Paracetamol producer purchased
The Competition Commission has approved the acquisition of Fine Chemicals Corporation (FCC) by Aspen Pharmacare, subject to conditions.
This acquisition allows Aspen, one of the largest pharmaceutical companies in the country, to vertically integrate by acquiring FCC, a local manufacturer of “active pharmaceutical ingredients” or APIs.
Aspen seeks to add domestic manufacturing capability and to become more competitive in the global market through this acquisition.
After analyzing the proposed acquisition, the Commission found that it raised a number of competition concerns. FCC is currently the only firm in South Africa with a licence to manufacture certain controlled substances, including codeine phosphate, an ingredient often used in analgesic medicines (painkillers).
FCC is also the only South African manufacturer of paracetamol, a widely used nonprescription drug that is also used in analgesic medicines. A number of pharmaceutical firms, including Aspen, currently source codeine phosphate and paracetamol from FCC.
Several FCC customers raised a concern that if the Commission approves this acquisition, Aspen would seek to advantage itself to the disadvantage of its competitors through its ownership of FCC.
They submitted that this acquisition would result in them as competitors of Aspen being forced to pay higher prices for ingredients they purchase from FCC, or face the possibility of being cut out of the market altogether. Consumers could also be harmed by the possibility of higher prices, particularly for painkillers.
There is also information in the Commission’s possession suggesting that imports of finished products could constrain the ability of Aspen to hurt its competitors in the marketplace. However, the Commission was not convinced that imports are currently an effective constraint on the prices consumers pay at the pharmacy.
The Commissioner of the Competition Commission, advocate Menzi Simelane said “This acquisition in particular raised concerns because of FCC’s position as the sole manufacturer of two key ingredients in pain medicines, a position strengthened through regulatory and other barriers prevailing in this industry.
“We therefore needed assurances that FCC will continue to deal with its customers on a fair and equitable basis. It is for this reason that we decided to attach conditions to this acquisition.”
“We are of the view that the conditions attached will address our concerns, and those of Aspen’s competitors and customers of FCC,” added Simelane.
The conditions include the following:
* FCC will continue to supply South African customers that currently purchase narcotic products from it and undertakes to supply new South African customers.
* FCC undertakes to price the narcotics, including codeine phosphate, based on the current pricing scale it uses.
* In the event FCC increases the price of narcotics, it shall provide the Competition Commission with written notice of such an increase, the formula used to calculate the increase and supporting documentation. The formula will set out the cost component of the relevant products as well as the basis for the increase.
* FCC shall provide the Commission with detailed annual reports proving compliance with the undertakings, together with affidavits by a senior official in the company.
