SFO inquiry into drugs price fixing collapses after eight years

An eight-year Serious Fraud Office (SFO) investigation that has already cost the taxpayer more than £40m was left hanging in tatters yesterday when a judge at Southwark Crown Court dismissed a case against a number of drugs companies and executives accused of defrauding the NHS.

Goldshield, and four other privately owned generics pharmaceutical groups, were accused by the SFO of conspiracy to defraud in relation to fixing the prices of several drugs, including warfarin and penicillin.

However, in yesterday's hearing Mr Justice Pitchford ruled that the SFO had got the law wrong and could not amend the indictment against the defendants. The decision follows a House of Lords judgment in March, which said that price fixing did not amount to conspiracy to defraud at the time the investigation was started. The judge refused to allow an appeal but the SFO did confirm that it will seek a hearing in the Court of Appeal.

The House of Lords judgment came in a separate case involving Ian Norris, the former chief executive of engineering group Morgan Crucible, who is facing extradition to the US on price-fixing charges.

Craig Shuttleworth, a litigation partner at Jones Day, the law firm that represented Goldshield during the action, said the SFO had been warned in 2000, at the start of the investigation, that there was no legal basis for the inquiry. "The SFO have messed this up. There was never any evidence of criminal activity but they decided to go down this path for such a long time," Mr Shuttleworth said.

The SFO, which has had a bad year after being heavily criticised for abandoning its inquiry into BAE System's arms deal with Saudi Arabia after three years, declined to comment of the case. But a spokesman did argue that the cost of the investigation was, in fact, a lot less than the £40m suggested by lawyers for Goldshield.

Keith Hallawell, the chairman of Goldshield and Tony Blair's former drugs tsar, said that in his view the costs would probably be significantly higher than £40m, given the resources allocated to the investigation known as Operational Holbein. He also attacked the SFO, saying that yesterday's judgment had found the organisation wanting.

"This cannot do anything but damage the SFO's reputation," he said. "It would be fine if this was a one-off, but they have had no major recent successes. It must come as a bitter blow."

Mr Hallawell rejected the notion that Goldshield had got away on a legal technicality. The group did pay "£4m or £5m" to the NHS in an out-of-court settlement two years ago in which Goldshield did not admit any guilt.