An appeals tribunal has overturned £35m fines imposed on drug firms for their alleged involvement in an anti-competitive deal after it determined that the initial decision was based on speculation, shaky evidence and “material errors”.  

Last Thursday (May 23) the Competition Appeal Tribunal (CAT) struck out fines imposed on Lexon, Alliance Pharmaceuticals and Focus by the Competition and Markets Authority (CMA) in February 2022 following a successful appeal by the companies.  

The fines were issued after the CMA found that Alliance and its distributor Focus had arranged to pay Lexon and Medreich to delay bringing their respective prochlorperazine 3mg dissolvable tablet products to market so that Alliance could retain its dominant market position. 

The CMA found that this alleged agreement directly contributed to the price paid by the NHS for packs of 50 tablets rising by 700 per cent from £6.49 to £51.68 over a four-year period. 

But the tribunal last week did not find any evidence that the supposed market exclusion agreement (MEA) at the heart of the allegations was ever entered into by the relevant parties. It questioned the watchdog’s interpretation of documentary evidence including emails and contemporaneous notes from meetings. 

The CMA’s position was that the MEA between Alliance, Focus and Lexon was established at a “key meeting” in “late May or early June” of 2013, but the CAT found that communications between the companies at the time provided “no direct evidence that there was any discussion of when Lexon would enter the market, nor of delaying that entry”.

“There is a world of a difference between, on the one hand, gathering intelligence as to options for supply and, on the other, concluding an agreement to exclude Lexon from supplying not only to Alliance but to the market as a whole,” said the CAT in its assessment of emails and other evidence dating from the period in question.  

In addition, the CAT found evidence that as of July 2013 Focus was “still considering whether or not to enter into an agreement with Alliance to distribute procholorperazine POM” – undermining the CMA’s finding that the MEA was established in May or June that year. 

‘Wholly speculative’ 

The CAT judgement, which runs to almost 120 pages, also dismisses the CMA’s finding that Alliance’s business model was based on “profiting from temporary price hikes” rather than products offering “a modest but solid and reliable revenue stream”. 

The watchdog’s assessment of the company’s business model was “wholly speculative,” the CAT found, agreeing with Alliance’s representations that the arrangements between Alliance and Focus were “part of a unilateral strategy to debrand and appoint a distributor” and not part of the alleged MEA “which did not exist”.

Concluding, the CAT said: “Whatever may have been the reason for the increase in the Drug Tariff for prochlorperazine POM from £11.98 in October 2014 to £51.03 on 1 July 2018, it was not the alleged MEA.” 

The CMA had “periled its entire decision” and the explanation for these large price hikes on the existence of the MEA, it added. 

Second blow for watchdog 

This is the second occasion in recent months in which fines imposed by the CMA have been overturned on appeal. In March, the CAT found that fines totalling £106m against Actavis UK and Advanz over alleged "cartel behaviour" with respect to hydrocortisone tablets could not be allowed to stand because of a failure of “due process” during a trial cross-examination.

Following the publication of the judgment last week, a CMA spokesperson told P3pharmacy: “We note today’s judgment from the Tribunal. We will carefully consider our next steps, including whether or not to appeal.”

A spokesperson for Alliance Pharma said: “We are delighted that Alliance has been successful in its appeal.”

Posting on LinkedIn, Lexon co-founder Anup Sodha welcomed the tribunal decision and said: “The integrity of Lexon, our directors, and our staff should never have been questioned. To the doubters, this decision is proof of our vindication, meaning it provides evidence and confirmation that Lexon, its directors, and staff have been cleared of any wrongdoing or unjust accusations.” 

A spokesperson for the Bestway Group, which bought Lexon last year, told P3pharmacy: “When Bestway Healthcare acquired Lexon we were fully aware of the CMA’s regulatory investigations which were tied to the previous ownership of the Lexon group.

“Comprehensive due diligence was conducted by our legal and finance team and all aspects were factored into the acquisition process. We take compliance with all laws and regulations governing our business very seriously – including competition laws – and have appropriate governance structures in place.” 

Medreich, which did not take part in the appeal, reportedly admitted to the CMA in 2022 that it had taken part in a breach of competition rules around prochlorperazine in return for a reduced fine. However, the tribunal judgment finds because there was no MEA, “there was nothing for Focus and Medreich to participate in, and no such breach”. Medreich has been approached for comment.