In case anyone thought it was just the U.S. where pharma has been accused of hiking prices, the U.K. has been quick to remind everyone it happens across the pond as well, after hitting Pfizer ($PFE) with a £10,000 ($14,100) penalty this week.
What for? Technically, because it was late to submit documents demanded by the country’s Competition and Markets Authority (CMA)--but in reality, this all revolves around one thing: pricing, and this is just the warm up act ahead of the watchdog’s bigger decision this fall--which could see Pfizer with a fine in the billions of pounds.
Let’s go back to 2012, when Pfizer sold its epilepsy drug Epanutin (phenytoin sodium) in the U.K., with the state-run NHS spending around £2.3 million ($3.2 million) each year on the treatment--a pretty low cost, when you consider family doctors in the country once spent more than £300 million annually on Pfizer’s Lipitor alone.
But then in September of that year the drug lost its patent, and Pfizer sold it to Stevenage, U.K.-based Flynn Pharma (with the U.S. giant still manufacturing the pills), while several other drugmakers also sold their generic versions. Cue a massive spending hike: the NHS paid £50 million for the drug in 2013, and £40 million in 2014. This left the pricing watchdog scratching its head: aren’t generics supposed to be cheaper?
The CMA did a little digging and alleged that Pfizer had in fact sold the drug to Flynn at a rate 8 and 17 times higher than its historic prices. Flynn then decided to up this even more, according to the CMA, and pushed the price up 25 and 27 times higher than those previously charged by its partner.
The watchdog released a statement last August saying in that typically British way that it “objected” to such practices, adding that “each [company] abused a dominant position by charging excessive and unfair prices in the UK.”
Fast forward a few months and the CMA tells Pfizer it must come to an oral hearing to explain itself, which is does, but here says it objects to the CMA’s objections. The CMA said fine; prove you weren’t doing anything wrong by showing us specific documents around the drug.
The CMA gave Pfizer 15 days to disclose the information, but Pfizer kept them waiting, and took nearly 20 days to show its evidence. It even asked for, but was denied, an extension, after failing to give the CMA a good enough answer as to why it needed more time to prove what it said in a meeting a month before. Things must be very busy in Pfizer’s U.K. offices.
The CMA was not amused, and concluded that the company had “failed to comply with a requirement imposed on it” under the country’s Competition Act “without reasonable excuse.” A £10,000 fine for the breach was “appropriate and proportionate,” the CMA said.
“The purpose of [the information request] was to obtain the evidence supporting a pre-prepared representation Pfizer made at the oral hearing,” the CMA said in its penalty notice. “Given this, the CMA considers [...] that the factual information underpinning its own representation was readily available to Pfizer, or should have been, and consequently that Pfizer was in a position to provide it to the CMA in short order, and certainly within 15 calendar days.”
Learning of the fine, Pfizer told the CMA it was unfair and that it has always been a good company: “Pfizer has always taken its information production obligations extremely seriously and considers it has usually gone above and beyond strict compliance in order to ensure the CMA is as fully informed as possible,” it said, adding: “Against that background, to issue Pfizer with a fine is excessive.” The CMA said no dice--“The failure to comply was flagrant [and] intentional,” it said.
The fine is small (Glaxo ($GSK) was hit with a $3 billion “marketing abuse” fine in 2012 for instance, though not by the CMA), and the U.K. watchdog noted as much, saying its profits after tax in the country are more than £40 million, with a turnover of greater than £1.2 billion, adding: “Pfizer has significant financial resources available, and will not be materially affected by a penalty of £10,000 in a disproportionate manner.”
The significance of this is context: While this fine is not directly as a result of price hiking, this will only serve to bring the issue further into a spotlight that is already glaring on the industry. It also shows the tougher stance taken by the CMA, which by the tone of the penalty notice is clearly frustrated with Pfizer and its “flagrant” flouting of a legal demand.
The CMA told FiercePharma that this was a new power they were invoking and that they're looking to be tougher with companies not following the rules. And this isn’t the end of the matter: The CMA is still sifting through all the documents and will come to a decision in August on whether Pfizer did abuse its market position. The maximum fine for this is a far more substantial 10% of its global turnover--which would work out as $4.89 billion based on last year’s revenues.