THE drugs at the centre of the Serious Fraud Office investigation are some of the most widely prescribed in the NHS.

In 2004 more than 14 million prescriptions were issued for antibiotics of the penicillin class, 5.7 million for the warfarin blood-thinning agents and 3.6 million for the ulcer drug ranitidine (Zantac).

So a few pennies on the price of each prescription adds a lot to the NHS drug bill.

The claim is that in the second half of the 1990s the companies involved managed to defraud the NHS of £100 million or more by conspiring to raise prices — in many cases by a lot more than a few pennies.

The companies involved make their livings by picking up drugs that have reached the end of their patent life and marketing their own versions at lower cost.

Pharmaceutical companies have 20 years of patent protection during which to recoup the money that they have spent researching and testing the drugs.

After that their market share is eroded as the generic companies move in.

During the 1990s the NHS saw generics as the easiest way of slowing the growth in the drug bill and doctors were urged to prescribe them.

As a result generic prescriptions rose from 43 per cent of the total number written in 1989 to 79 per cent in 2004.

Typically, a generic drug might cost the NHS less than half — and sometimes as little as a tenth — of the cost of a medicine still protected by patent.

In 1998, for example, generic warfarin was selling at a price of 82p for 26 days’ supply of 3 mg tablets, against £1.70 for the branded product. Amoxcycillin, an antibiotic, sold at 47p against the branded product’s £2.88.

But in the late 1990s something very strange happened to the market, as the House of Commons Select Committee on Health (from whom these figures come) reported in December 1999. Over the previous year, the committee found, the price of some generics had increased by as much as 500 per cent. In a single year generic amoxycillin went up from 47p to £1.69, and warfarin from 82p to £1.70. The diuretic furosemide went up from 26p to £2.14.

Three factors were blamed for the rapid increases: problems with supply caused by the closure of one company and the relocation of two others; the switch from bulk supply to individual blister-packs demanded by European legislation and the operation of the system by which pharmacists are reimbursed for drugs issued on prescription.

The committee concluded that the market had been characterised by “market manipulation, hoarding and collusion” and that the pricing mechanism not only failed “but also actively contributed to the problems”.

One way that the market was manipulated, the committee said, was that manufacturers and wholesalers often reported that they had less than four weeks’ supply of drugs, triggering an emergency system, called Category D status, in which pharmacists are no longer forced to seek out the lowest prices.

It was these Category D drugs that showed the greatest price rises.

It is the burden of the case against the companies that this was no accident, but the result of a deliberate policy.

Two companies — Generics UK and Ranbaxy — have settled the civil actions against them by paying the NHS £12 million and £4.5 million respectively, without admission of liability.

The drugs involved include:

Ranitidine is the generic version of the 1980s bestseller Zantac, originally developed by Glaxo. It is used to heal ulcers by suppressing acid production in the stomach.

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