Legal Updates - Suspected Anti-competitive Agreements

Pharmaceuticals: Suspected Anti-competitive Agreements - Statement of Objections

On 23 May 2019, the Competition and Markets Authority (‘CMA’) issued a statement of objections alleging that Focus Pharmaceuticals, Medreich, Alliance Pharmaceuticals and Lexon breached UK and EU competition law by allegedly entering into anti-competitive agreements in relation to the supply of a prescription-only drug called Prochlorperazine 3mg dissolvable or buccal tablets (‘Buccal’) in the UK. Buccal is used to treat nausea and dizziness.

...'The Statement of Objections is addressed to: (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 Corporation; (iii) Cinven Capital Management (V) General Partner Limited, Cinven (Luxco 1) S.A. and Cinven Partners LLP; (iv) Lexon (UK) Limited and Lexon UK Holdings Limited; and (v) Medreich plc, Medreich Ltd, Meiji Seika Pharma Co. Ltd and Meiji Holdings Co. Ltd.

In this Statement of Objections, the CMA proposes to find (in some cases for part of the time period under investigation) that the following legal entities formed part of: (i) the undertaking referred to as Alliance Pharmaceuticals - Alliance Pharmaceuticals Limited and Alliance Pharma plc; (ii) the undertaking referred to as Focus - Focus Pharmaceuticals Limited, Focus Pharma Holdings Limited, Mercury Pharma Group Limited, Concordia Investment Holdings (UK) Limited, Concordia Investments (Jersey) Limited, Advanz Pharma Corporation, Cinven Capital Management (V) General Partner Limited, Cinven (Luxco 1) S.A. and Cinven Partners LLP; (iii) the undertaking referred to as Lexon - Lexon (UK) Limited and Lexon UK Holdings Limited; and (iv) the undertaking referred to as Medreich - Medreich plc, Medreich Ltd, Meiji Seika Pharma Co. Ltd and Meiji Holdings Co. Ltd...'

The CMA has provisionally found that the four pharmaceutical companies were in breach of the law contrary to Chapter I CA98 and Article 101 TFEU as they allegedly reached an agreement between them not to compete in the supply of Buccal to the NHS.

'...A Statement of Objections gives parties notice of a proposed infringement decision under the competition law prohibitions in the Competition Act 1998 and EU law equivalents. It is a provisional decision only and does not necessarily lead to an infringement decision. Parties have the opportunity to make written and oral representations on the matters set out in the Statement of Objections. Any such representations will be considered by the CMA before a final decision is made. The final decision will be taken by a case decision group, which is separate from the investigation team and was not involved in the decision to issue the Statement of Objections...'

The CMA has alleged that, between June 2013 and July 2018, the four pharmaceutical companies reached an agreement by which they would not compete for the supply of Buccal to the NHS. The CMA provisionally found that the four pharmaceutical allegedly entered into an overarching arrangement comprising two separate agreements between (i) Alliance Pharmaceuticals and Focus; and (ii) Focus, Lexon and Medreich.

'...Between December 2013 and December 2017, the prices paid by the NHS for Prochlorperazine rose by around 700% from £6.49 per pack of 50 tablets to £51.68. From 2014 to 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 has provisionally found that Lexon and Medreich were paid a share of the profits earned by Focus on the supply of the Alliance Pharmaceuticals product, and agreed not to compete for the supply of Prochlorperazine in the UK.

The over-arching agreement referred to in the SO commenced in June 2013, and the CMA believes continued until July 2018. Medreich was party to the alleged infringing agreement from February 2014 until February 2018...'

It is alleged by the CMA that under the arrangement, Alliance Pharmaceuticals supplied Buccal exclusively to Focus and in return Focus paid Lexon a share of the profits earned from sales to Alliance Pharmaceuticals. It is further alleged that Lexon shared the payments it received with Medreich.

'In its provisional findings the CMA alleges that, before entering into this arrangement, Lexon and Medreich had been taking steps to launch their jointly developed Prochlorperazine. Although Medreich obtained a licence to supply Prochlorperazine in January 2014, it did not supply the product until November 2017'

The CMA alleges that the agreements between Alliance Pharmaceuticals and Focus and between Focus, Lexon and Medreich were in breach of competition law.

The position is that by refraining from entering the market to supply Buccal, the price of the said medicine was impacted due to less suppliers being available.

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© RT COOPERS, 2019. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.