For the First Time, Israel Competition Authority Enforces Prohibition on Excessive Pricing

Barnea Jaffa Lande & Co.

For the first time, the Israel Competition Authority has opened enforcement proceedings against a monopolist for abuse of its dominant position by charging an unfairly high price. Subject to a hearing, the authority intends to impose a pecuniary sanction of ILS 8 million on MBI Pharma Ltd. and personal sanctions on two officers of the company (of about ILS 600,000 each). The company faces accusations of charging an excessive price for Leadiant, a life-saving drug for CTX patients (an incurable genetic disease), which is marketed by MBI Pharma in Israel.

The acting director-general of the Competition Authority announced that, according to the Ministry of Health’s regulations, MBI Pharma holds a monopoly in Israel in the supply of this drug. According to the authority, since MBI Pharma began supplying Leadiant in Israel, in 2018, it has hiked the price of the drug by hundreds of percentage points.

The price of the original drug for the treatment of CTX (which MBI Pharma marketed in Israel until the manufacturer discontinued its manufacture) was about ILS 8,000 per pack in 2017. However, MBI Pharma sold Leadiant for about ILS 50,000 per pack. Even after the drug was included in Israel’s Healthcare Services Basket, its price was still high, at about ILS 32,000 per pack.

In its announcement, the Competition Authority explained that Israeli HMOs and the Healthcare Services Basket are bearing this high cost and draining their budgets at the expense of the public. The Competition Authority opened an investigation of the matter following a complaint lodged by the Ministry of Health. It is important to note the Netherlands Authority for Consumers and Markets also recently imposed a sanction of about EUR 20 million on the drug’s manufacturer, the Italian company Leadiant Biosciences, for abuse of its monopolistic position and excessive pricing of the drug Leadiant.

As stated, this is the first time the Israel Competition Authority has opened enforcement proceedings against a monopolist for charging an unfairly high price.

The question of whether the Israeli statutory prohibition against charging an “unfair” price for a monopoly product applies to excessive pricing has been under dispute for many years. Nevertheless, it is indisputable the prohibition applies to predatory pricing by a monopolist, since the assumption is that such pricing is a tactic to drive the monopolist’s competitors out of the market. The matter of the prohibition against excessive pricing is currently pending before the Supreme Court. The Supreme Court’s ultimate decision is expected to have significant repercussions on consumer lawsuits currently underway before the courts on these grounds, on future lawsuits against monopolists (including class actions), and on enforcement proceedings by the Competition Authority.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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