Gaviscon maker in danger of OFT fine
The household goods giant Reckitt Benckiser has been accused by the competition watchdog of deliberately manipulating its “dominant market position” to stop NHS doctors from supplying generic versions of its Gaviscon heartburn and indigestion medicine.
If it is found to have abused its power, the Office of Fair Trading could fine Reckitt, which makes the painkiller Nurofen and the dishwasher powder Finish, up to 10% of its annual sales, which were £7.78bn in 2009.
The notice by the OFT is significant because Gaviscon is a major contributor to Reckitt's revenues, although analysts said that any potential fine is likely to be less than the maximum the OFT could levy.
The competition watchdog alleges that Reckitt sought to “restrict” competition to the heartburn brand by withdrawing and delisting its packs of Gaviscon Original from the NHS prescription database just before a generic name had been assigned.
According to the OFT, this meant that when doctors used prescribing software to search for the product and its generic equivalents they could only find Gaviscon Advance Liquid, which is patent-protected until 2016.
Simon Williams, the OFT's senior director for goods, said: “This case raises significant and complex competition issues relating to the supply of prescription drugs to the NHS.”
The company will now have a full opportunity to respond to theproposed findings. The OFT said no assumption should yet be made that an infringement of competition law had occurred.
Graham Jones, an analyst at Panmure Gordon, said: “While Gaviscon Original is still available as an over-the-counter product, Reckitt has previously commented that it is the second largest prescribed brand on the NHS. The maximum fine, if found guilty, could be 10% of group worldwide turnover but we do not expect a fine to be anywhere near this level.”
Reckitt said: “RB believes it competes fairly and within the letter and spirit of the law in all of our operations, and has co-operated fully with the OFT throughout its inquiry.”
The inquiry followed a BBC Newsnight report that generic copies of Gaviscon could have saved the NHS £40m since 1999.