21 July 2024

Pharmacy fined for price-fixing of prescription items

A pharmacy business operating two pharmacies has been ordered to pay a fine of $344,000 after admitting engaging in price-fixing in breach of the Commerce Act.

The Wellington High Court has also ordered a director of the Nelseon-based Prices Pharmacy 2011 Limited to pay $50,000 for an arrangement that resulted in consumers paying $6, instead of $5, for their prescription items.

This follows the filing of proceedings by the Commerce Commission in April 2018 alleging that Prices Pharmacy 2011 Limited and its directors facilitated a price-fixing arrangement with competing Nelson pharmacies in May 2016, in breach of Part 2 of the Commerce Act.

Justice Dobson said that, “….the effect of the arrangement was to fix the prices that the participating pharmacies would charge for filling prescriptions. The immediate consequence was to substantially lessen competition in the Nelson community pharmacy market, to the detriment of the customers purchasing the prescription medicines.”

Commission Chair Anna Rawlings says “Competition between pharmacies is important because studies suggest that even modest changes in patient charges can result in some patients not collecting all or some of their medicines, which can in turn put pressure on other aspects of the health system such as hospitals.

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“This case, and the penalty imposed, are a timely reminder to health professionals of their obligations under the Commerce Act, and risks of discussing prices with competitors.

“The Commerce Act prohibits anti-competitive behaviour that can amount to price fixing…price fixing will become a criminal offence from April 2021,” Ms Rawlings says.

Prices Pharmacy 2011 Limited operated two Nelson pharmacies at the time of the price fixing: Prices Nelson on Hardy Street and Nelson Care Chemist on Collingwood Street in the CBD. The pharmacy businesses were sold to another company during 2017.

The Commission had previously warned the pharmacy sector about similar conduct, and 10 pharmacies were warned in 2018.

Community pharmacy services are funded by the Government via a standard services agreement, the CPSA. The CPSA is entered into by each DHB and service provider (ie, pharmacy) and typically re-negotiated every three years. The CPSA covers the provision and funding of core pharmacy services, as well as certain other specified pharmacy services.

Under the 2012 CPSA, pharmacists are paid by the government via DHBs for services provided rather than for the number of items dispensed.

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