The Competition and Markets Authority has imposed a record £84.2 million fine on the manufacturer Pfizer, and a £5.2 million fine on the distributor Flynn Pharma after finding that each broke competition law by charging excessive and unfair prices in the UK for phenytoin sodium capsules. The CMA has also ordered the companies to reduce their prices.
The price of phenytoin sodium capsules increased by up to 2,600 per cent overnight after the drug was deliberately de-branded in September 2012. As a result of the price increases, NHS expenditure on the medicine increased from about £2 million a year in 2012 to about £50 million in 2013. The prices of the drug in the UK have also been much higher than prices in any other European country.
Prior to September 2012, Pfizer manufactured and sold phenytoin sodium capsules to UK wholesalers and pharmacies under the brand name Epanutin, and the prices of the drug were regulated. In September 2012, Pfizer sold the UK distribution rights for Epanutin to Flynn Pharma, which de-branded the drug, meaning that it was no longer subject to price regulation.
Since September 2012, Pfizer has continued to manufacture phenytoin sodium capsules and supplied them to Flynn Pharma at prices between 780 per cent and 1,600 per cent higher than Epanutin. Flynn Pharma has been selling on the products to UK wholesalers and pharmacies at prices between 2,300 per cent and 2,600 per cent higher than they had previously paid.
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.
Philip Marsden, chairman 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.
"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."
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.
Although Pfizer has claimed that Epanutin was loss-making before it was de-branded, the CMA calculated that, according to Pfizer’s figures, all such losses would have been recovered within two months of the price rises.
In order to ensure that there should be no risk to the ongoing supply of phenytoin sodium capsules to those patients who rely on it, the CMA has given Pfizer and Flynn between 30 working days and four months to reduce their respective prices. Both companies will continue to be able to charge prices which are profitable, but their prices must not be excessive and unfair.
Warwick Smith, director general of the British Generic Manufacturers Association, said: “Pfizer’s cynical behaviour flies in the face of the virtuous circle between innovator and generic companies which normally works extremely well in the interests of patients and the NHS.
“In our view, the role of the so-called research based sector is precisely that: to innovate and develop new medicines to deal with currently unmet clinical need. The main job of the generic sector is to introduce competition when the innovators lose their monopoly due to patent expiry.
“When originators put their resources into artificially increasing the commercial value of their older products by extending their monopoly, they not only cost the NHS more money, but fail to live up to their promise to society to deliver much needed new medicines."