ACCC Drops Legal Action against GSK over Alleged Misleading Conduct
Tuesday 11 October 2016 @ 9.11 a.m. | Trade & Commerce
It has been revealed that the Australian Competition and Consumer Commission (ACCC) has concluded its investigation into whether GlaxoSmithKline (GSK) made misleading statements about a price increase of its Panadol Osteo products.
The ACCC has abandoned plans to take legal action against GSK over alleged false and misleading statements after deciding its case wasn’t strong enough, instead ACCC Chairman Rod Sims issued a strong warning to the drug company that it was being watched.
Background to the Investigation
On 2 November 2015, the Government announced from 1 January 2016 it would be removing a number of medicines from the Pharmaceutical Benefits Scheme (PBS) that were also available over-the-counter, where those medicines cost less than the standard co-payment amount, including paracetamol products.
On 30 December 2015, the Minister for Health (Sussan Ley) outlined concerns about the representations made by GSK and asked the Department of Health to alert the ACCC to this issue.
The product was removed from the PBS lists because of apparent duplication with Panadol or near equivalents able to be purchased for $5 or less a packet, when people were buying it on prescription for $7.52 a packet.
The Government went through the PBS lists to remove similar close substitutes. Glaxo then increased the recommended retail price of its product from $7.69 to $9.99 a packet and blamed the PBS move for the increase.
The Minister was quoted at the time as saying:
“… attempts by the makers of Panadol Osteo to link their proposed 50 per cent price increase to Government regulatory changes without any detail to support their claims can only be interpreted as an attempt to mislead consumers and pharmacists.”
The Minister then referred the matter to the ACCC in December 2015.
The Investigation
The ACCC investigated concerns that GSK had made statements that linked a price increase of Panadol Osteo to the delisting of the product from the PBS.
The ACCC investigated whether these statements were false, misleading or deceptive and found the evidence available is unlikely to establish a contravention of the Australian Consumer Law (ACL) [contained in Sch 2 to the Competition and Consumer Act 2010 (Cth)]. However, the ACCC had some significant concerns about the ambiguity of GSK’s statement.
In December 2015, GSK sent a letter to pharmaceutical wholesalers stating:
The Government recently confirmed most OTC [Over The Counter] medicines, including Panadol Osteo, will no longer be available on the PBS from 1st January, 2016.
In moving to an OTC business model, GlaxoSmithKline is no longer able to sustain its current pricing of Panadol Osteo. As such, there will be a price increase on Panadol Osteo from 1st January 2016.
GSK also sent a letter to pharmacists making similar representations.
Comment from the Consumer Watchdog
The ACCC Chairman Rod Sims said:
“GSK’s statements about the increase in price of Panadol Osteo did not make clear the reasons for it, leaving open to interpretation whether the delisting of the product from the PBS contributed to the price increase and to what extent. There can be a fine line between an ambiguous statement and a misleading one. Where price increases are attributable to a number of factors, businesses need to be careful in linking one factor, such as a change to Government policy, to an increase in prices so as not to mislead consumers.”
Findings by the ACCC
The ACCC found that the delisting from the PBS resulted in some modest indirect costs to GSK, but was only one of a number of reasons for the price increase. Other contributing factors included the entrance into the market of generic paracetamol 665mg products and the effect this had on sales of Panadol Osteo.
There were no direct regulatory costs to GSK arising from the delisting of Panadol Osteo from the PBS.
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