European Commission fines pharmaceutical companies in first “pay-for-delay” case

United KingdomBelgium

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The European Commission has announced fines totalling €145m euros on five pharmaceutical companies who were found to have entered into anticompetitive agreements to delay the entry of generic medicines within the European Union. The bulk of the fines went to the Denmark-based pharmaceutical company, Lundbeck, with the remainder being imposed on generic manufacturers, Alpharma, Merck KgaA/Generics UK, Arrow and Ranbaxy. (See the Commission's press release here.)

The case concerns a lucrative anti-depressant, Citalopram, which Lundbeck developed in the late 1980's. By 2002, Lundbeck's patent protection for Citalopram had all but expired and a number of generic companies were getting ready to enter several different European national markets.

However, the Commission found that in order to protect its monopoly profits from Citalopram (drug prices tend to drop by an average of 90% once generic entry occurs), Lundbeck agreed with each of these potential market entrants that they would not launch the product in competition with Lundbeck in exchange for payment. According to a speech by Joaquín Almunia given on 19 June 2013, the documents seized by the Commission include reference to these companies as a "club" who shared a "pile of dollars". (See here.)

This is the first fining decision flowing from the European Commission's extensive pharmaceutical sector inquiry of 2008/2009, with two others in the pipeline. Almunia's speech emphasised the major policy drivers behind the decision, in particular focussing on how delays to the entry of generic providers precludes the availability of affordable healthcare for both patients and public health systems.

The complex interplay between originator pharmaceutical companies and generic manufacturers has long been a subject of controversy both in Europe and the USA. Given the extensive litigation which continues to take place in the United States regarding this topic (see a previous note here), and the novel nature of this decision, it seems likely that one or more of the companies fined will choose to appeal to the European Courts.