UK: CAT imposes competition remedy on Genzyme

Last Updated: 4 October 2005
Article by David Marks, Salim Gunny and Simon Leathley

On 29 September 2005 ,the Competition Appeal Tribunal (CAT) gave its judgment on the remedy to be imposed on Genzyme Limited, following the CAT's earlier decision on the merits of the case (which found that Genzyme had infringed UK competition law in pricing its Cerezyme drug and homecare services for administering Cerezyme).

This case concerns Genzyme's supply of drugs for the treatment of Gaucher's disease. The Office of Fair Trading (OFT) and CAT examined whether it was an abuse of Genzyme's dominance in that market to bundle the supply of Cerezyme with the provision of associated homecare services, and/or to charge independent third party homecare services providers a price for Cerezyme which allowed them no possible margin (a "margin squeeze")

The OFT found that Genzyme had abused its dominant position by bundling and by applying a margin squeeze (To view the article in full, please see below).

Full Article

Office of Fair Trading fines Genzyme £6.8m for exclusionary pricing behaviour

The Office of Fair Trading (OFT) has imposed a £6.8m fine on pharmaceutical producer Genzyme for exclusionary pricing behaviour in breach of Chapter II of the Competition Act 1998. This is the second fine imposed on a pharmaceutical company in relation to exclusionary practices in breach of the UK's prohibition of abuse of a dominant position. The first was a fine imposed on Napp for predatory and excessive pricing.

The fine concerned Genzyme's product Cerezyme which was until recently the only treatment for Gaucher disease, a rare inherited disorder. The OFT found that Genzyme held a dominant position in the market and abused this position by:

  • bundling the supply of Cerezyme with the provision of associated homecare services, thereby ensuring that only Genzyme could provide such services;
  • precluding third party competition by charging independent third party homecare service providers a price for Cerezyme which allowed them no possible margin.

The OFT found that such conduct excluded alternative home delivery providers and deprived the National Health Service (NHS) and patients of choice. It also raised entry barriers to alternative treatments of Gaucher disease.

The OFT issued directions which (inter alia) required Genzyme:

  • to offer to supply Cerezyme to the NHS at an unbundled, drug only, price;
  • to supply third parties at a price no higher than the unbundled price agreed with the UK Department of Health.

Genzyme appealed to the CAT, which in March 2004 disagreed with some of the OFT's findings but agreed that Genzyme had abused its dominance by applying a margin squeeze, reducing the fine to £3 million (To view the article in full, please see below).

Full Article

CAT reduces Genzyme's fine

On 11 March 2004, the Competition Appeal Tribunal (CAT) ruled on Genzyme's appeal against an earlier Office of Fair Trading (OFT) decision to fine the pharmaceutical company £6.8 million for breach of UK competition law. The CAT reduced Genzyme's fine to £3 million on the basis that the OFT had not sufficiently proved all parts of its case and on the basis that the abuse lasted for a shorter period than established by the OFT.

The OFT decided that Genzyme had infringed UK competition law by abusing its dominant position through bundling the cost of the drug and homecare services for administering the drug. It also found that Genzyme had abused its dominance by pricing the drug and homecare services at such a level that HH and other third parties could not make a profit on providing homecare services (a "margin squeeze").

In its 11 March judgment, the CAT found that the OFT had been correct to find that Genzyme had abused its dominance through the margin squeeze. However, the CAT continued that the OFT had not sufficiently proved that the bundling of the drug and the homecare services breached UK competition law, even though it facilitated the margin squeeze. It also decided that the abuse had lasted for a shorter period than the OFT had found.

For further details of the CAT's judgment of 11 March and its impact, please click here.

For the full text of the CAT's judgment, please click here.

The March 2004 judgment was confined to the merits of the case and the issue of remedies was adjourned for a separate hearing.

The CAT's judgment of September 2005 addresses this outstanding issue. The CAT noted that the adversarial position taken by Genzyme in relation to remedies meant that the remedies process took over eighteen months instead of the six weeks the CAT had originally envisaged. This was one of a number of reasons why the CAT decided that it was important to make a formal direction to Genzyme as to its future behaviour on the market to ensure that the infringement is brought to an end.

The CAT's direction ("the Direction") requires Genzyme to:

- no longer set a price for the supply of Cerezyme to providers of homecare services which results in a "margin squeeze" (this happens when the price charged is at a level where competitors as efficient as Genzyme are unable to make a profit on the homecare services);

- refrain from repeating that infringement or doing anything with equivalent effect;

- supply Cerezyme to any bona fide provider of homecare services at a drug-only price exclusive of any charge in respect of any element of homecare services and at a discount from the prevailing NHS list price for such drugs of at least 20 pence per unit; and

- ensure that sales of Cerezyme taking place by Genzyme to any Genzyme's former homecare business are on arm's length terms and on the same terms and conditions as trading with any other supplier of homecare services.

The OFT will monitor Genzyme's compliance with the Direction, and may modify or revoke any part of the Direction, although it may not revoke the Direction for the next three years without the CAT's consent.

This is the first time that the CAT has issued formal remedial directions under the Competition Act 1998.

For the text of the judgment (shorter version), please click on or copy and paste the link below:

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 04/10/2005.

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