The judgment from the Court of Appeal (Court) comes after the Competition Appeal Tribunal (CAT) set aside the Competition and Markets Authority’s (CMA) 2022 decision and made its own findings against the parties.
In re-making the decision, the CAT concluded – as the CMA had – that Pfizer and Flynn abused their dominant positions by charging excessive prices for phenytoin sodium capsules between 2012 and 2016. It also imposed almost identical fines on the firms to those issued by the CMA, totalling £69 million. However, it said there were flaws in the CMA’s analysis, and replaced the CMA’s reasoning with its own.
Following appeals to the Court from both Pfizer and Flynn, and the CMA’s own appeal, the Court has now rejected the CAT’s approach in its entirety. It fully upheld the CMA’s appeal against the CAT setting aside the CMA’s decision, and found that the CAT had “misread, or mischaracterised, the CMA’s decision on critical issues”, and was “wrong” to set it aside.
The judgment states
The CAT found errors in the [CMA’s] Decision which, on a fair reading, the CMA did not make…
Adding that
… the CAT failed to engage with, or mischaracterised, the CMA’s decision on critical issues…
In addition, the Court rejected the CAT’s finding of bias in the CMA’s approach, saying
… the CAT was wrong to find that the CMA predetermined the outcome… and examined the evidence in a biased and selective way…
And
The CMA set outs its analysis at great length in the Decision. We can detect nothing in the CMA’s analysis of prices over time which indicates, or is relevant to, a finding of bias.
In relation to Pfizer and Flynn’s appeals, the Court concluded that, “the CAT’s remade decision was vitiated by procedural unfairness” and went on to set aside the re-taken decision. It concluded also that, because the CAT was wrong to set aside the CMA’s decision, it had no basis to remake the decision.
Now, the Court will consider further submissions from the parties before deciding whether to reinstate the CMA’s decision, including fines.
Juliette Enser, Executive Director of Competition Enforcement, said
This is an important judgment from the Court of Appeal. Phenytoin is a vital drug relied on by thousands to prevent life-threatening seizures, and the CMA found that these companies exploited their positions to charge the NHS excessive prices. The judgment confirms the Competition Appeal Tribunal was wrong to set aside the CMA’s decision – recognising that our findings were based on a fair and robust assessment of the evidence. We will now make submissions to the Court in advance of its further ruling.
Case background
After reassessing part of its case following a remittal from the CAT, the CMA imposed fines of approximately £70 million, in 2022, on Pfizer and Flynn – £63,300,000 and £6,704,422 respectively – for breaching competition law. It found that both firms had used their positions as the dominant suppliers in the UK market to charge excessive and unfair prices for phenytoin sodium capsules over a 4-year period.
The CMA’s decision found that between 2012 to 2016, Pfizer’s prices rose by 780-1,600%. The company supplied the drug to Flynn, which then sold the capsules to wholesalers and pharmacies at prices significantly above its own costs. The combination of the prices imposed by Pfizer and Flynn resulted in prices between 2,300% and 2,600% higher than those previously charged for the drug. This illegal behaviour led to NHS annual costs for phenytoin capsules increasing from £2 million in 2012 to approximately £50 million the following year.
In November 2024, the CAT agreed with most of the drug firms’ grounds of appeal, finding against the CMA in a number of areas, including its approach to calculating a ‘reasonable rate of return’, its assessment of unfairness, and aspects of its procedure.
However, it concluded the firms had infringed competition law and imposed similar fines, with a small – 1% – reduction to Pfizer’s penalty.
Today, the Court of Appeal has found that the CAT was wrong to set aside the CMA’s decision.
For more information, see the Phenytoin sodium capsules case page.
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