On 19 January 2017, the Competition Appeal Tribunal (CAT) rejected pharmaceutical distributor Flynn Pharma’s claim for interim relief after it was ordered to reduce its prices and was additionally imposed with a £5.2 million fine by the Competition and Markets Authority (CMA). Flynn submitted that the Directions imposed by the CMA, as discussed in our previous article here, should be suspended until the CAT’s judgment on the substantive appeal.
Background to the application
The CMA’s original decision, on 7 December 2016, held that both Flynn and Pfizer, a pharmaceutical manufacturer, abused their dominant positions by imposing unfairly high prices. The sale of phenytoin sodium capsules, a preventative treatment for epilepsy, was allegedly being sold to the NHS by Flynn at between 2,300% and 2,600% higher than the previous prices for the drug.
Flynn argued that immediate compliance with the CMA’s ruling would cause substantial damage, but more importantly that the losses would be irreversible. It would be impossible to raise its prices again if the substantive appeal it intended to make was successful, and the damage it suffered would be irrecoverable because the CMA would not compensate for Flynn’s losses.
Flynn argued that its intended appeal would raise important issues concerning the CMA’s role and its ability to impose price regulation based on claims of ‘pure overcharging’. Flynn claims that the CMA is intervening in the price regulation too dramatically in a field which is already subjected to extensive statutory price regulation.
The CAT has refused Flynn’s request for interim relief. The CAT did not address the possible merits of Flynn’s intended appeal, but instead focused upon the CMA’s role as a competition authority and the impact of granting or refusing the interim relief. The CAT weighed up the harm to the public from allowing the continuation of high prices for the product and the harm to Flynn and Pfizer in reducing these prices. The CAT held that the risk to public health and interest, alongside the pecuniary effect of high prices on the resources of the NHS, outweighed the risk to Flynn and Pfizer.
Further, the CAT held that the CMA’s directions were not so unclear and contradictory that they were impossible to comply with. This was evidenced by Pfizer’s proposed compliance with the Directions, suggesting that Flynn’s claims as to their unworkability may be over-stated. By contrast, the CAT identified difficulties with Flynn’s counter-proposal of a cross-undertaking in damages in case its appeal was unsuccessful.
Flynn intends to make a substantive appeal to the CAT against the CMA’s original decision; the deadline for such an appeal to be filed is 7 February 2017. In the meantime, as a result of the CAT decision, the parties were required to reduce prices on existing stock, while prices of stock on new shipments must fall by 7 April 2017 to reflect the lower prices charged by Pfizer. However, Flynn’s fine of £5.2 million will not be payable until the appeal process has concluded.