Pfizer appeals record fine from U.K. regulator tied to 2,600% drug price hike

Pfizer
Pfizer is appealing the record $108 million fine levied by a U.K. regulator over a huge price increase it said Pfizer orchestrated for an older epilepsy drug.

Pfizer wasted little time in challenging the record £85 million fine imposed by a U.K. cost watchdog for a supply scheme that resulted in a 2,600% price increase on an epilepsy drug sold to the National Health System. The drugmaker in an appeal claims the competition regulator ignored market realities when it fined Pfizer. 

The government’s Competition and Markets Authority disclosed the appeal of the $108 million fine in a summary on its website. Flynn Pharma, the wholesale distributor that also was fined £5.2 million in the scheme, has filed a separate appeal.

Both companies challenged CMA findings that they were “dominant” players in the market for the drug. They claimed the CMA ignored market realities when it said that the price Flynn paid Pfizer for the drug and the price it then charged the NHS were excessive. It said the CMA didn’t even take into account that the price that Flynn charged was less than what the NHS paid for a comparable version of the drug from another supplier.

Pfizer said its "conduct was entirely unobjectionable" when it took into account the revenue-earning potential (or economic value) of the drug to Flynn in setting its supply price. 

Both companies asked for the decision to be annulled and the fines to be set aside, or at least reduced. Pfizer also says it wants the agency to pay its costs for the appeal.

In an emailed statement today, Pfizer said that while it disagrees with the regulator’s findings, “Pfizer can confirm that it has reduced the price at which it supplies phenytoin sodium capsules to Flynn Pharma Ltd as directed. The new price is the lowest price suggested by the CMA decision.”

In issuing the fines in December, the regulator accused Pfizer of dodging U.K. price controls in 2012 by licensing out the unprofitable drug, then marketed under the brand name Epanutin, to Flynn, which then “debranded” the drug and sold it as phenytoin sodium to the NHS at a much higher price. The CMA said Flynn jacked up the price to £67.50 a pack from the £2.83 per pack Pfizer had charged the NHS.

But the regulator claims Pfizer profited handsomely, because under a supply arrangement with Flynn the U.S. drugmaker continued to manufacture the med. The prices that Flynn paid Pfizer were “significantly higher” than those Pfizer had been able to charge the NHS, it said: as much as 1,600% higher.

The companies “deliberately exploited” the debranding mechanism to raise the drug’s price, Philip Marsden, who headed the investigation for the CMA, said at the time of the fine.

Pfizer said at the time that its agreement with Flynn was a chance to “secure ongoing supply” of an important medicine that it had been having to sell at a loss. It claimed the price Flynn charged the NHS was actually 25% to 40% less than that of an equivalent medicine from another supplier.

It also said that it would appeal, in part, to seek clarity about “real policy and legal issues” about the respective roles of the Department of Health and the CMA in regulating U.K. drug prices.

The fight also highlights the differences between the U.K. and the U.S. in the ways they can handle the question of big price hikes on drugs, generic or branded. The U.K. has a regulated market so not only negotiates prices, but can also take steps to penalize companies that it believes have raised prices unconscionably.

The U.S., which has little government control over pricing and relies on markets establish them, pays the highest drug prices in the world in most cases. More recently, as the public has questioned huge price jumps, even on older generic drugs, politicians have used the bully pulpit to call out drugmakers on big price jumps and pressure them into cost reductions.

This week, Sen. Bernie Sanders, and Rep. Elijah Cummings demanded answers about the $89,000 price that Marathon Pharma put on an older steroid drug after the FDA approved it and gave it an orphan designation for Duchenne muscular dystrophy. The drug, which has never been marketed in the U.S., is sold in the U.K. for about $1,000 a year, Sanders and Cummings pointed out.

After the two politicians publicly blasted the company, Marathon this week said it was halting the launch of the drug so that it could “meet with Duchenne community leaders and explain our commercialization plans, review their concerns, discuss all options, and move forward with commercialization based on the resulting plan of action.”