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11 Feb 2008 18:14
The Competition Commission has referred three pharmaceutical companies to the Competition Tribunal for prosecution after they were found to be colluding when bidding for government tenders, it said on Monday.
A Competition Commission investigation found Adcock Ingram Critical Care (AICC), Dismed Criticare, Thusanong Health Care and Fresenius Kabi South Africa (FKSA) had engaged with each other during tender processes to avoid competition and manipulate prices.
FKSA was exempted from prosecution after it agreed to cooperate during the investigation in terms of the commission’s corporate leniency policy.
“This is an important case in the light of growing public concern about escalating healthcare costs.
“Collusive behaviour would undoubtedly be one of the contributing factors to higher prices in healthcare markets,” said competition commissioner Shan Ramburuth.
The commission’s Thulani Kunene said collusion involved the competitors getting together and agreeing to fix their prices instead of competing.
“They simply sit together and agree on how much they will charge; it is done to inflate prices. It’s not helpful to the consumers,” he said.
The companies under scrutiny were bidding for public-sector tenders—taxpayers’ money was used to foot their inflated bills. The government was unaware that the companies were colluding when calling for tenders, Kunene said.
“The Department of Health annually invites tenders for the supply of pharmaceutical products, large volume parenterals, irrigation solutions, administration sets and accessories to its public hospitals.
“The commission’s investigation found that the representatives of AICC, FKSA, Dismed and Thusanong held telephonic discussions and meetings prior to the submission of their respective responses to the invitations to tender,” the commission said.
With some tenders, the companies would agree on who was to win the bid and would rotate obtaining tenders to avoid competing with each other.
“Each year they would sit and allocate the tender and decide who would win and at what price and what everyone would bid to ensure that the anointed bidder gets the tender,” Kunene said.
If the anointed bidder did not succeed, they would be compensated in some way by the winning bidder.
“As customers you think you are getting the best price when, actually, you are not,” Kunene said.
He said this was not the only investigation underway in this sector.
“[We are] looking at others. We are quite confident that theses are not the only tenders that have been rigged,” he said.
The commission had filed papers with the Competition Tribunal and was seeking a fine from the companies. The companies would have the opportunity to respond to the papers filed by the commission.
They are accused of collusive tendering and market allocation, both of which are contraventions of section four of the Competition Act.
While there were other factors contributing to increasing health costs, collusion among pharmaceutical companies was “certainly a contributing factor”, Kunene added.—Sapa
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