In a unique challenge to drug makers, the Dutch Pharmaceutical Accountability Foundation is taking the manufacturer of Humira, AbbVie, to court for alleged excessive profiteering. The Foundation accuses AbbVie of engaging in “unfair, excessive pricing practices” regarding its drug Humira (adalimumab).”
The Foundation is not seeking financial damages. Rather it wants the court to rule on what it deems to be a principle of what constitutes a reasonable profit.
If the Foundation’s challenge is successful, this could establish a precedent on price and profit limits which in turn could become a template for holding pharmaceutical companies accountable for excessive profiteering in other (European Union) jurisdictions.
The case will be heard in court on June 21st. But the Foundation’s attorneys expect that it may take until 2024 before the case is resolved.
Humira has been a blockbuster worldwide for nearly two decades. The biologic has multiple indications, including rheumatoid arthritis, Crohn’s disease and psoriasis.
The Foundation asserts that it is justified for a drug maker, such as AbbVie, to earn a profit of 25% on a product such as Humira. According to the Foundation’s calculation, however, between 2004 and 2018 a sum of 1.2 billion euros in profit was not justified. In this context, the Foundation calculated excessive profit by subtracting from revenues all R&D, production and distribution costs, and what the Foundation views as a “fair” 25% profit.
The Foundation is pursuing civil litigation based on Dutch tort law (here, the alleged unlawful act constitutes a breach of “social duty of care”), human rights law (here, the plaintiff alleges violation of the “right to life and the right to health;” rights enshrined in Dutch law) and competition law (here, the Foundation accuses AbbVie of a “dominant position”).
Interestingly, the Foundation explicitly invokes the importance of considering opportunity costs when evaluating expenditures on Humira: “The Dutch government has set a maximum budget for healthcare. That means you have to make choices. You can only spend every euro once. And we see that because drug manufacturers charge too high a price, other drugs or services cannot be delivered.” In the Netherlands, health economists working for the Foundation calculated that by spending “too much” on AbbVie’s product, the forgone alternative is “16,300 additional years of healthy life for Dutch citizens.” Moreover, the Foundation suggests that ordinary Dutch citizens are negatively impacted financially, as they “pay for the [excessive profit], through higher and higher [health insurance] premiums.”
AbbVie has said in response to the legal complaint that it acts in accordance with all Dutch laws and regulations, and the company categorically rejects the Foundation’s allegations.
Difficult legal challenge
The court case against AbbVie concerns the fundamental question to what extent pharmaceutical companies like AbbVie are free to set and maintain the prices of the drugs they offer. Effectively, the Foundation is stating that AbbVie engaged in price gouging.
Price gouging is generally considered the practice of increasing the prices of goods, services, or commodities to a level “much higher” than is considered “reasonable or fair.” More often than not, the term is associated with sellers taking advantage of circumstances that decrease supply. This would include, for example, emergencies causing severe supply-side constraints.
While Humira did enjoy a period during which it was a monopoly – this lasted until 2018 in Europe – there weren’t any supply limitations per se that AbbVie would have been exploiting.
A professor of private law at Utrecht University, Elbert de Jong, has called the case “quite ambitious.” He wonders whether the Foundation’s reasoning regarding “excessive profits” will be accepted in court.
And there may be an even more thorny problem for the plaintiff, says de Jong: “The price of a product is determined by market forces and any public law rules. It is not up to private law to intervene in the price.”
In the Netherlands, drug manufacturers face multiple entities, including the National Health Care Institute and the Ministry of Health, Welfare, and Sport, when negotiating the pricing and reimbursement of prescription drugs. Presumably, AbbVie negotiated an acceptable price with the relevant authorities.
Regardless of the complexities involved in the case and the uncertainty concerning any judicial outcome that may be reached, the Dutch Pharmaceutical Accountability Foundation has thrown down the gauntlet, putting drug companies on notice about their pricing practices.