The CAT’s decision, issued on November 20, 2024, is the latest (and may not be the last) development in an 11-year saga since the CMA first opened an investigation into Pfizer and Flynn Pharma. It serves as a reminder that, although the pharmaceutical sector remains a priority area for antitrust enforcement in the U.K., it is also a sector in which the CMA is regularly having its decisions overturned, or fines substantially reduced, on appeal.
The CMA’s investigation and original GBP89.4m fining decision
Pfizer first acquired the rights to phenytoin sodium capsules in 2000, when the drug had already been off-patent for decades, and was sold under the brand name Epanutin. As a branded drug, its price had been regulated in the U.K.
In 2012, Pfizer entered into exclusive supply arrangements with Flynn Pharma. These arrangements included, among other key features, that the product would be de-branded, meaning that its prices would no longer be subject to controls. After Flynn Pharma took over supply, the drug’s prices increased significantly. NHS annual spend on the capsules increased from approximately GBP2.3m in 2012 to just over GBP50m in 2013.
The CMA began investigating Pfizer’s price increases in 2013, and Flynn Pharma’s in 2014. The CMA issued its first fining decision against Pfizer and Flynn Pharma in 2016, finding that both companies had abused their dominant market positions through excessive and unfair pricing. Pfizer and Flynn Pharma were fined GBP89.4m in total in this first decision.
A litany of appeals reducing the fines imposed—first by approx. GBP20m, and most recently by a further GBP1m
The CMA’s 2016 decision was appealed to the CAT, which set aside part of the CMA’s decision, and subsequently to the Court of Appeal, which remitted the case to the CMA for a reassessment of evidence.
In July 2022, the CMA again found against Pfizer and Flynn Pharma, and imposed fines of nearly GBP70m—almost GBP20m less than those set in 2016. You can read more about the CMA’s reassessment in our blog post on the 2022 decision.
On further appeal by both Pfizer and Flynn Pharma, the CAT has now set aside the CMA’s 2022 decision and made its own infringement findings against the parties on seven of the eight separate infringements originally found by the CMA.
However, this has had very little effect on the fines ultimately imposed—Pfizer’s fine has been reduced by just 1% (from GBP63.3m to GBP62.37m), and Flynn Pharma’s has stayed at GBP6.7m.
The CAT’s decision to dismiss the CMA’s conclusions and impose its own findings
The judgment highlights the technical complexities involved in assessing excessive and unfair pricing in the pharmaceutical sector. The CAT rejected several aspects of the CMA’s assessment methodology on unfair pricing, finding the CMA’s reasoning to be unfair against both Pfizer and Flynn Pharma. The CAT also found that the CMA’s reasoning on excessive pricing was unfair against Flynn Pharma and would also need to be reassessed against Pfizer, given the importance of applying consistent methodologies on excessive and unfair pricing to both parties.
As well as finding against the CMA’s substantive conclusions, the CAT concluded that the CMA’s 2022 fining decision was procedurally unfair in its entirety.
Typically, when the CAT sets aside a CMA decision, it remits the decision back to the CMA to reconsider. In this instance, the CAT took the unusual step of asserting its own jurisdiction to remake the decision. In doing so, the CAT set out a detailed analysis of its own views on the appropriate methodologies for excessive and unfair pricing, and their application to the facts set out in the CMA decision. The CAT noted that its decision to assert its jurisdiction to conduct its own assessment had been driven by the length of time since the infringements had occurred, the fact that there had already been one remittal decision, and the CMA having set out the facts in detail in its 2022 decision.
What next for Pfizer, Flynn Pharma and CMA antitrust enforcement in the pharmaceutical sector?
We may yet see a further appeal in this case from the parties in relation to their fines, and/or from the CMA in relation to the CAT’s dismissal of its approach to excessive and unfair pricing. Pfizer has said that it “respectfully disagrees with the CAT’s approach in this matter” and is “considering all options”. The CMA has stated that it agrees with the CAT’s conclusion that the firms’ pricing behaviour was abusive, and that “significant fines are appropriate in this case”, but that it is now “carefully considering whether to appeal the judgment”.
The CAT’s ruling is another in a recent series of mixed results for the CMA in pharmaceutical sector appeals. During its recent hydrocortisone tablets market sharing cartel investigation, for example, the CMA’s 2021 decision to fine drug firms over GBP260m for excessive and unfair pricing and market sharing has been subject to various appeals to the CAT and the Court of Appeal. The CMA has won most of the hydrocortisone appeals but was ordered to reduce the fines it had imposed in relation to excessive and unfair pricing by GBP25m. The CMA has also had its decisions upheld by the CAT, albeit with fines substantially reduced, in the Paroxetine case (where GBP45m fines for anticompetitive agreements and abuse of dominance were reduced to GBP27.1m on appeal), and in its Liothyronine investigation (where GBP101m fines for excessive and unfair pricing were reduced to GBP84m on appeal).
Enforcement in this sector clearly remains a priority for the CMA, as evidenced by its ongoing investigation into Vifor Pharma for disparagement, and its recent decision to call-in Theramex's purchase of Femoston and Duphaston under its merger control powers (which resulted in a clearance subject to divestment of the U.K. rights to the products, and a fine of GBP1.5m, imposed in November 2024 for procedural infringements by the seller).
However, the CMA does not currently have any publicly announced open investigations into abusive pricing practices, which have been among the most common cases to succeed (at least in part) on appeal. To some degree, recent CAT and Court of Appeal decisions confirm that the CMA should continue to have ambition to enforce against these practices in this sector. The risks associated with abusive pricing practices should certainly remain on the radar of pharmaceutical companies. However, these cases have also made clear that the CMA will often face a difficult and unpredictable road in having its substantive and procedural findings on abusive pricing practices in the sector challenged. Any further appeal by Pfizer, Flynn Pharma or the CMA of the present decision should be monitored closely and, if the CMA shows appetite to investigate similar practices in this sector in the future, its approach will require careful scrutiny.
