On 19 June 2026, the UK Court of Appeal handed down its judgment in the case of Pfizer and Flynn Pharma v the UK Competition and Markets Authority (CMA), upholding the CMA’s appeal. The Court found that the grounds on which the Competition Appeal Tribunal had previously set aside the CMA’s penalty decision were not valid, and reinstated the CMA’s original finding that the two companies had engaged in unfair pricing and abused their dominant market position.
The case centred on the anti-epileptic drug ‘phenytoin sodium capsules’ and dates back to 2012. Pfizer had long marketed the branded medicine Epanutin in the UK; although the patent for this medicine had long since expired, as a branded medicine it remained subject to the UK’s medicine pricing regulatory framework. In September 2012, Pfizer entered into an exclusive distribution arrangement with Flynn, under which Flynn acquired the marketing authorisation for the medicine for ￡1. Flynn subsequently de-branded Epanutin and sold it as a generic medicine, thereby removing it from the original regulatory framework.
The medicine itself underwent no substantive changes; the capsules continued to be manufactured by Pfizer in Germany and distributed via the same UK supply chain as before. The only change was the insertion of Flynn into the supply chain as the exclusive distributor.
However, following the implementation of this arrangement, the price of the capsules rose sharply. Flynn’s average selling price to the UK National Health Service (NHS) increased by up to 2,682 per cent compared with previous levels; the price of the most commonly used 100mg capsules rose from ￡2.21 per box to ￡59.53. Between 2012 and 2016, these price increases generated profits of approximately ￡57 million for Pfizer and approximately ￡36 million for Flynn, whilst the NHS’s annual procurement expenditure soared from ￡2.3 million in 2012 to ￡50 million in 2013.
The UK Competition and Markets Authority (CMA) first found the two companies guilty of abusing their dominant market position in 2016. The case subsequently went through multiple proceedings, including the Competition Appeal Tribunal, the Court of Appeal, a review by the CMA, and a further appeal. In 2024, the Competition Appeal Tribunal found that the CMA had committed multiple substantive and procedural errors in its analysis, even criticising it for reaching a predetermined conclusion and selectively admitting evidence; on this basis, it quashed the CMA’s decision. However, the Court of Appeal subsequently reached a new determination based on its own analysis, still ruling that Pfizer and Flynn had breached the law, whilst making only minor adjustments to the amount of the fines.
The central issue in the Court of Appeal’s judgment was not whether the prices of the medicines were excessive, but whether the Competition Appeal Tribunal had sufficient grounds to overturn the Authority’s decision. The Court of Appeal ultimately held that the Competition Appeal Tribunal had misinterpreted the Authority’s analytical framework. The Court noted that, whilst the Competition Appeal Tribunal had found that the Authority had ‘treated the distribution agreement between Pfizer and Flynn as an illegal cartel’ and conducted its analysis on that basis, this interpretation did not correspond to the actual content of the Authority’s decision. The Authority had never found that the agreement itself constituted a horizontal cartel or an abuse of a joint dominant position, but merely regarded it as a tool and contextual factor in the two companies’ implementation of their price-raising strategy. The Authority’s core allegation had consistently been that the two companies had exploited their respective dominant positions in the relevant markets to engage in unfair pricing.
The Court also rejected the Competition Appeal Tribunal’s finding that the Authority “regarded any price higher than cost plus a reasonable return as unlawful”. The judgment explicitly states that ‘cost plus a reasonable return’ is merely the starting point for assessing whether a price may be excessive, rather than an absolute ceiling on the legality of the price. Even if an undertaking continues to generate additional profits on this basis, this does not automatically constitute an infringement; the key issue lies in whether the price could have been formed under normal and fully effective competitive market conditions. The Court of Appeal held that the Competition Appeal Tribunal’s characterisation of the Authority’s analysis as merely a ‘cost-plus test’, and its subsequent criticism that the Authority had disregarded other evidence, was inaccurate.
With regard to the price itself, the Authority had already examined a number of factors in detail: the medicines had long since passed their patent expiry dates; there was no innovation or improvement in the products or supply chain; there was no new investment; there was no increase in commercial risk; and the price increase far exceeded the level necessary to maintain the commercial viability of the products. The Authority also found that the two companies were fully aware of their market power and deliberately exploited it. Internal documents revealed that the objective of the relevant arrangements was to evade price regulation, drive up medicine prices and share the resulting additional profits.
It is worth noting that the Court of Appeal also upheld the objections raised by Pfizer and Flynn regarding the Competition Appeal Tribunal’s ‘remand’ procedure. The Court held that, whilst the Appeal Tribunal had identified fundamental defects in the CMA’s proceedings—such as bias and prejudgement—it had nevertheless proceeded to re-determine the infringement itself without affording the parties a full opportunity to be heard, thereby breaching the principle of procedural fairness. Consequently, even setting aside the substantive issues, the Appeal Tribunal’s re-determined decision could not be upheld on its own merits.
Ultimately, the Court of Appeal ruled in favour of the Competition and Markets Authority’s appeal, quashed the Competition Appeal Tribunal’s judgment in its entirety, and reinstated the Authority’s original decision. The Court of Appeal found that the Competition Appeal Tribunal had erred in concluding that the Authority had prejudged the matter or selectively admitted evidence; its various criticisms of the Authority’s decision were based on a misinterpretation of the original decision’s content, and it was neither entitled to overturn the Authority’s decision on that basis nor had it any grounds to make its own further findings.
Attached: Judgment
