A record fine of £84.2m has been imposed on pharmaceutical company Pfizer Limited for charging “excessive and unfair” prices for an epilepsy drug.
The Competitions and Markets Authority (CMA) also fined distributor Flynn Pharma Limited £5.2m, making it the largest fine levied by the watchdog, and ordered both companies to reduce the price of the medication.
The two companies deliberately de-branded an epilepsy drug, allowing them to increase the price by up to 2,600% overnight, the CMA said. It estimates NHS spending on the drug to rose from £2m a year in 2012 to about £50m in 2013 as a result.
Both companies refute the CMA’s decision and said they will appeal.
Under NHS rules branded drugs are subject to a profit cap. However, once their patent expires they become generic drugs and the cap no longer applies.
The problem of price inflation for drugs caused by companies de-branding drugs was brought to light in August when an investigation by the Times found a UK firm was buying up licences for old drugs in order to raise the price by up to 600%.
A bill is currently passing through Parliament attempting to limit the price of unbranded or generic drugs.
In Pfizer’s case, the firm sold the distribution rights for its phenytoin sodium capsules to Flynn Pharma in September 2012, which then de-branded the drug making it no longer subject to price regulation.
Prior to this Pfizer sold the drug, used to prevent and control seizures of epilepsy patients, directly to UK wholesalers under the brand Epanutin. It is estimated to be used by 48,000 people in the UK.
CMA said the two firms abused their dominant position in the market for the drug 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,” said Philip Marsden, chairman of the Case Decision Group for the CMA’s investigation.
He added the “extraordinary price rises” had no justification because it was a “very old drug for which there has been no recent innovation or significant investment”.
Pfizer said it refutes the findings in the CMA’s decision and that it believes it fully complies with competition law.
It said: “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.”
Flynn Pharma said it was “disappointed” with CMA’s decision, which it said was based on a “flawed understanding of the UK pharmaceutical market”.
“Phenytoin sodium capsules are already less expensive than the alternative equivalent drugs in the UK market. It beggars belief that the CMA seeks to punish Flynn for selling phenytoin capsules at a significant discount to phenytoin tablets,” a spokesman for Flynn said.
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