CMA fines companies for arrangement under which a competitor was paid not to launch a product and which allowed price increases
From 2013 to 2017, prices paid by the NHS for prochlorperazine rose from £6.49 per pack of 50 tablets to £51.68, an increase of 700%
Firms fined include Advanz, private equity firm Cinven and Lexon, all of which have been fined for violating competition laws in previous investigations into the pharmaceutical AMC.
The fines are the result of an investigation by the Competition and Markets Authority (CMA) into the conduct of several pharmaceutical companies. The CMA found that, from June 2013 to July 2018, Alliance Pharmaceuticals, Focus (now owned by Advanz, previously owned by private equity firm Cinven) and Lexon were involved in an agreement that restricted competition in the supply of prochlorperazine 3 mg soluble or ‘mouth’ tablets to the NHS. Another company (Medreich) participated in the arrangement between February 2014 and February 2018. Prochlorperazine is an important drug used to treat nausea, dizziness and migraines.
As part of this agreement, Alliance Pharmaceuticals appointed Focus as a distributor, and Lexon and Medreich received a share of the profits Focus made by selling Alliance’s product. In return, Lexon and Medreich have agreed not to compete in the supply of these prochlorperazine tablets in the UK.
Prior to entering into this agreement, Lexon and Medreich had taken steps to launch their jointly developed version of prochlorperazine. Although Medreich was first licensed to supply prochlorperazine in January 2014, it did not supply commercial volumes of the product during the period of the infringement.
From December 2013 to December 2017, prices paid by the NHS for prochlorperazine increased by 700%. As a result, between 2014 and 2018 annual NHS costs for prochlorperazine fell from around £2.7 million to around £7.5 million, although the number of boxes distributed fell.
The CMA has fined the pharmaceutical and private equity companies involved a total of more than £35million for the relevant periods in which they broke the law. This includes: a £7.9m fine for Alliance Pharmaceuticals; a £7.3million fine for Lexon; a £4.6 million fine for Medreich; and a fine for Focus of £15.5 million, split between Advanz and Cinven. Medreich’s fine would have been higher, but was reduced by 40% because Medreich was granted leniency in exchange for admitting his involvement in the offense and cooperating with the CMA investigation.
Andrea Coscelli, Chief Executive Officer of CMA, said:
The amount of the fines reflects the seriousness of this offence. These companies have conspired to stifle competition in the supply of this important medicine, so the NHS – the main buyer of the drugs – has lost the opportunity for increased choice and lower prices. While the arrangement was in place, the price rose dramatically for a drug people rely on to manage debilitating nausea, dizziness and migraines.
All businesses should know that we will not hesitate to take such action against any business that colludes at the expense of the NHS.
The survey of these companies is part of the CMA’s ongoing work in the pharmaceutical sector. Recent action includes fines of over £260m for pharmaceutical companies for competition law breaches and the imposition of over £100m in fines for charging unfair and excessive prices for a crucial thyroid drug.
Advanz, Cinven and Lexon have all been fined in previous CMA pharmaceutical investigations. In the case of Advanz and Cinven, this is the first time that a company has been fined by the CMA in three separate investigations.
For more information, see Pharmaceuticals: Cases of Alleged Anticompetitive Agreements.
Notes to Editors
Advanz and Cinven appealed to the Competition Appeals Tribunal against CMA decisions in the other two investigations in which they were fined.
The infringement notice is addressed to the following legal entities: (i) Alliance Pharmaceuticals Limited and Alliance Pharma plc; (ii) Focus Pharmaceuticals Limited, Focus Pharma Holdings Limited, Mercury Pharma Group Limited, Concordia Investment Holdings (UK) Limited, Concordia Investments (Jersey) Limited and Advanz Pharma Corp. Limited; (iii) Cinven Capital Management (V) General Partner Limited, Cinven (Luxco 1) S.à.rl and Cinven Partners LLP; (iv)- Lexon (UK) Limited and Lexon UK Holdings Limited; (v) Medreich plc, Medreich Ltd, Meiji Seika Pharma Co. Ltd and Meiji Holdings Co. Ltd.
In its decision, the CMA noted the existence of an agreement between Alliance and Lexon relating to the buccal tablets of prochlorperazine 3 mg sold in boxes of 50 which is a medicine available only on prescription, in which Focus, then Medreich, participated and which had as its object the restriction of competition. This agreement breached the prohibition in Chapter I of the Competition Act 1998.
The infringement began on June 7, 2013 and continued until July 31, 2018. Focus was involved in the infringement from June 22, 2013 to July 31, 2018. Medreich was involved in the infringement from February 5, 2014 as of February 15, 2018.
Focus was independent until October 1, 2014. Cinven indirectly owned Focus between October 1, 2014 and October 20, 2015. Advanz, the current owner, acquired indirect ownership of Focus from Cinven on October 21, 2015.
The total fines imposed are as follows:
- Alliance: Alliance Pharmaceuticals Limited and Alliance Pharma plc are jointly and severally liable for £7,900,000
- Lexon (UK) Limited is liable for £6,706,220; and
- Lexon (UK) Limited and Lexon UK Holdings Limited are jointly and severally liable for an additional £593,780
- Medreich plc and Medreich Ltd are jointly and severally liable for £1,167,554; and
- Medreich plc, Medreich Ltd, Meiji Seika Pharma Co and Meiji Holdings Co Ltd are jointly and severally liable for an additional £3,452,446.
- Focus Pharmaceuticals Limited and Focus Pharma Holdings Limited are jointly and severally liable for £549,343;
- Focus Pharmaceuticals Limited, Focus Pharma Holdings Limited, Mercury Pharma Group Limited, Cinven Capital Management (V) General Partner Limited, Cinven (Luxco 1) S.à.rl and Cinven Partners LLP are jointly and severally liable for an additional amount of 1 £843,380;
- Focus Pharmaceuticals Limited, Focus Pharma Holdings Limited and Mercury Pharma Group Limited are jointly and severally liable for an additional £921,357;
- Cinven Capital Management (V) General Partner Limited, Cinven (Luxco 1) S.à.rl and Cinven Partners LLP are jointly and severally liable for an additional £4,856,620; and
- Focus Pharmaceuticals Limited, Focus Pharma Holdings Limited, Mercury Pharma Group Limited, Concordia Investment Holdings (UK) Limited, Concordia Investments (Jersey) Limited and Advanz Pharma Corp. Limited are jointly and severally liable for an additional £7,288,853.
CMA’s work on this matter was halted in April 2020, to reallocate resources and ensure CMA was able to focus on urgent work related to the coronavirus (COVID-19) pandemic. ) In progress. Work on the case resumed at the earliest possible opportunity in July 2020.
Under the CMA’s Leniency Policy, a company that has been involved in a cartel may be granted immunity from sanctions or a significant reduction in sanction in exchange for reporting cartel activity. and assistance to the CMA in its investigation. Further information on the CMA’s leniency and whistleblower reward policies can be found on the Guidance page.