CMA fines pharma companies in pay for delay case

The Competition and Markets Authority has fined pharmaceutical companies including GlaxoSmithKline (GSK) £45 million for their agreement to delay the sale of generic versions of paroxetine, a GSK antidepressant drug.

The fine follows a five year investigation and comes three years after the OFT issued a statement of objections.

GSK bears the largest portion of the fine (£37.6 million) and has stated that it is considering an appeal.  Merck has been fined £5.8 million and companies in the Allergan group are jointly and severally liable for a £1.9 million penalty.

The agreements were entered into in 2001 and 2004 to settle complex patent disputes.  According to statements from GSK they enabled the NHS to save over £15 million in savings by facilitating early entry of a generic paroxetine product. The CMA, however, considers that but for the agreements independent generic entry could have occurred earlier than 2003 when it prompted a 70 per cent fall in prices over the next two years.

The CMA’s decision echoes recent enforcement activity at EU level where the European Commission is maintaining the scrutiny of settlement agreements that it signalled in its pharmaceutical sector inquiry.  The Commission has also carried out a series of patent settlement monitoring exercises since the sector inquiry reinforcing its continued interest in this area.  In parallel, the Commission has issued antitrust decisions in cases involving settlement agreements in the pharmaceutical sector (including cases involving Johnson & Johnson, Novartis, Servier and Lundbeck).

The details of the CMA’s analysis are not yet public and it will be interesting to see its reasoning.  Patent settlements involving a transfer of value (e.g. a payment) from the originator to the generic company in return for delayed entry tend to attract antitrust scrutiny, but these cases are not always straightforward.  Important questions need to be asked such as whether the settlement went beyond what was necessary to settle the dispute, whether it extended beyond the scope of the relevant patents and whether the foregone profits of the generic companies had any bearing on the settlement terms.

CMA press release, 12 February 2016