The major international drug companies have an appalling record with respect to compliance with the law. On many occasions they have been called to account and required to pay massive sums as a result. This record is convincing evidence that these companies cannot be trusted to operate ethically. This blog and the next two will summarise some examples of the actions by the regulatory authorities in the UK and the USA. In view of the huge expectations many people have about the drugs they are using, I believe this information should be widely disseminated.

Action against Pfizer in the UK

The Competition and Markets Authority (CMA) in the UK has imposed a record fine of £84.2 million on the pharmaceutical manufacturer Pfizer, and a £5.2 million fine on the distributor Flynn Pharma for charging excessive and unfair prices for phenytoin sodium capsules in breach of the competition law. This drug is used to treat epilepsy (1).

The CMA has also ordered the companies to reduce their prices.

The original price was that paid when the product was sold under the brand name Epanutin. The price of branded products are controlled by regulation. What happened was that in September 2012, Pfizer sold the UK distribution rights for Epanutin to Flynn Pharma, which de-branded (or ‘genericised’) the drug, meaning that it was no longer subject to price regulation.

Since September 2012, Pfizer has continued to manufacture phenytoin sodium capsules and has supplied them to Flynn Pharma at prices that were significantly higher than those at which it previously sold Epanutin in the UK – between 780% and 1,600% higher than Pfizer’s previous prices. Flynn Pharma then sells on the products to UK wholesalers and pharmacies charging them prices which have been between 2,300% and 2,600% higher than those they had previously paid for the drug.

Huge increase in the price charged to the NHS

The impact of this can be demonstrated by the fact that the charge to the NHS for 100 mg packs of the drug was bumped up from £2.83 to £67.50 overnight. Subsequently it was reduced to £54.00 from May 2014, which is still an enormous increase. This meant that NHS expenditure on phenytoin sodium capsules increased from about £2 million a year in 2012 to about £50 million in 2013. The CMA noted that these prices were very much higher than those charges for the same drug in other European countries.

The drug is considered to be important for the treatment of epilepsy for about 48,000 patients in the UK. Epilepsy patients who are already taking phenytoin sodium capsules should not usually be switched to other products, including another manufacturer’s version of the product, due to the risk of loss of seizure control which can have serious health consequences. As a result, the NHS had no alternative to paying the increased prices for the drug.

Dominant market position

The CMA has found that both companies have held a dominant position in their respective markets for the manufacture and supply of phenytoin sodium capsules and each has abused that dominant position by charging excessive and unfair prices.

The fines follow prices increasing by up to 2,600% overnight after the drug was deliberately de-branded in September 2012. For example, the amount the NHS was charged for 100mg packs of the drug rocketed from £2.83 to £67.50, before reducing to £54.00 from May 2014. As a result of the price increases, NHS expenditure on phenytoin sodium capsules increased from about £2 million a year in 2012 to about £50 million in 2013. The prices of the drug in the UK have also been many times higher than Pfizer’s prices for the same drug in any other European country.

Phenytoin sodium capsules are used in the treatment of epilepsy to prevent and control seizures, and are an important drug for an estimated 48,000 patients in the UK. Epilepsy patients who are already taking phenytoin sodium capsules should not usually be switched to other products, including another manufacturer’s version of the product, due to the risk of loss of seizure control which can have serious health consequences. As a result, the NHS had no alternative to paying the increased prices for the drug.

The CMA has found that both companies have held a dominant position in their respective markets for the manufacture and supply of phenytoin sodium capsules and each has abused that dominant position by charging excessive and unfair prices.

Pfizer rejected the findings of the CMA’s three-year investigation and said it would be appealing “all aspects of the decision”. The group has previously said it had been making the drug at a loss, but was unable to stop making it because so many patients relied on it. But the CMA said Pfizer could have recouped the previous losses within just two months.

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.
  • Businesses are generally free to set prices as they see fit but those holding a dominant position should not abuse this situation and set prices that are excessive and unfair. There is no justification for such rises when phenytoin sodium capsules are a very old drug for which there has been no recent innovation or significant investment.
  • 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.”

Conclusion

The CMA is to be congratulated on this initiative and on the fines it has imposed. Although the companies have protested, I suspect this is a case of “They would say that wouldn’t they?” As far as I can see, the CMA has conducted a thorough a detailed, thorough investigation. There appears to be no satisfactory explanation for the much higher prices being charged in the UK compared with those in other European countries. Drugs are responsible for a substantial slice of the expenditure by the NHS. It is imperative that the drug companies and other suppliers to the NHS provide very good value for money. As the NHS has huge purchasing power, we would expect that organisation to ensure that it is not being ripped off. Why should it have to rely on the CMA to do this on its behalf? I am quite sure that the major supermarkets would never allow their suppliers to act in this way.

The CMA has a number of other investigations under way but we still left with the strong suspicions that there may well be other examples of overcharging which have not been tackled by the CMA. One thing is certain, most of the major drug companies have “previous” as shown by the much larger fines which have been levied by the authorities in the USA. This example cannot be brushed aside as a “one off”. In the next blog I will highlight some of the actions that have been taken in the USA, which will help to understand the bigger picture.

Reference

  1. https://www.gov.uk/government/news/cma-fines-pfizer-and-flynn-90-million-for-drug-price-hike-to-nhs