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Legal view: How has the CMA cracked down on profiteering pharmacies?

The CMA and GPhC have warned pharmacies against profiteering during COVID-19, says Susan Hunneyball

In March, I wrote about profiteering from COVID-19 and flagged up the steps that the Competition and Markets Authority (CMA) was taking in cracking down on this practice. So, what has happened since then?

All pharmacy owners received the joint letter from the General Pharmaceutical Council (GPhC) and the CMA at the end of June that said: “Unfortunately, we have received reports alleging that a small minority of pharmacies are seeking to benefit from the COVID-19 pandemic by charging unjustifiably high prices for essential products – including hand sanitiser, face masks and paracetamol – which continue to be in very high demand.”

The letter said that the CMA had opened investigations into suspected breaches of competition law by a total of four retailers, including pharmacies. The investigations related to suspected charging of excessive and unfair prices for hand sanitiser.

A fortnight is a long time in the pandemic world. By July 13, the CMA said in a letter it had closed three out of the four cases.

One case was closed as there were not grounds for action with respect to the relevant party’s pricing of hand sanitiser. The CMA said it had reviewed the evidence and concluded that the price the party had charged for hand sanitiser was not excessive under competition law. There are no details about the party involved or the relative prices considered.

The other two cases were closed on the basis of the CMA’s Prioritisation Principles. The CMA said that it looked at evidence, including the retailers’ wholesale costs and the volume of hand sanitiser that they had sold.

It concluded that it was “unlikely” that the retailers’ prices infringed competition law and that further investigation to reach a definitive view in these two cases would deliver “limited, if any, consumer benefits”.

Charts produced by the CMA in its July update record a median rise of 400% in the cost of hand sanitiser out of all reports of price hikes, but it can be seen that independent pharmacies and independent chains show the largest increases.

The charts show that the average price of 50ml hand sanitisers sold in pharmacies, excluding Boots and Superdrug, starts at around £1 at the beginning of January, peaks at £5 in the week from March 15 to 21[4] [CT5] , and then falls to under £3 in May. Of course, unjustifiable increases are always unfair but looking at the actual pricing – rather than the percentage increase – explains why the underlying wholesaling and operating costs have to be explored to understand the fluctuations.

These figures contrast with action taken by the CMA against major pharmaceutical companies. On July 9, it announced a settlement following its investigation into the pricing of fludrocortisone, a prescription-only medicine mainly used to treat Addison’s disease. It found that the manufacturers Amilco and Tiofarma agreed to stay out of the fludrocortisone market so that Aspen could maintain its position as the sole supplier in the UK.

In exchange, Amilco received a 30% share of the increased prices that Aspen was able to charge, and Tiofarma was given the right to be the sole manufacturer of the drug for direct sale in the UK.

Following the agreement, the cost of fludrocortisone to the NHS increased by “up to 1,800%”, the CMA said. The price increase of hand sanitiser has an everyday effect on all consumers, but taxpayers suffer a less immediate hit from this sort of price gouging.

What about the GPhC?

At the GPhC council meeting in June, the minutes show that the level of fitness to practise concerns in March (381)  and April (318 concerns) were higher than the average (240 concerns), although concerns in May were lower than usual (212). Approximately 180 of the concerns during these months were COVID-19 related. These included issues linked to profiteering and other anti-competitive behaviour.

As the CMA will now not be pursuing three out of four of its hand sanitiser price increase cases, it seems that the GPhC will not have a court-imposed decision to prompt fitness-to-practise procedures for the pharmacies concerned.

The GPhC said in its joint letter it has “written to a number of registered pharmacies to remind them about the requirements to meet our standards in the context of concerns we’ve received about price increases”, but it is yet to be seen whether these will translate into public fitness-to-practise proceedings.

The regulator appears to be taking a more proactive public health stance during the COVID-19 crisis, saying in relation to antibody testing for the virus: “During this ongoing national public health crisis, any activity that may contribute to false results or assurances that then impact on public behaviour should not be supported.” Of course, its legally mandated role under the Pharmacy Order 2010 includes protection of the public.

What’s next?

The CMA said in July that it considers that COVID-19 related profiteering has now become less widespread, although it also said “this trend may reverse”, particularly if new restrictions on people and businesses are introduced. Given the government ruling on masks in shops, there may well be a profiteering second spike.

This is a general overview. Independent legal advice should be sought for any specific concerns.

Susan Hunneyball is consultant solicitor at Gordons Partnership law firm.

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