Pfizer and Flynn Pharma fined GBP70m for excessive and unfair pricing after UK antitrust reassessment
24 August 2022
The authority originally sanctioned Pfizer and Flynn for the conduct in 2016. The firms appealed, and in 2018 the Competition Appeal Tribunal (CAT) set aside part of the CMA’s decision, ruling that while the authority’s conclusions on market definition and dominance were sound, it made errors in its findings that the prices were an unlawful abuse of that dominance. A further appeal saw the Court of Appeal dismiss all of Flynn’s arguments and the majority of those put forward by the CMA. However, the Court did uphold some of the CMA’s arguments on the application of the legal test for unfair pricing.
Following the Court of Appeal ruling, the CMA decided to look at the case again. It gathered additional evidence and carried out further analysis, ultimately concluding that the companies’ behaviour did amount to an abuse of dominance.
The CMA found that Pfizer and Flynn charged unfairly high prices for phenytoin sodium capsules between 2012 and 2016, after they de-branded the drug. According to the CMA, the prices charged by Pfizer rose by between 780% to 1,600%. It supplied the drug to Flynn, which then sold the capsules to wholesalers and pharmacies at prices that were 2,300%-2,600% higher than those previously charged by Pfizer. The CMA notes that these costs were ultimately paid for by the UK national health service.
Pfizer has been fined GBP63.3m. Flynn’s fine is GBP6.7m – this represents 10% of its global turnover, the statutory maximum that the CMA can impose for antitrust infringements.
The decision confirms the CMA’s appetite for taking enforcement action against suspected excessive and unfair prices in the pharma sector, with former CMA Chief Executive Andrea Coscelli noting that “[s]uch behaviour will not be tolerated”. Last year it imposed record fines (GBP266m) on several drug makers for excessive pricing and pay for delay agreements.
The CMA is not alone in treating excessive pricing as an enforcement priority. In recent months the Italian Competition Authority has sanctioned Leadiant EUR3.5m for charging excessive prices for the sale of an orphan drug. Leadiant has also been fined by the Dutch antitrust authority and is being investigated in Spain. At EU-level, the European Commission has accepted commitments from Aspen to address concerns over excessive pricing of cancer medicines.
Pharma companies should therefore be on notice that their pricing practices may come under close scrutiny by antitrust authorities. The publication of the CMA’s full decision in the Pfizer/Flynn case will likely provide further insights into the CMA’s reasoning and concerns, helping firms to assess how to stay on the right side of the line.
For Pfizer and Flynn, even after over six years of investigations and court proceedings, it may not yet be the end of the road. Pfizer, at least, has reportedly said it will appeal the CMA’s decision.