In the latest government effort to penalize unfair competition among drug makers, the United Kingdom fined GlaxoSmithKline $54.5 million for illegally colluding with generic rivals to delay marketing lower-cost versions of the Paxil antidepressant.
Specifically, the UK Competitions and Market Authority found that between 2001 and 2004, Glaxo made payments totaling about $72 million to several generic companies. The deals were reached as part of a settlement to end patent litigation that was filed by Glaxo against the generic drug makers.
Such settlements are known as pay-to-delay, since a brand-name drug company pays cash or transfers something else of value to a generic rival, which agrees to delay launching a copycat medicine. In 2001, Paxil was a blockbuster with sales in the UK exceeding $130 million.
In this instance, the agreement deferred competition and potentially deprived the UK’s National Health Service of a lower-cost generic Paxil. UK authorities noted that when a generic version of Paxil eventually became available at the end of 2003, average prices fell by more than 70 percent in two years.
“Cracking down on these practices is essential to protect consumers, to encourage legitimate business activity that such practices stifle, and to stimulate innovation and growth,” said Michael Grenfell, the CMA’s executive director for enforcement, in a statement.
Pay-to-delay deals have concerned various governments for some time. In the US, the Supreme Court ruled three years ago the deals may warrant antitrust scrutiny, although the justices left it to the lower courts to decide how to sort out some of the criteria for judging anticompetitive behavior.
The US Federal Trade Commission has argued such deals cost Americans about $3.5 billion annually in higher health care costs. But drug makers contend the deals are not only legal, but allow lower-cost generic drugs to reach consumers faster than if patent litigation dragged on for years.
Indeed, Glaxo disagreed with the ruling and argued the deals, ultimately, saved the UK’s National Health Service more than $20 million because the patent litigation was settled in a timely manner. A Glaxo spokeswoman wrote us that the drug maker is considering grounds for an appeal.
About $7 million in fines were levied against several generic drug makers, including Merck KGaA, which had owned one of the companies that struck a deal with Glaxo. We asked Merck for comment and will update you accordingly.
Meanwhile, the FTC last month found that drug makers entered into fewer pay-to-delay deals in fiscal year 2014, reflecting industry concerns that such settlements may violate antitrust laws. Most patent disputes were resolved without compensation to the generic rival or restrictions on generic competition.
Last year, Teva Pharmaceuticals agreed to pay $1.2 billion to settle FTC allegations that its Cephalon unit violated antitrust law over such a deal. The agreement marked the first time the agency recovered any money on behalf of consumers and other payers, such as pharmacy chains and health plans.