CMA issues guidance permitting drugs companies to work together on Combination Therapies

On 17 November 2023, the CMA issued a Prioritisation Statement (the Statement) indicating that it would not prioritise investigations under Chapter I of the Competition Act 1998 (the CA 98) of exchanges of competitively sensitive information (CSI) and/or agreements between medicine manufacturers which have the aim of making a combination therapy (a Combination Therapy) available to NHS patients in the UK, provided that certain market conditions and features are met and the parties implement the negotiation framework (the Negotiation Framework) set out in the Statement.

What is Combination Therapy?

A Combination Therapy is a treatment using two or more medicines in combination. This will typically comprise a 'backbone' treatment (i.e., a medicine that is already authorised for use and reimbursement by the NHS as a monotherapy) (the Backbone Medicine) and the 'add-on' treatment(s) (i.e., a medicine (whether already marketed or developed as part of the specific combination) that is added to the existing Backbone Medicine to create a Combination Therapy) (the Add-on Medicine).

The issue that the Statement is designed to mitigate is that Combination Therapies are not, based on the evidence provided to the CMA by the Association of the British Pharmaceutical Industry (the ABPI) and a number of its members, getting approval from the relevant UK health technology assessment agencies. (We refer primarily to the National Institute for Health and Care Excellence in England (NICE) in this note, but each of Scotland, Wales and Northern Ireland has their own assessment agency, each an HTA Agency). This is because the price of Combination Therapies is not sufficiently 'cost effective' to receive the reimbursement recommendation necessary for the Combination Therapy to become routinely available to NHS patients.

The Cost Effectiveness issue

'Cost effectiveness' is assessed by NICE by comparing the incremental costs and benefits of the new Combination Therapy against those of existing treatments. Recent research suggests that net price for the Backbone Medicine (i.e., the confidential discounted price agreed between the NHS and the supplier, set so as to ensure the treatment meets 'cost effectiveness' criteria) (the Net Price) is likely to be near the upper limit of what the NHS will pay for the treatment , and the NHS's 'uniform pricing' policy means that a Backbone Treatment has a single net price (with the result that the supplier of the Backbone Medicine (the Backbone Supplier) cannot reduce it for the Combination Treatment unless it is happy to do so for all other applications) (the Uniform Pricing Policy).  The only way the supplier of the Add-on Medicine (the Add-on Supplier) can make the Combination Therapy 'cost-effective' is therefore to reduce the price of its Add-on Medicine. However, in many cases the extent of the price reduction required would result in the Combination Therapy ceasing to be commercially viable. Moreover, combination treatments can lead to increased survival rates, meaning patients are on the Combination Therapy for longer. This increases the cost to the NHS, meaning the cost-effectiveness threshold might be exceeded because of the life-enhancing benefits of the Combination Therapy.

The ABPI and some of its members indicated to the CMA that, without some form of commercial agreement between Backbone and Add-on Suppliers, it is extremely challenging to meet the 'cost effectiveness' threshold; and that as a result many companies have aborted their efforts leading to reduced patient access to innovative treatments for serious diseases (including cancer, HIV, hepatitis C, rheumatoid arthritis and COVID-19) and potential  discouragement of R&D in this in the area in the UK. The NHS and NICE also informed the CMA there was no viable regulatory solution to this issue.

The ABPI Negotiation Framework

As the process that would allow Backbone and Add-on Suppliers to reach a commercial agreement might involve the exchange of CSI and concerns around improper coordination on the price of the component medicines, the ABPI developed the Negotiation Framework for use in these circumstances. The object of the Negotiation Framework would be to determine the amount per patient that the Backbone Supplier would need to pay to the Add-on Supplier to compensate the latter for offering the Combination Therapy to the NHS at a price low enough for it to meet the relevant cost-effectiveness threshold so that it is approved for reimbursement by the NHS (the Contribution Payment).

While the Statement sets out in some detail the various steps under the Negotiation Framework, at a high level these comprise the following:

• Add-on Supplier determines what the gap is to achieve positive NICE cost-effectiveness recommendation;
• Add-on Supplier determines whether the following market features are present (the Required Market Features):
  • Agreed pricing for Backbone Treatment limits the price paid by the NHS; and
  • Clinician Decisions about whether to use the Combination Therapy is driven by NICE clinical effectiveness guidance (i.e., once NICE approves a Combination Treatment as 'cost effective', the decision of the clinician will be driven by non-price factors, primarily clinical effectiveness guidance issued by NICE);
• Add-on Supplier writes to the Backbone Supplier with a business proposition;
• (If proposition accepted) Suppliers discuss proposition and enter into agreement relating to net price adjustment of Add-on Medicine necessary to meet cost-effectiveness threshold/consequent Contribution Payment (the Combination Therapy Agreement).

The CMA's approach under its Prioritisation Statement

Provided that the following applies, the CMA will not prioritise the investigation of the information exchanges that form part of negotiations or any subsequent Combination Therapy Agreement(s) (particularly in relation to Contribution Payments):

• The Required Market Features are present;
• The Negotiation Framework is followed;
• The information exchanged not being disseminated more widely than necessary and being limited to:
  • Certain permitted information including: relevant information about the Combination Therapy (e.g., treatment pathway, indication, expected patient population), the status/timing of the UK HTA process and key commercial points in the Combination Therapy Agreement (e.g., the amount of the Contribution Payment, duration and implementation mechanisms); and
  • Any additional information reasonably necessary to agree the Contribution Payment but which would not include/allow for the calculation (through reverse engineering) the confidential Net Price (the Permitted information); and
• The terms of any Contribution Therapy Agreement must be directly related to and necessary for the calculation or operation of the Contribution Payment mechanism and do not involve:
  • An agreement to fix the price of either the Backbone and/or Add-on Medicine;
  • Provisions that agree or discuss any collective action outside scope of UK HTA reimbursement approval.

