Pharmaceutical shock hits SA

The Competition Commission has referred a case of collusion against Adcock Ingram Critical Care (Pty) Ltd, Dismed Criticare (Pty) Ltd and Thusanong Health Care (Pty) Ltd for prosecution, according to a statement from the commission.

The three companies are competitors who supply pharmaceutical products to the local healthcare market.Tiger Brands implicatedTiger Brands, the owner of Adcock Ingram Critical Care, is also cited because it is alleged that certain of its directors were aware of the collusion.
During 2005, the Competition Commission initiated an investigation into allegations of a cartel between these firms, as well as Fresenius Kabi South Africa (Pty) Ltd.

"The Commission’s investigation found that the parties were engaged in collusive tendering and market allocation, both of which are contraventions of section 4 of the Competition Act. The conduct was designed to avoid competition between the colluding firms and manipulate prices for pharmaceutical and hospital products," the statement said.

According to the Competition Commission, Fresenius Kabi South Africa has confessed its involvement in the cartel and had agreed to co-operate with the Commission’s investigation. It was therefore granted immunity from prosecutions in terms of the Commission’s Corporate Leniency Policy.

Collusive tenderingThe Department of Health annually invites tenders for the supply of a wide range of pharmaceutical products and other key healthcare products.

The Commission’s investigation found that the representatives of Adcock Ingram Critical Care, Fresenius Kabi South Africa, Dismed Criticare and Thusanong held telephone discussions and meetings prior to the submission of their respective responses to the invitations to tender.

In these discussions and meetings they collaborated on their responses and discussed and agreed on prices. This involved the manipulation of prices for the pharmaceutical and hospital products with which the tender was concerned, the commission said.

"The colluding firms agreed amongst themselves who would win the tenders and, to give effect to this agreement, the terms of their respective bids. They would also agree that whenever tenders were not awarded as agreed or arranged between them, the winning firms would cede portions of the tender to one of their colluding partners," The statement said.

The Commission’s investigation also found that the alleged conduct came to the attention of several board members of Tiger Brands, but no action was taken.

Dividing marketsThe Commission also found that Adcock Ingram Critical Care and Fresenius Kabi South Africa were engaged in dividing markets in the supply of pharmaceutical products and services to private hospitals, including Afrox Healthcare Limited (now Life Healthcare Group Holdings (Pty) Limited), Network Healthcare Holdings Limited, Medi-Clinic Corporation Limited and mine hospitals. This involved them agreeing who would provide which products and to which hospitals.

"The Commission has evidence that senior officials of each of the firms involved held meetings and telephone conversations to agree on the rigging of bids and allocation of markets," the statement said.

Competition Commissioner Shan Ramburuth says: “This is an important case in the light of growing public concern about escalating healthcare costs. Collusive behavior would undoubtedly be one of the contributing factors to higher prices in healthcare markets.”

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