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Veterinary medicines monopoly inquiry

THE COMPETITION Commission is set to investigate the contentious issue of the supply of prescription-only veterinary medicines in the UK. The Commission considers that a ‘scale monopoly’ situation may already exist in favour of one particular veterinary medicines supply company, itself a subsidiary of a large pharmaceutical group. The Commission has not yet reached any final conclusions on these or other questions arising from the terms of reference of the ongoing inquiry.

The Director General of Fair Trading referred this matter to the Commission on October 9 2001. The Commission is due to submit its report by 8 January 2003.

The Commission has provisionally concluded that, on the basis of information at present available to it, a scale monopoly situation exists in relation to the supply within the United Kingdom of prescription-only veterinary medicines since it appears that National Veterinary Services Ltd (NVS), a wholly owned subsidiary of Dechra Pharmaceuticals plc, supplies at least one-quarter of prescription-only veterinary medicines to veterinary surgeons. The Commission has also provisionally concluded that this scale monopoly situation exists in favour of Dechra Pharmaceuticals PLC.

The evidence which has led the Commission to this provisional conclusion is set out in Appendix B of its current report. The Commission is at pains to point out that this finding does not imply the existence of any facts which operate (or may be expected to operate) against the public interest, although this will be considered further in the next stage of the inquiry.

NVS, a wholly owned subsidiary of Dechra Pharmaceuticals plc, has provided the Competition Commission with a table, setting out data that it had obtained from Martin Hamblin GfK Healthcare UK, a market research company, (hereafter referred to as GfK), showing the shares of the six veterinary wholesalers’ sales of veterinary medicines for each of the six years 1996 to 2001.

Over this period NVS’s share increased from about 36 per cent to more than 40 per cent. The share of NVS’s nearest competitor was around 25 per cent, and those of the other four veterinary wholesalers remained below 20 per cent throughout the six years. The GfK data covered the sales of all veterinary medicines by the six veterinary wholesalers, rather than their share of Prescription only medicines (POMs). Because of differences in the range of veterinary medicines supplied by the six wholesalers, their respective shares of POM sales might differ slightly from their shares of sales of veterinary medicines.

Some POMs are sold by the veterinary manufacturers to customers other than veterinary wholesalers. The Commission separately asked the veterinary manufacturers to provide them with an analysis for 2001 of their sales for each of the classifications of veterinary medicines by customer type. The report states: “We have had replies from most of them, including all the largest ones, and these indicate that on average around 90 per cent of these veterinary manufacturers’ sales of POMs were made to the six veterinary wholesalers. Taken together with the GfK data, these suggest that NVS’s share of the total UK supply of POMs is more than 35 per cent, while none of the other five wholesalers has a share of more than 25 per cent.

From this, the Commission has provisionally concluded that NVS supplies at least 25 per cent of prescription-only veterinary medicines in the UK.”

The Commission also has to consider whether any complex monopoly exists. Although there are a number of practices that prevent, restrict or distort competition which may be currently carried out by more than one veterinary manufacturer, veterinary wholesaler or veterinary surgeon in total accounting for more than 25 per cent of the supply of prescription-only veterinary medicines, the Commission is not in a position at this stage to conclude even provisionally whether or not any complex monopoly situations exist.

A complex monopoly would exist if at least one-quarter of prescription only medicines are supplied by members of a group of persons (not being a group of interconnected companies) who, whether voluntarily or not and whether by agreement or not, so conduct their respective affairs so as to prevent, restrict or distort competition in connection with the supply of prescription-only veterinary medicines.

The Commission will also consider whether any other facts operate or may be expected to operate against the public interest.

Over the next three months, the Commission will conduct hearings with interested parties and organisations representing interested parties to hear their views on the issues set out in this issues statement. The Commission will also be undertaking fact-finding visits and commissioning market research and will later inform the parties of any further provisional conclusions.

If facts found by the Commission operate or may be expected to operate against the public interest, it will consider what remedies may be appropriate. Any potential remedies will be the subject of further consultation with interested parties before the Commission draws up its report to the Government later in the year.

A number of issues have already been identified in respect of the supply of prescription-only veterinary medicines

The Commission has elaborated on the issues set out in brief in its issues statement in an Appendix to its report. The aim is to illustrate the thinking of the Commission at this stage of the inquiry. The issues are divided into four groups:

• issues arising from the regulatory regime which governs the supply of prescription-only veterinary medicines in the United Kingdom,

• issues stemming from the practices of veterinary manufacturers,

• issues stemming from the practices of the veterinary wholesalers, and

• issues stemming from the practices of veterinary surgeons.

Although these issues are divided into four groups for convenience, the Commission recognises that many of the practices of those engaged in the supply of prescription-only veterinary medicines are closely inter-related.

The whole issue is undoubtedly a complex one, and the Commission has to balance whether the status quo is desirable or in the public interest, with market forces and whether new regulatory requirements for the provision of prescription only veterinary medicines can be are desirable and, indeed, workable.

OUR DOGS will continue to report on developments in this important investigation over the coming months.

A copy of this statement of issues can be found on the Commission’s website:, or in writing form the Reference Secretary (Veterinary Medicines) Competition Commission, Room 565, New Court, 48 Carey Street, London, WC2A 2JT.