THE UK Competition and Markets Authority (CMA) has fined Pfizer a record £84.2m (US$106m) for overcharging the National Health Service (NHS) for capsules of anti-epilepsy drug phenytoin sodium.
The drug’s distributor, Flynn Pharma, also received a fine, of £5.2m, and both companies have been ordered to reduce their prices, Pfizer within 30 days and Flynn within four months. In September 2012, Pfizer sold the marketing rights to the drug, then called Epanutin, to Flynn and ‘de-branded’. Virtually overnight the drug’s price skyrocketed by 2,600%. The NHS had paid £2.83 for 100 mg packs of Epanutin, but was forced to pay £67.50 for the same sized packs of the de-branded drug from Flynn. The price fell slightly to £54/pack from May 2014, but it’s estimated that NHS spending on phenytoin went from £2m in 2012 to £50m in 2013.
In the UK, branded drugs are subject to price regulation, but generic drugs are not, and the CMA believes that Pfizer’s decision to sell the rights to Flynn took advantage of this, and their dominant position in the marketplace for epilepsy drugs.
“The companies deliberately exploited the opportunity offered by de-branding to hike up the price for a drug which is relied upon by many thousands of patients. These extraordinary price rises have cost the NHS and the taxpayer tens of millions of pounds,” said Philip Marsden, chairman of the CMA Case Decision Group. “Businesses are generally free to set prices as they see fit but those holding a dominant position should not abuse this situation and set prices that are excessive and unfair.”
Pfizer continues to produce phenytoin for Flynn, selling it to the distributor at prices the CMA says are between 780% and 1,600% higher than it previously sold the drug for. Flynn then adds its own mark-up when selling on the drug to pharmacies. Pfizer says that Epanutin was a loss-making product, but the CMA argues that even according to the company’s own figures, the losses made would have been recovered within two months at the hiked price.
“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,” said Marsden.
Pfizer says it “refutes the findings” of the CMA and that it believes it complied with competition law. The company claims that the deal for Epanutin with Flynn “represented an opportunity to secure ongoing supply of an important medicine for patients with epilepsy, while maintaining continuity of manufacture.” It says that the price set by Flynn for the de-branded drug was 20–45% less than prices charged by another supplier for the same drug. The competitor’s drug was branded and therefore subject to market regulation and “appeared to be acceptable to the Department of Health”.
“Against that background, Pfizer believes the CMA's findings are wrong in fact and law and will be appealing all aspects of the decision. The ruling highlights real policy and legal issues concerning the respective roles of both the Department of Health and the CMA, in regulating the price of pharmaceutical products in the UK. Pfizer will seek clarity on these issues as part of the appeal process,” the company added.
Flynn, meanwhile, is “disappointed” with the CMA’s decision, which the company says is “based on a wholly flawed understanding of the UK pharmaceutical market”. It too will appeal the ruling.
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