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Pfizer slapped with record £84.2 million fine for 2,600% price increase

Published on 07/12/16 at 09:39am

Pfizer has been hit with a record fine by The Competition and Markets Authority for the increase in the price of phenytoin sodium capsules, a drug designed to help control symptoms of epilepsy. The CMA has also imposed a £5.2 million fine upon the distribution company, Flynn Pharma.

The decision was reached after the CMA ruled that Pfizer had “deliberately debranded” its drug Epanutin and then sold the distribution rights to Flynn Pharma. This move allowed the drug to be sold as a generic drug which allowed the companies to increase the price from £2.83 to £67.50, while the branded drug had been subject to price regulation.

Philip Marsden, chairman of the Case Decision group for the CMA’s investigation, said that “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.”

The NHS was unable to stop purchasing the drug because many epilepsy patients relied on the drug to prevent and control seizures. Medically it is inadvisable to switch medication for epilepsy patients as it can result in the loss of seizure control that can ultimately lead to serious health consequences. As a result, cost from purchasing the drug rose from £2 million a year in 2012 to £50 million a year in 2013.

Pfizer did drop the price in May 2014, from £67.50 down to £54 but the CMA has ordered both companies involved to lower the price of the drug further. This order comes with a time constraint of compliance within a period of 30 working days and four months.

The actual process of operations between the two companies, Pfizer and Flynn Pharma, was that Pfizer manufactured phenytoin sodium capsules and then supplied them to Flynn Pharma at a price increase of between 780% to 1600% on its previous price when it sold the drug under its own brand. Flynn Pharma then sold the drug on to UK wholesalers and pharmacies at a total price increase of 2,300% to 2,600% higher than previously paid.

Pfizer released a statement after the announcement of the fine stating: “Pfizer refutes the findings set out in the Competition and Markets Authority (CMA) 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.”

Pfizer stressed that the product, prior to divestment to Flynn Pharma, had been a loss making product. The CMA did not contest this fact but stated that, after examining Pfizer’s own figures, any losses that had been made on the drug would have been recovered within two months of the price increase.

Pfizer also countered with the argument that: “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.”

The CMA did not address this point directly but stated its case that both companies had abused their respective dominant positions in the manufacture and supply of phentonin sodium capsules “by charging excessive and unfair prices”.

Pfizer plans to appeal the decision.

Ben Hargreaves

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