European Commission fines Lundbeck and other pharmaceutical companies for delaying market entry of generic medicines

On 19 June 2013 the European Commission issued a press release stating that it had imposed fines in the amount of € 93,8 million on Lundbeck (a Danish pharmaceutical company) and € 52,2 million on manufacturers of other generic medicines that were producing a cheaper and generic version of Lundbeck’s brand-drug citalopram. The generics manufacturers were notably Alpharma (now part of Zoetis), Merck KGaA/Generics UK (Generics UK is now part of Mylan), Arrow (now part of Actavis), and Ranbaxy. According to the Commission, Lundbeck entered into agreements with these producers in order to delay their entry into the market in breach of Article 101 of the Treaty on the Functioning of the European Union (“TFEU”).

In 2002, citalopram, Lundbeck’s best-selling medicine, was nearing the end of its life-cycle, while its remaining patent protection was limited to certain manufacturing processes. However, as Competition Commissioner Joaquín Almunia noted, when these generic competitors were close to entering the market, Lundbeck did not prevent market entry by successfully enforcing its patent rights. Rather, it simply paid off these other companies. In particular, generic producers agreed not to enter the market in exchange for a substantial sum of money and other inducements (Lundbeck purchased generics’ stock for the sole purpose of destroying it), as well as guaranteed profits in a distribution agreement. Indeed, internal documents discovered by the Commission refer to a “club” being formed and “a pile of $$$” to be shared among the participants.

According to Commissioner Almunia, generics competition brings about substantial benefits in terms of lower prices. In the UK once generic versions of citalopram did enter the market, prices dropped on average by 90%. Furthermore he stressed that “…once the patent over the molecule has lapsed, price competition between the pharmaceutical companies that invented the original medicines and the generic makers plays a crucial role” and that “…competition by generics is also a dynamic force which stimulates pharmaceutical companies to continue to invest in research and to develop innovative treatments, as they cannot rely forever on their blockbuster products.”

Commissioner Almunia confirmed that these so-called “pay-for-delay” deals constitute severe infringements of EU competition law, and must be sanctioned accordingly: “It is unacceptable that a company pays off its competitors to stay out of its market and delay the entry of cheaper medicines. Agreements of this type directly harm patients and national health systems, which are already under tight budgetary constraints. The Commission will not tolerate such anticompetitive practices”. [Gabriele Accardo and Anthony Reda]