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Reckitt Benckiser, the drug company, is facing accusations of ripping off the NHS with a secret plan to maintain a monopoly in the supply of Gaviscon, the lucrative heartburn medicine.
Internal documents show Reckitt Benckiser executives plotted under the codename "Project Eric" to create obstacles to block rival manufacturers from selling cheap generic copies of the indigestion treatment.
In a statement this morning, Reckitt Benckiser said: "We are shocked by the allegations made in the press today, and by the inappropriate sentiment expressed in some of the internal correspondence of 2003.
"Reckitt Benckiser is a responsible company in the way it conducts its business, and we have therefore instigated an immediate internal investigation, and will take action."
The company said that it does not accept much of what has been alleged and that it does not have the power to achieve what has been suggested.
Gaviscon is one of Britain's most common remedies, prescribed in large quantities to people with heartburn. It costs little to produce but its high price makes millions for its Hull-based manufacturer.
Although Gaviscon has been out of patent for almost ten years, no other manufacturer has developed a cheap generic version. Such a drug could have saved the NHS up to £40 million.
Reckitt's tactics have been revealed by a senior whistle-blower from the drug company. The former senior executive said Reckitt had "cheated the NHS" and could have saved it "millions of pounds".
The company's data shows it costs only 74p to produce a bottle of Gaviscon. It and its variants are sold to the NHS for £2.70.
The Office of Fair Trading is now expected to look into the matter, to examine whether Reckitt was in breach of competition law.
The leaked documents reveal the existence of Project Eric, a plan to delay the development of a generic version of the drug, which allowed Reckitt to carry on selling Gaviscon to the NHS for three times the cost of a generic.
Executives also influenced regulatory bodies to delay the introduction of a generic name for Gaviscon. The generic name should have been published in 2000 but Reckitt objected. The same happened again in 2003 and Reckitt made further objections in 2005 and 2006.
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Most of the drugs produced and sold for much more than 2.7 BP cost much less than 74p to produce. This is how the industry is built.... The pharmacy mark up is 20% of sales price... which alone is around 40p.. The balance will have to pay for R&D , marketing,sales and company expenses...
Georges Rbeiz, Brummana, Lebanon
Gaviscon is sold to the nhs by the pharmacy at £2.70 not by the manufacturer, the difference in price is just a mark up for the pharmacy.
glenn jones, rotherham, uk
Never mind what it costs the NHS - what about those of us who buy it over the counter? It's effective, which is why it's popular - but 74p a bottle to produce?? The mark-up is horrendous!
Jenny Lane, Bath, UK
Most people over here would love to be 'ripped off' the way some of you claim to be. Even with insurance, I've paid 30 pounds for one prescription.
Bill Atkins, Rehoboth Beach, USA
I think you can add that stuff that falls free from the sky viz Water where down here in deepest South West water rates have doubled in 6 years. I'm so glad SW Water don't actually have to manufacture it if that were the case no one could afford it except maybe MPs, Councillors, Judges, Lawyers, Footballers, Bankers etc.
George Gibson, Saltash, Cornwall, England
£2.70 for the NHS to buy & £6.85 (prescription charge) for the NHS to sell it to the public. Who is cheating who?
karl, Leeds, W yorks
I 'm afraid the whole think gives me indigestion.
Mike Giggler (via e-mail), London,
Its a rip-off Britain, right from Gas, electricity,petrol,council tax to medicine,etc,etc - Abnormal price
HSMPImmigrant, wolves, uk
Reckitt Benckiser were very cafty. They withdrew Liquid Gaviscon for a short time before rival products were fully available. This meant doctors had to switch to the new more expensive product Gaviscon Advance. A tactic that has been used more often that once by pharmaceutical companies. AstraZeneca tried a similar stunt with Losec tablets, withdrawing the capsules formulation shortly before patent expiry.
These types of business decisions are encourage by the way the system currenlty works, using valuble NHS recources for a return of nothing. The system should be changed to encourage innovation rather than allow such useless product changes and supposed improvements.
Craig, Leeds,
Why is it the responsibility of sufferers to buy their own heartburn medicine? Surely heartburn is a legitimate and indeed painful condition that if not treated can over time cause cancer.
Presumably such people would also expect diabetics to buy their own insulin as well?
It surprises me that nobody takes the view that the prices expected by Gaviscon are unreasonable, particularly when your taxes are lining the Reckitt executives pockets.
Jim, London,
If it is prescibed by the GP then the patient should be paying the non-presciption, over-the-counter price. If it is dished out in hospitals the profit margin seems to be normal compared to drugs. The question should be why is so much being dished out free to cost the NHS 40million?
I fail to see how R&C can stop a generic version being manufactured.
David Smith, Stourbridge, UK
It only costs a couple of pence to make a hamburger or a ciggarette but they both sell for over five quid and can cause terminal heart disease. So Reckit makes a bit less profit than a hamburger chain for something that does some good!
Why is that a problem. Thats how business works get a life!
Dave , kelso, borders
Why on earth is the NHS paying for people to take heartburn medicine? Surely that is the responsibility of individuals. It would never occur to me to go to a doctor just because I had heartburn.
Lorne Anderson, Weybridge,
I don't actually see what Gaviscon have done wrong?
They have developed their own product, that is extremely successful. The government wants to allow competitors to make exactly the same product to bring the price down.
They couldn't do this with Coca Cola, the only reason Gaviscon is different is because it is a medicine (for indigestion).
Surely Gaviscon have a right to delay the introduction of state subsidied competition (effectively what they will be since they get the formula for free)?
Pete, Bristol, UK
Hmmm! We live in a capitalist society where it's every one for themselves, and the OFT is up in arms because someone decided to aim to maximise and maintain profit. Can't have it both ways!
Colin, Hemel Hempstead,