Pfizer could face large fine over pricing of generic phenytoinBMJ 2016; 355 doi: https://doi.org/10.1136/bmj.i6401 (Published 28 November 2016) Cite this as: BMJ 2016;355:i6401
The pharmaceutical company Pfizer could face a fine of millions of pounds from the Competition and Markets Authority (CMA), which has been investigating the prices charged for a generic drug used to treat epilepsy.
Court papers seen by the Times shed new light on a deal in which Pfizer agreed to supply the drug to a generic company, Flynn Pharma, at a much greater price than it had been charging the NHS.1 Flynn could then increase the price still further by selling it under the generic name phenytoin sodium. Both companies would benefit, at the cost of the NHS.2
The papers seen by the Times relate to a case brought by another generic company, Tor Generics, which had approached Pfizer with a similar scheme in 2009. Tor sued for breach of contract in 2013, after the deal with Flynn was struck. Pfizer admitted having discussions with Tor about the drug but denied breaching any agreement or misusing confidential information, but it is alleged to have paid Tor between £1.5 million (€1.8m; $1.9m) and £2m to settle the case.
The Office of Fair Trading launched the investigation into phenytoin pricing in May 2013 and the CMA (its successor body) took it on and will issue a decision soon.
There are no direct controls over the prices charged by generic companies. Unlike branded drugs, which are sold under a deal with the government that sets an upper limit for NHS spending with any overspend being reimbursed by the industry, the prices of generic drugs are supposed to be controlled by a competitive market.
Pfizer continued to make the drug after it had been withdrawn, selling it to Flynn. The price imposed by Flynn raised the cost of the drug to the NHS from £2.3m a year to £50m.
In August 2015 the CMA said that its provisional view was that the companies had abused a dominant position by charging “excessive and unfair” prices for phenytoin sodium. Pfizer sold the drug to Flynn at between eight and 17 times its original price. Flynn then sold it on at between 25 and 27 times the original price.
“While businesses are generally free to set prices as they see fit, those that hold a dominant position have a responsibility to ensure that their conduct does not impair genuine competition and that their prices are not excessive and unfair,” said Ann Pope, the CMA’s senior director of antitrust enforcement. “The prices that the CMA is concerned about in this case are very high compared with those prices previously charged and have led to a big increase in the NHS bill for what is a very important drug for tens of thousands of patients.”
According to the court papers seen by the Times, Tor’s managing director, Alison Stevenson, had a meeting with a senior Pfizer official, Jason Perfitt, in July 2009 during which she claimed to have outlined the plan. She explained that Pfizer could avoid a profit cap on the product by dropping the brand name, Epanutin, and selling it as a “nominally new generic.”
Pfizer argued that Epanutin was a loss making drug and providing it to a generic drugs company made it profitable and ensured a sustainable supply. David Fakes, a director of Flynn, said that the product was priced competitively against its rivals.
Stevenson told the Times that because the product had been losing money for years there was a possibility that it could have been withdrawn in the UK. “Debranding would give some price freedom and allow an acceptable and fair profit to be made, ensuring the continued supply of the product,” she said.
If the two companies are found guilty, they could face fines of up to 10% of worldwide sales. The CMA’s website says that a decision will be made this month.