The move, announced on Tuesday, comes amid a heated squabble between Pfizer and the UK Competition and Markets Authority over phenytoin sodium capsules. The drug maker used to market the medicine under the brand name Epanutin, but sold the UK distribution rights to another company, Flynn Pharma, in 2012.
Pfizer continued to manufacture the drug, but prices began to rise significantly.
Pfizer suddenly began selling its medicine to Flynn at prices that were between eight and 17 times higher than what the company historically charged, according to the regulator. And Flynn sold the drug to customers at 25 and 27 times what Pfizer had been charging.
So in May 2013, the regulator launched an investigation. The reasoning was simple enough — there are about 50,000 epileptics in the United Kingdom and, in a short amount of time, the National Health Service faced a ballooning expense. Before Flynn got involved, the NHS spent about $3 million on the capsules annually. But that expenditure rose dramatically to about $70 million in 2013 and more than $56 million in 2014.
Earlier this year, however, Pfizer and the regulator began tussling over a procedural matter. In January, the regulator demanded the company file responses to certain follow-up questions. But Pfizer failed to meet a February deadline and — after amid some back-and-forth communications — the regulator subsequently decided that this “failure was intentional,” according to a penalty notice.
The probe comes amid increased concern among governments over the cost of prescription drugs and commensurate wrangling over prices. The UK, for its part, relies heavily on one particular agency, the National Institute for Health and Care Excellence, to vet the cost effectiveness of medicines and recommend to what extent the government should provide coverage.
As for antitrust activities, these are punishable at any time, of course, but moves that affect the affordability of medicines can strike a particularly sensitive government nerve. Toward that end, regulators in the United States and the European Union have, in recent years, been probing deals between brand-name and generic drug makers that can delay the launch of copycat medicines.
Although the penalty that Pfizer must pay is small, the consequences can be notable. The Competition and Markets Authority can fine companies up to 10 percent of their annual worldwide sales if they have breached antitrust laws. This can add up — last year, Pfizer reported nearly $48.9 billion in revenue.
To what extent this probe will yield an eye-popping penalty remains unclear. But the regulator is clearly sending a signal that its demands must be taken seriously.
This is, in fact, the first time the CMA has imposed a fine since gaining the authority to issue administrative penalties nearly two years ago, according to Guy Lougher of the Pinsent Masons law firm. And, he warned, “it will not be the last,” he was quoted as saying on the firm’s blog.
A Pfizer spokeswoman wrote us to say that: “We’ll continue to work constructively with the CMA and provide any information it requires.”