Compare and contrast the current excessive pricing debates occurring in the US with those in the UK. In both markets, pharmaceutical firms are being berated for double, triple and even quadruple digit rises in the prices of drugs, often after government price controls come to an end. In the US there is the news that a pinworm treatment has risen to the equivalent of 200 times the current UK price, after a cheap generic product was taken off the market and replaced with a very expensive patented product. The news from the UK is instead of regulatory prosecutions in the run up to Christmas.
On 7 December 2016, the UK Competition and Markets Authority (“CMA”) announced that it had fined Pfizer, the pharmaceutical company, and Flynn Pharma, the distributor, nearly a combined £90m for excessive pricing. The case concerned the anti-epilepsy drug phenytoin sodium. As well as the imposition of the fine, the CMA ordered the companies to lower their prices following price increases of up to 2600% after the de-branding of the drug and the lack of price controls that entails. This resulted in an increase in the cost to the UK National Health Service (“NHS”) from about £2 million a year in 2012 to about £50 million in 2013.
Interestingly, £84.2m of the £90m fine was levelled at Pfizer. This is because the financial penalty which the CMA has imposed on Flynn represents 10% of Flynn’s worldwide turnover, which is the statutory maximum that the CMA can impose for an infringement of competition law. Pfizer was also fined for the abuse of a dominant position because of the prices it charged to Flynn who as the distributor, then subsequently charged the NHS.
Less than two weeks after the conclusion of the Pfizer case, on 16 December 2016, the CMA announced that a major pharmaceutical company had excessively priced an adrenal insufficiency drug, again in violation of Chapter II of the Competition Act 1998, the prohibition of an abuse of dominance. Whilst no fine has been levelled and that case and its allegations are still ongoing, attacking excessive pricing and the pharmaceutical industry looks to be a clear priority for the CMA.
This priority by the CMA could well be because of the sheer excesses involved in these cases but perhaps also the ease in prosecution for the CMA when the price increases are often over 1000% once price controls falls away. No doubt the pharmaceutical companies argue that these price increases were always planned and are legitimate as the only way to recoup development costs which were stifled by the price controls. However, no such argument has publicly won in recent times and such an argument would certainly make for bad PR for the pharma firms involved.
In excessive pricing cases it is always interesting to compare what the same drugs cost in other markets outside the US and the UK where no price control is present. These comparisons often counter any argument that increased prices are needed to meet development costs.
It would be interesting if one of these firms did appeal the CMA’s levelling of a fine so that an examination of the costs of research and development could be begin and whether huge price increases were in fact excessive or not. Crucially, the CMA has not ordered the companies to adhere to the previous NHS price but merely to a profitable price, albeit one not as high as before. Following this case it will be interesting to see what that ‘profitable’ price comes to. A large fall in the price of the drug could be construed as an admission of guilt by the companies concerned.