Britain's public funded National Health Service plans to sue seven major pharmaceutical firms, including Ranbaxy UK Ltd, for £30 million for allegedly fixing the price of amoxicillin, one of the country's most common drugs.

"The NHS lost millions of pounds as a result of the unlawful behaviour of a number of generic drug manufacturers," Jim Gee, chief executive of the Serious Fraud Office, said in London on Monday.

As part of a massive inquiry into the drug fraud, investigators believe the companies conspired to raise the price of the antibiotic amoxicillin by up to 260 per cent.

The authorities are also planning legal action against the companies for allegedly defrauding the NHS of a further £170 million relating to the prices of 30 other prescription drugs, he said.

Besides Ranbaxy UK Ltd, the other companies named in the action are Norton Healthcare Ltd, Norton Pharmaceuticals Ltd, Regent-GM Laboratories Ltd, Kent Pharmaceuticals Ltd, Generics UK Ltd and DDSA Pharmaceuticals Ltd.

The Serious Fraud Office is investigating the directors and senior managers of the firms involved and has raided their premises in search of incriminating evidence.

In documents lodged with the high court, the NHS fraud service provides evidence that senior representatives from the seven firms met at a hotel near Heathrow and agreed to join together to raise the price of the drugs artificially.

At that meeting, it is alleged, the firms agreed to act together to ensure that the NHS could only buy the drugs at a common price agreed by the companies.

"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," the claim form stated.

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

It further stated: "Each drug was to be the subject of a system of price-fixing, setting agreed values for wholesale list prices and minimum retail selling prices."

This is the second multi-million-pound claim against drug companies. Last year the NHS brought action against three drug firms for £28 million in damages alleging that they conspired to restrict the supply of the blood-thinning drug Warfarin and agreed to fix its price.

A report in The Times on Monday stated that the legal action is also politically embarrassing. Isaac Kaye was until June chairman of Norton Healthcare, and has given more than £100,000 to the Labour Party. Gerry Malone, the former Tory health minister is the chairman of Regent-GM.

Every year, the NHS spends £39 million on amoxicillin and financial experts believe the alleged fraud cost the taxpayer more than £30 million.