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Genzyme fined £6.8m for excluding competition

Since this press release was issued the case was appealed to the Competition Act Tribunal and the fine was reduced to £3 million. See the CAT website for more information.

PN 31/03    27 March 2003

Genzyme Limited has been fined £6.8 million by the OFT for exclusionary pricing behaviour in breach of the Chapter II prohibition of the Competition Act 1998.

Genzyme supplies a drug called Cerezyme, which has been until recently the only treatment for the rare inherited disorder Gaucher disease.

Genzyme holds a dominant position in the market for the supply of drugs for the treatment of Gaucher disease. Genzyme has abused its dominant position by:

i) charging the NHS a price for Cerezyme which includes the price of home delivery of Cerezyme and provision of homecare services, thereby effectively ensuring only Genzyme (or an undertaking acting under contract for Genzyme) can provide such services

ii) precluding viable competition by charging independent third party homecare service providers a price for Cerezyme that allows them no possible margin.

The OFT found that Genzyme's behaviour:

• prevents existing competitors in the home delivery of Cerezyme and provision of homecare services from operating viably and ensures that no new competitors can begin to offer such services viably
• deprives the NHS and patients of a choice of delivery/homecare services provider
• raises barriers to entry into the market for the supply of drugs for the treatment of Gaucher disease.

In addition to the fine, the OFT has also issued directions requiring that Genzyme:

• ends its exclusionary pricing and subsequently refrains from repeating the infringement
• thereafter refrains from adopting any measures having an equivalent effect
• offers to supply Cerezyme to the NHS at a stand-alone price for the drug only, ie exclusive of any home delivery of Cerezyme and homecare services that may be provided
• supplies Cerezyme to third parties at a price no higher than the stand-alone price for the drug only, as agreed between Genzyme and the Department of Health.

John Vickers, Director General of Fair Trading, said: 'Genzyme's abuse of its dominant market position has prevented viable competition and choice. This constitutes a serious infringement of the Competition Act and this is reflected in the level of the financial penalty.'

NOTES

1. The Competition Act 1998 came into force in March 2000. The Act contains two prohibitions:

i) the Chapter I prohibition prohibits agreements between undertakings, decisions by associations of undertakings or concerted practices which have the object or effect of preventing, restricting or distorting competition within the UK (or any part of it) and which may affect trade within the UK (or any part of it)
 
ii) the Chapter II prohibition prohibits conduct by one or more undertakings which amounts to the abuse of a dominant position in a market which may affect trade within the UK (or any part of it).

The OFT may impose a penalty of up to 10 per cent of UK turnover for a maximum of three years for infringement of either of the above prohibitions.

2. Genzyme now has two months to appeal the decision and/or the level of the financial penalty to the Competition Commission Appeal Tribunals.

3. The text of the decision will be published on the OFT website once commercially sensitive information has been removed.

4. The parent company of Genzyme Limited is Genzyme Corporation whose head office is based in Cambridge, Massachusetts, in the United States.

5. In this press release the functions of the Director General of Fair Trading (DGFT) under the Act are for simplicity described as the functions of 'the OFT'. The Enterprise Act 2002 will replace the office of the DGFT with the OFT, to which will be transferred the DGFT's functions. The relevant provisions of the Enterprise Act will come into force on 1 April 2003.

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