When a generic costs more than a branded drug

Epanutin capsules were costing the NHS just over £2m a year until Flynn Pharma, a British company, bought the rights to sell the anti-seizure medicine from Pfizer, repackaged it, and raised the price. Now the annual bill will be £46.6m.

How the?

The Stevenage-based firm has been able to raise the price by switching it from being a ‘branded’ drug – whose prices are set by industry agreement with the Department of Health – to a ‘generic’ version.

Anyone can make generics and so market forces usually drive prices down.

Interestingly sharp practice there.

The developing drugs part of pharmaceuticals is difficult. The chemistry part of making them not so much. Competition should drive that price down: but competition does require someone else to enter the market and make other generic versions of it.

Or, actually, what would be much simpler. Pfizer manufactures it, this small company has only purchased the rights to retail in the UK. Parallel imports are allowed in the EU. Purchase stock elsewhere, repackage (you\’ll want all the legal and warning guff in English, not German or Spanish or whatever) and pump out to the pharmacies.

So, anyone own a repackaging plant?

4 thoughts on “When a generic costs more than a branded drug”

  1. The key seems to be at the end of the article- the nhs may have extracted a price below pfizer’s costs for the branded product while in patent. Flynn, unlike the nhs, doesn’t have monopsony power so was unable to extract such a price from Pfizer. Unfortunately it is rather tough to succeed in a claim against nhs purchasing bodies that they offer abusively low prices (albeit possible).

    If this is a story, rather than a curiosity, why isn’t the nhs taking an abuse of dominance case against Pfizer and Flynn? Or indeed sourcing from elsewhere in the eu?

    Of course, some think that competition law with all its dastardly regulation of things like excessive pricing ought not to apply to health…

  2. It looks as if Pfizer was giving the NHS a price break as part of a package deal on its drugs. If so, it may encounter some hostility over its tactics the next time it comes to negotiate with the NHS.

    It’s possible that the brand name Epanutin is used for capsules only in the UK. And I can understand the reluctance of doctors and patients to switch treatments. But Dilantin capsules would seem to be exactly the same thing.

  3. Wildcards – Rising Stars – Cash cows – Dead dogs.

    The life cycle of a product.

    Epanutin with £2 million sales is definitely a Dead dog and Pfizer probably had forgotten they were selling it.

    Pharmas have voluntary price control. They agree an overall price increase with the NHS, and usually this means trading off increases on drugs in early life at the top of the cycle still to give a good RoI, against prices of Cash cows and Dead dogs.

    When the Dogs start dragging down the overall profit margin, and production runs are so small they just create a nuisance in the production schedule, the brand owners sell them off to companies who specialise in low volume drugs at the end of their life cycle.

    They sell at a higher price to pay back the acquisition costs – 3, 4 or more times annual sales – because short runs are more expensive to manufacture than long runs, and to give a reasonable revenue on a product expected to have a short remaining life in a diminishing market.

    I note the claim is that sales “will” be £46.6m, which sounds like an estimation of the new NHS price multiplied by historic sales.

    However since this is a product at the end of its life, it is wrong to apply historic sales to something which has probably been replaced by another branded drug – much more expensive – and has diminishing sales.

  4. For Pete’s sake!!
    The NHS deal with pharmaceutical companies that have research facilities in the UK after that left-wing extremist* insisted on compelling some Yankee company (Pfizer, coincidentally) to issue licences to UK producers when it was ripping the NHS off too blatantly was that they would get an overall return on their investment in R&D. Until New Labour decided it wanted to welch on that UK was a world leader in pharmaceutical R&D. It was a lot more difficult to totally scrap it than to reduce the promised return so there is still a trade-off between losses on one drug against profits on another. So Pfizer wasn’t too worried about losing a few pence on return on Epanutin but no-one else wanted to make it unless they got the sort of monopoly returns that Flynn does.
    This demonstrates the utter stupidity of political decisions made by Alastair Campbell and his cronies. It was “obvious to someone with the meanest intelligence” that New Labour’s generic drugs rule was bound to increase NHS costs.
    Epanutin is merely a small example

    *J. E. Powell

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