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CMA fines pharmaceutical companies for market sharing and information sharing

  • United Kingdom
  • Competition, EU and Trade - Competition e-briefings

09-03-2020

On 4 March 2020, the Competition and Markets Authority (“CMA”) fined four pharmaceutical companies for breaching competition law through market sharing and the exchange of competitively sensitive information relating to the supply of nortriptyline, an anti-depressant. This resulted in fines of over £3 million, a payment of £1 million to the NHS and one director disqualification.

Background

In October 2017, the CMA opened an investigation into the supply of nortriptyline, a type of anti-depressant drug. In June 2019, the CMA issued a Statement of Objections setting out its provisional finding that pharmaceutical companies, Auden Mckenzie’s pharmaceutical division (“Auden Mckenzie”) (now controlled by Accord-UK Ltd (“Accord-UK”)), King Pharmaceuticals Limited (“King”), Lexon (UK) Ltd (“Lexon”) and Alissa Healthcare Research Ltd (“Alissa”) breached competition law.

Firstly, the CMA found that between September 2014 and May 2015 King and Auden McKenzie shared out the supply of nortriptyline between themselves to a large wholesaler with King supplying the 25mg tablets and Auden supplying the 10mg tablets. Furthermore, they agreed the quantities and prices of the products. In October 2019, Auden Mckenzie and King admitted this infringement. The CMA has held Accord-UK liable for Auden Mckenzie’s infringement, as it acquired Auden Mckenzie’s nortriptyline business after the infringement took place.

Secondly, the CMA’s investigation found that King together with Lexon and Alissa exchanged competitively sensitive information with the aim of holding prices of nortriptyline at a high level. This illegal practice took place from 2015 until 2017 during a time when the price of the drug lowered. The information shared between the three companies concerned prices, volumes supplied by them as well as Alissa’s plans to enter the market. In September 2019 King and Alissa admitted to the information sharing infringement.

CMA Decisions

In its decision relating to the marketing sharing arrangement, the CMA fined King £75,573 and Accord-UK £1,882,238. Both of these fines were reduced to reflect the parties’ admission of the illegal activities. Furthermore, King’s fine was reduced further so as not to exceed the statutory maximum of 10% of its worldwide turnover.

Accord-UK and Auden McKenzie agreed to pay the NHS £1 million in connection with the case being the second time that the CMA has secured such a payment for the NHS. The payment will be distributed between the Department of Health and Social Care in England and equivalent bodies in Scotland, Wales and Northern Ireland. The NHS are still able to seek further damages from the parties, however, potential awards would take the £1 million payment into account.

For the illegal information exchange of competitively sensitive information, King was fined another £75,573, Alissa £174,912 and Lexon £1,220,383. King’s and Alissa’s fines were reduced because they admitted to the infringement and, in King’s case, so that the statutory maximum fine of 10% of worldwide turnover was not exceeded.

Separate from the fines, the CMA obtained director disqualification undertakings from Dr Philip Hallwood, one of the directors of King and the sole director of the consultancy firm Praze. Praze conducted King’ corporate and commercial services when the illegal activities took place, and formed a single economic unit with King. As a result of the undertakings, Dr Hallwood will be prevented from being a director in both companies, as well as having any involvement in management of a UK company for 7 years, taking effect from 19 March 2020.

Comment

The CMA’s decisions relating to the supply of nortriptyline follow a string of investigations that it has conducted in the pharmaceutical sector. Andrea Coscelli, Chief Executive of the CMA stated that the decisions should “act as a clear warning to any pharmaceutical company that considers stifling competition and cheating the NHS”.

The decisions also highlight the CMA’s determination to use its director disqualification powers to enforce competition law. Since 2016, the CMA has disqualified 13 individuals from being directors and have three further cases pending.