Case Study: In UK, Pfizer’s 2600% Price Hike in Generic Molecule and Consequences

In 2012, US pharma giant Pfizer and a partnering distributor have been slapped with a record fine for hiking UK drug prices by 2,600% overnight.

In September 2012, the amount the National Health Service (NHS) was charged for 100mg packs of anti-epilepsy drug phenytoin sodium went from £2.83 to £67.50 ($3.56 to $84.98), according to the UK’s Competition and Markets Authority (CMA). As a result of the price increase, NHS expenditure on the drug increased from about £2 million ($2.52M) a year in 2012 to around £50 million ($62.95M) in 2013. 

The CMA has ordered the two companies involved, the US pharma giant Pfizer and UK-based distributor Flynn Pharma, to pay record fines of £84.2 million ($106.01M) and £5.2 million ($6.55M) respectively, and to reduce their prices for phenytoin sodium. Companies may take legal action to overturn the decision.

Branded to De-branded – Strategic routes explored !

Before September 2012, Pfizer sold the drug in capsule form to UK wholesalers and pharmacies under the brand name Epanutin, and the prices of the drug were regulated. That month, Pfizer sold the UK distribution rights for Epanutin to Flynn Pharma, which “de-branded” the drug.

Prior to de-branding, Pfizer’s prices were governed by the Pharmaceutical Price Regulation Scheme (PPRS) which prevented any large prices increases.

The PPRS applies only to branded products.

After Flynn purchased the UK distribution rights from Pfizer, it de-branded the products. As de-branded (or generic) products in UK, the PPRS price controls did not apply, which allowed Flynn to charge whatever prices it wanted.

De-branding did not have the consequence of increasing prices; rather it removed the PPRS restriction on Flynn increasing the prices. Normally, we would expect competition to lead to the price of a generic product to fall.