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CMA fines drug firms £90m for over-charging NHS

The Competition and Markets Authority (CMA) has fined the pharmaceutical companies Pfizer and Flynn Pharma almost £90m for hiking up the price to the NHS for an anti-epilepsy drug by almost 2,600%, in a conclusion to an investigation begun last year.

The CMA imposed a record £84m fine on the manufacturer Pfizer and a £5.2m fine on the distributor Flynn Pharma after finding that each charged unfair prices to the NHS for phenytoin sodium capsules, also ordering the companies to reduce their prices.

Prices shot up overnight after the drug was deliberately de-branded in September 2012, meaning that NHS expenditure on the capsules increased from £2m a year to around £50m in 2013. Pfizer also priced the drug far higher in the UK than in any other European country.

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.

“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.”

Marsden added that the rises were particularly not justified due to the dominant position of both companies in their respective markets and the long-term availability of phenytoin sodium capsules, for which there has been no recent innovation or investment.

Phenytoin sodium is a vital drug for around 48,000 epilepsy patients in the UK, used to prevent and control seizures. The CMA has reported that the NHS had no alternative to paying the increased prices for the drug due to the serious health risks that would have been caused to patients had they been forced to switch to another product.

Flynn Pharma de-branded the drug, previously sold to wholesalers and pharmacies under the name Epanutin, when Pfizer sold the distribution rights to the supplier in September 2012, meaning that the drug was no longer subject to price regulation.

Since then Pfizer has supplied phenytoin sodium capsules to Flynn Pharma at prices 780% to 1,600% higher than it had previously sold Epanutin, with Flynn Pharma then selling them to wholesalers and pharmacies at an even further increased price. Although Pfizer claimed that Epanutin was loss-making before it was de-branded, the CMA calculated that all supposed losses would have been recovered within two months of the price rises.

Pfizer refuted the CMA’s findings, stating its belief that it approached the transaction with “integrity” and “fully complied” with competition law, as with all its business operations.

“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,” Pfizer said in a statement.

Warwick Smith, director general of the British Generic Manufacturers Association (BGMA), explained that, while generic companies sometimes need to raise prices in older medicines to keep them on the market, Pfizer’s artificial price rise contradicted the usual “virtuous circle” between innovators and generic companies.

“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,” Smith said.

“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.”

In order to ensure that patients can still receive phenytoin sodium capsules, the CMA has given Pfizer and Flynn up to four months to reduce their prices of the drug to prices which are profitable but not excessive. The CMA is currently conducting four other investigations into the pharmaceutical sector.

(Image: c. Gareth Fuller, PA Images)

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Concerned Patient   21/12/2016 at 15:59

I keep reading about these huge fines imposed by the CMA, can anyone tell me where/to whom the money from the fines ends up?

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