Same thing happened to me today. I got an exemption certificate 32 years ago when I was diagnosed; it got lost not long after and since then I've moved surgery maybe five times and not once was I informed I needed one nor did anyone enquire if it was still valid (I thought once issued, always valid).
Today I received a £24.15 charge and a £100 fine! I, like you, will take it all the way to the court which will cost a **** site more than the £124.15 they want from me. I am obviously entitled to free prescriptions because I'm an insulin dependent T1 diabetic, the fact that I didn't have the form filled in is simply a way of justifying the cost of the bureaucrats administering the "system", it's disgusting. My poor old mother is 78, she too is entitled to free prescriptions because of her age, however, she also suffers from the first stages of dementia, how is she supposed to a. remember if she has filled in a form or b. know in the first place that she needs to?
I might write to Watchdog and the papers; I'd rather spend the £124.15 advertising how unfair it is.