SoylentNews is people
SoylentNews
from the that's-another-fine-mess-you've-gotten-into dept.
Reuters reports on a record 84 million pound fine (about $107 million) for its role in raising the cost of a generic epilepsy drug by up to 2600%:
The Competition and Markets Authority (CMA) also fined Flynn Pharma 5.2 million pounds for overcharging for phenytoin sodium capsules, following a dramatic price hike in 2012. The CMA's ruling comes amid a growing debate on both sides of the Atlantic about the ethics of price hikes for old off-patent medicines that are only made by a few firms and where there is little competition. U.S. drugmaker Turing Pharmaceuticals, led at the time by hedge fund manager Martin Shkreli, caused outrage last year by raising the U.S. price of Daraprim, an old anti-infective drug, by more than 5,000 percent to $750 a pill.
[...] Pfizer used to market the medicine under the brand name Epanutin but sold the rights to Flynn, a privately owned British company, in September 2012. It was then debranded, meaning that it was no longer subject to price regulation, and the price soared. "The companies deliberately exploited the opportunity offered by debranding to hike up the price for a drug which is relied upon by many thousands of patients," Philip Marsden, chairman of the CMA's case decision group, said on Wednesday. "This is the highest fine the CMA has imposed and it sends out a clear message to the sector that we are determined to crack down on such behavior."
So, ironically, by turning the drug into a "generic" under UK regulations, they were able to jack the price up to extreme levels. Pfizer plans to appeal the ruling. The Guardian has further details:
Pfizer defended its actions, saying the drugs were loss-making before they were debranded and distributed through Flynn Pharma. It also argued that the price was less than that of the equivalent medicine from another supplier to the NHS.
A spokesman for the CMA said Pfizer recouped its losses on the medication within two months, adding that the price of other drugs did not permit the companies fined to charge "excessive and unfair prices".
One thing I wonder about such fines is whether they can possibly be effective. Even if they manage to hurt a pharmaceutical company's bottom line in the UK a bit, without some sort of international standard regulation of drug pricing, won't they just pass any costs of litigation onto consumers in the U.S. or somewhere else by hiking the price on this or other drugs even more?
(Score: 2) by AthanasiusKircher on Saturday December 10 2016, @03:16AM
I have to admit I'm rather confused about what distinction you're trying to draw in your first point, and while I agree with your second, I'm not sure it precludes my postulated behavior either.
I didn't said the point of fines was to "hurt a company" but to hurt the company's "bottom line," which as far as I know is a synonym for profitability (implicitly, we're talking about profitability from the behaviors in question, since that's the point of regulation). I really don't understand the distinction there.
As for the second point, yes, that's true... But we all know companies are beholden to shareholders and investors, and IF a fine hurts profitability in one market, management will likely try to increase it elsewhere, no? And if profits are largely based on excessive price hikes in generics, and one market says they won't allow it, to maintain the same profitability in that sector, the may in fact try to make it up elsewhere... I'm not saying there would necessarily be a direct correlation for prices of drug X going down one place and rising in another, but we do KNOW that drug companies operate like thus at least in some circumstances, pricre-gounging in the markets it can to fund R&D if it can't get those prices somewhere else.
(Score: 2) by tfried on Saturday December 10 2016, @08:39AM
Well, the point about "hurting the company" may really be a bit subtle, and we may well be on the same side of it from the start. I'll still try to explain: It does not make sense to see a company similar a natural person. A natural person who violates the law (severely) you will put into jail for various reasons. There is not generally much of a point in "taking revenge" on a company, though. Esp. the size of Pfizer they are a totally diverse conglomerate of things, some of which a very benefitial, and some of which are just plain wrong. You want to target the wrong ones, selectively.
There are practical consequences to this hairsplitting: It means it does not matter that the fine may be peanuts on the level of Pfizer the whole company (or Pfizer's bottom line, if you like). It's totally enough that it hurts the profitability of the price hike strategy, selectively. If you can credibly achieve that, you can reasonably expect Pfizer (and other actors) to draw the consequences.
The second point, again: A company is never working to maintain profitability, it is always working to maximize profitability. If it believes strategy X will generate profit in market A, then it will go for it. Not because it has to make up for losses in market B, or segment Y, not because it has to fund R&D, but because. It does not need any "cause" for seeking to maximize profits. These things are entirely independent.
Thus, if Pfizer believes it will be long-term profitable to go for a price hike strategy in the US, then it will do so. Irrespective of what happens in the UK.
Of course the pharmas will be eager to point out that they do need to make profits in order to fund R&D, and that is a valid point not to overlook. Importantly, though (and particularly in the present context), any pharma's R&D spending will depend entirely on the expected ROI of the research spending itself (i.e. the expected profitability of the expected new products). Not on the amount of "free profits" they can squeeze out of existing products.