On 19 June 2013, the European Commission announced that it had imposed a fine of € 93.8 million on Danish pharmaceutical group Lundbeck and a total of € 52.2 million on several generic medicines producers over their conclusion of so-called "pay-for-delay" agreements in the antidepressant medicine market. The decision follows the Commission's opening of an investigation in 2010 and its issuance of a formal Statement of Objections ("SO") against the parties back in July 2012 (see VBB on Competition Law, Volume 2010, No. 1 & Volume 2012, No. 7, available at www.vbb.com).

According to the Commission, Lundbeck concluded in 2002 agreements with generic producers of its citalopram to delay entry of cheaper versions on the market, contrary to Article 101 of the Treaty on the Functioning of the European Union ("TFEU"). In theory, entry on the market of generic versions of citalopram should have been possible when Lundbeck's patent in the active substance had expired. However, due to agreements between Lundbeck and the four generic producers, the latter subsequently abstained from entering the market. Of particular concern to the Commission is the fact that Lundbeck offered the generic producers substantial lump sum payments and guaranteed their profits in a distribution agreement. Lundbeck also purchased their stock of generic citalopram for the sole purpose of destroying it.

The detailed breakdown of the fines is the following:

  • Lundbeck: € 93,766,000;
  • Merck KGaA: € 21,411,000 of which € 7,766,843 jointly and severally with Generics UK Ltd;
  • Arrow Group ApS: € 9,975,000 of which € 9,360,000 jointly and severally with Arrow Generics Ltd, of the latter amount of which € 823,735 jointly and severally with Resolution Chemicals Limited;
  • Alpharma: € 10,530,000 for Zoetis Products LLC and Xellia Pharmaceuticals ApS jointly and severally of which € 43,216 jointly and severally with A.L. Industrier AS;
  • Ranbaxy: € 10,323,000 for Ranbaxy Laboratories Limited and Ranbaxy (UK) Limited, jointly and severally.

Lundbeck has already stated that it would appeal the decision before the EU General Court. For its part, the European Federation of Pharmaceutical Industries and Associations ("EFPIA"), which represents the interests of the pharmaceutical industry, has indicated that the Commission's decision would increase legal uncertainty and ultimately harm R&D and the growth of the sector generally. Rather, it identifies the EU's fragmented patent system as a cause for companies' willingness to avoid expensive litigation costs through such patent settlement agreements.

The Lundbeck case echoes the findings of the Commission's 2009 pharmaceutical sector inquiry in which a number of alleged competition problems had been identified, including delays to generic market medicine entry (see VBB on Competition Law, Volume 2009, No. 7, available at www.vbb.com). In its final version of the sector inquiry, the Commission signalled that it would follow closely developments in the pharmaceutical sector, particularly as regards patent settlement agreements that involve what it refers to as a "value transfer" from the innovative to the generic sector. Other Commission investigations are ongoing against a number of pharmaceutical companies including Cephalon and Teva (see VBB on Competition Law, Volume 2011, No. 4, available at www.vbb.com) and Johnson & Johnson and Novartis (see VBB on Competition Law, Volume 2011, No. 11 & Volume 2012 No. 2, available at www.vbb.com).

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