Paving the way for combination therapies

What is a ‘combination therapy’?

A ‘combination therapy’ uses two or more medicines, supplied by different manufacturers, in combination to treat a patient. Combination therapies enable certain medicines to be used together to generate better outcomes for patients by targeting different pathways or levels of the disease. Certain combination therapies are already available on the market and are commonly used to treat patients with cancer and other serious health conditions. As the CMA observes, we can expect the use of combination therapies to continue to increase in future.

What competition law risks may arise?

The central competition issue that arises in relation to combination therapies is how do suppliers work together to work out how to apportion the price paid by the national health body for each product in the combination?

In the ordinary course, medicine manufacturers make independent decisions about what is an acceptable level of price for their products. The actual (discounted) price that a manufacturer is paid by the national health body when their product is dispensed or supplied is considered confidential.

However, the price that the UK NHS, Australian Pharmaceutical Benefits Scheme (PBS) or EU national health body is prepared to pay for a combination therapy would be expected to be less than the sum of its parts (that is, the discounted price paid for each product if it was supplied for use as a standalone treatment). This can leave manufacturers in the difficult position of having to work together to work out what discount or rebate will be offered for each product in the combination in circumstances where the individual medicines in the combination could compete to some degree – such as where each product can be used to treat the same indication, but with different mechanisms of action, or as a first, second or later line treatment.

Such arrangements between competing manufacturers in relation to price, rebates or discounts may fall foul of price-fixing prohibitions, with potentially significant criminal and civil consequences for companies and individuals involved, not to mention the cost and reputational impact of an investigation. Such negotiations of arrangements may also lead to the anticompetitive sharing of confidential and competitively sensitive information.

As the CMA’s prioritisation statement rightly notes, many manufacturers are reluctant to engage in such conversations due to these risks. Without some collaboration, manufacturers may also face challenges in ensuring that relevant “cost effectiveness” (or similar) thresholds for reimbursement are satisfied. These hurdles may mean that in the long run, patients are the ones missing out on the availability of innovative combination treatments.

What are the key principles of the CMA’s guidance?

At the core of the CMA’s guidance is a negotiation framework for medicine manufacturers to follow when negotiating the supply of combination therapies.

• The framework: in consultation with the CMA, the Association of the British Pharmaceutical Industry (ABPI) and certain of its member organisations, developed the framework to enable manufacturers to negotiate and agree on an amount per patient to be paid by the ‘backbone’ medicine supplier (who supplies the medicine already approved for use and reimbursement as a standalone therapy) to the supplier of the ‘add-on’ medicine (a medicine which is added to an existing backbone treatment to create a combination therapy).
• What can be shared: the CMA limits the type of information that can be shared between manufacturers using the framework to a specified list of topics, or other information reasonably necessary to agree on a contribution payment. Importantly, it does not permit the sharing of the ‘confidential net price’ (being the agreed confidential discount to a manufacturer’s list price that reflects the upper limit the NHS pays for a medicine) or any information that will allow this price to be reverse engineered. The ‘add-on’ manufacturer can share with the backbone manufacturer (among other things listed) the sum per patient it requires to make its own confidential discount sufficient for a positive healthcare technology assessment and for supply to be commercially viable.
• Market features and conditions: in addition to the above conditions, the CMA’s statement applies so long as agreed pricing limits the price paid by the NHS and it remains true that the prescription of combination therapies is driven by factors other than cost. Manufacturers must also ensure that the terms of any agreement reached are directly related to, and necessary for, the contribution payment, and do not extend to other matters such as price of the individual components when supplied stand-alone. Manufacturers should also have appropriate internal ring-fencing measures in place to limit information flows.

What may this mean for other jurisdictions?

Combination therapies, and the competition risks raised above, are not unique to the UK, with a similar need for such therapies in Australia and in the EU. Similar issues could also potentially arise in relation to companion diagnostics, where the cost-effective utilisation of a given treatment may be dependent on the availability and reimbursement of some diagnostic test, which is also seeking reimbursement. However, there is currently no equivalent guidance in Australia or in the EU. Of course, that does not mean that manufacturers whose products could be offered in combinations have no path forward. In Australia, for example, medicine manufacturers contemplating a combination, may consider:

• the extent to which their products are competitive (rather than complementary) and the need to share competitively sensitive information;
• whether there are any relevant exemptions that could apply, such as a joint venture exemption, if there is joint production, supply or acquisition of goods or services by the parties involved; and/or
• authorisation, which allows parties to obtain protection from legal action by the Australian Competition and Consumer Commission (ACCC) or third parties for a specified period for conduct that might otherwise contravene competition law. Depending on the type of conduct, the ACCC may authorise it on the basis that it would not be likely to have the effect of substantially lessening competition or would result in a benefit to the public (that would outweigh any detriment).

The ACCC also has the power to make a class exemption that exempts specific business conduct from the application of competition law (without the need for businesses to make a specific application to the ACCC) if it is satisfied that the conduct would not be likely to substantially lessen competition or would be likely to result in overall public benefits. Following the CMA’s lead, combination therapies would appear to be a candidate for a class exemption, given their potential to increase available treatment options and improve outcomes for patients.

In the EU,¹  where no competition authority has yet taken a public position on addressing the competition risks raised by combination therapies, the European Federation of Pharmaceutical Industries (EFPIA) published a report²  in April 2023 that identified potential approaches to facilitate access to combination therapies. It highlighted the challenge resulting from the inability of manufacturers to coordinate with each other without creating the price fixing risk discussed above. EFPIA suggested introduction of a new framework for direct multi-manufacturer negotiations (similar to the framework proposed by the ABPI in the UK), coupled with ‘safe harbour’ approvals from competition authorities.

Similarly, in June 2023, the Swedish trade association for the research-based pharmaceutical industry Läkemedelsindustriföreningen (Lif), the Swedish National Council for Medicines, and the regions’ cooperation model for medicines proposed an access model³  to the Tandvårds- och läkemedelsförmånsverket (TLV) (the Swedish equivalent of the NHS) to facilitate access to combination therapies. The proposed model also includes a “work-in-progress” negotiation framework to facilitate negotiations without infringing competition law. The Swedish Competition Authority is expected to examine the proposed model and negotiation framework.

In September 2023, the Belgian General Association of the Pharmaceutical Industry (Pharma.be) also highlighted the importance of receiving guidance from the Belgian Competition Authority regarding how manufacturers could engage in limited coordination to enable them to offer combination therapies without infringing competition law.⁴

While we are yet to see competition regulators in other major jurisdictions follow the CMA’s lead, in the EU it appears to be a matter of when, rather than if.