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Nine pharma firms face EU fines over pay-for-delay deals

Lundbeck could be the hardest hit with a maximum penalty of €240m

EU flagNine pharmaceutical companies are facing fines over deals to prevent the arrival of generic competition, with Danish firm Lundbeck said to be facing a 'sizeable' financial penalty. 

Lundbeck, Merck KGaA, Generics UK, Arrow, Resolution Chemicals, Xellia Pharmaceuticals, Alpharma and Ranbaxy are all in line for financial penalties from the European Commission (EC), according to Reuters.

This is all due to so-called 'pay-for-delay' deals, where pharma firms developing branded drugs make payments to a generic company in return for that firm agreeing to delay its entry into the market.

This means the generic firms are compensated for delaying the sale of their drugs, and pharma companies can keep artificially bringing in revenue from their branded medicines after patents have expired. 

This may benefit the firms involved, but can cost patients and healthcare providers billions in extra money it shouldn't need to pay out.

European officials told Reuters the size of the fine will be “sizeable” in Lundbeck's case.

“The fine for Lundbeck is expected to be significant, less so for the others,” said one of the people, who declined to be identified because of the sensitivity of the matter.

The Commission can officially fine a company up to 10 per cent of its global revenue for breaching antitrust laws, which in Lundbeck's case would be up to €240m, based on last year's revenue.

The companies involved and the Commission have refused to comment, with Lundbeck saying it has not been told of any such fine.

On-going practice

The potential new fines follow an inquiry launched into the practice in 2009 by the EC - the European Union's anti-trust regulator - in a bid to crack down on the industry's pay-for-delay deals. 

It recently found that consumers are paying up to 20 per cent more than necessary for some medicines, had a legitimate generic not been delayed.

In April, GlaxoSmithKline was accused by the UK's Office of Fair Trading of setting up delays with several generics firms in the UK over the sale of copycat forms of its drug Seroxat.

If found guilty the firm could be fined 10% of its global revenue - a potential loss of over £2.6bn. 

The practice has been a particular problem in the US, where a Federal Trade Commission's (FTC) staff report found these deals involved 22 brand-name pharma products in 2011, with combined annual US sales of about $9.3bn.

Much like the EC, the FTC is now increasing its efforts to combat these deals, and have even challenged a number of patent settlement agreements in court, contending that they are anti-competitive and violate US antitrust laws.

4th June 2013

From: Regulatory

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