The Competition and Markets Authority (CMA) imposed a "record" £84.2m fine on Pfizer, and a £5.2m fine on Flynn Pharma for their parts in charging “excessive and unfair” prices in the UK for epilepsy drug phenytoin sodium.
The financial penalty imposed on Flynn represents 10% of the distributor’s worldwide turnover, which is the statutory maximum that the CMA can impose on a company if it is found to have infringed competition law, the watchdog announced in a statement today (December 7).
Pfizer and Flynn Pharma “abused” their “dominant position” in the marketplace by deliberately de-branding the drug in 2012 and hiking up the price, the CMA said.
As a result of a 2,600% overnight price increase when the drug was “genericised”, NHS expenditure on the epilepsy drug increased from “about £2m” a year to “about £50m” in 2013, the CMA said.
The CMA said the amount the NHS was charged for 100mg packs of the drug "rocketed" from £2.83 to £67.50. It then reduced to £54.00 from May 2014.
It added that the cost of the drug in the UK was “many times” higher than what Pfizer charges in other European countries.
Story behind the price rise
In September 2012, Pfizer sold the distribution rights of the phenytoin sodium capsules – which were being sold under the brand name Epanutin – to Flynn Pharma. The distributor de-branded the drug, meaning it was no longer subject to price regulation.
The CMA said its ruling and the fines relate to both the prices that Pfizer charged to Flynn Pharma – which were “between 780% and 1,600% higher” than Pfizer had previously sold the drug in the UK – and the prices that Flynn charged customers, including the NHS – “between 2,300% and 2,600% higher” than before September 2012.
Healthcare guidelines recommend that epilepsy patients who take phenytoin sodium capsules do not switch to other products, including another version of the product, and so “the NHS had no alternative to paying the increased prices for the drug”, the CMA stressed.
Philip Marsden, chairman of CMA group leading the investigation, said the companies “deliberately exploited” the opportunity offered by de-branding to hike up the price.
“Businesses are generally free to set prices as they see fit but…there is no justification for such rises when phenytoin sodium capsules are a very old drug for which there has been no recent innovation or significant investment,” he said.
Pfizer has refuted the CMA's decision, stating today: “The CMA’s findings are wrong in fact and in law”.
It will be appealing all aspects of the decision, Pfizer added.
“When Flynn launched its product, the company set a price that was between 25% and 40% less than the price of the equivalent medicine from another supplier to the NHS, which had long been regulated and appeared to be acceptable to the Department of Health (DH),” the manufacturer said.
Pfizer said the ruling calls into question the role of the DH and the CMA in regulating the price of pharmaceutical products in the UK. It added that it will seek “clarity” in the “real policy and legal issues” of product pricing as part of its appeal process.
Warwick Smith, director general of the British Generic Manufacturers Association, said: “Pfizer’s cynical behaviour flies in the face of the virtuous circle between innovator and generic companies which normally works extremely well in the interests of patients and the NHS.”
Price increases can be justified when generic companies invest in older medicines in order to keep them on the market and to meet current regulations, he stressed. “But we would never support activity designed purely to artificially increase prices.”
CMA "sending a message"
The CMA found both Pfizer and Flynn Pharma had broken competition law and has ordered both companies to reduce their respective prices within four months.
Mr Marsden added: “This is the highest fine the CMA has imposed and it sends out a clear message to the sector that we are determined to crack down on such behaviour and to protect customers, including the NHS, and taxpayers from being exploited.”
The CMA confirmed that it has four ongoing investigations into “suspected unfair pricing” in the pharmaceutical industry.