Inside the EU's first-ever drug cartel
11 November 2024
From 2005 to 2019, five pharma companies formed a cartel to control the pricing of SNBB, a key ingredient in essential drugs like Buscopan – which relieves abdominal cramps and irritable bowel syndrome (IBS).
The companies involved, ranging from India-based Alkaloids Corporation to Germany's Transo-Pharm, agreed to set minimum sales prices and control distribution quotas, artificially inflating prices for over a decade. The European Commission recently fined these companies €13.4 million as punishment, marking a first in the European pharmaceutical industry.
These price-fixing arrangements lead to higher costs for consumers and healthcare systems. Cartels like this form when competing companies conspire to eliminate competition, setting prices that remove natural market pressures. Such coordination allows them to set higher prices without fear of undercutting, turning them into a unified front that operates against consumer interests.
EU authorities have countered this kind of behaviour through antitrust actions, leveraging the Commission's leniency program to encourage insiders like C2 Pharma to expose illegal activities. So by balancing the promise of immunity with the risk of hefty fines, EU regulators aim to break cartel structures and maintain fair competition. In this case, the first of its kind and only one so far, it worked.
 | Leticia Batista Cabanes While the €13.4 million fine imposed on the SNBB cartel by the Commission may seem like a hefty penalty, its deterrent effect is questionable. Given the pharmaceutical industry's profitability, some argue that such fines are merely a slap on the wrist and insufficient to prevent future misconduct. How could such fines make anti-competitive practices unprofitable? The Commission's solution is to scale such penalties with market impact, meaning that the bigger the profit, the bigger the fine. Brussels set the fine based on a percentage of the annual sales linked to the infringement, adjusted by the time the companies participated in the cartel, plus an added entry fee to deter initial involvement. |
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