The Competition and Markets Authority (CMA) will not appeal the May decision of the Competition Appeal Tribunal (CAT) to overturn multi-million pound fines it issued against Lexon UK, Alliance Pharmaceuticals and Focus Pharmaceuticals for a prochlorperazine “pay for delay” scheme, the competition regulator has confirmed with C+D.

In a 117-page judgment issued in May, the three-person appeal tribunal rejected the CMA’s 2022 decision against wholesaler Lexon, manufacturers Alliance and Focus, bringing closure to a saga that led a former chair of the National Pharmacy Association (NPA) to resign from the role in 2019.

It ruled that there was no “pay for delay” or market exclusion agreement (MEA) between Lexon and Alliance regarding a presentation of prochlorperazine. 

The CAT decision nullified the fines issued by the CMA against those companies in 2022 - £7.9m for Alliance, £7.3m for Lexon, and £15.5m fine for Focus, split between its owners Advanz and Cinven.

The CAT also struck off the attempt by the CMA to disqualify directors involved in the matter, Lexon’s Pritesh Sonpal, Alliance’s Peter Butterfield and John Dawson, Focus’s Mark Cresswell, Roland Brown and Graeme Duncan, and Debangshu Dey of Medreich.

Generic manufacturer Medreich was also subject to findings in the initial CMA case, but did not join the case before the CAT. Instead, Medreich “admitted to breaking the law and paid out a fine of £4.6 million” for its role in the matter, a CMA spokesperson told C+D last month (July 15).

Despite its loss in the appeal tribunal, the CMA told C+D that it stood by its “well-evidenced decision” which it said followed from a “thorough investigation”, even as it decided that it would not lodge a further appeal.

“We are disappointed with this judgment,” the CMA spokesperson told C+D.

 

Prochlorperazine case

 

In May 2019 the CMA published provisional findings alleging that the manufacturers Alliance Pharmaceuticals, Focus Pharmaceuticals and Medreich, and wholesaler Lexon UK, had agreed to an anti-competitive scheme , to restrict the supply of prescription-only prochlorperazine 3mg buccal tablets. It claimed the scheme lasted from June 2013 to July 2018.

The cost to the NHS of this drug, which had been debranded as Buccastem by Alliance in 2013, rose by 700% over four years - and the CMA claimed it was because of the alleged collusion. 

In November 2013, Alliance charged £5.65 for prochlorperazine in its branded form, and the drug tariff price was £5.89. In December 2013 the drug was launched as a generic, marketed exclusively by Focus, at a cost of £9.98 on the drug tariff. By July 31 2018, “the end of the alleged infringement”, the price for this presentation of prochlorperazine on the drug tariff was £51.03, according to the CAT judgment.

All the while, Lexon did not bring its version of prochlorperazine to market using the manufacturer Medreich, with which it had a joint venture agreement in place since 2008.

But the CAT did not agree with the CMA’s findings as it ruled that “whatever may have been the reason for the increase in the drug tariff for prochlorperazine … it was not the alleged MEA”.

 

No MEA culpa

 

The CMA argued that a “pay for delay” agreement had been struck between Alliance and Lexon sometime in 2013.

The competition authority claimed that Focus, which had separate agreements with Alliance and Lexon, was the intermediary used by Alliance to “transfer value” to Lexon so that it would not enter the market. 

Focus had the exclusive right to supply of the drug from Alliance at a fixed price – it also had a five-year agreement, signed in August 2013, with Lexon to split the profits from the sale of its prochlorperazine, with 75% of the profits going to Lexon and 25% going to Focus. Notably, the agreement applied to Focus’s sales of the drug “from any other source”.

But Lexon argued before the CAT that the CMA had “reverse engineered” the existence of the MEA. Alliance argued that there was no agreement between it and Lexon and that it “continued to anticipate competitive entry by Lexon after the point at which the CMA claims Alliance entered into the MEA”.

The CAT found the CMA did not establish the presence of an MEA and rejected the CMA’s finding that a deal struck by Focus with Lexon could “be explained only on the basis of the MEA”. 

It was not convinced by the competition authority’s explanation that the extensive communications between the companies during the period of investigation was proof of an MEA.

