The Pharmaceutical Price Regulation Scheme - Office of Fair Trading

February 2007
Markets to secure a GP’s prescription
2.31 To treat a given condition, GPs choose between groups of medicines that are therapeutically
substitutable. Depending on the patient’s medical history and condition, the range of
appropriate medicines may be broad or narrow. Often, but by no means always, the list of
products appearing in a relevant ‘Paragraph’ of the British National Formulary (BNF)
represents the available scope for choice.
2.32 BNF paragraphs can contain one or two, and up to sometimes ten or more, medicines with
somewhat different chemical actions, interactions, side-effects and evidence bases, and
which may be on- or off-patent. Members of the same BNF Paragraph are all designed to
treat the same condition of a specific part or system of the body (though some may have
alternative uses).
2.33 A BNF paragraph can therefore in some cases be considered in broad terms to constitute a
‘market’ for drugs to treat a given medical condition. However, it is important to note that in
Competition Act investigations or merger decisions, appropriate market definitions may be
wider or narrower than the Paragraph according to the individual circumstances and the
specific question being addressed. This is discussed in the box below.
Box 2.1: Market definitions relevant to prescribing behaviour
A standard approach to defining markets for drugs (taken by the European Commission, for
example) is to use the Anatomical Therapeutic Chemical (ATC) classification devised by the
European Pharmaceutical Marketing Research Association (EphMRA). The World Health
Organisation maintains a similar classification.
Within the ATC system, drugs are grouped according to the organ or system on which they act –
the first level of analysis – and their therapeutic, pharmacological and chemical properties – the
second, third, fourth and sometimes fifth levels of increasingly specific classification. An example
from EphMRA is:
N
N6
N6A
N6A4
Prozac®
Nervous system
Psychoanaleptics excluding anti-obesity preparations
Anti-depressants and mood stabilisers
SSRI anti-depressants
(A branded product, chemical name: fluoxetine)
The European Commission considers the third level of analysis – ATC3 – (in the above example
‘C10A’) to be a suitable starting point for market definitions in competition cases. However, the
Commission regularly carries out analyses at other ATC levels, or a mixture thereof, recognising
that relevant economic markets can be wider or narrower than ATC3, or do not fit neatly into one
of the ATC levels. The guiding principle is that products should be included in the same market if
they are substitutable for the same purpose.
Often, markets are judged to be narrower than ATC3 or even ATC4. Even medicines with identical
active ingredients may have distinct therapeutic uses according to their delivery technology, their
side-effects resulting from the presence of chemicals other than the active ingredient, their
reputation and other factors influencing their functional substitutability in the eyes of clinicians.
The OFT took these factors into account in the Competition Act 1998 decision concerning Napp
pharmaceuticals. 9 There, the market relevant to the undertaking’s brand was narrowly defined as
‘sustained-release morphine tablets and capsules’. Other factors in addition to therapeutic
substitutability will also inform market definition, such as price.
9 Decision of the Director General of Fair Trading No CA98/2/2001, 30 March 2001, Napp Pharmaceutical Holdings Limited
and Subsidiaries. This decision was appealed to the Competition Appeal Tribunal on 29 May 2001. On 15 January 2002
the Competition Appeal Tribunal upheld substantially the Director General of Fair Trading’s decision on liability.
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