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[e-drug] Drug companies & price fixing

E-DRUG: Drug companies & price fixing
[Brand and generic industry are being investigated for price fixing in the UK. 
Copied as fair use. WB]

Novartis sucked into Serious Frauds Office inquiry
Crackdown on alleged price-fixing cartels is widened

Heather Tomlinson
Friday January 21, 2005

The Serious Fraud Office is investigating a division of Novartis, one of the 
world's largest pharmaceutical firms, for alleged criminal marketing practices 
as part of its investigation into alleged price-fixing by drugs companies.

Novartis's generic drug division, Sandoz, is being investigated to find out if 
it broke criminal or competition law while selling its products. Sandoz makes a 
wide range of drugs in the UK, from the breast cancer treatment tamoxifen to 
diazepam and ibuprofen. 

Generics are drugs that are no longer protected by patent so many firms can 
manufacture and sell them, in theory bringing competition into the market and 
reducing prices. 

The inquiry indicates a widening of the investigation, which has been under way 
for more than two years, as the SFO cracks down on alleged cartels. In 2002 the 
agency raided the offices of six generic drug firms to investigate alleged 

Separately, the counter-fraud division of the NHS is suing these firms, 
including India's Ranbaxy and UK-listed Goldshield group, to recover around 
#180m it claims was made by raising the prices of the drugs. 

Generics UK, a division of German firm Merck, and Ranbaxy, are also being sued 
for more than #100m by the NHS over the pricing of ulcer drug ranitidine. The 
NHS is investigating the pricing of 30 more drugs on the UK market. The 
companies, including Regent-GM, Ivax and Kent Pharmaceuticals, are fighting the 
legal actions and deny any illegal activity. 

It is believed other firms beyond the original six are now being looked at, and 
that Novartis is part of this wave. Yesterday Novartis said: "One of the 
group's UK Sandoz affiliates, along with other generic drug companies, is the 
subject of an investigation by the UK Serious Fraud Office to determine whether 
its marketing practices during the period prior to its acquisition by Novartis 
violated criminal or competition laws. The affiliate is cooperating with the 
SFO's investigation." 

The company would not comment on which drugs are involved or on the nature of 
the "marketing practices" being investigated. 

Sandoz, which used to be known as Lagap Pharmaceuticals in the UK, makes 
warfarin and ranitidine, two of the products which have been scrutinised by the 
NHS. The inquiry was revealed in Novartis's annual report, which was published 
yesterday along with its full year financial results. The firm reported a rise 
in sales of 14% to $28bn and a 15% increase in profits to $5.8bn (note - Indian 
Pharma Industry turnover  approx USD 4 billion).

The profits were lower than some analysts had predicted. One factor was a 
forthcoming settlement with the US department of justice, which has been 
investigating the firm's marketing and pricing of patient feeding tubes. The 
company has set aside $51m to cover the cost of the settlement. 

The firm also reported a sharp fall in the profitability at Sandoz, down 50% to 
$235m. Daniel Vasella, the chief executive of Novartis, indicated he is still 
interested in merging or acquiring other large drugs firms. "Only one company 
has more than 10% market share, the industry is still fragmented," he said 
yesterday. "To predict who and when would be foolish." (Note - What are the 
implications for cartel pricing 

British firm AstraZeneca is considered a possible takeover target as its share 
price continues to suffer.

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