...medicating commercial overcharging
Pharmaceutical giant Pfizer and British distributor Flynn Pharma have both received large fines by the Government’s Competition and Markets Authority (CMA) for allegedly overcharging the NHS for an anti-epilepsy drug.
Both companies have denied claims from the CMA and have stated that they will appeal the decision.
Detailing the fine, Luke Corcoran – specialist in commercial law – looks at the CMA’s claims and explains whether Pfizer and Flynn Pharma can appeal the decision.
Pharmaceutical price spikes
The CMA, which is the UK’s competition watchdog, fined Pfizer a record £84.2 million and Flynn Pharma £5.2 million for overcharging the NHS for phenytoin sodium capsules, which are used to treat epilepsy.
In 2012 Pfizer was selling the drug – used by 48,000 UK patients – for £2.83 per 100mg, under the brand name Epanutin.
Under a pricing scheme agreed by the NHS and the drugs industry, the price the health service pays for branded products are locked in and cannot be raised without an agreement between both parties.
In September 2012 Pfizer sold the UK distribution rights for Epanutin to Flynn Pharma, who de-branded the drug and increased its price to £67.50 per 100mg, which they reduced to £54 in May 2014.
In their report, the CMA claim that both companies took advantage of de-branding to wildly overinflate the drug’s price, which increased the NHS’ spending on phenytoin capsules from £2 million in 2012 to around £50 million in 2013.
After de-branding, Pfizer continued to manufacture the drug and supplied it to Flynn Pharma for a price that was between 780% and 1,600% more than they used to charge the NHS; Flynn Pharma then charged the NHS up to 2,600% more for the drug than the health service had paid previously.
In response, Pfizer and Flynn Pharma have claimed that before the price rise the drug was loss-making and increasing its price ensured that they could continue to make and supply the crucial drug for patients.
Flynn Pharma have gone on to explain that the price they charge is significantly lower than the costs associated with buying the same drug in tablet form.
Prescribing repeat fines
This is not the first time that Pfizer have found themselves recipients of a hefty fine; however this is a record amount awarded by the CMA.
Pfizer have had costly, and high-profile, legal battles in the US and were involved in the largest health care fraud settlement in the history of the US Justice Department. In that case they settled for $2.3 billion (around £1.8 billion) after allegations of off-label promotion and kickbacks to physicians.
In response to the pharmaceutical’s claims that the drug was loss-making before de-branding, the CMA claimed that by Pfizer’s own figures the price increase would have paid for any losses after two months; the higher price has been in place for three years.
Both Pfizer and Flynn Pharma have stated that they intend to appeal the decision, which – as Luke explains – could lead to a long legal battle:
“The CMA is clear in how they came to their decision, claiming that these companies deliberately exploited the opportunity presented by de-branding this drug.”
“This story is similar to that of hedge fund manager Martin Shkreli, who made headlines last year after raising the price of anti-infective drug Daraprim by more than 5,000% almost immediately after purchasing its rights.”
“Shkreli used a similar argument to Pfizer and Flynn Pharma, as he claimed that the drug was too cheap before the price increase and as a loss-maker it would be unsustainable to continue selling at that price.”
“During their appeal, Pfizer will likely claim that the new price ensures that patients can continue to receive the drug, as the previous price caused losses and could have jeopardised future production of the capsules.”
“In the first instance, Pfizer and Flynn Pharma will have to lodge an appeal with the Competition Appeal Tribunal; they have two months to do this.”
“If the tribunal rules against them, the companies will only be able to appeal a point of law, which would see the case go in front of the Court of Appeal.”
“Going on the immediate response from Pfizer and Flynn Pharma, it’s likely that they feel a legal appeal would be appropriate, as they have claimed that the CMA’s findings were incorrect in both fact and in law.”
Written by Luke Corcoran.
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