Legal threat fails to deter Torex-Isoft merger plans

Two software companies at the centre of the NHS's £2.3bn IT programme are going ahead with a merger despite ongoing legal action...

Two software companies at the centre of the NHS's £2.3bn IT programme are going ahead with a merger despite ongoing legal action and concerns among hospital trusts that it could drive up their costs and reduce competition.

The aim of the merger of Isoft and Torex is to provide the "full spectrum of the healthcare market, from the GP's surgery through to the clinicians in hospitals and ancillary services."

But IBA, an Australian company and supplier of systems to the NHS, is seeking to refer the merger to the Competition Commission.

Several hospital trusts have also expressed concern about the merger to the Office of Fair Trading, which considers referrals to the Competition Commission. The OFT decided not to refer the merger, but is reconsidering its decision after IBA won an appeal.

Although the OFT is not due to make a decision until 2 February, Isoft and Torex have completed the merger.

Under deals awarded by the national programme in December, Isoft and Torex, as a single merged company, signed contracts in three of the five "cluster" areas that cover England.

Before the contracts were awarded, Isoft and Torex had 44% of the NHS market in electronic patient record systems.

Patrick Cryne, chief executive officer of Isoft and chairman of the merged group, said the potential benefits arising from the merger "outweigh the potential implications of an adverse outcome of the competition review process".

Executives at Isoft said that, at worst, any referral to the Commission could lead to the company being ordered to sell off parts of the business. But this was unlikely, they said, because by the time any decision by the Commission was taken Isoft was scheduled to deliver systems and services as part of its contractual commitments.

A spokesman for Isoft said the company was taking a "calculated risk" by merging before the outcome of the OFT's deliberations was known, but he added that it was in the best interests of the company, its shareholders and the National Programme for IT in the NHS to do so.

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