The Office of Fair Trading – OFT – has today referred the anticipated acquisition of Stockport based Surgichem Limited from Bupa Care Homes plc (CFG) by Omnicell, Inc./MTS Medication Technologies, Inc. (MTS) to the Competition Commission after it identified concerns about possible increased prices and/or a worsening of services to pharmacies for ‘adherence packaging’ products.
Adherence packaging products are used to repackage a patient’s pharmaceutical medicine requirements, to make it easier for patients to take the correct medicine and dose at the correct time. The packaging is sold to pharmacies who then supply it free to patients in the community and in care homes.
The merging companies’ combined share of supply in adherence packaging is over 50 per cent and evidence indicates that the parties are strong competitors. The OFT therefore considers that the merger may lead to increased prices and/or a degradation of quality and/or service levels for customers.
The cost of adherence packaging is generally borne by pharmacies, though NHS Scotland reimburses pharmacies purchasing through its framework agreement. A number of pharmacies expressed concerns about potentially higher prices as a result of the merger.
The OFT’s investigation also found that, although adherence packaging may be manufactured outside the UK, a strong reputation in the domestic market is needed for suppliers of adherence packing to win business. Consistent with this, there is limited recent evidence of successful entry by other adherence packaging suppliers into the UK.
The parties entered into the merger agreement on 9 December 2013 and completion of the merger is conditional on clearance by UK competition authorities.
Chris Walters, OFT Chief Economist and Decision Maker in this case said:
‘Adherence packaging helps patients take the correct medicine at the right time and is provided by pharmacies as a free service to patients in the community and in care homes. Any loss of competition may therefore affect some potentially vulnerable consumers.
‘Our investigation concluded that MTS and Surgichem are strong competitors with a high combined position in the UK market for adherence packaging products. We concluded that there is a realistic prospect that the merger may lead to increased prices and/or a worsening of service levels for customers and an in-depth investigation is therefore required.’
The Phase Two mergers inquiry will be conducted by a panel of independent Members on behalf of the Competition Commission, and from 1 April 2014 on behalf of its successor, the Competition and Markets Authority. The panel is expected to issue its report by 28 August 2014.
SurgiChem Limited was established in 1989 by a community pharmacist as a means to supply a new medication management system to the community and care home markets. It has now become firmly established as a very successful element in the BUPA Care Services portfolio of companies.
Source: http://www.oft.gov.uk
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