The pharmaceutical company Pfizer has been fined a record £84.2m by the UK’s competition regulator after the price charged to the NHS for an anti-epilepsy drug was increased by up to 2,600%.
The Competition and Markets Authority, issuing its biggest fine, said the “extraordinary price rises have cost the NHS and the taxpayer tens of millions of pounds”.
The CMA also fined the drugs distributor Flynn Pharma £5.2m for charging excessive and unfair prices in the UK for phenytoin sodium capsules, which are used by an estimated 48,000 epilepsy patients in the UK to prevent and control seizures. The watchdog has ordered both companies to drop their prices.
US-based Pfizer rejected the CMA’s findings. Both companies said they would appeal against the decision.
The CMA has four other ongoing investigations into the pharmaceutical industry, with at least one of those focused on excessive pricing.
The fines follow an overnight price increase for the drug of up to 2,600%, after it was deliberately debranded, the CMA said. Pfizer makes the drug and sells it to Flynn, which in turn sells it to the NHS.
Before September 2012, Pfizer manufactured and sold phenytoin sodium capsules to UK wholesalers and pharmacies under the brand name Epanutin, and the price was regulated. In September 2012, Pfizer sold the UK distribution rights to Flynn Pharma, debranding the drug and making it generic.
The drug was no longer subject to price regulation, leaving Pfizer free to sharply increase the price it charged Flynn, which in turn further raised the price it charged the NHS.
Generic drugs are generally available to customers at cheaper prices than branded products because they can be manufactured by any company, not just the developer of the original drug.
However, the CMA said that because epilepsy patients who are already taking phenytoin sodium capsules would not usually be switched to other products, including another manufacturer’s version of the product, the NHS had no alternative but to pay the increased prices for the drug.
The amount the NHS was charged for 100mg packs of the drug was increased from £2.83 to £67.50 before being reduced to £54 from May 2014. As a result, the amount the NHS spent on phenytoin sodium capsules rocketed from about £2m a year in 2012 to £50m in 2013.
The CMA also found that Pfizer, best known for its mass-market drugs such as Viagra, was charging a far higher price for the anti-epilepsy drug in the UK than in any other European country.
Its fining of Pfizer is the highest imposed in UK competition law, reflecting the seriousness of the case, the watchdog said. The previous record was a £58.5m fine handed to British Airways in 2012 for colluding with Virgin Atlantic on fuel surcharges.
Philip Marsden, who led the investigation for the CMA, accused the Pfizer and Flynn Pharma of exploitation and said there was no justification for such price rises. Phenytoin sodium capsules are an old drug and there had been no recent innovation or significant investment, he said.
Marsden added: “The companies deliberately exploited the opportunity offered by debranding 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.
“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.”
Pfizer defended its actions, saying the drugs were loss-making before they were debranded and distributed through Flynn Pharma. It also argued that the price was less than that of the equivalent medicine from another supplier to the NHS.
A spokesman for the CMA said Pfizer recouped its losses on the medication within two months, adding that the price of other drugs did not permit the companies fined to charge “excessive and unfair prices”.
Pfizer said in a statement: “Pfizer refutes the findings set out in the Competition and Markets Authority decision. In this transaction, and in all of our business operations, we approached this divestment with integrity, and believe it fully complies with established competition law.
“Phenytoin capsules were a loss-making product for Pfizer and the Flynn transaction represented an opportunity to secure ongoing supply of an important medicine for patients with epilepsy, while maintaining continuity of manufacture.
“Pfizer believes the CMA’s findings are wrong in fact and law and will be appealing all aspects of the decision.”
David Fakes, Flynn Pharma’s chief executive, said: “We believe that, left unchallenged, the CMA’s decision today would stunt investment in generics, eventually leading to a reduction in supply and less choice for doctors and patients. It is a matter of common interest for us to appeal and see this decision overturned.”
Duncan Liddell, competition partner at the law firm Ashurst, said the CMA had decided to make a point by handing out a record fine.
“Amidst the manifold uncertainties of Brexit, there’s a clear message here that boards should be including competition law compliance in their priorities for 2017.”
