Last month the CMA continued its long-standing scrutiny of the pharmaceutical sector, handing out a combined £35 million fine to Alliance Pharmaceuticals (Alliance), Lexon, Medreich and Focus (previously owned by Cinven, now owned by Advanz). The parties were found to have concluded anti-competitive agreements restricting the supply of prochlorperazine, a drug to treat nausea, dizziness and migraines, that drastically increased the market price of the drug over a four-year period.
Conduct and fine
From June 2013 to July 2018, Alliance appointed Focus as distributor of its 3mg prochlorperazine dissolvable tablets. Lexon and Medreich had separately been working on launching their own jointly- developed version, and in January 2014 Medreich obtained a licence to supply the drug. Despite taking these steps, Medreich and Lexon did not enter the market themselves. Instead, the CMA found that they agreed not to compete in the UK prochlorperazine market in return for a share of Focus' profits from selling Alliance's product.
As Focus did not face any competition from Lexon and Medreich, it was able to increase its prices. By December 2017, the price paid by the NHS for prochlorperazine had increased by around 700%. Between 2014 and 2018 the annual NHS costs for the drug rose by nearly £5m to around £7.5m whilst the number of packs dispensed fell.
The distributor Focus received the highest fine of £15.5m (apportioned between Advanz and Cinven), with Alliance and Lexon receiving fines of £7.9m and £7.3m respectively. Medreich's fine of £4.6m was reduced by 40% on account of its leniency application.
The Decision follows other substantial fines issued by the CMA in the last year for anti-competitive behaviour, regarding the supply of hydrocortisone tablets and the excessive pricing of thyroid tablets. Since July 2021 the CMA has issued fines totalling nearly £400m to pharmaceutical companies. By contrast to earlier competition authority activity which focussed on delays to initial generic entry, these cases all concern products that have long been off patent. The generics sector is generally expected to deliver competitive pricing, but certain niche products have seen significant price rises. The CMA's focus on this part of the sector is unsurprising, given the cost that is borne by the public purse for such price increases. Nevertheless, it is important to recall that not all such increases are attributable to anticompetitive conduct, and indeed the CMA has closed a number of its other investigations into generic products.
In this case Focus, was fined nearly double the amount of any other party. Along with Alliance Pharmaceuticals, Focus stood to gain from the delayed entry of its competitors. Its position in the market means that is likely that to have been viewed as having had a leading role in the infringement.
The full text of the decision will be published in due course, and will no doubt reveal more clearly the nature of the conduct and the CMA's reasoning.
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