Reckitt Benckiser agrees to pay OFT penalty

Reckitt Benckiser has agreed to pay a fine of £10.2 million after admitting abuse of a dominant position in the market for the NHS supply of alginate and antacid heartburn medicines.

The fine was reduced from £12 million to reflect Reckitt Benckiser's admission and decision to co-operate as part of an early resolution agreement with the OFT.

The agreement follows a Statement of Objections, issued by the OFT on 23 February 2010.

Reckitt Benckiser has admitted infringing UK and European competition law by withdrawing and de-listing Gaviscon Original Liquid from the NHS prescription channel in 2005.

Where a branded medicine's patent has expired and a 'generic name' has been assigned to it, GPs can use their prescribing software to search for the brand and then provide patients with an 'open' prescription that lists its generic name. Pharmacies that receive these prescriptions can choose whether to dispense the relevant brand or equivalent but cheaper generic medicines. This choice provides for strong price competition between pharmaceutical suppliers and can result in considerable savings to the NHS.

The OFT's allegation was that Reckitt Benckiser withdrew NHS packs of Gaviscon Original Liquid from the NHS prescription channel after the product's patent had expired but before the publication of the generic name for it, so that more prescriptions would be issued for its alternative product, Gaviscon Advance Liquid. Pharmacies that receive prescriptions for Gaviscon Advance Liquid must dispense it, as it is patent protected and there are no generic equivalent medicines.

John Fingleton, the OFT Chief Executive, said:

'Vigorous competition between firms supplying the public sector is vital to ensure taxpayers get the best value for money.

'This case underlines our determination to prevent companies with a dominant position in a market from using their strength to seek to restrict competition from rivals. The imposition of penalties should serve to deter firms from engaging in anticompetitive behaviour of this sort in future.

'We welcome Reckitt Benckiser's early co-operation which will enable the swift resolution of this complex case and will reduce the costs of the investigation both for the OFT and for the company itself.'

NOTES

1. A 'generic product' is defined in the EC Pharma Sector Inquiry Report as a medicinal product which has the same qualitative and quantitative composition in active substances and the same pharmaceutical form as a reference (originator) medicinal product and whose bioequivalence with the reference medicinal product has been demonstrated.

2. Both Gaviscon Original Liquid and Gaviscon Advance Liquid remain available for purchase over-the-counter. Gaviscon Advance Liquid remains available in NHS packs in the NHS prescription channel. Gaviscon Advance Liquid, which was introduced in 1997, is patent protected until 2016, and is not subject to competition from equivalent generic medicines.

3. On 23 February 2010, the OFT issued a Statement of Objections to Reckitt Benckiser, setting out its proposed findings. [See www.oft.gov.uk/news-and-updates/press/2010/20-10] A Statement of Objections gives notice of a proposed infringement decision under the Competition Act 1998 to the party or parties involved. It sets out the facts on which the OFT relies, the objections raised by the OFT, the action(s) it proposes to take and the reasons for it. The party or parties then have the opportunity to make written and oral representations in response to the case set out by the OFT.

4. Under the Chapter II prohibition of the Competition Act 1998 and Article 102 of the Treaty of the Functioning of the European Union, the abuse of a dominant position is prohibited. Any business found to have abused a dominant position could be fined up to 10 per cent of its worldwide turnover.

5. In calculating financial penalties, the OFT takes into account a number of factors including the seriousness of the infringement, the relevant turnover of the undertaking in question and any mitigating and/or aggravating factors. The basis of the OFT's considerations is set out in the OFT's guidance as to the appropriate amount of a penalty (pdf 145kb)

6. The penalty to be imposed on Reckitt Benckiser would be payable following the issue by the OFT of an infringement decision to be published in due course. The full details of the penalty calculation will be included in any infringement decision.

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