PFE Pfizer Inc

LONDON—Pfizer Inc. has become the latest drugmaker taken to task for high prices after U.K. authorities slapped the company with a record £ 84.2 million ($107 million) fine over the price of an anti-epilepsy drug.

The Competition and Markets Authority said Wednesday that Pfizer and drug-distribution company Flynn Pharma broke competition law by charging unfair prices in the U.K. for phenytoin sodium capsules, an anti-epilepsy drug used by around 48,000 patients in the country.

The CMA said the Pfizer fine was the highest it had ever imposed. The regulator also fined Flynn Pharma £ 5.2 million and has ordered both companies to reduce their prices.

Spokespeople for Pfizer and Flynn Pharma said the companies rejected the CMA's findings and would appeal all aspects of the decision.

Drug prices have become a hot political issue in the U.S., where companies are free to set the price and increase it at any time. The issue is less incendiary in the U.K., where the price of drugs typically is well-controlled.

The CMA said Pfizer and Flynn Pharma took advantage of a peculiarity of the U.K. system. The price of branded drugs is determined by negotiations between the government and pharmaceutical companies. Unbranded, or generic, drugs may be freely priced, but competition between suppliers typically drives the cost down.

The regulator said Pfizer and Flynn Pharma "deliberately debranded" the drug in 2012 to raise the price and were able to do so because there were no competing suppliers.

The CMA said the price of a 100-milligram pack of phenytoin sodium shot up—to £ 67.50 from £ 2.83—after Pfizer sold the rights to sell the drug to Flynn Pharma in September 2012. It said the price decreased to £ 54 in May 2014. Before the agreement, Pfizer had sold phenytoin sodium capsules directly to U.K. wholesalers and pharmacies under the brand name Epanutin.

The price increase was partly because Pfizer, which continued to manufacture phenytoin sodium, sold the drug to Flynn Pharma at up to 17 times the price than it charged wholesalers and pharmacies previously, the regulator said. Flynn Pharma hiked the price further still.

The case has echoes of the scandal that gained U.S. pharmaceutical executive Martin Shkreli widespread notoriety over the past year and a half. His company, Turing Pharmaceuticals, bought the rights to Daraprim, a half-century-old drug that treats a parasitic infection, and raised the price more than 50-fold.

A spokeswoman for Pfizer said the company "approached this divestment with integrity and believes it fully complies with established competition law."

She said phenytoin capsules were unprofitable for Pfizer before the deal with Flynn Pharma and the transaction secured ongoing supply of the medicine. The spokeswoman added that the price charged by Flynn Pharma was 25% to 40% lower than that for an equivalent, branded epilepsy medicine whose price was regulated.

Philip Marsden, the chairman of the case decision group for the CMA investigation, said the companies "deliberately exploited the opportunity offered by debranding to hike up the price of a drug which is relied upon by many thousands of patients."

Although Pfizer said the drug was unprofitable before debranding, the losses would have been recovered within two months of the price rises, Mr. Marsden said.

"There is no justification for such rises when phenytoin sodium capsules are a very old drug for which there has been no recent innovation or significant investment," he said.

A spokesman for Flynn Pharma said the CMA's judgment used "an entirely novel theory as to the level of margin that can be made by a generic company [that] has never been discussed, let alone agreed, with the pharmaceutical industry."

Warwick Smith, director-general of the British Generic Manufacturers Association, an industry body, said Pfizer and Flynn Pharma's behavior "broke the virtuous cycle" between innovator and generic companies in which drugs that lose patent protection sharply fall in price, allowing the health system to afford the higher prices for new medicines.

"We would never support activity designed purely to artificially increase prices," he said.

Write to Denise Roland at Denise.Roland@wsj.com

(END) Dow Jones Newswires

December 07, 2016 08:35 ET (13:35 GMT)

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