Competition & Markets Authority
£70 million in fines for pharma firms that overcharged NHS
After reassessing part of the case, the CMA has found that Pfizer and Flynn abused their dominant positions to overcharge the NHS for a life-saving epilepsy drug.
- Pharmaceutical companies Pfizer and Flynn fined £63 million and £6.7 million respectively
- NHS costs for the drug rose from £2 million to £50 million in a single year
- CMA CEO: “These firms illegally exploited their dominant positions to charge the NHS excessive prices and make more money for themselves – meaning patients and taxpayers lost out”
The fines are the result of an in-depth investigation carried out by the Competition and Markets Authority (CMA), which found that Pfizer and Flynn charged unfairly high prices for phenytoin sodium capsules for over 4 years, ultimately paid for by the NHS.
The firms de-branded the drug, previously known as Epanutin, meaning it was no longer subject to price regulation and the firms could set prices at their discretion. Given Pfizer and Flynn were the dominant suppliers of the drug in the UK at the time, the NHS had no choice but to pay the inflated final price for this important anti-epilepsy medicine.
Over the following 4 years, Pfizer charged prices between 780% and 1,600% higher than previously. The company supplied the drug to Flynn, which then sold the capsules on to wholesalers and pharmacies at a price between 2,300% and 2,600% higher than the prices previously charged by Pfizer. This illegal behaviour led to NHS annual costs for phenytoin capsules increasing from £2 million in 2012 to approximately £50 million the following year.
Following its original investigation, the CMA previously issued an infringement decision – finding that the companies’ behaviour broke competition law – in December 2016. Pfizer and Flynn challenged this decision at the Competition Appeal Tribunal (CAT). The CAT upheld the CMA’s findings on market definition and dominance, but set aside its conclusion that the companies’ prices were an unlawful “abuse” of dominance. The CAT referred this matter back to the CMA for further consideration – known as a remittal.
The CMA and Flynn then appealed to the Court of Appeal. In March 2020, the Court dismissed Flynn’s appeal in its entirety and upheld aspects of the CMA’s appeal relating to the application of the legal test for unfair pricing. Following this, the CMA decided to re-investigate the matters remitted by the CAT and opened its current investigation in June 2020.
Following additional evidence gathering and analysis, the CMA has determined that the companies’ behaviour was an abuse of their dominant positions in their respective markets and that both Pfizer and Flynn charged unfair prices for phenytoin capsules.
Andrea Coscelli, Chief Executive of the CMA, yesterday said:
Phenytoin is an essential drug relied on daily by thousands of people throughout the UK to prevent life-threatening epileptic seizures. These firms illegally exploited their dominant positions to charge the NHS excessive prices and make more money for themselves – meaning patients and taxpayers lost out.
Such behaviour will not be tolerated, and the companies must now face the consequences of their illegal action.
All information about the investigation to date can be found on the Phenytoin sodium capsules: suspected unfair pricing page.
Notes to Editors
- The CMA and Flynn appealed the CAT’s decisions to the Court of Appeal. In March 2020, the Court dismissed Flynn’s appeal in its entirety and upheld aspects of the appeal brought by the CMA relating to the application of the legal test for unfair pricing. Following this, the CMA decided to re-investigate the matters remitted by the CAT and opened its current investigation in June 2020.
- The fine has been imposed on the following companies, which were directly involved in the alleged infringements: Pfizer Limited, and Flynn Pharma Limited.
- The fine is also imposed on the following companies, which the CMA has found are jointly and severally liable as parent companies of the companies directly involved in the infringements: Pfizer Inc, and Flynn Pharma (Holdings) Limited.
- The final fines are: £63,300,000 (Pfizer) and £6,704,422 (Flynn).
- Phenytoin sodium capsules are sold in 4 different strengths in the UK: 25mg, 50mg, 100mg and 300mg capsules. The decision concerns the prices that each of Pfizer and Flynn charged for each of those capsule strengths.
- The Chapter II prohibition of the Competition Act 1998 prohibits the abuse of a dominant position by one or more undertakings which may affect trade within the UK or a part of it.
- The CMA may impose a financial penalty on any business found to have infringed the Chapter II prohibition of up to 10% of its annual worldwide group turnover. In calculating financial penalties, the CMA takes into account a number of factors including seriousness and duration of the infringement(s), turnover in the relevant market and any mitigating and/or aggravating factors.
- The financial penalty which the CMA has imposed on Flynn represents 10% of Flynn’s worldwide turnover, which is the statutory maximum that the CMA can impose for an infringement of competition law.
- The NHS can rely on the CMA’s infringement decision in a related court claim for damages against the companies concerned. It will be for the court to determine the level of any damages.
- All enquiries from journalists should be directed to the CMA press office by email on email@example.com or by phone on 020 3738 6460.
- All enquiries from the general public should be directed to the CMA’s General Enquiries team on firstname.lastname@example.org or 020 3738 6000.
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