European Commission Fines Pharma Companies For Payments To Delay Generic Entry

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The European Commission (EC) has fined Danish pharmaceutical company Lundbeck as well as eight other generic manufacturers for delaying market entry of generic medicines by way of patent settlement agreements (also known as “pay-for-delay” agreements).

According to a Commission press release, Lundbeck was fined € 93.8 million while other generic producers incurred fines totalling € 52.2 million. In 2002, Lundbeck and these generic firms agreed to delay the market entry of the generic versions of Lundbeck’s citalopram, a “blockbuster antidepressant.” The generic companies involved were Alpharma (now part of Zoetis), Merck KGaA/Generics UK (Generics UK is now part of Mylan), Arrow (now part of Actavis), and Ranbaxy.

The EC decided that these agreements were anticompetitive and violated European Union antitrust rules (Article 101 of the Treaty on the Functioning of the European Union – TFEU). The reasoning was that these agreements guaranteed Lundbeck that potentially competing generics would stay off-market for the duration of the agreements but did not guarantee the generic firms market entry thereafter.

The EC found that Lundbeck paid “significant lump sums, purchased generics’ stock for the sole purpose of destroying it, and offered guaranteed profits in a distribution agreement.” EC distinguished these agreements from other patent settlements “where generic companies are not simply paid off to stay out of the market.”

“It is unacceptable that a company pays off its competitors to stay out of its market and delay the entry of cheaper medicines,” said Joaquín Almunia, European Commission vice-president and head of competition policy. “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.”

In a related development, earlier this week, the United States Supreme Court reached a decision that settlement agreements by branded pharmaceutical companies involving payments to generic companies to delay their cheaper drugs’ entry into the market may not be immune from antitrust scrutiny but are not “presumptively” unlawful (IPW, Public Health, 17 June 2013). That case also involved Actavis.

Industry Reactions

In response to the decision, Lundbeck released a statement claiming that the company “strongly believes in and advocates for a level-playing field, which includes that intellectual property rights should not be ignored and infringed by third parties, since this seriously damages innovators’ investments and reduce their incentives to innovate.” Lundbeck said it “strongly disagrees with the Commission’s decision” and intends to appeal the decision.

The European Federation of Pharmaceutical Industries and Associations (EFPIA) has responded, saying that the EC decision will prolong patent litigation, weaken patent protection, and undermine confidence in the patent system itself, which will lead to less European innovation and growth.

In its statement, EFPIA said that patent settlement agreements should not be presumed to be anti-competitive, and also that they involve payment should not undermine the validity or strength of the disputed patents. EFPIA claimed that patent settlement agreements are “efficiency enhancing and legitimate” where there are genuine grounds for dispute.

EFPIA Director General Richard Bergström said, “The EU patent system is still a mess. It is no surprise that companies settle to save legal fees and uncertainty,” referring to Europe’s “fragmented and inefficient” IP enforcement regime.

EFPIA believes the resulting reductions in innovation from this decision “will have knock-on effects for patient welfare and economic growth” and calls for a “full policy debate at the level of the College of Commissioners.”

Brittany Ngo is currently completing her Master’s in Health Policy and Global Health at the Yale School of Public Health and previously obtained a Bachelor’s of Arts in Economics from Georgetown University. Through her studies she has developed an interest in health-related intellectual property issues. She is a summer intern at Intellectual Property Watch.

Brittany Ngo may be reached at info@ip-watch.ch.

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