Pfizer, Flynn Get Record Fine on 2,600% Drug Price Increaseby
CMA imposes record fines for abusing dominant position
Companies increased prices on epilepsy drug, regulator says
Pfizer Inc. and Flynn Pharma Ltd. were fined a record amount for abusing their dominant position in the U.K. by charging unfair prices for unbranded versions of the Epanutin anti-epilepsy drug.
The Competition and Markets Authority fined Pfizer 84.2 million pounds ($106 million) and Flynn Pharma 5.2 million pounds after they increased prices by as much as 2,600 percent in September 2012, the regulator said Wednesday. The price increases occurred after Pfizer transferred distribution rights to Flynn, which sold the medicine by its generic name, phenytoin sodium.
“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,” said Philip Marsden, chairman of the Case Decision Group for the CMA’s investigation. “These extraordinary price rises have cost the NHS and the taxpayer tens of millions of pounds.’’
Britain’s National Health Service spent about 50 million pounds on the anti-epilepsy capsules in 2013 and 40 million pounds in 2014, the CMA said in its August 2015 complaint. The amount the NHS was charged for 100-milligram packs of the drug "rocketed" from 2.83 pounds to 67.50 pounds, before dropping to 54 pounds starting in May 2014, the CMA said Wednesday.
Pfizer said that it “refutes” the findings of the regulator. Both companies said they will appeal.
“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,” the company said in a statement. “When Flynn launched its product, the company set a price that was between 25 and 40 percent 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.”
A Flynn spokesman said the CMA had "ignored or misunderstood" important aspects of its investigation, including the fact that alternative epilepsy drugs were more expensive than phenytoin.
"Phenytoin sodium capsules are already less expensive than the alternative equivalent drugs in the U.K. market," a Flynn spokesman said. "It beggars belief that the CMA seeks to punish Flynn for selling phenytoin capsules at a significant discount to phenytoin tablets."
Steep price hikes have put a string of drugmakers under the microscope in the U.S. with companies like Mylan NV and Valeant Pharmaceuticals International Inc. bearing the brunt of the public outrage. President-elect Donald Trump, who had been cited as a boon to free-market health care, also declared himself an opponent of high drug prices in an interview with Time magazine. His comments weighed down biotech stocks in the U.S. on Wednesday.
“Illegal excessive pricing is usually very difficult to prove -- how do you identify the ‘right’ price and how much extra margin is ‘excessive?’” said Duncan Liddell, a competition partner at law firm Ashurst. “Here the CMA has clearly decided to make a point with a record U.K. fine.”
Prior to September 2012, prices were regulated when Pfizer manufactured and sold phenytoin sodium capsules to U.K. wholesalers and pharmacies under the brand name Epanutin, the CMA said. In September 2012, Pfizer sold the distribution rights for Epanutin to Flynn Pharma, which de-branded the drug, meaning that it was no longer subject to price regulation.
"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," the regulator said.
"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 behavior and to protect customers, including the NHS, and taxpayers from being exploited," the CMA’s Marsden said.