The CMA reached these conclusions on the basis that it felt there was limited scope for the exchange of Permitted Information to lead to higher prices for the NHS/poorer patient outcomes given that:

• The Net Price system limits the price that can be charged for each treatment and a Supplier's ability to unilaterally raise prices;
• The Negotiation Framework restricts the sharing of Net Pricing information and generally seeks to limit information exchange to what is strictly necessary; and
• Clinician decision making on which Combination Therapies to use are, once they are deemed to be cost-effective by a UK HTA, driven by non-price factors (primarily clinical effectiveness) which means exchanging Permitted Information is unlikely to have a significant negative effect on market outcomes.

Moreover, in the CMA's view, the Negotiation Framework would have a limited negative impact on competition as it is intended to facilitate the offer of a commercially viable/lower price for a Combination Therapy to the NHS. Even though this might lead to the withdrawal of relevant monotherapies (following the emergence of a Combination Therapy) in some (but not all) cases, and thus a reduction in competition, this would be reflective of clinical preference rather than a result of the relevant Combination Therapy Agreement.

In light of the above and particularly given the significant improvement in patient outcomes that might result from the greater availability of Combination Therapies, the CMA considered it appropriate to publish the Statement. However, it noted that there may be other approaches to getting to the desired outcomes, that Suppliers will need to self-assess their competition law compliance in all cases and that the CMA may revisit/update the Statement as circumstances evolve.

Comment

The Statement is a welcome if unusual step from the CMA. While the Secretary of State did, during Covid-19, put in place a number of 'public policy exclusion orders' (now all revoked) relaxing competition law for certain agreements subject to their being notified (e.g., in the groceries or the dairy sector), the Statement does not give pharmaceutical companies the same level of certainty, nor does it exclude the negotiation of or entry into a Combination Therapy Agreement from the ambit of the CA 98.

Instead, it offers a detailed framework for pharmaceutical companies (likely with the assistance of their competition law advisers) to self-assess the competition law compatibility of a Combination Therapy Agreement and the negotiations/exchanges of information necessary to enter into it. The Statement suggests that the CMA would not prioritise an investigation into a proposed or agreed Combination Therapy Agreement, but this does not exclude the possibility of the CMA, for example, sending information requests to Suppliers to establish whether they had or were acting in line with the Statement. Moreover, the CMA leaves open the possibility that it may revisit or revise the Statement in the future.

Nonetheless, the Statement does suggest that the CMA are open to market-led initiatives in certain cases, particularly where there is a very clear and compelling potential consumer benefit (as the CMA notes in its introduction to the Statement, evidence from the APBI suggested that, since 2017, 50% of Combination Therapy appraisals by UK HTAs have been terminated or found not to be 'cost effective'). It appears that the APBI developed the Negotiation Framework 'blessed' by the CMA in the Statement and engaged extensively with the CMA as part of the process leading to it being issued. However, it is not clear that the CMA would be open to similar market-led proposals in other sectors where the fact pattern may be less clear-cut and/or the benefits not as readily appreciable.

This is because there are several factors which may strongly differentiate the UK pharmaceutical sector in general and Combination Therapies in particular from other markets where UK competition law may be hindering collaborative innovation. the CMA has in recent years been focussed on the UK pharmaceutical sector; in 2021-2 it issued several infringement decisions in relation to excessive pricing and market sharing agreements in the sector (several of which are currently on appeal).  As the CMA explained in its 2022-23 Annual Report, this forms part of one of its current key priorities, namely protecting consumers from unfair behaviour in areas of essential spending at a time when budgets are tight.

The purpose of the Statement (enabling Suppliers to develop Combination Therapies which are both therapeutically effective and cost-effective) clearly aligns with the work the CMA has done around this theme, and the evidence presented by the ABPI to the CMA suggests that competition law may have been hindering rather than helping innovation in this area. The CMA is likely to have taken some comfort from the fact that the NHS and NICE appeared broadly supportive (and, indeed, informed the CMA that there was no regulatory means to resolve this issue) and that, because of the Net Price/Uniform Pricing Policy, there appears to be no unilateral means for Suppliers to increase the price of a Backbone or Add-on Medicine unilaterally.

The practical impact of the Statement will likely depend on whether it increases the number of Combination Therapies which secure approval and, as is hoped, facilitates this outcome without giving rise to the competition law risks associated with discussion of normally sensitive issues such as pricing and launch plans. Much is likely to turn on whether Backbone and Add-on Suppliers are able to conduct the requisite negotiations in conformity with the Statement. Companies will wish to consider involving their competition advisors throughout the process, in light of the detailed analysis that seems likely to be required to give a Supplier sufficient comfort that it falls within the terms of the Statement. As the CMA itself notes, given these challenges and the importance of securing better patient outcomes through facilitating UK HTA approvals, it may well be that the Statement is updated/revised as matters evolve.

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