The National Health Service is planning to sue seven large drugs companies for £30m, for allegedly fixing the price of one of Britain's most common antibiotics, it was reported last night.

Investigators conducting an operation against drug fraud believe the companies, all leading suppliers of generic drugs, worked together to raise the price of the antibiotic amoxycillin - a type of penicillin by up to 260 per cent.

Legal action is also planned against the companies for allegedly defrauding the NHS of £170m in relation to the prices of 30 other prescription drugs.

Simultaneously, the Serious Fraud Office is investigating the directors and managers of the firms involved and has raided their offices in search of incriminating evidence.

The companies are Norton Healthcare Ltd, Norton Pharmaceuticals Ltd, Regent-GM Laboratories Ltd, Kent Pharmaceuticals Ltd, Generics UK Ltd, Ranbaxy UK Ltd, and DDSA Pharmaceuticals Ltd.

Isaac Kaye, who is, until June, the chairman of Norton Healthcare, has donated more than £100,000 to the Labour Party. Former Tory health minister Gerry Malone is chairman of Regent-GM.

The NHS Counter Fraud and Security Management lodged a claim in the High Court alleging that, between 1997 and 1998, the companies conspired to inflate the price of several types of penicillin.

Documents have been lodged with the High Court by the NHS fraud service that allege senior representatives from the firms met at a hotel near Heathrow and agreed to reduce the supply and refuse to sell the drugs to the NHS below an agreed price.

The Claim Form states: "In 1997 and early 1998, a number of defendants, acting in some cases individually and in some cases in concert, considered the possibility of arrangements designed to reduce competition in the UK.."

It continued: "A series of meetings followed at which the defendants negotiated a sophisticated scheme by means of which the prices and supply of penicillins in the UK could be controlled and manipulated."

It is the second multi-million pound claim against the companies. Last year, the NHS brought a £28m action against three companies amid allegations they conspired to restrict the supply of the blood-thinning agent warfarin and fix its price.

Jim Gee, the chief executive of the fraud service said the NHS had "lost millions of pounds as a result of the unlawful behaviour of generic drug manufacturers".