Office of Fair Trading (OFT) closed Competition Act 1998 case.
Party: Procter & Gamble Pharmaceuticals UK, Limited (P&GP)
Issue: Whether P&GP engaged in predation and in behaviour aimed at foreclosing the supply of mesalazine 400mg drugs to competitors
Relevant provision: Competition Act 1998, Chapter II prohibition
Outline of the case
Following the receipt of a complaint in late 2005, the OFT opened an investigation, under Chapter II of the Competition Act 1998 (the Act), into aspects of P&GP's conduct in relation to the supply of Asacol, a mesalazine 400mg drug used to treat Ulcerative Colitis and Crohn's Disease, in the UK.
During the course of the investigation, the OFT considered the following allegations about P&GP's behaviour:
- use of predatory pricing by P&GP in the hospital sector in response to a national tender for the supply of mesalazine 400mg drugs
- use of a blending of pricing for generic and branded prescriptions (brand equalisation) in pharmacy outlets in the community sector, aimed at foreclosing generic entry, and
- use of certain marketing practices by P&GP, including P&GP supplying software to GPs' practices to alter generic prescriptions and casting doubt on the suitability of use of generic forms of mesalazine through medical journal advertisements.
In relation to the predation allegation, based on an analysis of P&GP's costs and other relevant information, the OFT has found no evidence of P&GP pricing below the appropriate measure of cost. In light of this, we did not come to a firm view on whether P&GP is dominant on the relevant market, because we did not need to.
In relation to the allegations about P&GP's brand equalisation and marketing practices, in the absence of evidence of predatory pricing, the OFT has decided not to pursue the matters further at this time on administrative priority grounds.
The OFT has not formed a definitive view as to whether the brand equalisation deal offered by P&GP contravenes the Act in this case. One key reason for this is that it is possible that the outcome of the current renegotiation of the Pharmaceutical Price Regulation Scheme will make brand equalisation deals less attractive to the UK pharmaceutical industry in the future. In addition, it is also relevant that Asacol is a modified-release drug and - while the view outlined below may not be shared by all gastroenterologist groups - the British National Formulary and the National Prescribing Centre currently recommend that mesalazine formulations should be prescribed according to their mode and site of action and the brand name should be specified. For both these reasons, the OFT has not carried out a detailed analysis of the brand equalisation issue in this context and pursuing any specific case involving alleged anti-competitive conduct by P&GP as a result of brand equalisation is not a priority at this time.
With regard to the marketing practices aspect of the case, as for brand equalisation, the OFT has decided to close its investigation on administrative priority grounds. The OFT has not looked at this aspect of the case in detail. The OFT does not rule out the possibility that the type of behaviour complained of, if proven, may contravene the Act, by raising barriers to entry and competitors' costs, but it has not carried out any significant analysis of this issue in the specific circumstances of this investigation.
In light of these facts, the OFT's casework prioritisation criteria and other significant project commitments, the OFT has therefore decided that at this stage it would not be an appropriate use of its resources to pursue this case and has therefore decided to close the file.
Case reference: CE/6993/05