Britain fines Pfizer record $107 mln for huge drug price hike

* Pfizer (NYSE: PFE - news) , Flynn Pharma fined for charging excessive prices

* Cost of epilepsy medicine increased up to 2,600 percent

* Drugmakers dispute decision and plan to appeal (Adds detail on previous largest fine, other pharmaceutical cases)

By Ben Hirschler

LONDON, Dec (Shanghai: 600875.SS - news) 7 (Reuters) - Britain's competition watchdog has fined Pfizer a record 84.2 million pounds ($107 million) for its role in ramping up the cost of an epilepsy drug by as much as 2,600 percent.

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 (Shanghai: 600558.SS - news) 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.

In the case of phenytoin sodium capsules, the UK price charged for 100 mg packs of the drug jumped from 2.83 pounds to 67.50 in 2012, before reducing to 54.00 from May 2014.

As a result, annual spending on the capsules by Britain's National Health Service rose from 2 million pounds in 2012 to about 50 million in 2013. The CMA said UK prices were many times higher than elsewhere in Europe.

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 behaviour."

The previous highest fine of 58.5 million pounds was handed to British Airways in 2012 for colluding with rival Virgin Atlantic on fuel surcharges. That was imposed by the CMA's predecessor, the Office of Fair Trading.

Pfizer said it planned to appeal all aspects of the verdict.

The U.S. drugmaker said the medicine had been loss-making and it was therefore forced to consider whether it could continue supplying it. Pfizer added that the price set by Flynn was actually 25 to 40 percent less than the cost of an equivalent tablet form from another supplier.

Flynn's chief executive David Fakes said punishing his company, which also plans to appeal, for selling phenytoin capsules for less than phenytoin tablets "beggars belief".

The CMA also ordered both to reduce their prices, a move that lawyers said could trigger claims for redress from customers who had been over-charged.

In February it fined GlaxoSmithKline (Other OTC: GLAXF - news) 37.6 million pounds for striking deals to delay the launch of cheap generic copies of its former blockbuster antidepressant Seroxat.

The watchdog has four other ongoing investigations into the pharmaceutical sector.

($1 = 0.7903 pounds) (Editing by Jane Merriman/Keith Weir/Alexander Smith)