Provisional finding in the pharmaceuticals competition investigation

First published by Author on May 30, 2019 in the following categories: Cartels Industry Market Sharing Price Fixing Price Hikes Pricing and tagged with cartels | cma | competition law | market abuse | marktet sharing | Pharmaceuticals | price fixing | pricing

There has been a provisional finding in the pharmaceuticals competition investigation by the Competition and Markets Authority (CMA) who have been looking into companies for quite some time.

It has been alleged that anti-competitive agreements are in place between four firms in the sector, and the calculated costs to the NHS is terrifying. If the provisional finding is formalised, huge fines could be issued to the alleged offenders involved in the investigation.

The costs of anti-competitive arrangements in the pharmaceutical industry often fall on the NHS, and therefore on the taxpayer, which is why these kinds of investigations are incredibly important.

Background to the pharmaceuticals competition investigation

The background to the CMA’s pharmaceuticals competition investigation is about alleged anti-competitive behaviour involving the following four companies:

• Alliance Pharmaceuticals;
• Focus;
• Lexon;
• Medreich.

The investigation began back in October 2017 and surrounds the supply of prescription-only 3mg dissolvable Prochlorperazine tablets to the NHS; a  drug that’s used for treating dizziness and nausea.

Since the inception of the investigation, a number of steps have been taken by the CMA to identify if there’s any foul play in the market.

This month, there has been a huge development.

Provisional finding

Last week, the CMA published their provisional findings in the pharmaceuticals competition investigation.

A statement of objections has been issued on the basis that the four companies at the heart of the investigation are guilty of breaking important competition law. It’s alleged that Alliance Pharmaceuticals agreed to solely supply Prochlorperazine to Focus, and that Focus has allegedly had a profit-sharing arrangement with Lexon and Medreich on the basis that they agree to not compete.

This would effectively restrict the supply of Prochlorperazine and restrict the consumer from enjoying the benefits of healthy competition through choice and competitive pricing. It’s practically a self-made monopoly.

Importance of the pharmaceuticals competition investigation

The pharmaceuticals competition investigation is incredibly important. The cost of these tablets has reportedly  risen from £6.49 per pack of 50 to a staggering £51.68 between 2014 and 2018.

That’s an overall cost increase to the NHS from £2.7m to around £7.5m, the CMA has estimated, and there has also been a reduction in the number of packets dispensed.

That’s a 700% increase.

For the NHS to have to incur the cost burden of what’s being provisionally found as a breach of vital competition law is unforgivable. If the findings are finalised, we expect the financial punishments that will be issued to the offending companies to be substantial.

The CMA has been investigations the pharmaceutical industry for quite some time, and a number of investigations into overcharging the NHS have taken place. Some, like this one, remain ongoing. To think that there are pharmaceutical giants who are prepared to rip the NHS off is abominable. That’s why the fines in these cases are usually substantial.

We’ll continue to keep a very close eye on how this particular investigation develops.