Commission Imposes Fines for “Reverse Payments” on Lundbeck and Producers of Generics

On June 19, 2013, in its first “reverse payments” case, the European Commission imposed fines of €146 million on Danish pharmaceutical company Lundbeck and on several producers of generic medicines for violating EU competition rules by entering into settlement agreements that delayed the marketing of generic versions of Lundbeck’s branded anti-depressant, citalopram.

In 2002, after Lundbeck’s basic patent for citalopram expired, producers of cheaper, generic versions of the drug had the possibility to enter the market. The Commission found that the generic producers instead made an agreement with Lundbeck not to enter the market in return for receiving substantial payments and other inducements amounting to tens of millions of Euro. These inducements included guaranteed profits in distribution agreements of the branded product and the purchase by Lundbeck of the generic producers’ stock with the sole purpose of destroying the stock. The Commission found that the agreements were anticompetitive “by object,” i.e., the agreements were intended to distort competition, and therefore determined that the Commission did not need to provide evidence of consumer harm. The Commission stressed, however, that it did not automatically assume that all settlements involving payments between research-based companies and generics are illegal, and that each should be analysed on a case-by-case basis.

The decision against Lundbeck is also in line with the U.S. Supreme Court’s June 17, 2013 ruling in FTC v. Actavis, Inc., concerning the possible illegality of a similar reverse payment settlement. Although the U.S. Federal Trade Commission argued that payments by brand drug companies to generic companies to delay generics’ market entry are “per se” abuses of antitrust law, the Supreme Court held that reverse payment settlements are not presumptively illegal and that circuit courts should apply the “rule of reason” to determine whether a particular settlement is anticompetitive.

While recognizing that the vast majority of settlements will not violate EU rules, the Commission continues to monitor a number of settlements and has stated that it will continue to examine reverse payment agreements. A press release about the decision is available here. Lundbeck has advised that it intends to appeal the Commission’s decision.