Patent settlement agreements and anti-competitive behaviour

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The pharmaceuticals sector is no stranger to the attention of the competition authorities. At the EU level a report of the European Commission published in 2009 found that the pharmaceuticals market was not functioning as it should and this was largely attributable to delays in the entry of generic medicines.

An illustration of this came in 2013 when the Commission fined Lundbeck €93.8 million and its generic competitors €52.2 million following an investigation which found that Lundbeck had concluded agreements with generic competitors to prevent the market entry of competing generic versions of its drug citalopram (the antidepressant) following the expiry of its patents. Essentially, the Commission considered that Lundbeck had paid substantial sums to the generic competitors in return for a delay in launching generic products onto the market.

About the same time, the Office of Fair Trading, whose competition law functions have since been assumed by the Competition and Markets Authority, announced that it had sent a statement of objections to GlaxoSmithKline (GSK) and three generic companies alleging that they had entered into agreements to settle patent infringements actions, which provided for a delay in the launch of generic versions of the drug paroxetine, in return for substantial payments.

The CMA investigation has now run its course, culminating in total fines of just under £50 million including a fine of £37.6 million against GSK. The CMA found that the agreements effectively prevented the generic competitors from entering the paroxetine market and deprived the NHS of price falls averaging 70 per cent.

This is the first UK decision to consider the application of competition law to patent settlement agreements. Lundbeck, incidentally, is appealing against the Commission decision in its case and judgment is expected later this year.

It is possible that aggrieved third parties – notably the NHS – could institute follow-on damages against Lundbeck, although whether that happens remains to be seen.