The pharmaceutical company RP Scherer Ltd, of Swindon, Wiltshire, asked a judge to rule that the Secretary of State for Health, Stephen Dorrell, erred in law when he decided to ban its top-selling product after the capsules were linked to the deaths of addicts who injected the gel.
Michael Beloff QC, appearing for Scherer, said it was a "perfectly safe" product and Mr Dorrell had no power to include a product on the prohibited list on the grounds of its misuse.
He added the decision marked an important precedent for the drugs industry.
Mr Beloff said the Health Secretary introduced on 1 January this year a regulation under the provisions of the 1977 NHS Act which meant that GPs could no longer prescribe the capsules on the NHS, although they were still available privately. The reason given was the risk they posed to public health and safety when injected by drug misusers.
Mr Beloff said the issue "of considerable public importance" raised by the case was whether it was right that the sale of "the most commonly prescribed sleep-inducing pharmaceutical product in the UK" should be restricted on public health grounds because a small number of people were misusing it.
Before the restrictions were imposed, almost the entire prescription of temazepam was to NHS patients, and Scherer had a 67 per cent market share as the sole manufacturer of gel-filled capsules.
The company estimates it could suffer "severe losses" amounting to pounds 2m of its total turnover of pounds 35m a year for all types of capsule.
Mr Beloff argued that the Health Secretary had made a novel and "ad hoc" use of the list for prohibited drugs under Schedule 10 of the NHS (General Medical Services) Regulations 1992.
The list had never been meant to include drugs because they had been misused but was intended to oblige GPs to prescribe on the NHS alternative cheaper generic products available on the market.
The Department of Health had conceded the original Schedule 10 purpose was to contain cost and also conceded that, until the case of the temazepam capsules, no drug had been placed on the list on public health and safety grounds.
There were no statutory safeguards for the use of Schedule 10 on an ad hoc basis, in contrast to the safeguards laid down under the 1968 Medicines Act, argued the QC.
Such safeguards were needed not only to protect the public but also drug manufacturers who invested millions of pounds in their products. An NHS ban had similar effects to the withdrawal of a product licence and Scherer had been "grievously affected", Mr Beloff said.
The Secretary of State's actions were contrary to both European and domestic law and Mr Dorrell had "cast a dagger through the commercial activities" of RP Scherer.
If the Secretary of State was right, Mr Beloff said, it meant that all drugs on prescription, or even non-prescription drugs such as paracetamol, could be subject to similar bans because they caused serious harm if misused.
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