The Competition Commission is investigating the SA subsidiary of Indian generic drug manufacturer Hetero for possible price collusion.
The probe into Hetero SA was triggered by a referral from the national health department, which excluded the company from its upcoming HIV drug tender due to suspected collusion with other bidders. The allegations, which Hetero SA deny, are set out in court documents filed by the company in its legal challenge to the tender.
Competition Commission spokesperson Siyabulela Makunga confirmed on Tuesday that Hetero SA was being probed for alleged price collusion.
If the commission finds evidence of conduct prohibited by the Competition Act it can refer the matter to the Competition Tribunal for adjudication. Companies can face penalties of up to 10% of their annual turnover if found guilty of contravening the act.
Business Day’s attempts to obtain comment from Hetero SA failed. Parent company Hetero India said: “[At] this point, we would prefer not [to] comment on this subject.”
Hetero SA previously won contracts to supply the state with the three-in-one HIV pills taken by most HIV patients, but was left out of the latest tender, which comes into effect on December 1. The contracts for monthly and three-monthly packs of pills combining tenofovir, lamivudine and dolutegravir (TLD) have been split between eight companies and have a combined value of R12.6bn.
Hetero SA filed an urgent court application earlier this month seeking to suspend implementation of the tender, pending the outcome of its application to have it re-evaluated. It is also asking the court to order the health department to revert to its current suppliers in the interim. It cites the health minister, director-general and the successful bidders as respondents.
In its papers, Hetero SA says that when it queried its exclusion from the tender with health department officials it was told that it had been suspected of colluding with bidders Pharma-Q and Q-Sol.
Among the reasons given by the health department were that all three companies relied on Hetero India for their active pharmaceutical ingredients and intellectual property; that Q-Sol had submitted a bid that included Hetero SA’s medicine registration certificate, provided with the consent of Hetero India as part of a technology transfer agreement; that Hetero SA director Bhavesh Shah signed a technology transfer agreement between Hetero India and Q-Sol on behalf of Hetero India; and that according to a letter from Pharma-Q, the pricing for Q-Sol was dictated by Hetero India.
Hetero SA argues in its papers that the department failed to provide it with an opportunity to respond to its suspicions of collusion with other bidders.
However, rival pharmaceutical manufacturer Pharma Dynamics, which won a share of the TLD contracts and is opposing Hetero SA’s application, says in its papers that the health department asked Hetero SA to provide information about its association with any other companies that might have submitted bids.
It points to an exchange of emails between Hetero SA and the health department outlined in Hetero SA’s court papers, in which it says it was asked to provide information about any commercial or operational associations it had with other bidders. Pharma Dynamics contends Hetero SA’s response heightened the departments’ suspicions.
Hetero SA’s high court application was originally due to be heard on Tuesday but was postponed after some of the parties involved in the matter requested more time.
Business Day understands a case management meeting is due to be held later this week to chart the way forward.
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