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