Four South African drug manufacturers have been found by the country’s competition authority to have colluded in fixing bids for the supply of products to the tender system through which the state buys drugs for its hospitals and healthcare services.
One of the companies, Adcock Ingram, is one of the largest makers of generic drugs in South Africa and holds several licences from multinational pharmaceutical companies for the local manufacture—supposedly cheaply—of drugs used to treat HIV and AIDS. The three other companies, one of which assisted the authority and gave details of the collaboration, are smaller.
The Competition Commission, a statutory body empowered by the government to investigate, control, and evaluate restrictive business practices, said it had found that Adcock Ingram Critical Care, Dismed Criticare, Thusanong Health Care, and Fresenius Kabi had formed a cartel and engaged in collusive tendering and market allocation. “The conduct was designed to avoid competition between the colluding firms and manipulate prices for pharmaceutical and hospital products,” a statement from the commission said. It has sent its findings to the Competition Tribunal, which adjudicates in competition matters, for prosecution and sentencing.
The Competition Commission also implicated the four companies in similar anticompetitive behaviour when selling to private hospitals. South Africa’s public healthcare system buys drugs through a public tender system. But a large share of spending on drugs and thus profitability for companies occurs in the private healthcare system, where prices are largely governed by a market dominated by health insurers and private hospitals, supposedly regulated by the Medicines and Related Substances Control Act.
This act, although incomplete in some of its regulatory details, has the power to ensure that drug prices are set and cannot be changed through discounts or other marketing devices previously used by drug companies. This should, in theory, prevent anticompetitive behaviour in the market.
Private hospitals are currently the subject of official scrutiny, and the government has threatened to regulate the pricing mechanisms and agreements they set. Responding to complaints by the health insurance industry and its regulators, health minister Manto Tshabalala-Msimang said that private hospitals charge too much and keep private health care out of the reach of poor people.
The listed owner of Adcock Ingram, Tiger Brands, was fined 100 million rand (£6.7m; €8.9m; $13.2) late last year for colluding in keeping bread prices artificially high. Its chief executive officer resigned and a new one was being announced when the Competition Commission made public its findings about pharmaceutical and hospital products. The company acted swiftly, suspending the chief executive officer of Adcock Ingram.
Tiger Brands said it was “devastated at allegations of collusion” and that it was investigating all the company’s businesses. It has called in an independent legal company with expertise in competition law to assist with its investigation.