In 2016, the  Competition and Markets Authority (CMA) imposed a fine of £84.2m on Pfizer and £5.2m on Flynn Pharma for overcharging for epilepsy drug phenytoin sodium. At the time, the CMA concluded that the companies had “abused” their “dominant position” in the market to hike up the price in 2012, breaking competition law in doing so.

The CMA found that NHS expenditure on phenytoin sodium capsules rose from about £2m a year in 2012 to about £50m in 2013. This included the price of 100mg packs of the drug shooting up from £2.83 to £67.50.

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. In 2018, the CAT backed the distributor when it ruled in an appeal case that the two companies had not abused their position, stating that “the CMA’s conclusions on abuse of dominance were in error”.

The purpose of the CMA’s appeal was to challenge this conclusion, but the Court of Appeal has now reinforced the CAT’s decision, asking the CMA to once again look at its evidence against the two companies.

One of three judges hearing the case, Lord Justice Green, said: “The judgment of the [Competition Appeal] Tribunal is therefore upheld, including the order made for a remittal of the issues of abuse and penalties and any other consequential matter.”

CMA: “Right to appeal” judgement

Commenting on the court’s decision, the CMA said it is a “good result” and that it has helped clarify the ”legal test for excessive and unfair pricing”.

However, it added that while the Court of Appeal did not back the CMA's fine, it dismissed Flynn Pharma’s case “in its entirety” and additionally found that the CAT had wrongly applied EU case law when determining whether the price hikes qualified as excessive or not.

In the judgement, Sir Geoffrey Vos, chancellor of the High Court, stated that: “It was quite easy to lose sight of a stark reality, which was that, literally overnight, Pfizer and Flynn increased their prices for phenytoin sodium capsules by factors of between approximately seven and 27, when they were in a dominant position in each of their markets.”

CMA chief executive, Andrea Coscelli, said on Tuesday: “The CMA was right to appeal the CAT’s judgment. We will now get on with the elements of the case against Pfizer and Flynn Pharma that the court has decided to refer back to us.”

In a statement released on Tuesday, the CMA said it still has “serious concerns about the very big price increases imposed by certain drug companies for several other generic drugs, which have cost the NHS hundreds of millions of pounds”.

It added: “The CMA remains committed to its work to robustly tackle any illegal behaviour by drug companies ripping off the NHS.”

In a statement on Tuesday, Pfizer said: “We are pleased the Court of Appeal has affirmed the judgment of the Competition Appeal Tribunal and dismissed the CMA’s appeal against Pfizer. Our priority has always been to ensure a sustainable supply of medicines to UK patients, which was at the heart of our decision to divest this medicine.”

Flynn Pharma: CMA decision “fundamentally flawed”

A spokesperson for Flynn Pharma said on Tuesday: “Flynn Pharma is pleased to receive the judgment of the Court of Appeal regarding the CMA’s phenytoin investigation.

“The Court of Appeal’s findings on the law reflect Flynn’s position since the outset of this investigation and vindicate Flynn’s consistently stated position that the basis of CMA’s decision was fundamentally flawed.”

“Whilst we recognise and appreciate the important public interest that the CMA seeks to serve, we submit that the CMA was wrong to use this case to push and test the boundaries of the law.”