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A drug firm is embroiled in claims of NHS overcharging after it was accused of raising the price of a life-saving drug by 12,000%.

A watchdog has accused Actavis UK of breaking competition law by changing the price of hydrocortisone tablets from 70p to £88.

Before 2008, when restrictions on the drug's prices were lifted, the NHS spent just £522,000 a year on hydrocortisone tablets.

By last year that figure had soared to £70million, the Competition and Markets Authority (CMA) said.

Today the watchdog provisionally found the firm had broken the law by "charging excessive and unfair prices".

Actavis' owner said it plans to defend the allegations, is "proud of our track record in bringing cost savings to the NHS" and claimed the watchdog intervention "raises serious policy concerns".

In a statement the CMA said Actavis, formerly known as Auden Mckenzie, increased the price of 10mg hydrocortisone tablets from 70p in April 2008 to £88 per pack by March 2016.

(Image: Getty Images)

It also alleged the company increased the price of 20mg hydrocortisone tablets by nearly 9,500% compared to the previous price.

That resulted in charges to the NHS of £102.74 per pack by March 2016, when it had previously paid £1.07.

Hydrocortisone tablets are used as the primary replacement therapy for people whose adrenal glands do not produce sufficient amounts of natural steroid hormones - for example, those with Addison's disease.

The condition is life-threatening and 943,000 packs of hydrocortisone tablets were dispensed in the UK in 2015, according to the CMA.

Before 2008 the drug was branded, meaning it was subject to strict restrictions on its price.

But those restrictions were lifted after it became a "generic" drug.

Usually when this happens there is competition that pushes prices down, but the prices rose in this case, the CMA said.

(Image: PA/Getty)

Andrew Groves, the CMA's senior responsible officer, said: "This is a life-saving drug relied on by thousands of patients, which the NHS has no choice but to continue purchasing.

"We allege that the company has taken advantage of this situation and the removal of the drug from price regulation, leaving the NHS - and ultimately the taxpayer - footing the bill for the substantial price rises.

"The CMA's findings are provisional and no conclusion should be drawn at this stage that there has in fact been any breach of competition law. The CMA will carefully consider any representations of the parties under investigation before determining whether the law has been infringed."

The move is part of a wider clampdown on pharmaceutical firms and their dealings with the NHS.

Earlier this month, Viagra-maker Pfizer was fined a record £84.2 million by the competition watchdog for its role in overcharging the NHS after the price of an epilepsy drug was hiked by up to 2,600% overnight.

A statement by firm Teva, which bought Actavis recently, said: “Teva is reviewing the Statement of Objections and intends to defend the allegations.

"Generic medicines continue to be an affordable alternative to branded therapies.

"Teva is proud of our track record in bringing cost savings to the NHS as the UK’s largest generic medicines manufacturer. Competition from generic medicines saves the NHS in England and Wales £13.5bn per year overall, and Teva medicines account for approximately £3.2bn of this saving.

"Although the pricing of the acquired Actavis product (Hydrocortisone) under investigation was never under Teva's effective control, Teva believes that intervention by the CMA in prices for generic medicines raises serious policy concerns regarding the roles of both the CMA and the Department of Health."