U.K. Accuses Pfizer of Inflating Drug's Price

LONDON—U.K. competition authorities have accused Pfizer Inc. of inflating the price of an antiepileptic drug, leading to a 20-fold increase in the cost of the medicine to the country's National Health Service.

Britain's Competition and Markets Authority Thursday alleged that the U.S. drug maker, along with closely held drug supplier Flynn Pharma Ltd., abused a dominant market position by charging "excessive and unfair prices" for the pill. It is used to treat more than 50,000 patients in the U.K.

A spokeswoman for Pfizer said the company was cooperating fully with the CMA's investigation. A spokesman for Flynn Pharma wasn't immediately available to comment.

The authority said the U.K.'s bill for the drug, known as phenytoin sodium, jumped to more than £ 50 million ($78 million) in 2013 from £ 2.3 million in 2012, after Pfizer entered a distribution agreement with Stevenage, England-based, Flynn Pharma. The bill fell slightly the next year, to just over £ 40 million. Before the agreement, Pfizer had sold phenytoin sodium capsules directly to U.K. wholesalers and pharmacies under the brand name Epanutin.

The CMA alleged that following this arrangement, Pfizer, which continued to manufacture the drug, sold the capsules to Flynn Pharma at eight to 17 times the price it had previously charged to wholesalers and pharmacies. The authority further alleged that Flynn then sold the drug to customers at prices 25 to 27 times those that Pfizer previously charged.

Ann Pope, the CMA's senior director of antitrust enforcement, said the prices were "very high compared to those previously charged" and had led to a big increase in the drug bill for the U.K. National Health Service.

"While businesses are generally free to set prices as they see fit, those that hold a dominant position have a special responsibility to ensure that their conduct does not impair genuine competition and that their prices are not excessive and unfair," she said.

Ms. Pope added that the findings were provisional and the CMA would now "carefully consider any representations from Pfizer and Flynn Pharma before deciding whether the law has been infringed."

She added that, before the deal with Flynn Pharma, Pfizer had been selling Epanutin at a loss in the U.K. and had been forced to consider whether it could continue the product at all.

"If Pfizer had discontinued the product, the cost to the NHS would have been higher due to patients switching to the nearest alternative, phenytoin sodium tablets, which would have a higher cost…than Flynn capsules," she said. "Ensuring a sustainable supply of our products to U.K. patients is of paramount importance to Pfizer and was at the heart of our decision to divest the product."

If the CMA finds that Pfizer and Flynn breached competition law, they each could be fined as much as 10% of annual global revenue. The ultimate size of any financial penalty depends on the seriousness of the infringement and the proportion of revenue made in the U.K., among other things. In 2014, Pfizer's global sales were $49.6 billion.

Write to Denise Roland at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires