The Competition Appeal Tribunal (CAT) found that Pfizer and Flynn “abused their dominant positions by charging excessive prices for a life-saving epilepsy drug, phenytoin sodium capsules, between 2012 and 2016,” the Competition and Markets Authority (CMA) last week (November 20) announced.
In 2022, the CMA fined pharmaceutical companies Pfizer and Flynn £63 million and £6.7m respectively after it decided they charged excessive prices for the pills – a decision both companies vowed to appeal.
Now, the CAT has “re-made the decision of the CMA and imposed fines totalling £69 million – almost identical to the fine levels imposed by the CMA”, the authority added.
Read more: Over £70m in fines for pharma giants in price surge probe
In a unanimous judgment, the tribunal found both Pfizer and Flynn were “gouging the market in a manner that can only be characterised as unjustifiable or opportunistic or – in a word – unfair”, the CMA said.
But it added that the tribunal found against the CMA in a “number of matters, including in relation to the approach to calculating a ‘reasonable rate of return’, its assessment of unfairness, and the overall procedure followed”.
Read more: CMA accuses Pfizer and Flynn of overcharging NHS for anti-epilepsy drugs
It said that the CAT imposed the “same level of fines as the CMA, but for a 1% reduction of Pfizer’s fine” – bringing the penalties down to £62,370,000 for Pfizer and £6,704,422 for n Flynn, according to the CAT.
“However, the CMA disagrees with the CAT’s findings and reasoning in relation to the CMA’s decision, and is carefully considering whether to appeal the judgment,” the authority added.
C+D approached both Flynn and Pfizer for comment.
“Excessive and unfair prices”
The CMA’s 2022 investigation found that “between 2012 to 2016, Pfizer’s prices rose by 780-1,600%”.
“The company supplied the drug to Flynn, which then sold the capsules to wholesalers and pharmacies at prices significantly above its own costs,” the CMA said.
Read more: Pfizer fined £84m for ‘excessive’ epilepsy drug pricing
“The combination of the prices imposed by Pfizer and Flynn resulted in prices between 2,300% and 2,600% higher than those previously charged for the drug,” it added.
“This illegal behaviour led to NHS annual costs for phenytoin capsules increasing from £2 million in 2012 to approximately £50 million the following year,” it said.
A seven-year investigation
The CMA issued its first statement of objections to Pfizer and Flynn Pharma in August 2015.
In 2016, the CMA imposed a fine of £84.2m on Pfizer and £5.2m on Flynn Pharma for overcharging for phenytoin sodium and breaking the competition law. Flynn Pharma later vowed to challenge the CMA’s decision, warning that it was a “serious error” and would result in a shortage of epilepsy drugs for doctors and patients.
Read more: Appeal court reinstates mammoth hydrocortisone cartel fines
Both Flynn Pharma and Pfizer appealed the CMA’s decision and in June 2018, the Competition Appeal Tribunal (CAT) “set aside” the CMA’s finding that the companies’ prices were an unlawful “abuse” of dominance, although it upheld the competition watchdog’s findings on market definition and dominance.
The matter of “abuse” of dominance was then referred back to the CMA. The competition watchdog and Flynn subsequently went to the Court of Appeal, which reinforced the CAT’s decision and asked the CMA to look at its evidence against the two companies once again.
The CMA started re-investigating the matters and re-opened the case in June 2020.
Considering an appeal
A Flynn spokesperson today (November 25) told C+D that “in the CAT judgment of 20th November, they largely agreed with Flynn’s grounds of appeal and found against the CMA”.
“The CAT rejected the CMA’s calculation of the reasonable rate of return (return on sales), assessment of unfairness, and the overall procedure followed,” they added.
Read more: CMA will not appeal after prochlorperazine ‘pay for delay’ fines overturned
“The CAT however, sought to fix its own reasonable rate of return by reference to a much higher rate than the rate of return previously set by the CMA (in both of its decisions), but it in our view, failed to properly apply it to the prices charged by Flynn,” they said.
“Flynn is considering an appeal to the Court of Appeal. As we have throughout these most protracted investigations, CAT Decisions, a Court of Appeal hearing and a Supreme Court hearing, we will continue to respect and follow due process,” they added.
