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June 16, 2013 3:50 pm
Payments by pharmaceutical companies to generic rivals to delay the launch of competing medicines are coming under fresh pressure on both sides of the Atlantic, with a European regulatory penalty and a US Supreme Court ruling expected in the coming days.
The European Commission is set this week to fine the Danish pharmaceutical group Lundbeck and four generic makers for allegedly reaching anti-competitive deals to delay generic versions of its antidepressant citalopram. The commission has powers to levy fines of up to 10 per cent of global turnover.
Brussels’ penalty for the so-called “pay for delay deal” is the first to arise from almost a decade of antitrust scrutiny of the sector. It will have wide ranging implications for settlements in such patent disputes.
It comes ahead of a US Supreme Court decision on the case brought by the Federal Trade Commission against Solvay for payments to generic producers to delay rivals of its AndroGel product, with initial indications that the judges will also take a tough line.
Joaquín Almunia, EU competition chief, sees the enforcement action as a test case for the sector, demonstrating that regulators will be unwilling to allow side-deals that harm consumers by restricting access to cheap drugs.
EU officials see direct payments or benefits offered to generic makers as a means to stifle competition by colluding to share monopoly rents. The enforcement decision will give notice that the commission will act against pharma patent settlements that effectively delay market entry of generic drugs.
The tough line in the Lundbeck case is worrying lawyers and companies. They fear it takes a simplistic view of a complex and uncertain legal process which sometimes justifies agreements to bring a clear and rapid resolution.
Lundbeck strongly denied wrongdoing. It argued that the settlements were a legal means to protect a strong and valid production patent, which it successfully defended in court. Some of the antitrust probes of these deals are so old that they are approaching the 10-year statute of limitations.
Competition officials concluded that the settlements – which came after Lundbeck’s patent expired in some European markets – delayed market entry of the generic product by up to two years.
While some other EU commissioners are being urged to raise concerns about the decision, Mr Almunia’s recommendation is highly unlikely to be overturned. He sees the implications as limited to tackling damaging anti-competitive practices among drugmakers, rather than a judgment with implications for patent enforcement in other sectors.
Since it launched a major review of the pharmaceutical industry in 2009, which identified key concerns about “pay-to-delay” agreements, Brussels has served charges in three separate cases against Lundbeck, involving Servier , Johnson & Johnson and Novartis.
Charges in the Lundbeck case were also served against multiple offshoots of the generic groups involved: Merck KGaA, Generics UK, Arrow, Resolution Chemicals, Xellia Pharmaceuticals, Alpharma, A.L. Industrier and Ranbaxy.
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