Britain's competition watchdog alleged on Thursday that U.S. drugmaker Pfizer and Flynn Pharma had breached competition law by ramping up the cost of an epilepsy drug used by more than 50,000 British patients.
The Competition and Markets Authority (CMA) said its provisional view was that Pfizer and Flynn Pharma each abused a dominant position by charging "excessive and unfair" prices for phenytoin sodium capsules.
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Pfizer said it was cooperating fully with the CMA and noted a final decision on infringement had not yet been made.
The U.S. group, which was in politicians' crosshairs last year after trying to buy British rival AstraZeneca, manufactures the drug and Flynn distributes it.
The U.S. group used to market the medicine itself, under the brand name Epanutin, but sold the rights to Flynn in September 2012, since when the price has surged.
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The CMA said Pfizer sold the drug at between 8 and 17 times its historic price to Flynn, which then sold it on at between 25 to 27 times more than the prices previously charged by Pfizer.
As a result, the state-run National Health Service (NHS), which used to spend around 2.3 million pounds ($3.6 million) on phenytoin sodium capsules annually, saw its bill jump to more than 50 million in 2013 and more than 40 million in 2014.
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," said Ann Pope, the CMA's senior director of antitrust enforcement.
The prices that the CMA is concerned about in this case are very high compared to those prices previously charged and have led to a big increase in the total NHS drug bill, for what is a very important drug for tens of thousands of patients.
Pfizer said in a statement that ensuring a sustainable drug supply was of "paramount importance" to the company and was at the heart of its decision to divest the medicine.
Officials at Flynn, based in Stevenage near London, were not immediately available to comment.
The CMA said it would consider any representations from the two companies before deciding whether the law had been infringed.