A recent resurgence of excessive or unfair pharmaceutical pricing cases brought by European competition authorities has underscored the question of how European regulatory authorities and courts ought to curb prices deemed to be “too high.” What tests ought to be used to determine whether prices are excessive or unfair, and should the policing of such prices be accomplished by the enforcement of competition law or by improving existing regulatory frameworks?
A new Economist’s Note in the Journal of European Competition Law & Practice by two Analysis Group consultants examines these issues in detail. In “Economics of Excessive Pricing: An Application to the Pharmaceutical Industry,” Managing Principal Antoine Chapsal and Vice President Joshua White lay out the prevailing three-step test by which prices are determined to be excessive: assessment of dominant position in an appropriately defined market, establishment of robust benchmark comparisons, and assessment of economic profitability. For each step, they summarize the reasons why particular features of the pharmaceutical market may complicate or even frustrate the relevant inquiry.
Given the potential for serious harm to the market and to society if intervention is flawed, the authors ask whether the enforcement of competition policy is the optimal vehicle for controlling excessive prices. “To the extent that governments or public health authorities believed that companies in recent excessive pricing cases were taking advantage of gaps in regulatory policy,” they conclude, “action should have been directed at improving the regulatory policy rather than competition law enforcement.”
Associated People
Antoine Chapsal
Dr. Chapsal is an economist who specializes in empirical and theoretical industrial organization. He has provided economic expertise in a large number of high-profile cases involving mergers, cartels, information exchanges, abuses of dominant positions, regulation, intellectual property matters, and damages quantifications. Recent examples include the Lafarge/Holcim and Fnac/Darty mergers, as well as airfreight, cathode ray tube, and elevator cartel cases. Dr. Chapsal has also assisted various firms in designing optimized pricing strategies and dealing with policy issues. His reports have been presented to the competition authorities of France, Germany, Austria, and South Africa; the European Commission; the Higher Regional Court of Düsseldorf; and the Court of Appeals, Conseil d’Etat, Conseil constitutionnel, and Tribunal of Commerce of Paris.
Prior to joining Analysis Group, Dr. Chapsal founded MAPP, a Paris- and Brussels-based economic consultancy, which was acquired by KPMG in 2018. Previously, he worked in a US competition economics consultancy. Dr. Chapsal regularly publishes articles on competition economics, on subjects ranging from the econometric analysis of cartels to geographic market delineation and exclusionary strategies. He is an affiliated professor at the Sciences Po Department of Economics and a member of the CESifo academic research network.
Joshua White
Mr. White is a consulting economist who specializes in applying microeconomics and sophisticated econometric modeling to complex litigation and merger-related questions, primarily in matters involving the health care, financial services, and technology industries. His work across a diverse set of engagements has encompassed simulating consumer demand and switching behavior, analyzing whether intellectual property (IP) licensing rates are FRAND-compliant, and estimating ex ante default probabilities for structured investment vehicles. He also has substantial experience developing innovative technological tools for analyzing datasets for merger and competition analyses.
Mr. White has supported both economic and scientific experts addressing competition and intellectual property (IP) issues in matters related to cutting-edge pharmaceutical products. He has supported clients in various jurisdictions and industries in follow-on cartel damages litigation, assessing overcharge, upstream and downstream pass-on, and volume effects.
Mr. White has worked in a number of international jurisdictions and has served as a testifying expert in the UK’s Upper Tribunal (Lands Chamber) on competition matters related to restrictive land covenants. He has also given evidence and submissions to the UK’s Competition and Markets Authority (CMA) on behalf of clients involved in market investigations and mergers. Mr. White has supported several clients before the European Commission on cartel and merger matters and has provided support to European financial and competition regulators in coordinated conduct investigations. Mr. White has published a number of articles and regularly speaks at international competition law and policy conferences.