CMA Fines Pharmaceutical Companies £45 million for Pay-For-Delay Deals

The Competition and Markets Authority (CMA), a UK-based non-ministerial department monitoring market competition, has fined multiple pharmaceutical companies £45 million ($64.3 million) for pay-for-delay deals.

The US Federal Trade Commission defines pay-for-delay deals as agreements between drug companies to “stifle competition from lower-cost generic medicines.” Companies may offer patent settlements to companies in exchange for not bringing lower-cost generic drugs to market. CMA says these agreements “potentially deprived the National Health Service of the significant price falls that generally result from generic competition.” Chapter I prohibition of the Competition Act of 1998 prohibits these methods of competition restriction. A company found in violation of this act can face fines of up to 10% of its worldwide turnover.

According to CMA, between 2001 and 2004, GlaxoSmithKline (GSK) entered into pay-for-delay agreements with Generics Limited UK (GUK) and Alpharma Limited, companies working to bring generic versions of GSK’s Seroxat (paroxetine) to market. GSK initially challenged both companies in court, claiming the generics would infringe on GSK’s paroxetine patents. Before going to trial, GSK allegedly entered into agreements with both companies, terms of which prohibited them from bringing generic versions of the drug to market. According to CMA, as part of the agreement, GSK also made payments to GUK, Alpharma, and Norton Healthcare Limited.

In 2001, GSK received more than £90 million ($128.6 million) sales for Seroxat. When paroxetine generics eventually entered the market by the end of 2003, the price of the drug fell more than 70% in two years.

GSK now faces a £37.6 million ($54.3 million) fine from CMA for its participation in the deal. Merck KGaA (former parent company of GUK) and GUK face a £5.8 million fine. CMA also says that Actavis UK, Xellia Pharmaceuticals, and Alpharma will face a £1.5 fine for Alpharma’s participation in the deal.

In a statement to Bloomberg, GSK said it disagreed with CMA’s decision. A spokesperson from GSK told the publication that the company is considering an appeal.

“The agreements allowed the generics companies to enter the market early with paroxetine product and ultimately enabled a saving of over 15 million pounds,” a GSK representative said in an email to Bloomberg.

Mylan NV (formerly GUK) told the publication that the company also plans to appeal the decision. Merck KGaA told Bloomberg, “Merck has already made adequate provision for this. The fine will not, therefore, have a material impact on Merck’s financial results.” 

Source: Competition Markets Authority