Pfizer and Flynn Pharma have been fined nearly £90 million by the UK's Competition and Markets Authority (CMA) for deliberately unbranding an anti-epilepsy drug to enable excessive price hikes.
A record £84.2 million fine has been imposed on Pfizer and £5.2 million on distributor Flynn Pharma, after the CMA ruled that each broke competition law by charging unfair prices in the UK for phenytoin sodium capsules.
Originally Pfizer manufactured and sold phenytoin sodium capsules to UK wholesalers and pharmacies under the brand name Epanutin. But the drug's NHS price rocketed 2,600 percent overnight after it was actively genericised in September 2012, through a sale of UK distribution rights to Flynn, placing it outside the realms of normal price regulation, the CMA says.
Since September 2012, Pfizer has continued to manufacture phenytoin sodium capsules and has supplied them to Flynn at prices "significantly higher" - between 780 percent and 1,600 percent- than those at which it previously sold Epanutin in the UK. Flynn sells on the drug UK wholesalers and pharmacies charging prices which have been between 2,300 percent and 2,600 percent higher than those they had previously paid, according to the agency.
The CMA found that both companies have held a dominant position in their respective markets for the manufacture and supply of phenytoin sodium capsules and "each has abused that dominant position by charging excessive and unfair prices".
"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 Case Decision Group for the CMA's investigation.
"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".
Pfizer argues that Epanutin was loss-making before it was de-branded, but the CMA calculated that, according to the drugmaker's own figures, all such losses would have been recovered within two months of the price increases.
However, Pfizer insists that it approached the divestment with integrity, "and believe it fully complies with established competition law", and as such 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", it said.
In the meantime, the agency has given the companies between 30 working days and four months to reduce their respective prices.
In February this year the CMA fined a number of pharmas including GlaxoSmithKline a total of £45 million for anti-competitive agreements and conduct in relation to the supply of the anti-depressant drug paroxetine, and it currently has four other ongoing investigations within the sector.
"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.