On 19 June 2013, the European Commission announced a fine of €93.8 million for H. Lundbeck A/S (Lundbeck) and a further €52.2 million of fines levied against a number of other pharmaceutical companies. The fines were imposed in connection with Lundbeck and the companies conspiring to delay entry into the market of cheaper generic versions of Lundbeck’s branded medicine, citalopram.

BACKGROUND

After Lundbeck’s basic patent for the citalopram molecule expired, it was only entitled to the more limited protection provided by the related process patents it held. At this point, generic versions of citalopram could enter the market.

On 25 November 2008, the Commission announced that it had conducted unannounced inspections of a number of pharmaceutical companies in the course of investigating whether or not those companies had been involved in restrictive behaviour in breach of Article 101 of the Treaty on the Functioning of the European Union (TFEU) and/or abused a dominant market position in breach of Article 102 of the TFEU.

Specifically, the Commission was concerned that the companies in question may have adopted practices intended to prevent the entry of a generic version of citalopram on to the European market. Further unannounced inspections to investigate these suspected breaches of European competition law were carried out in October and December 2009.

On 7 January 2010, the Commission announced that a formal investigation into the matter had been opened to determine whether or not agreements entered into between Lundbeck and producers of generic equivalents hampered market entry of generic versions of citalopram. Following this investigation, on 25 July 2012 the Commission issued a statement of objections to Lundbeck and a number of pharmaceutical companies that entered into agreements with Lundbeck: Merck, KGaA, Generics UK, Arrow, Resolution Chemicals, Xellia Pharmaceuticals, Alpharma, A.L. Industrier and Ranbaxy. The Commission was of the opinion that Lundbeck had concluded agreements to hinder the market entry of generic versions of citalopram in violation of Article 101 of the TFEU. The Commission took the view that this behaviour had the potential to cause significant consumer harm as entry of generic citalopram was delayed by up to two years, causing the prices paid for the medicine to remain artificially high during this period.

DECISION

The Commission found that Lundbeck entered into agreements with Alpharma (now part of Zoetis), Merck KGaA/Generics UK (now part of Mylan), Arrow (now part of Actavis) and Ranbaxy to delay the market entry of generic versions of citalopram, rather than competing with Lundbeck.

Documents on the Commission’s file refer to a citalopram "club" with "a pile of $$$" to be distributed between its members. The Commission determined that Lundbeck paid substantial lump sums, purchased generic stocks for destruction and offered guaranteed profits in distribution agreements as inducements to the companies not to compete. The Commission found that these agreements were different to other patent related settlements where generic producers are not paid simply to delay the launch of a product.

The Commission drew attention to its observation that generic competition drives medicine prices down, benefiting patients. In this case, the Commission commented that in the United Kingdom, prices dropped on average by 90 per cent after generic versions of citalopram entered the market.

The Commission imposed the following fines:

  • Lundbeck: €93,766,000
  • Merck KGaA: €21,411,000, of which €7,766,843 is shared jointly and severally with Generics (UK) Limited
  • Arrow Group ApS: €9,975,000, of which €9,360,000 is shared jointly and severally with Arrow Generics Limited, with €823,735 of this second figure being shared jointly and severally with Resolution Chemicals Limited
  • Zoetis Products LLC and Xellia Pharmaceuticals ApS: jointly and severally €10,530,000, of which €43,216 is shared jointly and severally with A.L. Industrier AS
  • Ranbaxy Laboratories Limited and Ranbaxy (UK) Limited: jointly and severally €10,323,000.

Lundbeck has indicated that it intends to appeal the decision.

COMMENT

The Commission has recently issued two other statements of objections concerning similar pay-for-delay scenarios in the pharmaceutical sector. The commission has not yet issued its decisions in respect of these investigations, one relating to the cardio-vascular medicine perindopril and the other the pain reliever fentanyl, but the Lundbeck fines will not be welcomed by the parties involved in these pending cases.