On March 13, 2020, the Council of State rejected the appeal lodged by Aspen Pharma Trading Ltd., Aspen Italia s.r.l., Aspen Pharma Ireland Ltd., and Aspen Pharmacare Holdings Ltd. (together “Aspen”) against the judgment issued by the TAR Lazio on July 26, 2017, which upheld the 2016 ICA decision to fine Aspen in an amount in excess of € 5 million for charging excessive prices in violation of Article 102(a) TFEU.
On September 29, 2016, the ICA fined Aspen for abuse of dominance in the markets for drugs containing the active substances melphalan, chlorambucil, thioguanine, and mercaptopurine. The ICA held that, by adopting an extremely aggressive negotiation strategy when renegotiating prices with the Italian Medicines Agency (the “AIFA”), Aspen obtained an excessive and unjustified price increase of between 300% and 1500% for the oncological drugs Leukeran, Alkeran, Purinethol, and Thioguanine (the “Cosmos Drugs”), considered essential to treat some types of cancer.
One year later the TAR Lazio rejected Aspen’s application for annulment of the ICA decision.
The Council of State’s judgment
Market definition and Aspen’s dominance
Before the Council of State, Aspen took issue with the definition of the relevant product markets by the ICA. It contested the TAR Lazio’s finding that the ICA did not manifestly err in defining separate relevant product markets for each active ingredient of the Cosmos Drugs. According to Aspen, the ICA wrongfully departed from the Anatomical Therapeutic Chemical (“ATC”) classification system, an approach to market definition commonly used by the EU competition authorities.
According to the Council of State, even though the traditional ATC classification system provides a useful indication of the possible markets, the ICA is not legally bound to use it. It agreed with the TAR Lazio that, in the case under review, specific circumstances existed that allowed the ICA to depart from this criterion. In the Council of State’s view, particular attention should have been paid to drug substitutability with regard to the patients affected: because of their special features, Cosmos Drugs could not be substituted with other drugs for the treatment of certain diseases, especially those that need to be treated at home, and for some categories of patients (children and elderly people). They therefore constituted four separate relevant markets.
Furthermore, the Council of State agreed with the TAR Lazio that the ICA’s assessment of Aspen’s dominance was correct. Aspen virtually held a monopoly and there was no effective and potential competition in the relevant markets, also in the light of the different types of barriers to entry that characterized them.
Aspen’s negotiation strategy
Aspen also took issue with the ICA’s finding that Aspen’s complex negotiation strategy constituted an abuse of its renegotiation rights, which according to Aspen was a misrepresentation of the facts. Contrary to what the ICA decision established, Aspen had the right to request the AIFA to approve a new classification for the same drugs and to withdraw the drugs from the market, although only for a limited period, pursuant to the sectoral regulation. Moreover, Aspen never acted in an intimidating manner towards the AIFA or left the Italian patients without supplies of the Cosmos Drugs.
The Council of State clarified that the lawfulness of Aspen’s actions was to be assessed as a whole, rather than separately for each type of conduct. The Court pointed out that Aspen’s entire negotiation strategy aimed at achieving excessive prices for the Cosmos Drugs, as proved also by the documents found during the dawn raids. In particular, Aspen exercised its rights to renegotiate the prices for Cosmos Drugs in an abusive manner, leveraging on the essential character of the drugs for cancer treatment and on the credible threat of a shortage of supply.
The assessment of the unfairness of the prices
Aspen also contested the ICA’s assessment of whether the prices for Cosmos Drugs that resulted from the renegotiation with the AIFA were excessive. The Council of State approved the ICA’s application of the two-limb test established by the EU Court of Justice in United Brands (27/76).
The ICA first carried out a price-cost comparison by applying two different methodologies (the cost-plus and the gross margin contribution methodologies). It concluded in both cases that Aspen’s prices were well above production costs. The ICA also provided convincing evidence that the prices charged by Aspen were unfair given that the discrepancy between the costs of production and the revenues realized could not be otherwise justified. The ICA considered the new prices charged by Aspen compared with those applied after the renegotiations, and found that there were no plausible justifications for the increase (as the justifications submitted by Aspen were not plausible).
The procedural arguments
Finally, the Council of State rejected also the procedural arguments raised by Aspen (only the two main ones are discussed below). First, Aspen submitted that the ICA had breached its procedural rights by relying on the assistance of Ireland’s Competition and Consumer Protection Commission to carry out unauthorized inspections. Secondly, Aspen argued that the ICA violated several principles of administrative law, such as the principle of transparency of administrative action, and also its rights of defense because it issued two different statement of objections.
With reference to the first procedural argument, the Council of State held that the search and seizure operations carried out by Ireland’s Competition and Consumer Protection Commission were in compliance with EU rules governing cooperation between EU competition authorities. Moreover, the relevant provisions of Italian law could not regulate the inspections carried out by foreign competition authorities.
With regard to Aspen’s claim that the ICA unlawfully introduced the theory of harm based on excessive pricing only after the issuance of the first statement of objections, the Council of State held that the contested conduct was challenged as an abuse of dominance even before and that, in any event, the ICA had notified Aspen with a second statement of objections. Therefore, in the Court’s view, Aspen’s procedural rights were not breached.
 Council of State, judgment No. 1832/2020; TAR Lazio, judgment No. 12806/2017.
 ICA Decision of September 29, 2016, No. 26185, Case No. A480, Incremento prezzo farmaci Aspen.
 Because of their classification in the Italian healthcare system, the prices of Cosmos Drugs are regulated by agreement between the right-holder and the AIFA, their costs being borne by the national health service. Aspen was the only pharmaceutical supplier holding the rights to market these drugs in Italy, having acquired the relevant business from GlaxoSmithKline (“GSK”) in 2009.
 In the ATC classification system, drugs are divided into different groups according to the organ or system on which they act and their chemical, pharmacological, and therapeutic properties.