US drug group Pfizer is facing accusations of over-charging Britain's National Health Service (NHS) for an epilepsy drug.
The Competition & Markets Authority (CMA) has accused Pfizer and drug distributor Flynn Pharma of breaking UK and European Union law by increasing the cost of phenytoin sodium capsules by up to 2,600%.
The CMA said it believed the two companies each abused a dominant position by charging excessive and unfair prices in the UK for the capsules, which are used to treat more than 50,000 British epilepsy sufferers.
Pfizer, which is thought to be considering a takeover bid for UK rival GlaxoSmithKline (LON:GSK), makes the medicine and supplies it to Flynn, which then distributes it to wholesalers and chemists.
The US group sold the distribution rights for the drug, otherwise known as epanutin, to Flynn in September 2012, after which time Flynn started selling its own genericised version.
But the CMA said Pfizer continued making the drug and sold it to Flynn at prices between 8 and 17 times Pfizer's historic prices.
Flynn then sold the drug to customers at prices between 25 and 27 times higher than those previously charged by Pfizer.
Before 2012, the NHS was spending about £2.3mln a year on the capsules, but ended up paying over £50mln in 2013 and more than £40mln in 2014, the CMA said.
Ann Pope of the CMA said: "While businesses are generally free to set prices as they see fit, those that hold a dominant position have a special responsibility to ensure their conduct does not impair genuine competition and that their prices are not excessive and unfair.
"The prices the CMA is concerned about in this case are very high compared to those prices previously charged and have led to a big increase in the total NHS drug bill for what is a very important drug for tens of thousands of patients.
"The CMA's findings on dominance and abuse are provisional and no conclusion can be drawn at this stage that there has, in fact, been any breach of competition law.
"We will carefully consider any representations from Pfizer and Flynn Pharma before deciding whether the law has been infringed."
Pfizer said in a statement that ensuring a sustainable drug supply was important to the company and was key to its decision to off-load the medicine.
Flynn told news agency Reuters that it would defend itself against the allegations. It said its product was priced competitively against rivals, including a tablet version of phenytoin.