Competition Appeal Tribunal grants interim relief to Healthcare at Home in its first judgment on damages in a private “follow-on” action

26 March 2007

Richard Eccles

On 15 November 2006, the Competition Appeal Tribunal awarded Healthcare at Home an interim payment in its private damages action against Genzyme Limited. The claim was the first time the Competition Appeal Tribunal has awarded damages in a private action.

Genzyme Limited (“Genzyme”) manufactures and sells Cerezyme, a drug used in the treatment of Gaucher disease. Cerezyme is administered to patients intravenously and many patients are treated at home. From 1998 to 2001 Healthcare at Home Limited (“Healthcare”) had an exclusive contract with Genzyme to provide Cerezyme to Gaucher patients in their homes.

In May 2001 Genzyme terminated its contract with Healthcare and established its own Cerezyme home delivery and care service. From then on, Healthcare and any other home care service were only able to obtain Cerezyme at the “NHS list price” which included the cost of providing the drug to patients at home. Healthcare complained to the Office of Fair Trading (“OFT”).

On 27 March 2003 the OFT found that Genzyme Limited had abused its dominant position in the “upstream” market for the supply of the drug Cerezyme. Genzyme had imposed a margin squeeze and bundled the price of the drug with the cost of providing home delivery and home care services. The OFT imposed a fine of £6.8 million and ordered the abusive conduct to be brought to an end.

Genzyme appealed to the Competition Appeal Tribunal (“CAT”). In March 2004 the CAT reduced the fine to £3 million on the basis that the OFT had not sufficiently proved that the bundled price of Cerezyme was contrary to the Chapter II prohibition. However, the CAT did agree with the OFT’s finding that between May 2001 and March 2003 there had been an unlawful margin squeeze in so far as the supply of Cerezyme to homecare providers at the NHS list price meant that they would not be able to achieve any profit margin.

The CAT further required the OFT’s remedial directions to be reconsidered; a further hearing was held and in September 2005 the CAT ordered Genzyme to end its pricing practice which resulted in the margin squeeze. Genzyme was required to supply Cerezyme at a price exclusive of any cost of homecare delivery, at a discount from the NHS list price of not less than 20 pence per unit or a discount of 7.2%.

In April 2006 Healthcare brought a “follow-on” private action for damages against Genzyme under section 47A of the Competition Act 1998. In August 2006 Healthcare applied for an order for an interim payment for damages for loss of margin on actual sales over three periods between May 2001 and June 2005.

Genzyme argued that the CAT had no jurisdiction to award damages for any loss which occurred after 27 March 2003. Genzyme further contended that the CAT’s judgment rendered in September 2005 regarding remedial directions, was not in fact a decision that Chapter II had been infringed within the meaning of section 47A(6)(c) of the Competition Act 1998.

The CAT gave its judgment in relation to an interim award on 15 November 2006. The CAT found that section 47A does not restrict a claim that can be brought before the CAT to the period during which the OFT or the CAT have held that a prohibition has been infringed; the infringement persists as long as the anti-competitive behaviour is not modified. Furthermore, the CAT held that the OFT had made no finding that the infringement in question had ceased on 27 March 2003, the day of the OFT’s original decision.

In relation to Genzyme’s second submission, the CAT noted that section 47A(9) of the Competition Act 1998 provides that the CAT “is bound by any decision mentioned in subsection [47(A)](6) which establishes that the prohibition in question has been infringed”. Therefore, the CAT considered the findings in relation to its September 2005 remedial directions. The CAT found that the amount likely to be awarded would not be below a 6.5% discount or 18 pence per unit, which Genzyme had admitted in July 2005 would be an appropriate margin, nor would any eventual award exceed the 7.2% discount established by the CAT in its September 2005 remedial directions; the CAT took the lower figure and calculated that Healthcare’s loss of revenue for the supply of units of Cerezyme would be £2,866,490.

In view of the “very substantial costs incurred by [Healthcare] in supplying homecare service to Gaucher patients between May 2001 and July 2005”, the CAT awarded an interim payment of £2 million or 70% of the loss of revenue figure. The CAT noted, without qualification, that 70% of 6.5% is only 4.6%, a figure well below the lower pricing limit. The CAT was not minded to include an allowance for interest in the interim award.

The case was settled in January 2007, as a result of which questions concerning the final quantification of damages and the possibility of exemplary damages remain undecided. Nonetheless, this case represents the first occasion on which a private damages action under section 47A of the Competition Act has been brought before the CAT in relation to a decision of infringement made by the OFT and is likely to encourage private parties to bring private “follow-on” actions for damages under the Competition Act.

Source: Healthcare at Home Limited v. Genzyme Limited, judgment on interim relief ([2006] CAT 29), dated 15 November 2006, available at http://www.catribunal.org.uk/

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