Fraud case dropped against UK generic firms

The criminal prosecution of five generic drug companies in the UK has collapsed, leaving legal bills running to millions of dollars and the future of the Serious Fraud Office in doubt. The case involved claims of price-fixing by an alleged cartel of non-branded drugmakers: Generics (a unit of Germany's Merck KGaA); Goldshield Group; Kent Pharmaceuticals; Norton Healthcare; and India-based Ranbaxy's UK subsidiary.

Although legislation introduced in 2003 may well have resulted in a conviction for price-fixing, the alleged incidents referred to in the SFO's charges related to events in the 1996-2001 period. An attempt to use the common law definition of "conspiracy to defraud" the National Health Service by overcharging was rejected, after an eight-year legal battle.

The outcome of Operation Holbein, the SFO's campaign which started in 2000, is a L25.0-million ($49.2 million) investigation with no convictions. The government agency, which has been under scrutiny over its performance in recent years, is reported by the Financial Times to be experiencing high levels of staff turnover and low morale. Keith Hellawell, Goldshield's chairman, said: "we feel strongly that the case should never have been brought." He added that "it has been an appalling waste of money for the taxpayer," putting the full cost of the investigation and law suits as in excess of L40.0 million.