Published: 18/04/2002, Volume II2, No. 5801 Page 4 5

One of six pharmaceutical companies raided by police and the Serious Fraud Office last week during investigations into allegations of price fixing is a firm which, two years ago, threatened to stop production of 23 common drugs after the government capped prices.

Residential and business addresses linked with six companies were raided as part of an investigation into a 'suspected conspiracy to defraud the NHS in relation to prices charged by suppliers for prescribed penicillinbased antibiotics and [blood-thinning drug] warfarin between 1 January 1996 and 31 December 2000', the Serious Fraud Office said.

Among these were Norton Healthcare, Britain's biggest generic drugs manufacturer, which in Spring 2000 warned it would have to stop producing 23 generic drugs, claiming they would be 'uneconomic' because the proposed price cap was too low.

In a letter sent to its customers, it provided a list of 23 products which would no longer be supplied when the cap was introduced. The government subsequently increased the proposed maximum prices by up to 500 per cent.

A spokeswoman for IVAX Pharmaceuticals UK - the parent company of Norton Healthcare - however, stressed that 'the products involved in the investigation were not included in the list of 23 products referred to in the letter back in 2000'.

She said the company was 'co-operating fully with the investigation and believes its sales of these products have been in compliance with all applicable laws and regulations'.

And she said IVAX 'has no plans in future to delist [ie stop production of] any of our generic products'.

The raids took place last week at businesses and residential addresses linked with Norton Healthcare, Rambaxy UK, Generics UK, Kent Pharmaceuticals, Regent GM Laboratories, and Goldshield Group in connection with the suspected conspiracy.

The case was referred to the SFO by the Department of Health's counter-fraud directorate. The scale of the alleged fraud is thought to be around£400m.

The raids took place against a backdrop of a long-running struggle to find generic drug prices which are acceptable to both the government and the industry.

The Commons health select committee launched an inquiry into soaring prices after the problem was revealed in HSJ in 1999.A year later DoH statistics revealed the full extent of the problem, showing a£200m jump in the cost of generic drugs to the NHS in 1999. The drugs with spiralling costs included those now being examined by the SFO.

At the time, in its report, the select committee report expressed concerns about 'market manipulation, hoarding and collusion' and said it was not convinced the practice was limited to smaller operations by short-line wholesalers.

Health select committee chair David Hinchliffe stressed he could not comment on the current inquiry by the SFO. But he told HSJ: 'Clearly the health committee did highlight a series of concerns at its inquiry. I am not surprised the issue is being investigated.'

And he said he had 'personal anxieties' about practices like market manipulation, hoarding and collusion.

A study of possible longer-term solutions to the spiralling costs of generic drugs - on which consultation ended last October - is still under discussion by the DoH and the pharmaceutical industry.

Options include changing the basis on which NHS reimbursement prices are calculated, statutory price control, switching to central purchasing and keeping the current maximum price scheme.

NHS Alliance chair Dr Michael Dixon also stressed he could not comment on the ongoing investigation. But he said: 'One of the spectacular successes of primary care over the past few years has been to cut prescribing for antibiotics' and ensure more appropriate prescribing, with increased use of generic drugs.

He added: 'It is slightly galling for primary care, having made such tremendous efforts to ensure We are prescribing wisely, to find the NHS hasn't benefited and patients haven't benefited in the way they should have done.'

Dr Malcolm Ward, chair of the Dispensing Doctors Association, had been 'very concerned' at the drugs price crisis.

He said: 'There was some suspicion that advantage might have been taken by some of the manufacturers, but as to whether there was fraud - actually a conspiracy - That is for the investigation to determine.'

There were reports this week that Norton Healthcare chair Isaac Kaye has been a substantial donor to the Labour Party, giving 100,000 in 1999 along with a£10,000 contribution to former health secretary Frank Dobson's campaign to become Labour's candidate for Mayor of London.

The Labour Party could only confirm that its accounts for 2000 showed Mr Kaye had given a donation of over£5,000.