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Pfizer (PFE) Fined for Price Hike of Anti-Epilepsy Drug in UK

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Leading pharma company Pfizer Inc. (PFE - Free Report) was levied a fine of $107 million (£84.2 million) by the Competition and Markets Authority (CMA) of the UK upon finding that it had violated competition laws by charging excessive and unfair prices for its anti-epilepsy drug, phenytoin sodium capsules. The CMA has also imposed a penalty of £5.2 million on the company’s distributor Flynn Pharma.

In a recent interview with Time magazine, President-elect Donald Trump clarified that his intentions were misinterpreted and that he intends to target excessive drug price hikes. Most pharma/biotech stocks saw their share prices slipping yesterday in response to Trump’s comments. Pfizer’s shares declined 1.2% in Wednesday’s trading.

In-fact, Pfizer’s shares have fallen 3.4% year to date, comparing favorably to the decline of 7.8% for the Zacks classified Large-Cap Pharma industry.

Coming back to the latest news, the abovementioned penalties came on the heels of an overnight price hike of up to 2,600% for the drug after it was deliberately de-branded in Sep 2012. Price of one 100mg pack of the drug skyrocketed to £67.50 from £2.83, before finally settling at £54.00 in May 2014. Moreover, prices in the UK were higher than that in any other European country.

The CMA has ordered the companies to reduce their prices. To do this, the companies have been granted 30 working days to 4 months to lower prices in order to ensure undisturbed supply of the drug to patients who rely on it.

Note that phenytoin sodium is indicated for the treatment of epilepsy to prevent and control seizures, and is presently used by about 48,000 patients in the UK.

Previously, Pfizer used to market the drug as Epanutin and in Sep 2012, it sold the UK distribution rights to Flynn Pharma. Following the transition of rights, the product was de-branded, which means that Pfizer was no longer subject to price regulation.

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Note that like several others, Mylan N.V. has lately been under the spotlight for the massive price hike of its lifesaving auto-injector, EpiPen, facing criticism from lawmakers, consumers and the common people alike. In Oct 2016, the company agreed to a $465 million settlement with the U.S. Department of Justice (DoJ) and other government agencies regarding the classification of EpiPen for purposes of the Medicaid Drug Rebate Program.

Meanwhile, Valeant Pharmaceuticals International, Inc. has been making it to the headlines for all the wrong reasons like a massive price hike of specialty drugs, erroneous financial reporting and termination of important contracts

Zacks Rank & Key Picks

Pfizer currently carries a Zacks Rank #3 (Hold). Sucampo Pharmaceuticals, Inc. is a better-ranked stock in the health care sector, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Sucampo’s earnings estimates increased from $1.03 to $1.22 for 2016 and from $1.30 to $1.58 for 2017 over the last 60 days. The company posted a positive surprise in all of the four trailing quarters with an average beat of 35.55%.

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