News and Press
Headache for Nurofen maker over NHS price abuse allegation

The Office of Fair Trading (OFT) this week issued a statement of objections to Reckitt Benckiser alleging that the consumer goods company abused its dominant position in the market for the supply of antacid drugs to the NHS.

The action follows a tip off from a former senior executive of Reckitt Benckiser to the BBC Newsnight programme which showed incriminating internal memos that provoked a 15 month investigation by the OFT. It is alleged that the makers of Gaviscon maintained a monopoly on the product after the patent had expired, in breach of competition law.

Once a drug patent expires and a generic name is assigned to the drug, GPs can prescribe the generic product and pharmacies can choose whether to dispense the branded drug or a cheaper generic alternative. This results in competition in the pharmaceutical market and savings to the NHS. GPs prescribe the generic product using software that searches on the well known branded name.

It is alleged that Reckitt Benckiser sought to restrict competition to its Gaviscon brand by withdrawing and de-listing Gaviscon Original Liquid from the NHS prescription channel towards the end of its patent protection, prior to the publication of its generic name. The result was that when GPs searched for Gaviscon prescription packs, they only found Gaviscon Advance Liquid which was still under patent and more expensive. Gaviscon Original Liquid and its generic equivalents were not revealed.

It is believed that Gaviscon was sold to the NHS at three times the price of generic equivalents. A senior director at the OFT says, "this case raises significant and complex competition issues relating to the supply of prescription drugs to the NHS".

Under Chapter II of the Competition Act 1998 and Article 102 of the Treaty on the Functioning of the European Union (formerly Article 82 of the EC Treaty), the abuse of a dominant market position (usually a market share of 40% or above) is prohibited. If found guilty, Reckitt Benckiser could be fined up to 10% of the business' worldwide group turnover.

Reckitt Benckiser responded that it "believes it competes fairly and within the letter and spirit of the law in all our operations, and has co-operated fully with the OFT throughout its inquiry." The OFT will decide whether there has been a infringement of competition law once it has received Reckitt Benckiser's response and any comments from other interested parties.

Nicola Kingaby, an associate in TLT's Competition Law Team says, "the current action by the OFT against Reckitt Benckiser is a timely reminder to businesses about the potentially serious sanctions of infringing competition law. It also highlights the ongoing risk that parties in possession of incriminating information about a firm's activities, particularly disgruntled former employees or directors, may blow the whistle on illegal behaviour. This risk is heightened by the fact that a whistle blowing individual can earn a reward of up to £100,000 for informing on their employer.

“It is interesting that this action follows the publication of the European Commission's report on the pharmaceutical sector in which it identified concerns about how companies sought to extend the commercial life of their products against generic alternatives."

For more information, please contact Nicola Kingaby.