(exerpt from the article by Billy Kenber)
The penalties set a benchmark for a broader CMA inquiry, launched in October, which followed a Times investigation revealing how pharmaceutical firms were exploiting a loophole in NHS pricing rules.
Michael Grenfell, executive director for enforcement at the CMA, said the fines were intended to send a “strong deterrent message” to companies engaged in excessive price rises. “The fine imposed on Pfizer is the highest ever imposed under UK competition law and it’s a sign of how seriously we take it,” he said yesterday. Flynn Pharma’s penalty was the largest available because the regulator can impose a maximum fine of 10 per cent of a company’s global revenue during the preceding business year.
Analysts said that Concordia International, formerly known as AMCo and among companies identified by The Times for engaging in similar pricing strategies, was at growing risk of bankruptcy or significant restructuring in the wake of the CMA decision. Concordia has debts of about £2.4 billion and faces a potential penalty of £66 million, based on revenue over the past 12 months, if it is found to have charged excessive prices in a separate CMA inquiry.
In a report published yesterday, analysts at RBC Capital Markets downgraded the company’s share price target from $2.50 to $1, warning that the CMA would now focus on Concordia’s pricing
Dimitry Khmelnitsky, of Veritas Investment Research, said the CMA’s decision was “very negative news for a company like Concordia”, adding that there was a “very high likelihood of restructuring”.
Concordia’s share price fell by 6 per cent yesterday to just over $2 a share, down from about $32 six months ago. At its height 15 months ago it traded at more than $80. It declined to comment.
Pfizer and Flynn were fined after the cost of a packet of 100mg phenytoin sodium capsules rose overnight from £2.83 to £67.50. Flynn and Pfizer, like other companies exposed by this newspaper, were free to impose huge rises by circumventing a profit cap on branded off-patent drugs by selling them under their generic names. They imposed huge increases after the existing brand name, Epanutin, was dropped in late 2012.
Pfizer had made the drug for many years but sold the distribution rights to Flynn and charged the company up to 1,600 per cent more than the previous price to continue manufacturing. Flynn Pharma then raised the price paid by the NHS to up to 2,600 per cent more than before the deal.
The companies have been ordered to cut the price of the epilepsy drug within four months. Mr Grenfell said that it was sold in the same capsule form in Europe for no more than £8 a packet.
Following the CMA decision, it is now open to the Department of Health to seek to recover the excessive costs it has paid through the courts. Pfizer and Flynn Pharma said they planned to appeal against the CMA’s decision.
The Department of Health welcomed the fines and said it was “absolutely determined to ensure that no pharmaceutical company can exploit the NHS”. A bill introduced in September, designed to reduce the cost of medicines which have had large price rises, passed through the Commons on Tuesday and is set to become law next year.