GLAXO SMITH KLINE, one of the world’s biggest drug companies, has become embroiled in the largest financial scandal to hit the National Health Service.

Documents lodged at the High Court in London by the health secretary allege that the price of the generic form of Zantac, one of Glaxo’s most successful products, was illegally fixed by a cartel of five producers of generic drugs — ones on which the inventor’s licence has expired.

The alleged scam cost the NHS and consumers tens of millions of pounds through overcharging. It could lead to related actions by the Serious Fraud Office (SFO) and the Office of Fair Trading (OFT).

In the current case, the NHS is considering seeking up to £120m in damages from the five firms that, it is alleged, formed a cartel to fix the price of the anti-ulcer drug after its patent expired in 1997.

Glaxo is not accused of any wrongdoing but its position is embarrassing. Documents seized by investigators and filed to the court appear to show that the five companies, apparently mistakenly, believed Glaxo was in the cartel with them.

It is claimed they were so convinced of this that they set aside 34% of the UK generic Zantac market for the multinational, attempted to keep the price fixed and agreed that Glaxo had exclusive rights to sell to a range of high street outlets. These included Boots, Lloyds, the chemist, Tesco and the Co-op.

A spokesman for Glaxo said yesterday that it had supplied GUK, the largest of the five accused companies, with a generic version of the drug but had played no further role.

The spokesman said: “There’s nothing in these court papers that identifies Glaxo as a party in this alleged cartel.

“Glaxo would not and did not seek to divide up the market. Glaxo simply supplied what GUK ordered and it was GUK that decided how to divide that up.

“While it appears from the court papers that the generics companies did agree not to supply certain customers, this was not based on any agreement or contract with Glaxo.

“Why these companies might reach such an arrangement between themselves we can only speculate on.”

Publication of the papers comes at a sensitive time for Glaxo. In America it is being sued by the federal government for £2.7 billion in unpaid tax. In a separate case, Eliot Spitzer, the New York state attorney-general, is claiming that Glaxo suppressed research showing that its anti-depressant Seroxat (sold as Paxil in America) had serious side effects on children.

Zantac was developed by Glaxo in the 1980s and quickly became the world’s biggest-selling prescription drug.

A year before its patent ran out, annual sales of the drug topped £2.2 billion, almost a quarter of Glaxo’s total sales.

After the patent expired Zantac’s price should have fallen as generic producers entered the market. Instead the price remained broadly static.

The OFT was concerned that the price had not dropped and wrote to all the companies involved — including Glaxo — in 1997, asking for an explanation. The companies argued that the price had come down.

It was not until raids on the generic companies two years ago that investigators were able to start shaping their case.

Officers from the SFO are still examining 1m documents that detail how the price of generic Zantac and other key NHS medicines were kept artificially high.

Neither Boots nor Tesco was prepared to comment last week. One senior executive at a big retailer said that Glaxo had offered to match the generic price of Zantac: “That seemed like a good deal at the time, but reading these documents I’m not so sure now.”

The five companies are defending the action and deny acting as a cartel.

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