Commission files proceedings against Nelson pharmacy

Commission files proceedings against Nelson pharmacy and directors for alleged price fixing

The Commerce Commission has filed civil proceedings in the Nelson High Court against Prices Pharmacy 2011 Limited and its directors for alleged price-fixing.

The Commission alleges that Prices Pharmacy 2011 Limited and its Directors Stuart Hebberd and Jason Wright facilitated a price-fixing agreement with competing Nelson pharmacies, in breach of Part 2 of the Commerce Act. In most cases, the agreement resulted in the dispensing charge consumers paid for fully funded prescription items increasing from $5 to $6 in May 2016.

The Commission alleges the conduct arose from a Nelson region pharmacy owners meeting in April 2016 which was attended by 10 pharmacy owners. The conduct ceased in June 2016 when pharmacy owners received additional taxpayer funding from the Nelson Marlborough District Health Board.

The Commission is seeking a declaration that Prices Pharmacy 2011 Limited and its Directors contravened the Commerce Act, along with financial penalties and costs.

The Commission has also issued warnings to 9 other companies whose pharmacies were represented at the meeting in April 2016. Copies of the warning letters can be found on the Commission’s Enforcement Response Register.

The Commission cannot comment further on the case as it is before the Court.

Background
The parties
Prices Pharmacy 2011 Limited operated two Nelson pharmacies at the time of the alleged price fixing: Prices Nelson on Hardy Street and Nelson Care Chemist on Collingwood Street in the CBD. The pharmacy businesses operated by Prices Pharmacy 2011 Limited were sold to another company during 2017. Stuart Hebberd and Jason Wright remain the Directors and Shareholders of Prices Pharmacy 2011 Limited.

The 10 pharmacies that are operated by the 9 companies who have been warned are:
• Savine Holdings Limited (Bay Pharmacy, Motueka)
• Tasman Pharmacies Limited (Greenwood Street Pharmacy, Motueka)
• Tasman Pharmacies Limited (Unichem 162 High Street Pharmacy, Motueka)
• Queen Street Pharmacy Limited (Queen Street Pharmacy, Richmond)
• Wakefield Pharmacy 2012 Limited (Wakefield Pharmacy)
• Richmond Mall Pharmacy 2001 Limited (Unichem Richmond Mall Pharmacy)
• Nelson City Pharmacy Limited (Life Pharmacy, Nelson City)
• McGlashen Pharmacy Limited (McGlashen Pharmacy, Richmond)
• Fry’s Pharmacy Limited (Fry’s Pharmacy, Richmond)
• Mapua Pharmacy Limited (Mapua Pharmacy)

Previous warnings to the pharmacy sector
The Commission has previously warned the pharmacy sector about similar conduct. Details of the 2004 warning can be found here and 2014 warning here.

Competition in health markets
Competition in health markets is important as even modest changes in patient charges can result in some patients not collecting all or some of their medicines, which can in turn lead to more general practice and Emergency Department visits, as well as hospitalisations.

Penalties
The Court can impose penalties for price-fixing. An individual can be fined a maximum of $500,000 and/or be prohibited from being a company director or managing a company. A body corporate can be fined the greater of $10 million or 3 times the commercial gain from the breach (or if this cannot be easily established, 10% of turnover).

Guide to competition law for businesses
The Commission has a number of quick guides and animations to help businesses understand competition law. They can be found on our website.

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