Affected market: Healthcare IT software
The OFT’s decision on reference under section 33(1) given on 30 July 2007. Full text of decision published 7 August 2007.
Please note that square brackets indicate text or figures which have been deleted or replaced with a range at the request of the parties for reasons of commercial confidentiality.
IBA Health Limited (IBA) is a leading provider of health care IT solutions in Australasia. IBA’s range of systems are designed to support workflows across all health sectors including hospitals, clinics, aged and community care facilities, primary care and claims and payments processes. IBA’s UK turnover is very limited at £ \ [-] for the year ended 31 December 2007.
iSOFT Group plc (iSOFT) provides software and systems to healthcare provider organisations including the National Health Service (NHS) and its National Programme for Information Technology (NPfIT) [see note 1]. In the year ended 31 December 2006, iSOFT's UK turnover was approximately £ [-] million.
IBA intends to acquire the entire issued and to be issued share capital of iSOFT. The transaction was notified by way of a merger notice on 26 June 2007. The (extended) statutory deadline expires on 7 August 2007.
As a result of this transaction IBA and iSOFT will cease to be distinct. The UK turnover of iSOFT is over £70 million, so the turnover test in section 23(1)(b) of the Enterprise Act 2002 (the Act) is satisfied. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.
FRAME OF REFERENCE
The parties submit that they overlap in the supply of Laboratory Information Management Systems (LIMS) products. LIMS are specific departmental systems, designed to meet the requirements of a hospital's laboratory, to prompt clinical processes in the face of specific diagnoses and to ensure best practice by clinicians in the laboratory. The parties contend that all types of LIMS should be considered together as the relevant frame of reference.
It is noted that the parties only overlap in a certain sub-segment of LIMS, namely in computer-based maternity information services systems (MIS). MIS are designed to record information about a woman’s pregnancy and subsequent delivery. At their simplest, MIS may be paper-based records. More complex versions will be computer based records prompting clinical care. The NPfIT requires, as part of its core products, a computerised MIS.
On the demand side, every MIS has its own specific clinical specifications and requirements. The OFT has in its iSOFT/Torex [see note 2] decision found that the functionally of each programme is specific to a particular department (for example maternity or A&E) and that there is no demand-side substitution between programmes used by different hospital department [see note 3]. On the supply side, the OFT has previously noted that healthcare IT companies appeared to be highly specialised by clinical need and that, historically, growth was through acquisition rather than new entry or expansion [see note 4].
In the absence of competition concerns even on the narrowest reasonable product scope, that is the supply of MIS systems, it was not necessary to conclude on the product frame of reference.
On the supply side, as noted in iSOFT/Torex and Clinisys/Torex [see note 5], IT software for the healthcare sector can be developed anywhere in the world. For example, both parties have development centres in India. On the demand side, a hospital’s choice of IT software will depend on their location and sources of funding. IBA’s MIS is currently used in only [-] hospitals in the UK. In iSOFT/Torex the supply of secondary healthcare software in the UK was considered to be the relevant geographic scope. In the context of this assessment the OFT has not received any compelling evidence that would warrant departing from this view. Therefore, the UK is considered as the appropriate geographic frame of reference.
The parties submit that while iSOFT’s share in UK hospital information systems is 30-40 per cent [see note 6], IBA’s share is minimal at less than  per cent. The parties submit that on any reasonable delineation, the accretion to market share is negligible.
While there is no publicly available information on market shares for MIS, there are several other suppliers of MIS besides the parties including Huntleigh Diagnostics, Scorpio Limited, Euroking, Meditech, Ciconia and Viewpoint/Stork. One third party estimated the parties' joint shares at around [10 - 20] per cent (increment: [less than 2] per cent). Another third party contacted by the OFT estimated the parties’ combined shares at [20 - 25] per cent (increment [less than 2] per cent). On a world-wide basis, the parties estimated their combined shares at [5 - 10] per cent (increment: [less than 1] per cent). Internal documents supplied by the parties confirm the largely complementary nature of this merger and the limited geographical overlap of their respective activities.
THIRD PARTY VIEWS
Third parties contacted by the OFT were generally unconcerned about this transaction. To the extent that concerns were raised, they appeared to result more from a perceived anti-competitive effect of the NPfIT than this transaction.
On the narrowest possible frame of reference, the parties overlap in the supply of MIS in the UK. While there was no independent data on the parties’ MIS shares available, estimates of the parties’ combined shares ranged between [15 - 25] per cent. However, according to all available estimates, the increment resulting from this transaction would be less than 2 per cent. The OFT has not received any substantiated competition concerns and several other competitors have been identified.
Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the United Kingdom.
This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act.
- The NPfIT is an ambitious programme which aims to create a single integrated record for patients (in England) that will allow primary and secondary health care providers access to that record.
- Completed acquisition by iSOFT Group Plc of Torex Plc, OFT decision of 24 March 2004.
- Ibid., paragraph 19.
- Ibid., paragraph 20.
- Anticipated acquisition by Clinisys Solutions Limited of Torex Laboratory Systems Limited, OFT decision of 26 January 2005.
- Note that it is not entirely clear whether this covers LIMS only or includes other hospital IT services.