Pharma clearly needs to refashion its strategy to protect branded drugs against generics. Two days ago the U.S. Supreme Court said drugmakers can be sued for pay-for-delay deals, and now the European Commission (EC) has fined Lundbeck and a cadre of companies €146 million ($195.5 million) for the same thing. The EC action was the first of its kind for this antitrust regulator, but it made it clear it will not be its last.
The EC fined Denmark's Lundbeck €93.8 million ($125.6 million) for working out agreements more than a decade ago with competitors like Ranbaxy Laboratories and Merck KGaA to hold off launching their copies of its blockbuster antidepressant, Celexa. The EC said the deals hurt patients and government payers by keeping prices artificially high. When generics of citalopram finally hit the market, the cost of the drug dropped by 90%, it said. "It is unacceptable that a company pays off its competitors to stay out of its market and delay the entry of cheaper medicines," said Joaquín Almunia, the European competition commissioner.
Merck was fined €21.4 million, Ranbaxy €10.3 million, Arrow Group, now part of Actavis ($ACT) €9.9 million, and Alpharma, now part of Zoetis, €10.5 million. Some other companies will share those fines.
Drugmakers have always said the agreements do not violate laws, or hurt competition, because the generics come on the market when the patents expire. The deals are just a settlement that provides generics makers an incentive to wait for that to happen and branded drugmakers some relief from litigation. Lundbeck and Ranbaxy told Bloomberg they intend to appeal, and Merck is considering it.
But the two-continent message this week was a double whammy for drugmakers. In a 5-3 vote, the U.S. Supreme Court ruled that the Federal Trade Commission, and others, can sue to challenge brand-name drugmakers' patent settlements with the generics companies that they usually see as their nemesis. It did not say the deals are automatically anticompetitive, but it shot down a lower court ruling that protected them from these challenges. According to The New York Times, the EC's Almunia cheered that decision and suggested the top EC court should do the same.
Almunia also made clear that the EC has other drug companies in its anticompetitive sights. The EC pointed to two other objections it has made about the practice. In January, it challenged Johnson & Johnson ($JNJ) and Novartis ($NVS) for allegedly colluding to hold off the launch of a generic of J&J's patch containing the painkiller fentanyl. It also pointed to last year's objection to a deal between French drugmaker Servier and several generics companies to hold off launch of the heart drug, perindopril. The U.K. has also moved on the issue and in April accused GlaxoSmithKline ($GSK) of working a deal to delay a generic of the antidepresant Seroxat--Paxil in the U.S.
The European Commission did say that the majority of arrangements between drugmakers and generics companies are okay. So while these actions in Europe and the U.S. may make drugmakers more cautious, it is unlikely to stop them from dropping the practice altogether. As Sanford C. Bernstein's Ronny Gal wrote following the Supreme Court ruling, "The industry is full of smart lawyers who could structure agreements to avoid visible reverse payments while transferring value between companies."
- here's the release
- see the New York Times' article
- read the Bloomberg story