Dawlish News

The NHS is suing seven pharmaceutical companies for £30m over allegations that they fixed the price of common antibiotics, it has emerged.

Documents lodged with the high court on December 17 by health secretary John Reid claim that the companies agreed to artificially raise the price of a range of penicillin-based drugs.

The case is part of a wide-ranging investigation into alleged price-fixing and restrictive supply of drugs that may lead to further court action in an attempt to recover up to £200m. The Serious Fraud Office (SFO) is also looking into allegations of drug pricing fraud.

The antibiotics case follows a £28m action brought last year against six companies over alleged conspiracy to restrict the supply of the blood-thinning agent, warfarin, to increase its price. The action is ongoing.

In the antibiotics case, it is alleged that the companies agreed to inflate the price of particular antibiotics known as cillins in 1997 and 1998 by reducing supply and refusing to sell below an agreed price.

The subjects of the latest action are Norton Healthcare Ltd, Norton Pharmaceuticals Ltd, Regent-GM Laboratories Ltd, Kent Pharmaceuticals Ltd, Generics UK Ltd, Ranbaxy UK Ltd and DDSA Pharmaceuticals Ltd.

The government has been struggling for years to cope with the spiralling cost of generic versions of brand-name drugs, which account for more than half of all prescriptions dispensed outside hospital.

Spiralling costs sparked an inquiry by the Commons health select committee in 1999, which expressed concerns about "market manipulation, hoarding and collusion". In 2000, Department of Health figures showed the cost of generic drugs to the NHS had shot up by £200m in 1999.

The government put a price-capping scheme in place in 2000, which it claims has saved the NHS around £330m a year on its drugs bill. But the scheme was put in place only after wrangling with the pharmaceutical industry.

Britain's largest generic drugs manufacturer, Norton Healthcare - one of the firms now being sued by the NHS - warned that it would have to stop producing 23 generic drugs because they would be "uneconomic" under the proposed price cap. The government later raised the proposed maximum prices by up to 500%.

Jim Gee, chief executive of the NHS counter fraud and security management service, said the decision to sue in the high court had been taken independently of the SFO's ongoing investigation.

"All the civil claims we have brought will be vigorously pursued to secure the maximum possible recovery for the NHS either by judgment and damages or earlier agreement with the defendant companies," he said.

"My organisation's investigations regarding the anti-competitive supply of over 30 other generic drugs continue. Nobody should be in any doubt about the NHS's determination to defend itself against unlawful behaviour and to ensure that its resources are protected and spent on the best possible patient care."

Norton Healthcare Ltd denied the price-fixing allegations. "The company firmly believes that sales of penicillin-based antibiotics during the period 1996 to 2000 were in compliance with all applicable laws and regulations, despite the high court claim issued by the Department of Health," said a spokeswoman.

"While strongly refuting the allegation, the company is cooperating fully to provide all the relevant information to repudiate this claim. Meanwhile, it is worth noting that some penicillin-based antibiotics were actually loss-making products during the period in question and as a whole represented less than 2% of company turnover."

The company said the extra cost of packaging introduced to meet new European regulations pushed up the price of the drugs.

A spokesman for Ranbaxy UK Ltd said: "We do not believe that we have behaved in an improper way and will defend the legal proceedings vigorously."

Regent-GM Laboratories Ltd said it would be defending the case. A spokeswoman declined to comment further.

Kent Pharmaceuticals Ltd said it had not acted unlawfully in any of its dealings with the NHS and would "vigorously" defend all the claims. It said most related to price changes in 1999 caused by factors outside the firm's control: "None of these factors has been taken into account by the Department of Health in formulating their claims."

Kent Pharmaceuticals last week lost a legal battle over documents taken in raids on its offices and homes of its executives in April last year. A judicial review found the raids were conducted lawfully and upheld the SFO's decision to pass some of the documents to the Department of Health.

The company said it also regretted that the Department of Health had issued the claims before the outcome of the SFO investigation. It said it was pursuing legal action relating to the SFO's actions with the court of appeal and the European Court of Human Rights.

"The accumulation of events of the last 20 months lead Kent to consider that both the criminal investigation and the civil claim are without foundation and are motivated by political expediency," the company said.

A spokesperson for Generics UK said the company had no comment on the case at the moment. DDSA Pharmaceuticals Ltd was unavailable for comment.