By Ashley Young-
The CMA has dished out fines over a £35m arrangement for an illegal drug .
The CMA fines firms in relation to an arrangement under which a competitor was paid not to launch a product, and which enabled price increases
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It relates an increase in prices paid by the NHS for prochlorperazine from £6.49 per pack of 50 tablets to £51.68 – an increase of 700%
The firms fined include Advanz, the private equity firm Cinven, and Lexon, for breaking competition laws in previous pharmaceutical CMA investigations
The fines are the result of a Competition and Markets Authority (CMA) investigation into the conduct of several pharmaceutical firms. The CMA found that, from June 2013 to July 2018, Alliance Pharmaceuticals, Focus (now owned by Advanz, previously owned by the private equity firm Cinven), and Lexon were involved in an arrangement that restricted competition in the supply of prochlorperazine 3mg dissolvable or “buccal” tablets to the NHS. Another company (Medreich) was involved in the arrangement between February 2014 and February 2018. Prochlorperazine is an important drug used to treat nausea, dizziness and migraines.
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Under the arrangement, Alliance Pharmaceuticals appointed Focus as its distributor, and Lexon and Medreich were paid a share of the profits that Focus earned by selling Alliance’s product. In return, Lexon and Medreich agreed not to compete in the supply of these prochlorperazine tablets in the UK.
Before entering into this arrangement, Lexon and Medreich had been taking steps to launch their jointly-developed version of prochlorperazine. Although Medreich first obtained a licence to supply prochlorperazine in January 2014, it did not supply commercial volumes of the product during the period of the infringement.
Between December 2013 to December 2017, the prices paid by the NHS for prochlorperazine rose by 700%. Consequently, between 2014 and 2018, the annual costs incurred by the NHS for prochlorperazine increased from around £2.7 million to around £7.5 million, even though the number of packs dispensed fell.
The CMA fined the pharmaceutical and private equity firms involved a total of over £35 million for the relevant periods in which they broke the law. This includes: a £7.9m fine for Alliance Pharmaceuticals; a £7.3m fine for Lexon; a £4.6m fine for Medreich; and a fine for Focus of £15.5m, apportioned between Advanz and Cinven. Medreich’s fine would have been higher, but was reduced by 40% as a result of Medreich being granted leniency in return for admitting its involvement in the infringement and cooperating with the CMA’s investigation.
Andrea Coscelli, Chief Executive of the CMA, said:
‘The size of the fines reflects the seriousness of this breach. These firms conspired to stifle competition in the supply of this important medication, so that the NHS – the main buyer of the drugs – lost the opportunity for increased choice and lower prices. While the arrangement was in place, the price increased significantly for a drug that people rely on to manage debilitating nausea, dizziness and migraines.
All firms should know that we will not hesitate to take action like this against any businesses that collude at the expense of the NHS.
The investigation into these firms is part of the CMA’s ongoing work in the pharmaceutical sector. Recent action includes fining pharmaceutical firms over £260 million for competition law breaches and imposing over £100 million of fines for charging unfair and excessive prices for a crucial thyroid drug’.
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