European Commission targets alleged ‘pay-for-delay’ with pharma fines

The European Commission’s competition directorate has levied fines totalling €146 million ($195 million) against originator pharmaceutical company Lundbeck and several producers of generics drugs.

The commission  said that in 2002, Denmark’s Lundbeck agreed with generic rivals to delay the market entry of generic alternatives to its anti-depressant citalopram in contravention of Article 101 of the Treaty on the Functioning of the European Union, which prohibits anti-competitive agreements.

The patent for the molecule citalopram had previously expired, and the settlement related to litigation around process patents covering the drug. The commission described these patents as offering “limited protection” to the drug.

Commission Vice President Joaquín Almunia said: “The practices we are sanctioning are simply unacceptable. By today's decision we are confirming 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.”

But in a strongly worded statement, Lundbeck rejected the allegations, and confirmed it will appeal against the ruling. The company, which was fined €93 million, said that it strongly disagrees with the decision, which “asserts that any settlement agreements involving a transfer of value from an originator to a generic company is a restriction of competition and the value transfer reflects an understanding that the patent is invalid or weak.”

The company rejected this approach. “There is no question about the validity of Lundbeck's process patents at issue.  Patent settlement agreements are efficiency enhancing and legitimate when there are bona fide grounds for dispute.”

In 2009, well after the settlement in question had been concluded, the European Patent Office’s Board of Appeal upheld the validity of Lundbeck’s patent covering the purification of citalopram, one of the process patents dealt with under the settlement.

Lundbeck said in its statement: “Over 600 meticulous analyses of the generic citalopram demonstrated that they were all produced with infringing processes. Furthermore, in many concurrent documents the generic companies acknowledged that their products violated Lundbeck's patents.”

When asked by LSIPR to comment further, commission competition spokesman Antoine Colombani underlined that the commission made its assessment under EU competition law. “It has not assessed the underlying patent dispute or taken a stance on that dispute: the commission's decision makes no judgment on the validity of Lundbeck's process patent,” he said. “In the decision we conclude that, in light of the substantial evidence we have, the generic competitors had a real chance to enter the market. There were various possible routes to the market: for example, they could have tried to offer medicines using different processes or to overturn the patent in question. They chose not to do so.”

Ian Forrester QC, competition partner at White & Case LLP in Brussels who has represented a large number of pharmaceutical groups, was surprised by elements of the case, and noted that when the settlements in question were concluded 10 years ago, “no one would have worried that there was a competition issue,” especially because according to Lundbeck, the agreements were actually reviewed by antitrust experts and given a clean bill of health.

He added that the commission’s policy of challenging so-call pay-for-delay deals “now appears to extend to settlement of any patent litigation, even if the patent is a valid patent.”

The commission’s decision follows hard on a US Supreme Court ruling, released on Monday, which found that the US Federal Trade Commission should be able to challenge pay-for-delay settlements on antitrust grounds, albeit not on a ‘quick look’ at the case. The FTC had argued that pay-for-delay deals should be presumptively illegal, but the court rejected that approach, saying that a ‘rule-of-reason’ should be applied based on the specific facts of the case.

Forrester added: “I would not agree that the judgment of the US Supreme Court endorses the approach adopted by the commission in Lundbeck.”

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