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Pfizer fined a record £84.2m for overcharging

Price of epilepsy drug rose 2,600% overnight

Jo Carlowe

Wednesday, 07 December 2016

Pharmaceutical giant Pfizer has been fined a record £84.2 million for charging the NHS “excessive and unfair prices”. 

The Competition and Markets Authority (CMA) imposed the fine, along with a £5.2 million fine on the distributor Flynn Pharma, after finding each broke competition law “by charging excessive and unfair prices in the UK” for the anti-epilepsy drug phenytoin sodium capsules. 

The CMA has ordered the companies to reduce their prices, but Pfizer says it will appeal the decision. 

The fines follow prices increasing by up to 2,600% overnight after the drug was “deliberately de-branded” in September 2012. The amount the NHS was charged for 100mg packs of the drug rocketed from £2.83 to £67.50, before reducing to £54.00 from May 2014. As a result of the price increases, NHS expenditure on phenytoin sodium capsules increased from about £2 million a year in 2012 to about £50 million in 2013. 

The prices of the drug in the UK have also been many times higher than Pfizer’s prices for the same drug in any other European country.

Prior to September 2012, Pfizer manufactured and sold phenytoin sodium capsules to UK wholesalers and pharmacies under the brand name Epanutin and the prices of the drug were regulated. In September 2012, Pfizer sold the UK distribution rights for Epanutin to Flynn Pharma, which de-branded (or ‘genericised’) the drug, meaning that it was no longer subject to price regulation.

Since September 2012, Pfizer has continued to manufacture phenytoin sodium capsules and has supplied them to Flynn Pharma at prices ‘significantly higher’ than those at which it previously sold Epanutin in the UK – between 780% and 1,600% higher than Pfizer’s previous prices. Flynn Pharma then sells on the products to UK wholesalers and pharmacies charging them prices which have been between 2,300% and 2,600% higher than those they had previously paid for the drug.

The final decision and fines relate to both the prices that Pfizer has charged to Flynn Pharma and the prices that Flynn Pharma has charged to its customers, since September 2012. The CMA found that both companies held a dominant position in their respective markets for the manufacture and supply of phenytoin sodium capsules and that each “abused that dominant position by charging excessive and unfair prices”.

Philip Marsden, Chairman of the Case Decision Group for the CMA’s investigation, said: “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.

“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. 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.

“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.”

Pfizer has issued a statement refuting the findings set out by the CMA.

Pfizer states: “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. 

“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. 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 Pharma giant added: “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. For many decades, Pfizer has been an important partner to the UK’s health, academic and scientific institutions, and is proud to supply and partner with the NHS. Our purpose is to develop therapies which significantly improve patients’ lives. Pfizer is a responsible, global business, committed to operating to the highest standards.”

However, the CMA states: “Although Pfizer has claimed that Epanutin was loss-making before it was de-branded, the CMA has calculated that, according to Pfizer’s figures, all such losses would have been recovered within 2 months of the price rises.”

In order to ensure that there should be no risk to the ongoing supply of phenytoin sodium capsules to those patients who rely on it, the CMA has given Pfizer and Flynn between 30 working days and 4 months to reduce their respective prices.

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