Anticipated acquisition by Intercare Group plc of Eldon Labotatories Ltd

Affected market: Pharmaceuticals

No. ME/1169/04

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, assessment and decision.

Please note square brackets indicate commercial confidential text or figures removed or replaced at the parties' request

The OFT's Decision on reference under section 33 given on 10 September 2004

PARTIES

Intercare Group plc (Intercare) is involved in the manufacture of pharmaceutical products on an outsourced basis, as well as the manufacture and supply of its own generic, branded and special pharmaceuticals. Martindale Pharmaceuticals (Martindale), a United Kingdom (UK) subsidiary of Intercare, manufactures special pharmaceuticals.

Eldon Laboratories Ltd (Eldon) is a wholly owned subsidiary of Alliance UniChem and is involved in the supply of special pharmaceuticals to pharmacies. Eldon's turnover in the year ending 31 December 2002 amounted to less than £70 million.

TRANSACTION

Intercare proposes to acquire the entire issued share capital of Eldon from Alliance. The transaction was notified 12 July 2004 and the extended administrative deadline is 15 September 2004.

JURISDICTION

As a result of this transaction Intercare, including Martindale, and Eldon will cease to be distinct. The parties overlap in the supply of special pharmaceuticals (specials) and the share of supply test in section 23 of the Enterprise Act 2002 is met. The OFT therefore believes that it is or may be the case that arrangements are in progress or in contemplation which, if carried into effect, will result in the creation of a relevant merger situation.

ASSESSMENT

The relevant economic frame of reference is the manufacture and supply of non-sterile specials manufactured by commercial manufacturers in the UK (possibly including hospital manufacturing units) to community pharmacies and hospital pharmacies in the UK. 

 At a horizontal level, post-merger, for the supply of commercial manufactured non-sterile specials to community pharmacies the parties' combined share of supply is [35-40 per cent] (increment [10-15 per cent]). For the supply of commercial manufactured non-sterile specials to hospital pharmacies the parties' combined share of supply is [25-30 per cent] (increment [less than 1 per cent]). With the inclusion of hospital manufacturing units, the parties' shares of supply would be expected to fall but it has not been possible to split this output between community and hospital pharmacies. However, for the entire pharmacy sector, the inclusion of hospital manufacturing units reduces the parties' share of supply to [15-20 per cent] share of non-sterile specials.

Although some third parties have raised potential concerns, post-merger five commercial manufacturers remain and on the basis of the evidence, competitors could increase supply to meet demand. Moreover, the transaction does not appear to change the parties' incentives when setting prices.

The NHS may also constrain the merged entity and could increase capacity to meet increased demand.

Barriers to entry do not appear to be insurmountable.

Consequently, the OFT does not believe that it is or may be the case that the merger may be expected to result in a substantial lessening of competition within a market or markets in the UK.

DECISION

This merger will therefore not be referred to the Competition Commission under section 33(1) of the Act

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