How much is too much? – Excessive Pharmaceutical Pricing in European Competition Law

Behrang Kianzad, Law, University of Copenhagen
Business Administration and Business Economics, Economic Growth, Economic History, Economic Innovation, Economic Methodology, Economic Policy, Economics, Economy and Society, Health, Health Economics, Heterodox Economics, History of Economic Thought, Human Rights and Global Justice, Industrial Organization, Law, Law and Economics
Keywords - excessive pricing, competition law, intellectual property law, political economy, legal philosophy, philosophy of economics, neoclassical economics, behavioural economics, Right to Health

The thesis concerns the multi-disciplinary area of pharmaceutical pricing and reimbursement in the interface of intellectual property law, competition law, regulatory approaches and Right-to-Health. The legal background is Article 102a TFEU prohibition against unfair pricing by a dominant undertaking, capable of distorting trade between Member States or in a substantial part of the Union. The demand-side in-elasticity, and the charging of prices to health systems rather than individual “customers”, in combination with the fog surrounding actual marginal costs and R&D spending compared to actual profits complicate the matter further. Add to this the competition through innovation dimension and the Standard Equilibrium Model and static competition are all but fit for the purpose of analysis of market dynamics and competition law rationales in this sector.

Recent years have seen the dominance of neoclassical, marginalist and welfarist schools of Competition Law and Economics being challenged more vigorously than ever. Although the core assumptions of the neoclassical school regarding overt reliance on rationality and efficiency ever since the inception of the school have been target of much criticism, the latest decades of both research and real life developments have reinvigorated the criticism. Insights in bounded rationality, that we care more about fairness than maximizing utility in transactions as well as a host of macro- and micro-economic research on calculable fairness in the realm of competition law and economics carry with them drastic consequences for this area of law.

The recent tide of “unfair pricing” cases, mostly in the pharmaceutical sector, is a testament to the renaissance of the Fairness concept in European Competition Law and Economics. A return to Kantian philosophy of law and a balanced approach between law and economics disciplines is thus observable in line with the legislative intent behind competition law, manifest economic reality and inherent human preferences.

The thesis breaks new normative ground in attempting to define “unfair pricing” for the purposes of enforcement of Article 102a TFEU in a rational, practical, objective and administrable way, re-connecting with settled jurisprudence and ratio legis and ratio oeconomica of Article 102a TFEU to ensure ex-ante legal certainty.