Two drug companies have been slapped with fines totalling almost £90m by the UK’s competition regulator for dramatically hiking up the price of an NHS anti-epilepsy drug.
The Competition and Markets Authority (CMA) issued its biggest ever fine (£84.2m) to drugs manufacturer Pfizer today (7 December), and also fined distributor Flynn Pharma £5.2m after it ruled that the companies “deliberately exploited” the NHS and the British public.
The regulator found that both companies broke competition law by charging “excessive and unfair” prices in the UK for the anti-epilepsy drug phenytoin sodium capsules.
Both Pfizer and Flynn Pharma have defended their actions and said that they will appeal the decision.
In order to ensure that there should be no risk to the ongoing supply of the drug to patients, the CMA has given the companies between 30 working days and 4 months to reduce their respective prices.
Flynn Pharma de-branded phenytoin sodium capsules – then known as Epanutin – in 2012 after it bought the distribution rights to the drug from Pfizer, the CMA found. Turning the drug into a generic meant that its price was no longer regulated, allowing its price to increase by up to 2,600% “overnight”, the CMA said.
Pfizer has continued to manufacture phenytoin sodium capsules since 2012, supplying the drug to Flynn Pharma at “significantly higher” prices than it sold Epanutin, the regulator noted.
Following its ruling, the CMA ordered the companies to reduce their prices. Both companies will continue to be able to charge profitable prices for the drug, but their prices must not be excessive and unfair.
Ruling “beggars belief”
Pfizer claimed that the drug had been making a loss before the de-branding, and the company was forced to consider whether it could continue supplying it.
But the CMA calculated that all such losses would have been recovered within two months of the price increase.
Pfizer also said that the price set by Flynn Pharma was actually 25-40% less than the cost of an equivalent tablet from another supplier.
Flynn Pharma chief executive David Fakes said that punishing the company for selling phenytoin sodium capsules for less than the same drug in tablet form “beggars belief”.
The CMA’s ruling could have “unintended consequences” on the future availability of generics because it could “stunt investment” in these drugs, he added.
The amount the NHS was charged for 100mg packs of the capsules went from £2.83 to £67.50 in 2012, before being reduced to £54 in May 2014, the CMA found.
As a result of the price increases, NHS annual expenditure on phenytoin sodium capsules increased from £2m to £50m between 2012 and 2013.
Approximately 48,000 patients in the UK use phenytoin sodium capsules to prevent and control seizures. Switching medication brand for the drug carries increased risk of seizures and so the NHS had no alternative to paying the increased prices for the drug.
“Cracking down” on exploitation
Philip Marsden, chair 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.”
The fine sent out a “clear message” that the watchdog would “crack down” on such practices and protect customers and the NHS from “being exploited”, he said.