On 7 December 2016, the Competition and Markets Authority announced its finding that pharmaceutical manufacturer Pfizer Limited and its distributor Flynn Pharma Limited had abused their respective dominant positions by imposing unfair prices for an anti-epilepsy drug (phenytoin sodium capsules), following a price rise of the drug from £2.83 to £67.50 per pack. Pfizer was fined £84.2million, and Flynn, £5.2million. Both companies were directed to reduce their prices for the drug within four months.
The CMA press release states that, prior to September 2012, Pfizer manufactured and sold phenytoin capsules to UK wholesalers and pharmacies under the brand name Epanutin and the prices of the drug were regulated. In September 2012, however, Pfizer sold the UK distribution rights for Epanutin to Flynn Pharma, which genericised the drug. As a result of the subsequent price increases, NHS expenditure on phenytoin sodium capsules increased from £2million a year in 2012 to about £50million in 2013. Pfizer argued that the re-branding and re-pricing of the drug were necessary, as it had been loss-making prior to this time.
Flynn has recently applied to the Competition Appeal Tribunal for it to suspend CMA’s direction to reduce its prices whilst Flynn appeals the decision. The CAT refused permission on the basis that if the directions were suspended, the adverse effect of the higher prices that will continue to be charged by Flynn to the NHS is likely to be substantial, not purely financial, and in part at least irreparable. The CAT concluded that the damage to Flynn from leaving the directions in place, although significant, is not enough to outweigh the damage to the public interest from allowing the continuation of higher prices for the drug.
De-branding of generics has been the subject of a number of press reports and these (together with complaints from patient groups) are no doubt influencing the CMA’s appetite for these cases; it currently has a further four ongoing investigation in the pharmaceutical sector, three of which also relate to potential abuses of dominance in the sector. Wider political fall-out has also resulted in the Government’s proposed Health Service Medical Supplies (Costs) Bill which proposes amendments to the NHS Act 2006 to enable the Government to secure better value for money for the NHS from its spend on medicines and specifically to control the price of unbranded generics. The Bill is passing through Parliament and will have its final reading in the House of Lords on 23 February 2017.
The CMA is not alone in its focus on pharmaceutical pricing, for example the Spanish Competition Authority has also recently announced that it has opened an investigation into Irish pharmaceutical group Aspen, for either refusing to supply certain drugs or applying excessive pricing to them. It’s clear that these issues will continue to be at the top of regulators’ agendas for the foreseeable future.
Once the final decision is published it will be interesting to see how the CMA has reached a finding of dominance in relation to both Pfizer and Flynn, and what consideration it has given to the pricing of potentially competing products and how the companies priced over their whole portfolio of products.