Tribunal fines drug firms 拢69m for excessive pricing after CMA investigation
Firms which raised prices for key epilepsy medicine 鈥� causing NHS costs to soar to 拢50 million 鈥� found by the CAT to have breached competition law.
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In a handed down today, the CAT found that Pfizer and Flynn abused their dominant positions by charging excessive prices for a life-saving epilepsy drug, phenytoin sodium capsules, between 2012 and 2016.聽聽
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The CAT set aside the CMA鈥檚 decision, but made its own infringement findings against the parties on 7 out of the 8 infringements originally found by the CMA.聽聽
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The CAT found that the parties intentionally abused their dominant positions and that 鈥渂oth Pfizer and Flynn were gouging the market in a manner that can only be characterised as unjustifiable or opportunistic or 鈥� in a word 鈥� unfair鈥�. The CAT went on to impose combined fines on Pfizer and Flynn of 拢69 million.
In reaching its findings, the Competition Appeal Tribunal (CAT) re-made the decision of the Competition and Markets Authority (CMA), and imposed fines totalling 拢69 million 鈥� almost identical to the fine levels imposed by the CMA.聽
The CMA agrees with the CAT鈥檚 conclusion that the firms鈥� pricing behaviour was abusive under competition law, and that significant fines are appropriate in this case. However, the CMA disagrees with the CAT鈥檚 findings and reasoning in relation to the CMA鈥檚 decision, and is carefully considering whether to appeal the judgment.聽聽
Background on the case聽
After reassessing part of its case following a remittal from the CAT, the CMA imposed fines of approximately 拢70 million, in 2022, on Pfizer and Flynn 鈥� 拢63,300,000 and 拢6,704,422 respectively 鈥� for breaching competition law. It found that both firms had used their positions as the dominant suppliers in the UK market to charge excessive and unfair prices for phenytoin sodium capsules over a 4-year period.聽聽
The CMA鈥檚 decision found that between 2012 to 2016, Pfizer鈥檚 prices rose by 780-1,600%. The company supplied the drug to Flynn, which then sold the capsules to wholesalers and pharmacies at prices significantly above its own costs. The combination of the prices imposed by Pfizer and Flynn resulted in prices between 2,300% and 2,600% higher than those previously charged for the drug.聽 This illegal behaviour led to NHS annual costs for phenytoin capsules increasing from 拢2 million in 2012 to approximately 拢50 million the following year.聽
In today鈥檚 judgment, the CAT agreed with most of the drug firms鈥� grounds of appeal, finding against the CMA in a number of matters, including in relation to the approach to calculating a 鈥榬easonable rate of return鈥�, its assessment of unfairness, and the overall procedure followed.聽聽
The CAT concluded that the firms had infringed the Chapter II prohibition. On the basis of those infringement findings, the CAT imposed the same level of fines as the CMA, but for a 1% reduction of Pfizer鈥檚 fine.聽
Notes to editors聽
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For media queries, please contact the press office on press@cma.gov.uk or on 020 3738 6460.聽
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Following the CMA鈥檚 original investigation, the CMA issued a decision (2016). Both Pfizer and Flynn challenged this decision at the CAT, which upheld the CMA鈥檚 findings on market definition and dominance but set aside its conclusion that the companies鈥� prices were an unlawful abuse of dominance. The CAT referred this matter back to the CMA for further consideration 鈥� known as a remittal. The CMA and Flynn then appealed to the Court of Appeal. In March 2020, the Court of Appeal dismissed Flynn鈥檚 appeal in its entirety and upheld aspects of the CMA鈥檚 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 investigation in June 2020 issuing a 鈥榬emittal decision鈥� in July 2022. Both Pfizer and Flynn appealed the remittal decision, and the CAT heard the case in November and December 2023. This judgment is the outcome of that appeal.