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Vice President of the European Commission responsible for Competition Policy
Statement on EbS, Strasbourg
10 December 2013
Today the Commission adopted a decision against two pharmaceutical companies, Johnson & Johnson and Novartis, and imposed fines totalling 16 million euros. These companies entered into an anticompetitive agreement to delay the market entry of a generic version of the pain-killer Fentanyl.
Fentanyl is a pain-killer produced and sold by Johnson & Johnson that is 100 times more potent than morphine. Fentanyl was originally developed in the 60's. It is applied as a patch to the skin. Doctors prescribe it notably to cancer patients to relieve them from severe pain.
In 2005, one Dutch subsidiary of Novartis was preparing to sell its own generic version of fentanyl, which was no longer protected in the Netherlands. The company had produced the packaging material, obtained the necessary authorisations, and was about to launch its product.
However, rather than competing against each other, the companies struck a deal: Novartis would abstain from entering the Dutch market in exchange for – and here I quote from internal documents – "a part of [Johnson & Johnson's] cake". The aim of the deal was – I quote again – "not to have a generic on the market and in that way to keep the high current price".
So, in July 2005, instead of actually starting to sell the generic version, Novartis concluded a so-called "co-promotion agreement" with Johnson & Johnson. The agreement gave Novartis strong incentives not to enter the market.
Under the pretext of "co-promotion" Johnson & Johnson would make monthly payments to Novartis for as long as there was no generic on the market. But Novartis did very little or nothing at all to promote the drug. Clearly, Johnson & Johnson was paying its competitor to keep the generic out of the market. Indeed, those payments exceeded the profits that Novartis expected to obtain from the generic product. The deal was terminated in December 2006 because of the imminent launch of a generic fentanyl patch by another company. This shows that the agreement was not about marketing, but about sharing monopoly profits.
In sum, for seventeen months, Dutch patients who needed this powerful pain-killer had to pay an artificially high price for it – probably more than 30% higher. Part of the extra charge was also borne by the national health system, in other words by taxpayers.
Such practices are simply intolerable. They breach EU competition rules and the Commission will keep fighting them.
Indeed, competition in the pharmaceutical sector brings huge benefits to patients and to welfare systems. Competition by generic medicines, in particular, gives access to the same treatment at a much lower cost. This is of particular significance today when public budgets are under strain. In fact, pharmaceutical expenditure absorbs an important share of the budgets of both states and households.
In this context, generics make a key contribution to ensuring affordable access to healthcare for all European citizens. These medicines are cheaper for patients, and they also help Member States to preserve an inclusive and sustainable welfare state.
In addition to that, competition by generics, gives an incentive to pharmaceutical companies to invest in R&D and develop new original medicines.
Last June, I announced the decision by the Commission to impose fines totalling 145 million euros on Lundbeck and other pharmaceutical companies. The agreements we sanctioned delayed the market entry of generic citalopram, a blockbuster antidepressant. That case involved a so-called "patent settlement", in contrast to today's decision which does not relate in any way to intellectual property matters.
However in both cases the logic is the same: a company was paying its competitor to delay the entry on the market of the generic version of its drug.
Today's decision is yet another warning that these so-called "pay for delay" agreements are illegal in the European Union. Companies across the sector should think twice before entering into deals of this type, as they will be pursued and eventually sanctioned through the enforcement of antitrust rules.
To conclude, let me briefly mention that we have cases in the pipeline which we are actively investigating. In 2012, we sent a Statement of Objections to Servier and several generic companies concerning the cardio-vascular medicine perindopril. We are also investigating Cephalon and Teva concerning modafinil, a drug used to treat sleeping disorders.
Preserving competition in the pharmaceutical sector makes a real difference to people's lives. This is why antitrust enforcement in the pharmaceutical sector is a top priority for me.