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Napp Pharmaceutical Holdings Limited

No. CA98/2D/2001

This decision was appealed to the Competition Appeal Tribunal on 29 May 2001. On 15 January 2002 the Competition Appeal Tribunal substantially upheld the OFT's decision on liability. For further details see Competition Appeal Tribunal website.

6 June 2011 

The OFT has published an evaluation of its 2001 case against Napp Pharmaceuticals. The aim of this evaluation was to understand the extent to which the SRM market has changed as a result of the 2001 decision and to estimate the impact of OFT's intervention in terms of monetary savings to the NHS. The evaluation was conducted 'in-house' by OFT economists and independently reviewed by Professor Stephen Davies.

The evaluation found that the OFT's 2001 intervention has stimulated competition in the market, as demonstrated by a reduction in Napp's market share in both hospital and community segments. Additionally, Napp has removed its exclusionary discounts in the hospital segment and it has also reduced its prices to the community. Annual savings from the intervention are conservatively estimated at £1.5 million.

5 April 2001

The OFT made its first decision under Chapter II of the Competition Act of 1998 when it imposed a penalty of £3.2 million on Napp Pharmaceuticals (Napp), a Cambridge-based pharmaceutical company, for abuse of its dominant position in the market for the supply of sustained release morphine tablets and capsules in the United Kingdom. Sustained release morphine is commonly used in the treatment of cancer-related pain and Napp was found to have supplied its sustained release morphine product, MST, to patients in the community at excessively high prices while supplying hospitals at discount levels with the effect of eliminating competition in the relevant market.

The OFT found that Napp had offered discounts well over nine per cent when tendering for hospital contracts. In addition, Napp had targeted these discounts at other sustained release morphine products produced by its competitors with the result that, in at least one instance, a competitor was forced to leave the market. By offering high discounts to hospitals, Napp was found not only to have been able to win hospital contracts but also to have been able to retain a similarly high share of the much larger community market because the prescribing practices of GPs were found to be strongly influenced by the brands used in hospitals. The OFT also found that Napp's profits on these 'follow on' community sales were maximised because Napp charged excessive prices on its sustained release morphine sold to the community, in some cases more than 10 times hospital prices and up to six times its export prices.

In addition to the financial penalty imposed, the OFT may make further directions regulating Napp's conduct in the relevant market. These may include an immediate reduction of the price of MST to the community and a limitation on the extent to which community prices may exceed hospital prices.

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