A look back at the 2014 supply of medicines to care homes case
First published by Author on November 24, 2017 in the following categories: Latest
The Competition and Markets Authority (CMA) are currently embroiled in a lot of investigations over the pricing of medicines, and it’s been something of a hot topic for quite some time. In 2014, two pharmaceutical companies were fined for breaching competition laws by entering into a cartel to reduce the competition of supplying medicines to care homes.
Lloyds’ Pharmacy and Tomms Pharmacy were the two companies involved in the cartel between May and November 2011, and they were justifiably investigated and fined as a result of their activities.
Lloyds Pharmacy is a community pharmacy with thousands of stores across the UK that dispenses prescription drugs and other medicines. Tomms Pharmacy is part of the Quantum Pharma Group founded in 2004; a niche pharmaceutical developer that supplies to pharmacies, hospitals, and the care home market.
Unfortunately, they ended up forming an illegal cartel that landed them in serious trouble.
Fines totalling over £370,000 were issued as a result of anti-competitive behaviour the two pharmacies engaged in. The two pharmacies agreed to not target each other’s existing care home customers with the aim to reduce competition. This is a flagrant breach of competition laws, and serves only to potentially force prices up and keep consumer choice down.
The agreement was that Tomms would not seek to supply Lloyds’ customers if Lloyds did not try to supply to Tomms’ customers – at least for a period of time. Lloyds’ eventually alerted the Office of Fair Trading (who preceded the CMA) about the cartel between the two companies, and investigations in to the activities commenced.
What was the outcome?
The outcome was that Hamsard, which is incidentally the parent company of Lloyds and Tomms, was fined over £370,000.
The original figure was £646,426, but the Office of Fair Trading enacted a leniency policy that the CMA themselves have today. Their policy is that they will allow partial or full immunity to companies that are involved in the anti-competitive behaviour if they come forward and inform them of any breaches. Due to Hamsards admitting to taking part in anti-competitive behaviour and agreeing to cooperate with the Office of Fair Trading, the original figure was reduced to £370,000.
The staff members that were involved with the cartel left the company.
How this breached competition law
The cartel breached competition law because it may have reduced competition within that specific market that was supplying to care homes. This was contrary to UK and EU laws, and in breach of the Competition Act as well as the Function of the European Union agreements.
By the two pharmacies agreeing they would not supply to each other’s customers, they effectively limited and controlled the market. This may have prevented consumers enjoying the benefits of fair competition.
A cartel is generally seen as the most serious form of anti-competitive behaviour, and can have more severe consequences imposed… Including prison sentences and unlimited fines.