This week Pfizer and Flynn Pharma were hit with maximum fines for hiking the price of an epilepsy drug by 2,600%. It’s not the first time the government has hit out at such practices in recent times, and it’s unlikely to be the last

Why has Pfizer been fined the colossal sum of £84.2m over a drug it makes to control epilepsy seizures?

The Competition and Markets Authority says Pfizer and a small company called Flynn Pharma both charged “excessive and unfair prices” for the supply of an anti-epilepsy drug in the UK.

It’s a huge fine – in fact, it’s a record. The CMA has hit Pfizer as hard as it is able, partly because the huge American pharmaceutical company has such large coffers that anything less will not make much of a dent, and partly to send a message to other drug companies that they should not even think about trying the same thing. It has also fined Flynn Pharma £5.2m, which is 10% of its worldwide turnover – the maximum possible fine.

So what have they done that is so heinous?

Pfizer has been making phenytoin sodium capsules for so many years – nobody is quite sure how long – that the price originally agreed with the NHS now looks very low, at £2.83 for a 100mg pack. Pfizer claims it was losing money on it. In September 2012, the company sold the distribution rights to Flynn Pharma, which debranded the drug. That meant that the drug, called Epanutin, was no longer sold as a Pfizer drug, and any profits from sales would no longer count towards the total amount Pfizer is allowed to earn in a year from the NHS, which is capped under the complicated arrangements of the pharmaceutical price regulation scheme (PPRS).

Did Flynn Pharma take over the manufacture and sales?

No. Pfizer continued to make the drug, just as before, but sold it to Flynn Pharma, which sold it on to the NHS – at £67.50 per pack. That’s an increase of 2,600%. Later it dropped the price a tad, to £54. But it was still far more expensive than anywhere else that Pfizer sells the drug in Europe.

That must have cost the NHS a pretty penny.

Yep. The NHS bill for Epanutin shot up from £2m in 2012 to £50m in 2013. The NHS has been paying this hugely increased price for four years now.

Why didn’t the NHS stop buying it then? This drug was old and out of patent. Weren’t there cheaper generic alternatives?

Normally they would, yes – generics are cheaper because anybody can make copies of drugs that are out of patent, so there is competition, which drives prices right down. But in this case, Pfizer and Flynn had the NHS over a barrel. Because this drug prevents people having epileptic fits, doctors are advised not to switch patients even to a generic version of the same thing, for fear that their epilepsy might slip out of control. So yes, there are generic versions of phenytoin sodium, but some are liquids, some are in different doses, and none of them is exactly the same as Epanutin. So the 48,000 patients on Epanutin had to stay on Epanutin.

Does Pfizer accept the CMA’s findings?

Absolutely not. Pfizer rebuts any allegation of wrongdoing and says it acted entirely within the rules. It says it was making a loss and “the Flynn transaction” was a chance to secure the supply of an important medicine. It also said it pitched the price to the NHS at 25% to 40% less than that of an equivalent version of the drug that the NHS had been buying for a long time. In a very robust statement, Pfizer said it would appeal every aspect of the decision.

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So what happens next?

The government has realised that it does not have quite the kind of control that it thought it had over drug prices. There is new legislation under way to ensure that the department of health can get tough with companies hiking their prices, so even if Pfizer wins on appeal, it hopes it will be able to block this particular loophole. In the meantime, there are several other cases being investigated by the CMA. It won’t say which companies or which drugs, but it is thought they may involve similar situations.

Are drug companies often found to be up to anti-competitive practices?

There is a bit of history. Big Pharma has been caught looking for ways to hang on to profits from blockbuster drugs when they approach the end of their patent life. Earlier this year, GlaxoSmithKline was hammered by the CMA, effectively for paying off generic companies that wanted to make cheap copies of its best-selling antidepressant, paroxetine (Seroxat). In 2001, profits from Seroxat were earning GSK £90m, so lobbing a few million to some generic companies to get them to keep out of the way seemed like good business. But that meant the NHS continued to have to pay a high price for the drug, and the CMA was not impressed, fining GSK a total of £37.6m.