'Pay for delay' agreements in anti-depressant drugs market were anti-competitive, says European Commission

It is the first case in which the Commission has investigated 'pay for delay' agreements and their relationship with competition law.

The Commission issued a 'statement of objections' to Lundbeck, as well as the firms Merck KGaA, Generics UK, Arrow, Resolution Chemicals, Xellia Pharmaceuticals, Alpharma, AL Industrier and Ranbaxy that belonged to the four generics groups, setting out its "preliminary view" that the firms had entered into anti-competitive agreements concerning the drug 'citalopram' .

The Commission said that Lundbeck had made "direct payments" and also bought its rivals products in order to destroy them even though the generic products were not restricted from being entered onto the market in competition to Lundbeck's product.

"The Commission takes the preliminary view that Lundbeck concluded agreements with generic companies to prevent the market entry of competing generic versions of its best-selling medicine citalopram," the Commission said in a statement. "Generic entry became in principle possible when certain of Lundbeck's citalopram patents had expired. But the companies entered into agreements that foresaw substantial value transfers from Lundbeck to its four generic competitors, who subsequently abstained from entering the market with generic citalopram."

"The value transfers included direct payments from Lundbeck to the generic competitors and also occurred in other forms, such as the purchase of generic citalopram stock for destruction or guaranteed profits in a distribution agreement," it added.

The European Commission is responsible for investigating agreements that restrict competition and have an effect on trade between EU Member States. It can fine firms that act in breach of competition laws, such as through forming anti-competitive agreements.

Under EU competition rules, "agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between member states" are generally prohibited if they "have as their object or effect the prevention, restriction or distortion of competition within the internal market".

The Commission is also currently investigating whether Servier has acted anti-competitively in relation to perindopril, a drug used for treating hypertension and heart problems and a statement of objections in relation to this investigation is expected shortly.

The Commission has also published a report (15-page / 242KB PDF) into its monitoring of patent settlements in the pharmaceutical sector during 2011. In its findings the regulator said that companies were increasingly forming settlement agreements over patents in the sector, with 120 such cases being recorded last year compared to an "annual average" of 28 spanning the period between the beginning of 2000 and the middle of 2008.

Of the 120 settlements that the Commission found, 70% did not limit market entry for generic products at all. However, in 11% of cases there was a "value transfer" from a pharmaceutical patent holder to a generic company, it said. The Commission said it would "continue paying particular attention to this area and to examine such patent settlements."