In the latest move by regulators to clamp down on so-called pay-to-delay deals, the European Commission has fined Lundbeck and four other drugmakers for reaching agreements to block entry of generic versions of the best-selling Celexa antidepressant. Lundbeck was fined $125.6 million, while the others - including Ranbaxy Laboratories - paid a total of nearly $70 million.
After the basic patent that Lundbeck held on the molecule had expired, the drugmaker only retained a number of related process patents that provided limited protection. And so, Lundbeck struck deals in 2002 with generic rivals to refrain from selling copycat versions in return for "substantial payments and other inducements amounting to tens of million of euros," according to the EC.
The regulator cited internal documents that refer to a "club" being formed and "a pile of $$$" to be shared, and charged that Lundbeck paid "significant lump sums," purchased stock from the generic drugmakers for the "sole purpose of destroying it," and offered guaranteed profits in a distribution agreement.
"It is unacceptable that a company pays off its competitors to stay out of its market and delay the entry of cheaper medicines," says EC vp Joaquin Almunia in a statement. "Agreements of this type directly harm patients and national health systems, which are already under tight budgetary constraints. The commission will not tolerate such anti-competitive practices."
The move comes amid increased scrutiny of these deals on both sides of the Atlantic and also marks the first time that the EC, which has been investigating such settlements for several years, has levied a fine. Over the past year, the regulator has twice issued what it calls a 'statement of objection' to other drugmakers (see here and here).
And earlier this week, the US Supreme Court ruled that drugmakers can face lawsuits over these deals, although they should not necessarily be assumed to be illegal. The decision largely vindicated the argument by the US Federal Trade Commission that such settlements are anti-competitive and cost US consumers some $3.5 billion annually (more here).
However, the court noted that there may be justifications for payments. "Where a reverse payment reflects traditional settlement considerations, such as avoided litigation costs or fair value for services," the court wrote, "there is not the same concern that a patentee is using its monopoly profits to avoid the risk of patent invalidation or a finding of noninfringement."
In a strongly worded statement, Lundbeck took exception to the EC conclusion and seemed to be making this argument. The drugmaker insisted it "acted transparently and in good faith trying to protect its patents," and vowed to appeal the fine. Lundbeck "strongly disagrees with the commission's decision... Any setttlement 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 approach is erroneous... Patent settlement agreements are efficiency enhancing and legitimate when there are bona fide grounds for dispute."
Ranbaxy also intends to appeal, according to Business Today. Besides Ranbaxy, the other drugmakers that were fined include Merck KGgA; Generics UK, which is a unit of Mylan Laboratories; Zoetis Product and Xellia Pharmaceuticals, which are now owned by Novo A/S; and AL Industrier.
STORY ENDS HERE
pic thx to donhankins on flickr