Instead, the appeal tribunal accepted the explanations given by witnesses from Lexon, Alliance and Focus for the period under investigation.

For instance, the CAT accepted that a meeting between Alliance and Lexon in 2013 had been arranged for “gathering intelligence“, which it said was “a world of a difference” away from a meeting to conclude a MEA.

It found that the agreement by which Focus would “would share its profit from the distribution of Alliance’s product with Lexon” while it waited for the “coming on stream” of Lexon’s cheaper product did not incentivise Lexon “to stay out of the market”.

And it ruled that the delays experienced by Medreich in bringing the prochlorperazine buccal to market were not because of a “pay for delay” agreement between Lexon and Alliance, but “more likely” due to “licensing and manufacturing difficulties”.

“When the documentary and witness evidence is looked at in the round, it does not demonstrate on the balance of probabilities that there was a MEA,” it ruled.

 

NPA and nortriptyline

 

The effect of the CMA’s investigation reached beyond the companies under suspicion of anti-competitive behaviour. Caught up in the prochlorperazine controversy was Nitin Sodha, then-chair of the National Pharmacy Association (NPA) at the time that the CMA investigations were announced.

Sodha was the managing director of Knights Pharmacy, but he was also non-executive director of the wholesaler Lexon, which he founded with his brother and his nephew, Pritesh Sonpal, in 1995.

Sodha’s term as chair, where he replaced Ian Strachan, was itself controversial owing to his close ties to Lexon. These ties led NPA board member Mike Hewitson to resign in protest in April 2018.

“At a time when NPA members face an existential battle for survival, made more difficult by the behaviours of wholesalers, large and small, this represents an insoluble conflict of interest,” said Hewitson in a resignation letter posted to Twitter at the time. 

In an opinion piece for C+D in June 2018, Hewitson called for “radical action on wholesalers linked to increases in generics prices”, that could include “breaking up the vertically integrated companies”.

Speaking exclusively to C+D in July 2018, Sodha said that his role as chair of Lexon’s board had ended two years prior to the publication of the interview. As a non-executive director, he said that he attended meetings “as and when – maybe four in a year” and insisted at the time that there was “no conflict” between the roles played by wholesalers and by pharmacies.

But in June 2019, one month after the CMA released its provisional findings, he announced that he would be “stepping aside with immediate effect” as chair while the CMA completed its collusion investigation.

And when the CMA released its findings against Lexon in a second matter, Sodha announced that he would be leaving the NPA board altogether after sitting on it for 12 years.

In June 2019, just a week after Sodha stepped down as NPA chair in 2019, the CMA released provisional findings that Lexon, fellow wholesaler Alissa Healthcare and manufacturer King Pharmaceuticals kept the price of nortriptyline artificially high by illegally sharing commercially sensitive information.

While Alissa and King both admitted to breaking the law in this matter in September 2019, Lexon did not accept wrongdoing.

Lexon was fined £1.2m, which CMA chief executive Andrea Coscelli said at the time should “act as a clear warning to any pharmaceutical company that considers stifling competition and cheating the NHS”.

The wholesaler also sought to appeal against the CMA’s nortriptyline decision to the CAT.

But in February 2021 the appeal tribunal “unanimously dismissed” Lexon’s case as it found that the sanction was “amply justified” owing to the “significant degree of seriousness”.

As a result of the CMA’s findings in the nortriptyline matter, in January 2022 Sonpal was disqualified from being a company director for four years.

A spokesperson for the NPA told C+D on July 16 that Sodha had “made a major contribution as an NPA board member and chair, but we understood and respected his decision to leave the board in 2019”.

In April 2023, Well Pharmacy’s parent company Bestway Healthcare announced that it had bought Lexon UK, in a deal that included over 40 Knights Pharmacy branches, and generic manufacturer Key Pharmaceuticals. 

Lexon UK’s managing director Anup Sodha said at the time that Pritesh Sonpal, Nitin Sodha and Pankaj Sodha, had "all decided that this is the time for them to step away from the business".

After months of uncertainty - the CMA launched a probe into the consequences for competition that could follow the buyout - the Bestway deal was waved through in August 2023.