Office of Fair Trading
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OFT evaluation of Napp case finds increased competition in morphine market

The OFT has today published an evaluation of its 2001 abuse of dominance case against Napp Pharmaceuticals (Napp).

The report finds increased competition in the sustained release morphine (SRM) market over the past decade, following the OFT's intervention. Sustained release morphine is used to manage severe pain and commonly used in the treatment of cancer-related pain.

This OFT research, conducted by OFT economists and independently reviewed by Professor Stephen Davies of the University of East Anglia, looked at the impact on the SRM market of the decision and restrictions imposed on Napp. In 2001, Napp was found by the OFT to be supplying SRM to patients in the community at excessively high prices while supplying to hospitals at high discount levels with the effect of eliminating competition. The £3.2 million fine against NAPP (subsequently reduced to £2.2 million) was the first financial penalty to be set by the OFT under competition law.

Today's evaluation found that:

  • Napp's list price for its SRM products in the community has reduced by approximately 25 per cent, in excess of the 15 per cent decrease stipulated by the OFT in its 2001 decision.
  • The OFT's 2001 intervention has stimulated entry into the SRM market. Napp's market share in the hospital segment has fallen from approximately 95 per cent to 50 per cent and in the community segment from 95 per cent to 65 per cent. 
  • Increases in Napp's SRM prices to hospitals have to some extent counterbalanced the savings from cheaper community prices. Nevertheless, the OFT has conservatively estimated that the intervention has saved the NHS in excess of at least £1.5 million in each year between 2001-2009.

The impact of the 2001 intervention has potentially been enhanced by the increase in generic prescribing of SRM. 

Amelia Fletcher, OFT Chief Economist, said:

'This research, the first we have carried out on a Competition Act case, clearly demonstrates the impact our interventions can have on making markets more competitive and efficient.

'Today's evaluation reveals that our action against Napp has already resulted in cost savings for the NHS, and therefore the taxpayer, in excess of £13 million.'

NOTES

  1. The OFT fined Napp in 2001 for abuse of dominance under the Competition Act 1998. See the case page.
  2. Napp's penalty was reduced to £2.2 million on appeal. See www.catribunal.org.uk/238-697/Final-judgment.html
  3. The OFT's evaluation programme aims to evaluate whether the OFT delivers its objectives cost-effectively, and to help the OFT prioritise, conduct, and follow up its work to maximise its impact.

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