Financial Daily from THE HINDU group of publications
Friday, Jun 25, 2004
Corporate - Courts/Legal Issues
UK health service allegations Ranbaxy initiates legal consultations
New Delhi , June 24
RANBAXY Laboratories Ltd has initiated legal consultations after UK's NHS (National Health Service) alleged unlawful price fixing of Ranitidine, a generic drug used for treatment of ulcer.
Sources in the company said that solicitors in the UK have already been pressed into action. The NHS has alleged that Ranbaxy and Generics UK, part of Merck, have indulged in price fixing of the drug, which is not patent protected.
It said that prices did not fall fast enough when generic competition was introduced in the late 1990s and has claimed losses of £100 million.
The Government-sponsored health scheme of the UK has applied to the High Court to recover the money.
Ranbaxy, in a statement, has acknowledged that its wholly-owned subsidiary, Ranbaxy (UK) Ltd, was yesterday notified of the `issue' of a claim from the Secretary of State for Health against it and Generics UK Ltd in connection with the sale and supply in the UK of the ulcer drug, Ranitidine.
"Yesterday's notification was the first notice Ranbaxy (UK) Ltd had of this claim. The details of the claim are most unclear. Damages are not quantified. The Department of Health has indicated that it is not in a position to set out its case in any detail or to serve its claim so as to commence its proceedings against Ranbaxy (UK) Ltd," the company said.
It also added that it would vigorously defend the case while stating that the cumulative sales of Ranbaxy in the UK for all products between 1997 and 2000 amounted to £35 million.
This is not the first time that generic drug companies have been caught in the storm of illegal price fixing. In December 2002, NHS had launched a civil action against seven other pharmaceutical companies including Generics UK and Ranbaxy for alleged price-fixing of penicillin. A £ 30-million lawsuit was filed against these companies. Prior to this, a £ 28 million legal suit was filed against six companies on unfair pricing practise of a blood-thinning agent, Warfarin.
However, the NHS case did not have much impact on the shares of Ranbaxy today. The stock fell to a day's low of Rs 860 on the Bombay Stock Exchange and recovered to close at Rs 905.3, up from the previous day's close of Rs 885.05.
So even as the stock market seems to have discounted the development, market men expect the issue to be discussed at the company's annual general meeting to be held on Friday. Analysts tracking the sector said that pharma companies, which are operating in the regulated markets, would have to be prepared for such litigations. "The £100 million loss claimed by NHS seems to be very high, while Ranbaxy's sales in the UK have not been much during the period. Therefore, we expect the liabilities for Ranbaxy to be low," said an analyst. Also, litigations normally take a long time and therefore this is not a major concern for the market, they added.
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