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A pharmaceutical company that has inflated the prices of thyroid drugs by up to 6,000% over a decade has paid out more than £ 400million to its shareholders and directors during the same period.
London-based Advanz Pharma – and its former private equity owners HgCapital and Cinven – were fined a combined £ 100million by the Competition and Markets Authority (CMA) on Thursday.
Advanz and its subsidiaries charged “excessive and unfair prices” between 2009 and 2017 for liothyronine tablets, primarily used to treat hypothyroidism, which affects at least two in 100 people and can lead to depression, fatigue and weight gain.
Patients said they had no choice but to pay private doctors for prescriptions and were forced to search the internet for cheaper pills, buy the drugs from online pharmacies and supermarkets. foreign suppliers without knowing whether the tablets sold were genuine.
At the same time, according to Guardian’s analysis, the company has generously rewarded investors and directors through a complex system of dividend payments and intra-company loans involving offshore entities.
During the period the CMA saw drug prices inflated, documents filed by Companies House show dividends were paid to entities controlled either from Luxembourg or Jersey.
The company sells a range of drugs, which means that revenue was likely generated by a variety of products, including, but not limited to, liothyronine, during the period.
Shareholder payments were channeled through the Mercury Pharma group, which is part of the Advanz Pharma network of companies and one of the companies fined in the CMA crackdown.
Between 2009 and 2012, Mercury Pharma Group paid £ 44.4million in dividends while ultimately owned by Hg Capital, through a Luxembourg entity called Midas.
In 2012, another Cinven private equity group bought Mercury from Hg and merged it with Amdipharm, which it bought that year, combining them under the control of a Jersey-based entity called Amdipharm Mercury.
Under the ownership of this new entity, Mercury paid a dividend of £ 12.8 million.
Cinven sold Amdipharm Mercury to Canadian pharmaceutical company Concordia Healthcare in a £ 2.3 billion deal in 2015, but the Jersey-based structure remained in place.
Now controlled by Concordia, Mercury paid dividends of £ 240.3million in 2016 and £ 85.4million in 2017, both to the London branch of Canadian firm Concordia Investment Holdings (UK) Limited .
This company paid no income tax during the period, instead claiming tax credits of a combined value of £ 42million.
He was able to do so in part because he suffered significant losses over the three years, in part because of the £ 344million debt interest he paid on £ 1.47bn sterling of loans with an interest rate of 10.5%.
In addition to paying the Jersey entity hundreds of millions of pounds in interest, Concordia Investment Holdings (UK) also paid it dividends with a combined value of £ 65million.
Concordia Healthcare changed its name to Advanz Pharma in 2018.
During the eight-year period covered by the CMA’s fine for inflating drug prices, Advanz Pharma also made significant payments to senior executives.
One subsidiary paid directors, who never numbered more than three, around £ 21million over the period of drug price inflation.
A spokesperson for Advanz said: “We are committed to upholding the principles of openness and transparency in all our dealings with all relevant authorities, including all tax authorities.
“The payment of dividends by a UK company to a Jersey company is of no tax benefit to any party, as the dividends are in no way tax deductible for the UK payer. Under UK tax law no tax is to be withheld from dividends paid by a UK company regardless of who receives the dividend and dividends are not taxable on receipt in the UK and Jersey. In view of this, the dividends did not create a tax advantage.
“The level of interest deducted by the CIHUKL [Concordia Investment Holdings (UK)] for UK tax purposes complies with the law and HMRC has accepted our taxes for the periods. “
On Thursday, the CMA said it had fined Advanz, its subsidiaries, Cinven and Hg £ 100million. Advanz was fined nearly £ 41million, while Hg and Cinven will pay 8, respectively. , £ 6million and £ 51.9million.
The CMA found in 2017 that Advanz had taken advantage of limited competition in the market to drive sustained price increases for liothyronine of more than 6,000% within 10 years.
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Repeated price hikes pushed NHS spending on shelves from £ 600,000 in 2006, ahead of the implementation of the price hike strategy, to over £ 2.3million in 2009 and up. ‘to £ 30million in 2016.
Liothyronine tablets were placed on the NHS ‘drop-down list’ in July 2015, forcing many people who were dependent on the drug to expose themselves to the prospect of stopping treatment, paying for the drug themselves, or resorting to to inferior treatments.
Hg declined to comment.
The Guardian approached Cinven for comment.
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