Teva Contests EU Charges at Antitrust Hearing

By Nicole Daniel

On 13 March 2018 Teva appeared at a closed-doors antitrust hearing in Brussels to contest EU pay-for-delay charges (COMP/39.686).

In April 2011 the European Commission opened an investigation against Teva and Cephalon, both pharmaceutical companies, for a 2005 pay-for-delay agreement. This investigation was a consequence of the 2009 sector inquiry of the pharmaceutical sector which had resulted in an EU policy of penalizing pay-for-delay settlements. This sector inquiry identified structural issues and companies’ practices that led to competition distortions. The Commission also recommend a stronger enforcement of patent settlements. Accordingly, these settlements are now monitored by the Commission on an annual basis.

Furthermore, this is the fourth pay-for-delay antitrust case opened after the sector inquiry. In Lundbeck (COMP/39.226), Servier (COMP/39.612) and Johnson & Johnson (COMP/39.685), the respective pharmaceutical companies were fined by the Commission. On 8 September 2016 the General Court upheld the Lundbeck Commission decision, thereby confirming the Commission’s finding that pay-for-delay agreements are a restriction by object, i.e. treating such an arrangement as infringement regardless of whether it has an anticompetitive effect. In the Servier case, the appeal to the General Court is still pending. The Johnson & Johnson case was not appealed.

The Teva case regards modafinil, a sleep-disorder drug. The patents for modafinil and its manufacture were owned by Cephalon but after certain patents expired, Teva entered the market with its generic version for a few months. A lawsuit for alleged patent infringement followed and the litigation in the UK and the U.S. was settled with a world-wide pay-for-delay agreement. In 2005 Teva received $ 125 million to delay the sale of generic modafinil. The agreement saw Teva taking modafinil off the market until October 2012. In the meantime, Cephalon became a subsidiary of Teva.

In the U.S. the same deal was also investigated by the authorities; this probe, however; was concluded with a $ 1.2 billion settlement.

On 17 July 2018 Teva received a Statement of Objections from the Commission. At that time Teva commented that it “strongly disagreed” with the Commission’s approach to patent settlements in the pharmaceutical industry. The Commission’s view is that substantial harm to health service budgets and EU patients may have been caused by the agreement, since it led to higher prices for modafinil.

It is possible for companies to respond in writing and in person to a Statement of Objections. On 13 March 2018 Teva therefore attended a closed-doors hearing in Brussels to respond to the allegations above.

It should be noted that since Teva had already started marketing its generic version of modafinil, this aspect could be an important element in deciding whether the market suffered due to that agreement. In other pay-for-delay cases, the pharmaceutical companies often argued that there was no anticompetitive intent or effect since no generic version, i.e. a rival product, had launched. However, this line of defense might not be applicable here.

It remains to be seen how the Commission will respond to Teva’s arguments.

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