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Vice President of the European Commission responsible for Competition Policy
Commission fines Lundbeck and other pharma companies for delaying market entry of generic medicines: statement by Vice-President Almunia
Brussels, 19 June 2013
Today the European Commission has found and sanctioned infringements of antitrust rules by several pharmaceutical companies. These companies entered into anticompetitive agreements to delay the entry of generic medicines on the market.
We have imposed fines totalling 145 million euros, including 93 to be paid by the Danish company Lundbeck.
Let me briefly explain the facts.
Citalopram is a medicine developed by Lundbeck to treat the symptoms of major depression. In 2002, this product, which was Lundbeck's best-selling medicine, was nearing the end of its life-cycle. The patent protection for the molecule had lapsed and the remaining patent protection was limited to certain manufacturing processes. At that point, it therefore became possible for competitors – namely, Alpharma, Merck, Arrow and Ranbaxy - to enter the market with generic versions of citalopram. One of them started to sell generic citalopram while others were all preparing to launch their own versions of the product.
However, when these generic competitors were close to entering the market, Lundbeck, the so-called "originator" of the medicine, agreed with each of them that they would stay out against payment. But Lundbeck did not prevent market entry by successfully enforcing its patent rights; rather, it simply paid other companies so that they would not compete, giving them the equivalent of what they would have earned if they had entered the market. This means they shared the monopoly rents among themselves: one internal document even speaks of this group of companies as a "club" and refers to "a pile of dollars" being shared among participants.
As you can imagine, all this occurred at the expense of patients who were deprived of access to cheaper medicines. It also harmed our public health systems, who for a longer period had to artificially bear the costs of an expensive medicine – and one of the most widely prescribed antidepressants. We are not talking about a small difference in price here: in the UK once generic versions of citalopram did enter the market, prices dropped on average by 90%.
The practices we are sanctioning are simply unacceptable. By today's decision we are confirming that these so-called "pay-for-delay" deals constitute severe infringements of EU competition law. They may cause severe harm to patients and taxpayers and must be sanctioned accordingly.
The sanctions we have set are proportionate to the characteristics of the infringement we found. We applied our guidelines on the setting of fines: their level takes into account, in particular, the gravity and the duration of the breach of competition rules. These fines aim both to sanction the infringers and to deter companies from engaging into such anticompetitive practices.
By the way, we are in good company in this approach: in a long-awaited ruling, the US Supreme Court has just concluded two days ago that these "pay for delay" deals should be open to antitrust scrutiny. As the judge noted in its opinion, under such agreements "the patentee and the challenger gain, the consumer loses". And in other sectors the EU Court of Justice has clearly confirmed that paying competitors to keep them out of the market is a serious restriction of competition.
The pharmaceutical sector is, literally, essential to our lives. Innovation can bring new or more effective cures and needs to be protected. But once the patent over the molecule has lapsed, price competition between the pharmaceutical companies that invented the original medicines and the generic makers plays a crucial role.
Thanks to competition, patients can have access to affordable healthcare: through generics they can get the same treatment significantly cheaper. It also ensures that public health systems can remain economically sustainable in these times of budgetary constraints. Pharmaceutical expenditure absorbs significant portions of budgets of states and households. It is therefore crucial that European citizens are not deprived of cheaper health bills by anticompetitive practices.
Moreover, competition by generics is also a dynamic force which stimulates pharmaceutical companies to continue to invest in research and to develop innovative treatments, as they cannot rely forever on their blockbuster products.
For all these reasons, the practice of entering into anticompetitive agreements to delay the entry of generic medicines should come to an end once and for all. Since the Commission's enquiry into the pharma sector in 2009, we have been monitoring patent settlements between pharmaceutical companies. These settlements have grown a lot over the last few years.
The overwhelming majority of such agreements are entirely legitimate as they do not involve any payments by originators to exclude generic companies. By avoiding the costs of expensive litigation they may bring real benefits. We have monitored hundreds of patent settlements over the last few years. The Commission only pursues a harmful and small portion of settlements.
Paying competitors to stay out of the market at the expense of European citizens has nothing to do with the legitimate protection of intellectual property: it is an illegal practice and the Commission will fight against it. We have other investigations ongoing and more decisions in this field are likely before the end of my mandate.