The CMA welcomes today’s Court of Appeal judgment, calling it an important step forward in clarifying the legal test for excessive and unfair pricing.
The Competition and Markets Authority (CMA) will now carefully review the elements that the court has decided to refer back to it, as it moves forward with its case against pharmaceutical companies Pfizer and Flynn Pharma.
In December 2016, following a thorough investigation, the CMA found that Pfizer and Flynn had breached competition law by charging unfairly high prices for phenytoin sodium capsules, an important anti-epilepsy drug. The CMA had intervened to protect patients, the NHS, and the taxpayers who fund it, because Pfizer and Flynn had imposed, overnight, a very large increase in the price of the phenytoin capsules in September 2012 despite there being no material change in the underlying costs. Today’s judgment from the Court of Appeal follows an earlier decision from the Competition Appeal Tribunal (CAT) in 2018, which the CMA appealed.
Although the Court of Appeal did not uphold all aspects of the CMA’s appeal, it dismissed Flynn’s case in its entirety. Importantly the Court of Appeal has found that the CAT had made a number of fundamental legal errors in its 2018 judgment. The CAT was found to have misapplied seminal EU case law. Specifically, the CAT was wrong to require the CMA to go beyond a cost plus calculation in order to determine whether the prices by Pfizer and Flynn were excessive.
In his judgment, the Rt Hon Sir Geoffrey Vos said of the CAT’s decision that:
“It was quite easy to lose sight of a stark reality, which was that, literally overnight, Pfizer and Flynn increased their prices for phenytoin sodium capsules by factors of between approximately 7 and 27, when they were in a dominant position in each of their markets.”
In its 2016 decision, the CMA found Pfizer and Flynn’s conduct to be a particularly serious breach of the law and imposed fines totalling £90m. NHS expenditure on phenytoin sodium capsules rose from about £2 million a year in 2012 to about £50 million in 2013 with, for example, the price of 100mg packs of the drug rising from £2.83 to £67.50. The prices charged in the UK were also many times higher than Pfizer’s prices for the same drug in every other European country it sold capsules in, and several Clinical Commissioning Groups complained about the impact on the services they would be able to offer patients. The significance of this case is further demonstrated by the European Commission’s rare decision to intervene in a national proceeding.
The CMA’s Chief Executive Andrea Coscelli said:
“Today’s judgment is a good result. The CMA was right to appeal the CAT’s judgment. We will now get on with the elements of the case against Pfizer and Flynn Pharma that the court has decided to refer back to us.
The CMA also continues to have serious concerns about the very big price increases imposed by certain drugs companies for several other generic drugs, which have cost the NHS hundreds of millions of pounds. The CMA remains committed to its work to robustly tackle any illegal behaviour by drug companies ripping off the NHS.
More information can be found on the case page.
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