R v GG Plc
| Jurisdiction | UK Non-devolved |
| Judgment Date | 12 March 2008 |
| Neutral Citation | [2008] UKHL 17 |
| Court | House of Lords |
| Date | 12 March 2008 |
[2008] UKHL 17
HOUSE OF LORDS
and others
and others and others
Appellants:
(1 st) David Pannick QC
Thomas De La Mare
(Instructed by Jones Day)
(4 th) Nicholas Green QC
Peter Carter QC
(Instructed by Roiter Zucker)
(7 th) David Pannick QC
Clare Sibson
(Instructed by Norton Rose LLP)
(11 th) David Pannick QC
Bridget Petherbridge
(Instructed by S J Berwin LLP)
Respondent:
Richard Lissack QC
James Flynn QC
Nicholas Medcroft
Maya Lester
(Instructed by the Serious Fraud Office)
Ordered to Report
The Committee (Lord Bingham of Cornhill, Lord Rodger of Earlsferry, Lord Carswell, Lord Brown of Eaton-under-Heywood and Lord Neuberger of Abbotsbury) have met and considered the cause R v GG PLC. We have heard counsel on behalf of the appellant and respondent.
This is the considered opinion of the Committee.
The issue in the appeal before the House is whether a prosecution will lie against the appellants for conspiracy to defraud the Secretary of State for Health and others by fixing and maintaining the price, and manipulating the supply, of certain drugs to suppliers of the drugs, if the steps taken in pursuance of the alleged conspiracy were dishonest and deceptive. The appellants raised the issue at a hearing of matters on which preliminary rulings were sought from Pitchford J and at which they asked him to quash the indictment on the ground that it did not disclose an offence against the criminal law. The judge on 27 April 2007 held against the appellants and ruled that the prosecution should go ahead. The Court of Appeal (Moses LJ and Jack and Owen JJ) on 9 November 2007 dismissed the appellants' appeal [2007] EWCA Crim 2659.
The defendants in the prosecution consist of five companies; together with nine individuals who were at the material times employees or directors of these companies. The companies were concerned in the manufacture, sale and/or distribution to wholesalers and pharmacists of drugs, mainly generic drugs, which pharmacists then supplied to members of the public on NHS prescriptions. The case being made against them is that in their respective capacities the defendants dishonestly fixed and maintained the price of the drugs. All save one of the defendants made submissions in the Crown Court and were appellants in the Court of Appeal, but the eighth and ninth named appellants in the Court of Appeal are not appellants before the House.
Count 2 in the indictment concerns a branded drug Marevan as well as the generic drug warfarin. In the interests of simplicity we propose to follow the example of the Court of Appeal and concentrate on count 1, which relates only to generic drugs.
Generic drugs are normally produced by a number of different manufacturers once the patent on a branded drug has expired. Suppliers provide list prices to the Prescription Pricing Authority, which calculates a drug tariff in reliance upon the lists of certain suppliers. The Department of Health does not regulate the prices of generic drugs, but states that it relies on the competition between suppliers in an open market to provide prices which represent value for money. Pharmacists purchase these drugs from the suppliers of their choice at their list prices and are reimbursed by the Department at the prices contained in the drug tariff for the cost of the drugs when they are dispensed on NHS prescriptions. The Department claims that the reimbursement system, to the knowledge of the suppliers, is predicated upon the existence of a genuine open competitive market and contends that it is important that the list prices published by suppliers and furnished by them to the Department should be a true reflection of the prices which should be charged in such a competitive market, otherwise they would pay the pharmacists' inflated prices in accordance with the drug tariff. It is alleged that the appellants have engaged in dishonest price fixing, so distorting the market and obtaining artificially inflated profits from the provision of generic drugs. The Department of Health made a civil claim for damages against the appellant companies and settlements have been reached of each of these claims, involving the payment of substantial sums of money. The question of criminal liability, however, remains outstanding and the present prosecution has been brought under the aegis of the Serious Fraud Office.
The prosecution case is that the appellants achieved their object in a variety of ways. First, they kept the price fixing secret, leading the Department to believe that the list prices represented true competitive market prices. Secondly, they held clandestine meetings in order to exchange information and devise and implement the price fixing scheme. Thirdly, they committed a number of misleading and dishonest acts as part of the devised scheme.
The indictment on which it is proposed to try the appellants is in general terms. The statement of offence in count 1 is "Conspiracy to defraud contrary to common law". The particulars of offence are that the appellants
"between the 1st day of April 1998 and the 30th day of September 2000 conspired together and with others to defraud the Secretary of State for Health and others concerned with the provision of medicinal products by dishonestly fixing and maintaining the price, and manipulating the supply, of penicillin-based antibiotics to wholesale and retail suppliers of the said medicines."
The allegations in count 2 in relation to warfarin and Marevan were in similar terms.
In compliance with an order made by Pitchford J on 5 October 2006 the prosecution served on 2 February 2007 a Prosecution Case Statement. This was a document of several hundred pages, which, together with a Supplemental Case Statement dated 1 October 2007, contained an extremely detailed compilation of the elements of the prosecution case, including the principal facts, the witnesses who would speak to those facts, the relevant exhibits, the propositions of law relied on and a section on the consequences which the prosecution claimed flowed from the matters set out.
The essence of the case against the defendants of conspiracy to defraud is contained in two passages in Section A of the Prosecution Case Statement. The first is in Part 2, para 8:
"In short it is alleged that they agreed to:
• withhold sales until October 1998 in order to clear out stock that was already in the supply chain;
• divide the market between themselves and others in accordance with pre-determined allocations;
• increase retail and wholesale selling prices several times between September 1998 and July 1999;
• mask the collusion by varying the increased list prices by +/- 2% from the prices agreed;
• police the agreed prices and allocations by auditing one another with agreed oversell penalties;
• pay compensation to other manufacturers to stay out of the UK market; and
• give false reasons for stock shortages and price rises to customers and to the DoH."
The second is in Part 5, para 10:
"The Crown invites the inference that the individual Defendants, and through them the corporate Defendants, acted dishonestly in one or more of the following respects:-…
i) fixing the prices of penicillin based antibiotics;
ii) engineering shortages;
iii) paying other undertakings to stay out of the UK drugs market;
iv) devising and implementing the antibiotics scheme evidenced by the "SCENARIO" documents and schedules;
v) submitting price lists to the PPA which were knowingly inflated;
vi) failing to disclose to the PPA the fact that the price lists of the major players were the product of collusive behaviour;
vii) colluding by mutually disclosing confidential information and holding clandestine meetings to devise, implement and enforce the alleged conspiracy; and
viii) lying as to the true position when questions were asked.
In respect of warfarin/Marevan (Count 2):
i) colluding by mutually disclosing confidential information and holding clandestine meetings to devise, implement and enforce the alleged conspiracy;
ii) fixing the prices of warfarin and Marevan;
iii) procuring an...
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