Media release from the Competition Commission

11 February 2008

Pharmaceutical product cartel referred for prosecution

The Competition Commission has referred a case of collusion against Adcock Ingram Critical Care (Pty) Ltd (“AICC”), Dismed Criticare (Pty) Ltd (“Dismed”) and Thusanong Health Care (Pty) Ltd (“Thusanong”) for prosecution. AICC, Dismed and Thusanong are competitors who supply pharmaceutical products to the health care market.

Tiger Brands, the owner of AICC, 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 (“FKSA”). 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.

FKSA 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 tendering

The Department of Health annually invites tenders for the supply of pharmaceutical products, large volume parenterals, irrigation solutions, administration sets and accessories to its public hospitals. The Commission’s investigation found that the representatives of AICC, FKSA, Dismed 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 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 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.

Market allocation

The Commission also found that AICC and FKSA 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.

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.”

ENDS

Prepared by: FD Beachhead

Dani Cohen -

Jennifer Cohen-

On behalf of: The Competition Commission

Further info:

Thulani Kunene, Manager, Enforcements and Exemptions