Glaxo balks at U.K.'s $54M pay-for-delay fine

London

GlaxoSmithKline’s U.K. offices have taken exception to a major multimillion-pound fine levied by the country’s market watchdog, saying its conduct was “objectively justified.”

Back in February, the Competitions and Market Authority (CMA) slapped a £37.6 million ($54 million) fine on Glaxo ($GSK), after finding the company guilty of a pay-for-delay scheme for its now off-patent antidepressant Seroxat/Paxil (paroxetine), to stop generics from flooding the country and undercutting its revenue.

The CMA contends that between 2001 and 2004, GSK set up deals and paid around $72 million to a host of generic companies to delay selling their copycat versions of its medicines--artificially allowing GSK to keep flogging its own, much pricier meds to the state-run NHS.

GSK said in its appeal that, among other errors, the CMA had “erred in finding that GSK’s conduct had the likely effect of restricting competition [and that] GSK’s conduct was objectively justified.”

The company implicitly admits it should have been fined, but argued that “any fine imposed on GSK should have been substantially smaller.”

The company is now asking for a tribunal to “annul or substantially reduce the fine imposed on GSK; and order the CMA to pay the costs incurred by GSK in this appeal.” A tribunal date has not yet been agreed.

The generic companies named in the original case against GSK, including Germany’s Merck, Generics UK and others, were also fined around $7 million together. They, too, are appealing those decisions.

This comes a week after Pfizer ($PFE) was hit with a £10,000 penalty from the CMA for not giving the regulator a set of important documents, which were meant to clear it of any wrongdoing in a separate case alleging that it helped to hike the cost of its now off-patent epilepsy drug Epanutin (phenytoin sodium) in the U.K. If found guilty this August, the U.S. giant could be fined 10% of its total $48.9 billion 2015 revenue.

This would be even larger than the record $3 billion GSK was charged by the U.S. Justice Department in 2012. The case, related to “marketing abuses,” included allegations around the off-label promotion of its antidepressants Seroxat/Paxil and Wellbutrin for unapproved uses, such as for the treatment of children and adolescents and for sexual dysfunction.

This also included a $300 million civil settlement for failing to provide best prices and underpaying rebates owed under the Medicaid drug program. GSK never admitted liability to this, however.

In the U.S., the Federal Trade Commission (FTC) believes pay-for-delay deals cost Americans around $3.5 billion each year, and has ramped up its efforts in recent years to put a stop to this strategy. Last year it fined Israeli generics giant Teva $1.2 billion in a pay-for-delay case.

- check out GSK’s appeal