You never give me your money: Competition law, damages actions, and the healthcare sector
Public healthcare bodies that have suffered loss as a result of competition law infringements should consider ‘follow on’ damages actions as a means of recovering public money. This seems to be behind the Department of Health’s recent claim against Reckitt Benckiser
Background
In October 2010, Reckitt Benckiser was fined £10.2m by the Office of Fair Trading for abusing its dominant position in relation to a lifecycle management practice connected with its popular heartburn medicine, Gaviscon. NHS packs of Gaviscon Original had been withdrawn and delisted from the NHS prescription channel by Reckitt Benckiser and replaced with a newer, slightly modified product, Gaviscon Advance. Certain features of the NHS electronic prescription system ensured that generic market entry was prevented as a result of this strategy.
Consequently, it is possible that health authorities continued to pay higher prices than would have been necessary if generic heartburn products had been available for prescription during the time of the infringement.
‘Follow on’ damages actions in the UK
Persons who have suffered loss as a result of an infringement of UK or EU competition law are entitled to seek damages in order to recover those losses through the UK court system.
‘Follow on’ damages actions, that is, actions for damages where liability has already been established through an infringement decision issued by a regulator, may be commenced either in the Competition Appeal Tribunal or the High Court, depending on the circumstances of the case.
- Competition Appeal Tribunal. The advantage of commencing a damages action in the Competition Appeal Tribunal is that it is a specialist competition law tribunal with expert judges and economic advisers; however follow on damages actions cannot usually be brought in the CAT until after the conclusion of any appeals against a regulatory infringement decision.
- High Court. Although the High Court has fewer specialist competition law judges, it is nevertheless possible to commence competition damages actions and make significant progress with them while the related regulatory investigation continues or any appeals are being heard.
The Department of Health’s claim against Reckitt Benckiser
According to recent press reports, the Department of Health, collectively with all 10 Strategic Health Authorities and 144 Primary Care Trusts, has lodged a claim against Reckitt Benckiser in the High Court. The same press reports suggest that the claim relates to an attempt to recover losses suffered as a result of Reckitt’s abuse of dominance in the Gaviscon case.
The precise nature of the claim will emerge as the case progresses. However, some broad outlines seem to be clear even at this early stage. It has been reported that the Department of Health has made two arguments.
- A policy of delay to prevent generic versions of Gaviscon Original from entering the market. It has been suggested that Reckitt Benckiser pursued a policy of delaying the British Pharmacopoeia Commission from production of a monograph which would have enabled other companies to produce generic versions of Gaviscon Original. This policy appears to have been composed of several elements, including legal interventions during the Commission’s production of the monograph. If this point is proved at court, then the implications could be very significant, as it would provide further weight for a thus far relatively untested proposition – namely that the use of legal procedures by dominant companies could, in itself, constitute an abuse under competition law.
- Withdrawal of Gaviscon Original from the NHS channel. The second limb of the Department of Health’s case is that Reckitt Benckiser deliberately withdrew the off-patent Gaviscon Original from the NHS channel in order to migrate patients on to Gaviscon Advance, which still benefited from patent protection. This and similar kinds of reformulation strategy have been common practice in the industry for a long time, but competition regulators and courts have been slowly undermining its legitimacy over the last couple of years.
Political significance of the Department of Health claim
If there is an underlying competition law damages action in this case, then as interesting as the legal issues may be, they could be outweighed by the political significance of the action. In this regard, it is worth noting the following.
- Duty to recover public money? Public sector bodies are often quick to claim that they consider themselves to have a duty to attempt to recover public money. In cases where public bodies have overpaid for services and medicines as a result of anticompetitive conduct, that laudable civic objective could restore significant sums of money to the public purse. Entities such as the Department of Health, Primary Care Trusts, and Strategic Health Authorities (together with their successors in the imminent NHS reforms) could all benefit from the UK’s damages actions regime.
- Legislative proposals to encourage damages actions.<//b><//b> In the face of sometimes strong opposition, in 2012 the European Commission intends to table legislative plans designed to encourage damages actions. The aim is to help small businesses and consumers bring claims against antitrust infringers, but the effect of the reforms should be to liberalise the whole sector.
- Don't forget about Monitor. The previously unassuming body set up in 2004 to authorise and regulate NHS foundation trusts is intended to become, under the government’s NHS reforms, a supercharged competition regulator. Monitor will have the ability to apply UK and EU competition law across the healthcare sector.
An already strong incentive to recover public money, especially at a time of severe budgetary restraint, combined with a dedicated sectoral competition regulator, could mean more investigations, more infringement decisions, and in turn that could result in greater scope for public bodies to make creative use of competition law damages actions.
Lawyers Robert Vidal, Louisa Penny
