Flynn / Pfizer v CMA: the CMA misapplied the test for excessive pricing

07 Jun 2018 | by Monckton Chambers

The Competition Appeal Tribunal handed down a Judgment today setting aside parts of the CMA’s decision imposing combined fines on the pharmaceutical companies, Pfizer and Flynn, of around £90 million for charging unfairly high prices for the anti-epileptic drug, phenytoin sodium capsules, in breach of Article 102 TFEU / the Chapter II prohibition.

Although the Tribunal upheld the CMA’s findings that Pfizer / Flynn each occupied a dominant position in the relevant market, it struck down the findings of abuse on the basis that the CMA was wrong in law to confine its methodology for testing whether the drug prices were excessive to a purely “Cost Plus” approach. The Tribunal held that the correct approach, which the CMA should have but failed to adopt, was to identify a benchmark price or price range which would have applied in conditions of “normal and sufficiently effective competition”. In determining that benchmark price, the CMA should have given proper consideration to whether phenytoin sodium tablets – the prices of which were higher than the allegedly excessive prices for capsules – served as a meaningful price comparator. The CMA also erred in law in failing to have any regard to the benefit to patients of phenytoin capsules in determining their economic value.

The Tribunal has indicated that its provisional view is to remit the matter back to the CMA for further consideration, but has invited written submissions from the parties before coming to a final decision on remedy.

Mark Brealey QC acted for Pfizer.

Ronit Kreisberger acted for Flynn.

Click here for the full judgment.