The U.K. Office of Fair Trading (“OFT”) jumped on the ”pay-to-delay” bandwagon last week when it issued a “Statement of Objections,” indicating a potential future adverse decision against GlaxoSmithKline (“GSK”) and several generic rivals under the U.K. Competition Act of 1998 in connection with previous patent litigation settlements.  As part of the settlements, GSK made “reverse payments” to the generic companies, which agreed to a delayed entry of generic paroxetine (also known as Seroxat and Paxil) into the U.K. market.   The U.K.’s actions only increases the stakes for branded and generic drug manufacturers awaiting the Supreme Court’s decision (expected in June) on the legality of reverse payment patent litigation settlements under the U.S. antitrust laws.

Background

The depression drug Seroxat, one of GSK’s best selling medications during the 2001-2004 time period in question (and which is more commonly known in the U.S. as Paxil), is at the heart of the recent OFT regulatory action.  Three generic manufacturers had entered into settlement agreements with GSK following their efforts to produce and sell generic equivalents of the paroxetine-based drug in the U.K. market and GSK’s response to file patent infringement suits.  In addition to GSK, the three generic manufacturers named in the OFT regulatory action are:

  • Alpharma: Actavis UK Limited, Xellia Pharmaceuticals ApS and Alpharma LLC
  • GUK: Generics (UK) Limited and Merck KGaA
  • IVAX: IVAX LLC and Norton Healthcare Limited

“The OFT’s provisional view is that these agreements included substantial payments from GSK to the generic companies in return for their commitment to delay their plans to supply paroxetine independently,” according to the OFT press release.

The U.K. Competition Act 1998 prohibits certain anti-competitive practices that may have a negative impact on trade in the U.K.   There are prohbitions against companies using their “dominant” market position to stifle competition and monetary fines for “infringement” of the Act, which can add up to 10 percent of a company’s worldwide revenue.  GSK and the three generic manufacturers now have an opportunity to provide the OFT with written and oral representations defending their respective position.  Although the OFT’s Statement of Objections itself is confidential, interested parties may request a public version from the OFT.

Observations

I recently wrote on the oral arguments before the Supreme Court last month in the “pay for delay” case from the Eleventh Circuit, Federal Trade Comm’n v. Actavis Inc., et alSee “Pay for Delay and Drug Design Defect Cases Take Center Stage at Supreme Court.”  In a nutshell, the FTC has been arguing for more than a decade that Hatch-Waxman patent litigation settlements in which the branded-innovator manufacturer (and patent holder) makes payment to a generic manufacturer (and alleged infringer) in exchange for delayed generic market entry are inherently anticompetitive and illegal.  Although the Supreme Court’s decision and reasoning in Actavis might influence future OFT actions, GSK & Co. will have no choice but to contend with OFT’s Statement of Objections to the paroxetine settlements in the presentClick on the link to the GSK Statement in Response to OFT Statement of Objections to read the company’s initial response to the OFT regulatory action.