EU keeps rolling out pay-for-delay penalties with plan to fine Servier, Teva

European antitrust regulators may have been a little late to the party when it comes to pay-for-delay actions but are making up for lost time. Sources are saying they will levy fines against French drugmaker Servier and Teva Pharmaceutical Industries ($TEVA) next month for delaying the launch of generic blood pressure meds. It will be the third time in about a year that they have levied antitrust penalties over deals drugmakers struck to delay generic launches.

Sources tell Reuters and BusinessWeek that other generic drugmakers may also feel the financial wrath of the EU for the delay of Servier's blood pressure drug perindopril. The European Commission in July 2012 charged Servier, along with Teva, Unichem and a subsidiary, Krka, Lupin and Matrix, which is now part of Mylan ($MYL), for working out deals that it believes kept generics off the market. That cost consumers significant money. Reuters reported that the fines won't add up to more than €300 million ($407 million), and could be less.

The EU in June 2013 levied fines totaling €146 million ($195.5 million) against Denmark's Lundbeck, Merck KGaA and a some other drugmakers for holding up generics of its blockbuster antidepressant, Celexa. Then in December they smacked Johnson & Johnson ($JNJ) and Novartis ($NVS) with fines of €16.3 million, or about $22 million, for keeping a generic version of a powerful painkiller off the market.

The illegality of the whole pay-for-delay proposition has been hotly contested by drugmakers in the EU and the U.S. Drugmakers argue that settling patent litigation under specific terms is a way to set aside uncertain and costly lawsuits over their patents. They contend it does not keep patents off the market any longer than their patents would have. BusinessWeek points out that by working out a deal with Servier in 2006, the Slovenian drugmaker Krka was able to sell a generic in some Eastern European countries but agreed to stay out of the U.K. The company told BusinessWeek it believed it had a right to avoid the risks of litigation and had no "duty to take an action to revoke the patent granted by the European patent authorities."

EU regulators, looking at it from the viewpoint of government payers, are not much impressed with those arguments. In the Lundbeck case, they say that by keeping generics of citalopram off the market it kept prices artificially high. When generics finally hit, 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," Joaquín Almunia, a European competition commissioner said of that case.

The U.S. for years has dogged drugmakers over these deals and one case finally made its way to the U.S. Supreme Court. A year ago, in a 5-3 vote, the top 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.

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