The Competition and Markets Authority ('CMA') has imposed a record £84.2m fine on pharmaceutical manufacturing giant, Pfizer, for overcharging its customers (including the NHS) for an anti-epilepsy drug.
The CMA also fined pharmaceutical distributor Flynn Pharma £5.2m for its role in the price hike of the phenytoin sodium capsules, the price of which rose by up to 2,600% after the drug was de-branded in September 2012.
In financial terms, the drug, used by an estimated 48,000 patients across the UK, cost the NHS in the region of £2m a year in 2012, prior to it being de-branded. By 2013, the NHS was paying around £50m a year for the same product. The prices for the drug in the UK were also many times higher than Pfizer's prices for the same drug in any other European country.
The CMA has cited the price increase as a breach of competition law. It has concluded that both Pfizer and Flynn Pharma have abused the dominant position they are believed to have held in their respective markets for the manufacture and supply of the drug capsules, by charging customers excessive and unfair prices.
This is the highest fine the CMA has imposed for a competition law infringement to date. In announcing its decision, the CMA has said that it wants to send out a clear message that the CMA is prepared to crack down on anti-competitive behaviour and protect customers (including, in this case, the NHS and the UK taxpayer) from being exploited.
This decision centres around allegations that the two businesses involved charged prices that were 'excessive'. It is well established that it is unlawful for dominant businesses to charge prices that are excessive. However, in practice, excessive pricing cases are relatively rare. This is in part because it can be challenging for the competition authorities to establish whether a given price level is or is not excessive. The complexities of the pharmaceutical sector, where suppliers inevitably charge relatively high prices in order to recoup the huge investments they are required to make in developing drugs and bringing them to market, presents its own challenges in this regard. With this in mind, it is perhaps hardly surprising that both Pfizer and Flynn Pharma are reported to have rejected the CMA's findings and look likely to appeal its decision to the Competition Appeal Tribunal.