Introduction

In a significant ruling for competition law enforcement in the pharmaceutical sector, the Court of Appeal has unanimously upheld the Competition and Markets Authority's (CMA) decision that Advanz abused its dominant position by charging excessive and unfair prices for liothyronine tablets to the NHS. The parties appealed against the initial CMA decision to the Competition Appeal Tribunal (CAT), which largely upheld the decision, but reduced the level of the fines imposed. Two of the parties sought leave to appeal to the Court of Appeal, and the CMA sought leave to appeal against the reduction in penalty. The Court of Appeal’s judgment, handed down on 8 May 2025, represents a decisive victory for the CMA, supporting its ongoing efforts to address anti-competitive practices in the pharmaceutical industry.

Background

Liothyronine is a medicine used to treat thyroid hormone deficiency. It was developed in the UK in the mid-1950s and had long been off-patent when Advanz acquired it in 1992. Between 2009 and 2017 (the “Infringement Period”), as the sole supplier of liothyronine in the UK, Advanz implemented a total of 63 progressive price increases:

• in January 2009, the price of a box of liothyronine was £20.48. 
• By August 2012, it rose to £46.
• By October 2015, it reached £190. 
• By July 2017, the price of a box was £247.87. 

This 1100% increase over the Infringement Period caused NHS annual expenditure on the drug to increase from £2.3 million to more than £30 million by 2016.

The CMA's investigation and decision

Following an extensive investigation, in July 2021, the CMA concluded that Advanz had abused its dominant position by charging excessive and unfair prices. The CMA found no objective justification for these price increases as:

• the cost of producing the tablets had not increased significantly; and 
• there was no evidence of meaningful innovation or investment by Advanz. 

Using the "Cost Plus" methodology - which calculates production costs plus a reasonable return on capital - the CMA determined that a fair price would have been approximately £4.94 per box.  Based on these findings, the CMA imposed fines totaling over £100 million, apportioned between Advanz Pharma and two of its former owners, HgCapital and Cinven, based on their ownership during the Infringement Period. The fines were apportioned as follows: 

• £8.6 million for HgCapital;
• £51.9 million for Cinven; and
• £40.9 million for Advanz Pharma Corp. 

Appeal to the Competition Appeal Tribunal

Advanz, HgCapital and Cinven appealed against the CMA's decision to the CAT.  In the appeal, the applicants advanced several arguments challenging the CMA's approach. The parties suggested the theory of market self-correction as an alternative price methodology, and proposed that a “workably competitive market” should be the benchmark for fair pricing. They additionally submitted various alternatives to the Cost Plus methodology used by the CMA, and suggested that the NHS’s payment of prices through the drug tariff system constituted legal acquiescence.

In August 2023, the CAT largely upheld the CMA's decision, endorsing Cost Plus as an appropriate benchmark for determining a fair price in generic pharmaceutical markets. However, the CAT did reduce the penalties imposed on HgCapital and Cinven, setting aside a portion of the financial penalty related to "specific deterrence" in Cinven's case.

Appeal to the Court of Appeal

Following the CAT's judgment, HgCapital agreed to pay its fine of £6.2 million.  However, Advanz and Cinven both sought permission to appeal the CAT's decision to the Court of Appeal. The CMA simultaneously sought to overturn the CAT's reduction in Cinven's penalty.

On 8 May 2025, the Court of Appeal unanimously refused Advanz Pharma and Cinven permission to appeal the CAT's judgment. The Court found that the applicants had no basis to challenge the CAT's decision to uphold the CMA's findings of abuse. Some key findings are outlined below. 

1. Pricing – when assessing issues of pricing, the Court of Appeal rejected the appellants’ proposal that “workable competition” - defined as having no market dominance, no collusion, and no insurmountable barriers to entry – should be a bright line test for fairness in pricing. The Court evaluated a range of alternative benchmarks proposed by the appellants, including Entry Incentivising Prices, Post Entry Pricing, and Multi-Firm Pricing, but concluded that none were suitable standalone tests. It reaffirmed the validity of the Cost Plus methodology – endorsed by both the CMA and CAT – as a legally certain and reliable basis for assessing fairness in pricing.  Citing CMA v. Flynn Pharma [2020] EWCA Civ 339 (Phenytoin), the Court found that the CAT had “fairly evaluated” the appellants’ evidence before rejecting it, so refused permission to appeal. 
2. Acquiescence - the Court of Appeal considered the appellants’ argument that the NHS’s continued payment of prices through the drug tariff system without objection, constituted acquiescence – thereby negating any “unilateral conduct” by the dominant undertaking and precluding a finding of abuse. The Court of Appeal dismissed this argument as “academic” and refused permission to appeal.
3. Burden and standard of proof – the Court also dismissed claims that the CAT had failed to properly apply the burden or standard of proof in its assessment of pricing evidence. It confirmed that both the CMA and the CAT had comprehensively considered the evidence submitted by the appellants. The Court clarified that the CAT’s reliance on Cost Plus was not exclusive; rather, it was supported by a variety of comparator evidence. The Court of Appeal refused permission to appeal, concluding that the analysis of the CAT was “careful, comprehensive and to the point”.
4. Penalties - on the issue of penalties, the Court granted the CMA's application for permission to appeal, allowed the appeal, and reinstated the full penalty of £51.9 million originally imposed on Cinven. It found that the CAT had made several errors in its approach to specific deterrence, including incorrectly comparing the penalty with the minimum financial benefit rather than with Cinven's global turnover.

In reaching these conclusions, the Court identified the following four "incontrovertible" facts:

1. The CAT endorsed the CMA's calculation of the Cost Plus figure (£4.94).
2. The CAT found the comparables relied on by the CMA were "validly made" and "meaningful" and supported the CMA’s position on Cost Plus.
3. The applicants never attempted to economically justify the highest prices charged (up to £247).
4. The prices the applicants contended were lawful were about 10 times higher than Cost Plus. 

Implications of the Judgment

This judgment represents another significant victory for the CMA in its ongoing efforts to tackle anti-competitive practices in the pharmaceutical sector. It reinforces the CMA's approach to excessive pricing cases, particularly its use of the Cost Plus methodology as a valid benchmark for determining fair prices in generic pharmaceutical markets.

It also points to a very practical approach to assessing abuse, for example, in its rejection of the argument that a competitive price will emerge immediately upon the first signs of competition in a market. Instead, prices may continue to be distorted (and may therefore not represent a competitive benchmark for assessing excessiveness) for some time after dominance ends. The Court described a test that ignored that possibility as being “incomplete and [lacking] evidential and economic support”. 

The case adds to a series of CMA enforcement decisions in the pharmaceutical sector, which have also included:

• Fludrocortisone (2019): £2.3 million in fines and £8 million redress for market-sharing.
• Nortriptyline (2020): £3.4 million in fines and £1 million NHS redress for illegal agreements.
• Paroxetine (2021): £27.1 million in fines for anti-competitive agreements and abuse of dominance.
• Hydrocortisone (2021): £260 million in fines for excessive pricing and market sharing. 

The judgment sends a clear message: dominant pharmaceutical companies must be careful not to charge excessive prices to the NHS, even for off-patent drugs. The Court’s endorsement of the CMA’s approach to “specific deterrence” also sends a warning of tougher penalties for similar cases in the future – and not only in the pharmaceutical sector. For pharmaceutical companies, this case highlights the importance of ensuring that pricing strategies comply with competition law, even when regulatory frameworks like the Pharmaceutical Pricing Regulation Scheme (PPRS) do not apply. 

For more information or further guidance on this topic, please contact Peter Willis or Flora McCarthy.

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