nine healthy life here somewhere else but nevertheless justifiable in terms of cost although not perhaps in terms of social welfare so that's something you want to look at and more in general the role of health technology assessment and the role of qualities and ICERS are relevant there I don't think they probably should be a price cap nor should they be used necessarily as the standard for willingness to pay but they can provide a comparison across different products that may be useful if you are doing comparisons also in an excessive pricing context public pricing intervention is something that is perhaps less relevant here in the UK than it would be in the Netherlands I'm not entirely sure what the system here is but I think you've got more control over products entering the markets and negotiating a price before they do if we're going to keep external reference pricing we probably wanted to be purchasing power parity based and also we may want it to be based on actual prices paid if available rather than on list prices that nobody's actually ever paid manage entry agreements are something that essentially involves only allowing a product onto the market after you've agreed a pricing arrangement at the gate and horizon scanning is another mechanism that you want to introduce where you know well ahead of time what's going to happen when the products are coming onto the market and you can account for the budget implications of that finally promoting competition for the market is something to look at tendering promoting tendering preferential sourcing and joint purchasing initiatives is something that our competition authority has looked at has looked at and tried to promote that with the health insurance companies unfortunately we have to say that so far the our results are fairly discouraging you can do that at a national scale or internationally there's a Benelux initiatives of the Benelux countries Austria and Ireland I think Canada has either joined or is thinking of joining to start negotiating at an international level well unfortunately it seems that so far this is merely aspirational and hasn't actually led to too many boots on the ground yet and final a final point here is that what we found out when we evaluated our our joint purchasing guidelines or guidance is that effective switching appears to be much more enforced than volume so it's not that helpful to organize on a large scale and because it's more difficult to reach consensus on which products than to target but if you're even on as a single hospital able to effectively switch your population between suppliers that may be much more effective at the end of the day than having a large volume that is more difficult to move but I'm happy to discuss maybe after the session with anyone who is interested in this kind of thing so finally a few words on on regulation also relevant to the Dutch context I think we need to adjust our regulation we need to close some regulatory loopholes and gaps with advocated revising the orphan regime which has basically got two possible ways of entry one is based on prevalence if you are rare disease and the other is based on profitability if you think you couldn't reasonably make a profit and it seems obvious and almost a drafting error that those are not cumulative requirements but our alternatives to my knowledge nobody's ever chosen the alternative route of saying that they couldn't be profitable which I think in itself is already indicative and that's also the reason that they haven't dropped out of the system after six months because nobody entered it on that basis health technology methods could be standardised at a level even though the cutoff or thresholds would probably have to be national in addition you could open some regulatory loopholes instead of closing them one of them is promoting pharmacy preparation or something that's happened in the Netherlands and to some extent pharmacy preparations are now becoming an alternative to some of the more expensive orphan drugs whether or not that's something that you would want to see in the long run is open for debate but it's definitely a regulatory loophole that can put some pressure on the industry compulsory licensing could be considered also as a competition remedy I don't think I have time for that but I have an additional slide on that that we can discuss maybe later also after the session what it also means is that if application of the competition rules in particular on excessive pricing doesn't work doesn't mean that that's the end of the game it means that we may be moving into things that nobody would really want but that are perhaps necessary in order to create a more level playing field where it's possible to negotiate a new more balanced outcome so we need a more effective competition enforcement which means developing a framework to take innovation into account about which I've just spoken I think we should at least try to enforce the rules whether we're going to win our case or not in the end at least we have to try developing in the process experience and a certain track record in doing so and experience has taught me that failing as at enforcing the competition rules sometimes means that you will by finding what you wanted being introduced by means of regulation now whether more regulation is always the solution is the question if we could solve it based on just the competition rules that might be preferable and of course there is always room for academic contributions and I think we could shed in particular more light on the balance between innovation access and affordability between IP rights and competition principles as I've just tried to do a little bit then there's an issue of balancing competition and regulation that I've just touched on very lightly and also as somebody mentioned Bill and Melinda Gates already alternative funding methods might be something to study whether it would be in terms of competitions or prizes or dealing with publicly funded innovation in different ways an open question and I think I'm not going to start with the compulsory licensing so I'll wrap it up here and thank you for your attention