Pfizer and Flynn: How are ‘excessive’ prices for generic drugs possible and should competition authorities do more about exploitative pricing?

(by Farasat Bokhari & Bruce Lyons)

Last week the UK Competition and Markets Authority (CMA) imposed a fine of approximately £90 million on Pfizer and a generic manufacturer Flynn Pharma, on the grounds that each abused a dominant position by charging excessive and unfair prices for phenytoin sodium capsules, an anti-epilepsy drug (brand name Epanutin). The price of a pack of 84 capsules of 100MG increased from £2.83 to £67.50 in October 2012.   This came about as part of a deal where Pfizer sold the distribution rights in the UK to Flynn Pharma, who in turn ‘de-branded’ the drug, and sold the generic at an inflated price.   The drug in question is not protected by any patents, so other generics are available and further generic entry is possible, yet the branded original drug was replaced by a higher priced generic.  The CMA’s case is a rare example of an abuse of dominance finding (under Art. 102 and/or Ch.2 of CA98) in relation to exploitative pricing. While we await the full published decision, it is worth looking at industry price and quantity data to contextualise the CMA’s case. We also try to understand how this price hike was possible and ask whether the CMA should pursue more exploitative pricing cases.

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