Drug companies face fresh action

Efforts to punish a group of drug companies allegedly behind one of the biggest price-fixing schemes to hit the public purse are being stepped up after the collapse of their criminal trial.

Frank Field, the former Labour social security minister, on Monday wrote to Alan Johnson, health secretary, to urge further action against the businesses over a conspiracy that was allegedly taking place while prices of dozens of basic remedies rose as much as 800 per cent.

Mr Field’s intervention comes as lawyers acting for the National Health Service press for further “substantial recoveries” through a damages action against the companies that has already netted £34m.

Many observers say the companies named have never been forced to account fully for their actions, because of weaknesses in the way Britain deals with financial misconduct.

Mr Field, a former member of the Commons’ public accounts committee, said the companies should be “on their knees thanking their lucky stars” at the decision of Mr Justice Pitchford last month to stop their criminal trial on conspiracy to defraud charges.

Peters & Peters, the law firm acting for the NHS, is pressing ahead with a damages action founded on allegations that the companies were involved in a conspiracy to rig the prices of drugs including penicillin and warfarin, a blood thinner.

Jonathan Tickner, a Peters & Peters partner, said: “The obvious success of the civil proceedings . . . speaks for itself and we – on behalf of the Department of Health – fully expect further substantial recoveries to be made.”

The main company still in the department’s sights is Ashford-based Kent Pharmaceuticals, supplier of many basic antibiotics to NHS hospitals, retail pharmacists and dispensing doctors.

Kent declined to respond to questions on the case. All the other companies that faced criminal charges – Goldshield, Ranbaxy, Generics and Norton Healthcare – declined to comment when asked if they denied colluding with each other, saying they could not speak while the threat of criminal proceedings remained.

Mr Justice Pitchford last month scrapped fraud charges laid by the Serious Fraud Office against the companies after the House of Lords criticised the way the indictment was drafted but left open the possibility it could be amended. The SFO has launched an appeal against the judge’s decision, arguing it should be allowed to reformulate the charges.

Since the trial collapsed, some senior executives – notably those at listed Goldshield, which is chaired by Keith Hellawell, the government’s former drugs “tsar” – have gone on the offensive and complained £25m of taxpayers’ money was wasted in mounting the trial. The companies have always argued that price-fixing was not a crime at the time of their alleged activities.

But lawyers said there seemed to be evidence of subterfuge to justify a prosecution, alleging companies conspired to defraud the government – and hence the taxpayer. Documents seized in the penicillin investigation included a presentation, known as “The Scenario”, that contained a bullet-point overview of how to operate a price-fixing cartel.

The case could be picked up by the Office of Fair Trading, which has imposed fines totalling hundreds of millions of pounds over the past year or so on companies involved in cartels in industries such as aviation, supermarkets and tobacco.

Another possibility is that the NHS could launch a private prosecution. It declined to say whether it had plans to do so.

Timeline

2000 SFO starts probe into price-fixing in supply of generic drugs to NHS

April 2002 More than
30 premises raided

April 2006 Five companies and nine executives charged with conspiracy to defraud

January 2008 Lords hear submissions from Goldshield and Ian Norris that price-fixing cannot be prosecuted under the common law offence of conspiracy to defraud

March 2008 Lords rule in favour of Mr Norris and Goldshield

July 2008 Judge quashes indictment against the five companies and nine executives charged