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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:
www.Competition-Commission.org.uk/inquiries/vetmed.htm,
or in writing form the Reference Secretary (Veterinary Medicines)
Competition Commission, Room 565, New Court, 48 Carey Street,
London, WC2A 2JT.
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