“We are part of the NHS team,” boasts Pfizer in a fuzzy claim on its UK website. But it’s not. On the evidence presented by the Competition and Markets Authority, which whacked the US company with a record £84m fine for breaking competition law, Pfizer is a company that thinks it OK to raise the price of an ancient drug by 2,600% by exploiting a loophole. The annual bill for the NHS jumped from £2m to £50m.
The price-hiking wheeze was artful. Pfizer sold the distribution rights to an anti-epilespsy drug called Epanutin to Hertfordshire-based Flynn Phama in September 2012. As a branded medicine, Epanutin was covered by price regulation. But Flynn immediately de-branded, or genericised, the medicine. Pfizer continued to manufacture and supply the drug but, critically, in generic form both parties could charge what they wished. The result was a jump in the price of a 100mg pack from £2.83 to £67.50, later reduced to £54.
In a normal market, other generic manufacturers would rush to produce their own copycat versions and competition would erode prices the CMA called “excessive and unfair”. But, as the regulator explains, this market was different. Medical advice says epilepsy patients already taking the medicine – phenytoin sodium – can’t be switched to another manufacturer’s generic version. “As a result, the NHS had no alternative to paying the increased prices for the drug,” says the CMA.
Pfizer’s attempts to justify its action are horribly weak. First, it says Epanutin was loss-making at the old price. But the solution was surely to approach the NHS for a fairer price; nobody expects pharmaceutical companies to supply at a loss. According to the CMA, Pfizer recouped all its losses within two months of the hike.
The company’s second argument is that, even at the higher price, the capsules were still cheaper than an unspecified “equivalent medicine” supplied to the NHS by another company under the regulated regime. But that argument ignores the CMA’s point that there wasn’t an equivalent medicine for the 48,000 patients taking Pfizer’s drug.
The company intends to appeal against the CMA’s findings, describing them as “wrong in fact and law”. We’ll see where that leads, but Pfizer’s legalistic tone is ugly and will infuriate patients, NHS managers and government. There is an unspoken bargain between wealthy countries and pharma companies: we are happy to pay good money for genuinely novel and innovative medicines, but we don’t expect to be ripped off on drugs that have been around for decades. In this case, phenytoin sodium dates to 1908.
The US has seen several high-profile attempts at price-gouging on obscure old medicines. Perpetrators like Martin Shkreli of Turing Pharmaceuticals have been denounced as cynical greed merchants by politicians on all sides. There are differences in the UK saga addressed by the CMA – but as many similarities. Pfizer is keeping unpleasant company and cannot be surprised if there is a backlash. It’s simple: you cannot describe yourself as a “partner” of the NHS and then behave this way.
Port Talbot’s steely resolve
It was as long ago as March that Sajid Javi, then business secretary, had to rush back from a trip to Australia to mutter ineffectually about doing whatever he could to save the Port Talbot steelworks. The months have rolled by and now a likely solution has emerged – but no thanks to the government.
Instead, the forces behind an agreement that would see owner Tata Steel keep the twin blast furnaces running for at least five years are these: the improvement in global steel prices; the fall in sterling that has made the south Wales plant more competitive; dogged pressure from the trade unions; and Tata patriarch Ratan Tata’s wish for his company to be seen as a genuinely long-term investor and employer.
Wednesday’s agreement hinges on a proposal to close the £15bn pension scheme to future accruals and offer workers a “competitive” defined contribution scheme instead. It is impossible to judge the details until they emerge and, note, Tata said it iwas still working on “a necessary structural solution” to the £15bn scheme. There is potential for eleventh-hour slip-ups.
But, if the agreement succeeds, Tata should be applauded for its willingness to rethink and negotiate on Port Talbot. It is also fair for Tata to appeal “to other stakeholders such as the UK government” to lend a hand on energy costs for heavy users like the steel industry.
A business select committee report last year concluded the government could have done more, and earlier, to support UK steel. Greg Clark, new business secretary in a new government that says it believes in having an industrial strategy, should make himself useful.
