Establishing Unfairly High Prices: The Implications of the CAT’s Judgment in Flynn and Pfizer v Competition and Market Authority

Abstract

Research and development of new and innovative pharmaceutical treatments is important but expensive and risky. Although patents, regulatory data exclusivity and other factors can result in pharmaceutical manufacturers and distributors holding significant market power, the rewards available are, to some extent, constrained by limitations in healthcare budgets (whether public or private). Nonetheless, the price of drugs has been attracting considerable attention across the globe, especially where dramatic increases in prices occur and where the price increases are implemented over a short period of time and relate to drugs which are old. The judgment of the UK’s Competition Appeal Tribunal (CAT) in Flynn and Pfizer v Competition and Market Authority (CMA), partly setting aside the CMA's decision to fine Pfizer and Flynn for charging unfairly high prices for an anti-epilepsy drug, has reaffirmed that, however lurid the headline, any challenge to pricing on competition grounds must be carefully reasoned. The CAT's judgment, and the appeal against it, has important implications not only for this case but also for other competition investigations pending before the CMA into high pricing in the pharmaceutical sector.

Keywords: abuse of dominance, exploitative abuse, unfairly high prices, unfair selling prices, excessive prices, pharmaceutical sector

JEL Classification: K21, L40, L41