The European anti-trust regulator has fined Danish originator drug manufacturer Lunbeck and several generic companies over "pay-for-delay" deals signed regarding antidepressant drug citalopram.
IHS Global Insight perspective | |
Significance | The European Commission has fined Lundbeck and several generic companies over "pay-for-delay" deals. |
Implications | Lundbeck has been requested to pay a EUR93.8-million (USD123.8-million) fine, and a total of EUR52.2 million has been imposed on the generic manufacturers involved. |
Outlook | The EC decision is likely to have a major impact on the companies operating in the European market as the ruling represents a signal that the European regulator intends to apply competition legislation more strictly when it comes to patent settlement agreements. |
The European Commission imposed yesterday (19 June) a EUR93.8-million (USD-123.8 million) fine on the Denmark-based originator company Lundbeck and a total of EUR52.2 million on several generic manufacturers – most notably Alpharma (subsidiary of Zoetis, US), Merck KGaA (Germany), Generics UK (part of Mylan, US), Arrow (subsidiary of Actavis, US), and Ranbaxy (India) – over the signing of "pay-for-delay" agreements aimed at delaying the entrance into the European market of generic versions of antidepressant drug citalopram, which Lundbeck most commonly brands as Celexa or Cipramil.
The companies were found guilty of breaking European Union anti-trust regulation which under Article 101 of the Treaty on the Functioning of the European Union forbids companies to enter into anticompetitive agreements. In particular, according to reports from the European Commission, Lundbeck agreed with generic competitors to delay their entrance into the market against payments and other compensations from Lundbeck that amounted to EUR10 million.
The EC maintains that Lundbeck provided competitors with significant lump-sum payments, acquired generic product stock with the aim of destroying it, and offered guaranteed profits in a distribution agreement.
Fines imposed by the European Commission | |
Company | Fine |
Lundbeck | EUR93,766,000 |
Merck KGaA, Generics [UK] | Merck KGaA: EUR21,411,000 of which EUR7,766,843 jointly paid with Generics UK Limited |
Arrow | Arrow Group ApS: EUR9,975,000, of which EUR9,360,000 jointly paid with Arrow Generics Limited and EUR823,735 jointly paid with Resolution Chemicals Limited: |
Alpharma | EUR10,530,000 jointly paid with Zoetis Products LLC and Xellia Pharmaceuticals ApS and EUR43,216 jointly paid with A.L. Industrier AS: |
Ranbaxy | Ranbaxy Laboratories Limited and Ranbaxy (UK) Limited: EUR10,323,000 |
Source: European Commission | |
Industry position on the case
Lundbeck published a note yesterday in which the company stresses its strong disagreement over the penalty imposed by the EU regulator. The company argues that the EC has undertaken an incorrect approach in maintaining that settlement agreements between the originator and generic companies represent an infringement of anti-trust law and reflect a weakness or invalidity of the branded drug patent. Furthermore, Lundbeck also asserts that "agreements are efficiency enhancing and legitimate when there are bona fide grounds for dispute". The company has already expressed its intention to appeal the European Commission decision.
Concerns have also been expressed by the European Federation of Pharmaceutical Industries and Associations (EFPIA) that stressed that the fact these agreements "involve a payment does not call into question the validity or strength of the disputed patents. Judging patent validity is the sole prerogative of specialised patent offices and courts".
Outlook and implications
The outcome of the investigation, which was started in 2008 by the EC, does not come as a surprise as it was pre-announced at the beginning of June in the media (see Europe: 5 June 2013: Nine pharma companies at risk of EU sanctions over pay-for-delay agreements). Lundbeck has affirmed that it will not change its final guidance for 2013, excluding costs that will be incurred due to the fine.
Concerns expressed on the industry side are based on the fact that settlement agreements are common in order to avoid long and cumbersome patent litigation in court. The industry highlighted that the ruling may potentially undermine confidence in the European patent system, with negative consequences on innovation. However, their legitimacy has clearly been challenged by the ruling, which states the agreements were aimed at infringing competition rules, favouring the originator drug vis-a-vis generic competitors.
In addition, it appears the European Commission will continue investigating these agreements in the pharmaceutical industry, a negative signal for other companies that intend to enter into settlements with generic competitors. According to reports from Reuters, the European Commission may be ready to launch an investigation into other major pharmaceutical companies.
Furthermore, in the comment released by the vice-president of the European Commission, Joaquín Almunia, who is responsible for competition policy, the European Commission's position on pay-for-delay deals is clearly expressed: "It is unacceptable that a company pays off its competitors to stay out of its market and delay the entry of cheaper medicines. Agreements of this type directly harm patients and national health systems, which are already under tight budgetary constraints. The Commission will not tolerate such anticompetitive practices." It is therefore clear that pay-for-delay will continue to be a high priority on the EU competition agenda.
The EC position seems to be in line with regulators in the US. The US Supreme Court issued a decision on 17 June in favour of the Federal Trade Commission allowing lawsuits against pharmaceutical companies participating in settlement agreements with large payouts to delay the entry of generics (see United States: 18 June 2013: US Supreme Court rules in favour of FTC over "pay-for-delay" deals).