Healthy Skepticism Library item: 761

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Tomlinson , H .
Novartis sucked into Serious Frauds Office inquiry Crackdown on alleged price-fixing cartels is widened
The Guardian 2005 Jan 21

Full text:

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 price-fixing.

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.