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This is a point that probably doesn't need to be stated, but prescription drug prices are generally expensive -- and they're seemingly growing pricier by the day, particularly if we're talking about branded or specialty drugs. Drug developers are aiming to cover not only the costs of developing a drug that makes it to pharmacy shelves, but also a number of ancillary costs, such as marketing and legal expenses -- not to mention the costs of dozens, hundreds, or perhaps thousands of failed ideas in the discovery, lab, preclinical, or clinical stages of development. For consumers like you and me, it all means ever-rising drug prices.

However, there's a fine line between what the public (and lawmakers) would deem reasonable price increases to cover these ancillary costs, and blatant price-gouging. Last year, we got a true taste of the latter from now-former CEO of privately held Turing Pharmaceuticals, Martin Shkreli.

Shkreli, who is aptly nicknamed the "Bad Boy of Pharma," and his company, Turing, acquired a rare disease drug known as Daraprim in August 2015 and promptly raised its price more than 5,500% overnight, from $13.50 per tablet to $750 per tablet. What was truly infuriating about the increase for users of the drug (and for insurers) was that Daraprim had been around for more than 60 years, and Turing didn't make a single change to the formulation or manufacturing process. Shkreli raised the price of the product by more than 5,500% merely to line his and his company's pockets.

This event can be widely credited with placing a magnifying glass on the pricing practices of the pharmaceutical and biotech industries. Drug developers Valeant Pharmaceuticals, with cardiovascular drugs Nitropress and Isuprel, and Mylan, with the EpiPen, have also come under fire for their pricing practices.

Now the time has come to add Pfizer (NYSE:PFE) to the list, although it caught the attention of overseas regulators, not U.S. lawmakers.

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Pfizer channels its inner Martin Shkreli (and pays for it)

According to Bloomberg, the U.K.'s Competition and Markets Authority (CMA), an independent agency responsible for investigating consumer issues and competition problems and enforcing consumer-protection legislation, fined Pfizer $106 million (84.2 million pounds) and Flynn Pharma $6.6 million (5.2 million pounds), for their roles in the astronomical price increase seen in the anti-epilepsy drug Epanutin in September 2012.

The CMA showed in its complaint that the price for 100 mg packs of Epanutin increased from just $3.56 (2.83 pounds) to $84.97 (67.50 pounds) before settling back to $67.97 (54 pounds). This meant that Britain's National Health Service spent approximately $63 million in 2013 and $50 million in 2014 on the drug. Pfizer actually transferred the distribution rights to Flynn before the price increase, but it was the act of de-branding the medication that allowed its price to rocket higher by as much as it did (and also why Pfizer was slapped with a considerably larger fine than Flynn).

Case Decision Group chairman Philip Marsden had this to say: "The companies deliberately exploited the opportunity afforded by de-branding to hike up the price for a drug which is relied upon by many thousands of patients. These extraordinary price rises have cost the NHS and the taxpayer tens of millions of pounds."

For their part, Pfizer and Flynn have refuted the findings of regulators. Pfizer specifically notes that when Flynn launched the de-branded product, it was priced 25% to 40% below a competing anti-epilepsy medication from another NHS supplier that had long been regulated. It remains to be seen if refuting these findings will result in a reduced fine.

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Pfizer is no stranger to price hikes

I'd like to say that this was a rare instance of Pfizer getting caught with its hand in the proverbial cookie jar, but it actually has a long history of pushing boundaries when increasing the price of its drugs. Recently, Morgan Stanley analyst David Risinger noted that Pfizer had increased its average list prices five times since mid-2014:

  • June 2014: an average increase of 7.4%
  • January 2015: an average increase of 8.8%
  • June 2015: an average increase of 8.5%
  • January 2016: an average increase of 10.4%
  • June 2016: an average increase of 8.8%

If you simply aggregated these increases on a compounding basis, you'd get an average list price increase of 52% over a two-year time span. Pfizer, along with other drug developers, does imply that gross-to-net discounts to pharmacy-benefit managers and insurers have helped curb its price hikes, but we're still likely talking about a 20% to 30% cumulative price hike being passed along to consumers over a two-year span. If Pfizer's trend of price hikes holds true, another increase could be coming next month.

This isn't the sort of publicity Pfizer wants or needs with the public increasingly leery of the pricing practices of drugmakers and President-elect Donald Trump pledging to bring down drug prices in his recent interview with Time. Pricing power is critical to the profitability and ongoing success of drug companies, but if Pfizer continues to lean heavily on price increases instead of organic volume growth and innovation, it could find itself on the wrong end of the microscope. It's not time for shareholders in Pfizer to panic, but this is something to closely monitor.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.