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European Commission imposes fines totalling €146 million on Lundbeck and generic drug manufacturers for agreeing to delay the market entry of generic medicines

    • Competition, EU and Trade
    • Health and life sciences

    21-06-2013

    On 19 June 2013, the European Commission imposed fines totalling €146 million on Lundbeck, one of the Nordic region’s largest drug manufacturers, and four generic drug manufacturers for agreeing to delay the market entry of cheaper generic versions of Lundbeck’s branded anti-depressant drug, Citalopram.

    The European Commission found that Lundbeck had agreed with each of Alpharma, Merck KGaA/Generics UK, Arrow and Ranbaxy for them to delay the launch of their competing drugs following the expiry of Lundbeck’s basic patent for Cialopram in 2002 in return for substantial payments amounting to tens of millions of euros.   Internal documents examined by the European Commission as part of its three year investigation refer to a "club" being formed and "a pile of $$$" to be shared among the participants.

    The fines imposed by the European Commission took into account the duration and seriousness of the actions of the parties and were apportioned between the five companies as follows:

    Company

    Fine Imposed

    Lundbeck

    €93,766,000

    Merck KGaA / Generics UK Limited Agreement

    €21,411,000 imposed on Merck KGaA (of which €7,766,843 is jointly and severally shared with Generics UK Limited (now owned by U.S. Generic drug maker Mylan)).

    Alpharma Agreement

    €10,530,000 imposed jointly and severally on Zoetis Products LLC and Xellia Pharmaceuticals ApS (of which €43,216 is jointly and severally shared with A.L. Industrier AS).

    Ranbaxy Agreement

    €10,323,000 imposed jointly and severably on Ranbaxy Laboratories Limited and Ranbaxy (UK) Limited

    Arrow Agreement

    €9,975,000 imposed on Arrow Group ApS (of which €9,360,000 is jointly and severally shared with Arrow Generics Limited and €823,735 of the latter amount is shared jointly and severally with Resolution Chemicals Limited)

    Total fines imposed

    €146,005,000

     

    The European Commission launched its investigation into the conduct of the drug manufacturers on the back of its 2009 study into the pharmaceutical sector, in which it concluded that “pay-for-delay” agreements between competing drug companies lead to consumers paying as much as 20% more for their medicines, and comes two days after the US Supreme Court similarly concluded that “pay for delay" deals should be open to antitrust scrutiny, with the judge noting that under such agreements "the patentee and the challenger gain, the consumer loses".

    In its decision, the European Commission concluded that such “pay-for-delay” agreements are in direct violation of Article 101 of the Treaty on the Function of the European Union which prohibits anti-competitive agreements. 

    Joaquin Almunia, Vice President of the European Commission responsible for Competition Policy, stated that “These so-called ‘pay-for-delay’ deals constitute severe infringements of EU competition law. They may cause severe harm to patients and taxpayers and must be sanctioned accordingly …  All this occurred at the expense of patients who were deprived of access to cheaper medicines. It also harmed our public health systems, who for a longer period had to artificially bear the costs of an expensive medicine – and one of the most widely prescribed antidepressants”.

    Comment

    Without the existence of the “pay-for-delay” agreements it is likely that all four of the generic drug companies would have launched their own drugs in competition with Citalopram, which would have resulted in dramatically cheaper drugs for the patients that rely on the medication.  For example, the European Commission stated in its press release announcing the fines that “prices of generic citalopram dropped on average by 90% in the UK compared to Lundbeck's previous price level once wide-spread generic market entry took place following the discontinuation of the agreements”.

    Lundbeck, however, has strongly contested the Commission’s analysis and has already announced its intention to appeal to the General Court.  Lundbeck maintains that the agreements did not restrict competition because the  generic Citalopram infringed its valid process patents and the agreements did no more than reflect the protection lawfully granted by these patents.  Furthermore, Lundbeck claims that the agreements had been blessed by the Danish competition authority.

    This is likely to be the first of many decisions taken by the European Commission in relation to “pay-for-delay” agreements – it is currently also examining arrangements in three other cases which include non-monetry value transfers in return for keeping products out of the market; such as such as  “co-promotion” and distribution arrangements.  The European Commission has it has said that it will look at these other types of “pay-for-delay” agreements on a case-by-case basis to see whether they have in anti-competitive effects. 

    What is clear is that many branded drugs companies have relied on “pay-for-delay” agreements, such as the one punished in this decision, as a legitimate means to settle patent disputes and to avoid arduous drawn out litigation actions with the manufacturers of generic alternatives.  The decision of the European Commission and its opinion that all types of “pay-for-delay” agreements will need to be assessed on a case-by-case basis will lead to a lot of uncertainty for both branded and generic drugs manufacturers who wait to see whether their agreed settlements now infringe European Competition law.

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