Costly Capsules: Court calls foul on Leadiant

The court found that (i) the ACM had correctly assessed whether Leadiant held a dominant position; and (ii) that the ACM had carefully and objectively assessed whether Leadiant’s price was excessive and unfair.

Background

• Since 2008, Leadiant has been marketing a CDCA-based drug called Chenofalk in the Netherlands. Chenofalk was intended for the treatment of gallstones, but had been used off-label to treat patients with the rare metabolic disorder CTX for decades.
• In 2009, Leadiant changed the drug’s name to Xenbilox and raised its price to EUR 885, which was around 20 times the original price.
• In 2014, Leadiant applied for orphan designation and market authorisation for the treatment of CTX. The price was raised to EUR 3,103.
• In 2017, market authorisation was granted, giving Leadiant the exclusive right to supply a CDCA-based drug for the treatment of CTX to the European market for ten years.
• Leadiant introduced CDCA-Leadiant on the Dutch market in 2017 and withdrew Xenbilox from the market. The selling price of CDCA-Leadiant was EUR 14,000 at that time.
• Since January 2020, Amsterdam UMC has manufactured CDCA in its own pharmacy, which led Leadiant to reduce the price of CDCA-Leadiant.

ACM’s approach confirmed

Having established that Leadiant held a dominant position, the court applied a two-pronged test to determine whether Leadiant had abused its dominant position. In line with EU case law, the court determined whether Leadiant’s price was (i) excessive and (ii) unfair. 

To determine whether Leadiant’s profit margin was excessive, the ACM had compared the internal rate of return (IRR) on Leadiant’s investments with a normative return. This normative rate of return was determined on the basis of the weighted average cost of capital (WACC) employed in the production of Leadiant-CDCA. The ACM also compared the minimum profitable price with the price actually charged.

According to the court, this methodology was both prudent and objective. 

The court then considered the fairness of the price charged by Leadiant. While Leadiant’s efforts to obtain a marketing authorisation were important, the court considered the added value of these administrative efforts to be limited. While such efforts might justify a modest price increase, the jump from EUR 46 to EUR 14,000 was considered to be manifestly unfair by the court. 

Leadiant’s complaint

In a separate judgment, the court ordered the ACM to revisit its decision to dismiss a complaint by Leadiant, which claimed that health insurers had collectively boycotted negotiations over the reimbursement of CDCA-Leadiant. The ACM had refused to investigate Leadiant’s complaint,  on the basis of its prioritisation policy. However, the court determined that the ACM had overlooked the fact that key elements of the complaint had already been examined during the process of imposing a fine. Consequently, the court concluded that a thorough investigation would place a lesser burden on the ACM's resources than the agency had indicated.

Conclusion

The Leadiant judgment may serve as a reminder of the continuing European regulatory interest in pricing practices in the pharmaceutical sector, as is also evidenced by European Commission decisions such as Aspen, and CMA decisions such as Pfizer/Flynn and Advanz Pharma. Given the increased enforcement in this area, dominant pharmaceutical companies should continue to critically review their pricing policies. The court's confirmation of the ACM's methodology may provide pharmaceutical companies with a clearer framework for assessing whether a price should be considered excessive.

Both judgments can be appealed to the Trade and Industry Appeals Tribunal. Meanwhile, the ACM is required to revisit its decision not to conduct an in-depth investigation into Leadiant’s complaint.

Note: Joost van ‘t Hof contributed to this article. He was a Legal Assistant at the Competition & Regulated Markets practice group during February 2025.