[Ip-health] BMJ: South African drug companies are found guilty of price fixing

[Matt Price]

http://www.bmj.com/cgi/content/full/336/7641/413-c

BMJ  2008;336:413 (23 February), doi:10.1136/bmj.39497.390069.DB
News - South African drug companies are found guilty of price fixing
Pat Sidley 1 Johannesburg

Four South African drug manufacturers have been found by the country's
competition authority to have colluded in fixing bids for the supply
of products to the tender system through which the state buys drugs
for its hospitals and healthcare services.

 One of the companies, Adcock Ingram, is one of the largest makers of
generic drugs in South Africa and holds several licences from
multinational pharmaceutical companies for the local
manufacture=97supposedly cheaply=97of drugs used to treat HIV and AIDS.
The three other companies, one of which assisted the authority and
gave details of the collaboration, are smaller.

 The Competition Commission, a statutory body empowered by the
government to investigate, control, and evaluate restrictive business
practices, said it had found that Adcock Ingram Critical Care, Dismed
Criticare, Thusanong Health Care, and Fresenius Kabi had formed a
cartel and engaged in collusive tendering and market allocation. "The
conduct was designed to avoid competition between the colluding firms
and manipulate prices for pharmaceutical and hospital products," a
statement from the commission said. It has sent its findings to the
Competition Tribunal, which adjudicates in competition matters, for
prosecution and sentencing.

 The Competition Commission also implicated the four companies in
similar anticompetitive behaviour when selling to private hospitals.
South Africa's public healthcare system buys drugs through a public
tender system. But a large share of spending on drugs and thus
profitability for companies occurs in the private healthcare system,
where prices are largely governed by a market dominated by health
insurers and private hospitals, supposedly regulated by the Medicines
and Related Substances Control Act.

 This act, although incomplete in some of its regulatory details, has
the power to ensure that drug prices are set and cannot be changed
through discounts or other marketing devices previously used by drug
companies. This should, in theory, prevent anticompetitive behaviour
in the market.

 Private hospitals are currently the subject of official scrutiny, and
the government has threatened to regulate the pricing mechanisms and
agreements they set. Responding to complaints by the health insurance
industry and its regulators, health minister Manto Tshabalala-Msimang
said that private hospitals charge too much and keep private health
care out of the reach of poor people.

 The listed owner of Adcock Ingram, Tiger Brands, was fined 100
million rand (=A36.7m; 8.9m; $13.2) late last year for colluding in
keeping bread prices artificially high. Its chief executive officer
resigned and a new one was being announced when the Competition
Commission made public its findings about pharmaceutical and hospital
products. The company acted swiftly, suspending the chief executive
officer of Adcock Ingram. Tiger Brands said it was "devastated at
allegations of collusion" and that it was investigating all the
company's businesses. It has called in an independent legal company
with expertise in competition law to assist with its investigation.