June 19 (Bloomberg) -- Les Laboratoires Servier and Teva Pharmaceutical Industries Ltd., the world’s largest maker of generic drugs, face European Union antitrust fines as soon as next month over agreements that delayed the release of cheaper versions of a Servier hypertension treatment.
As many as four other companies may also be penalized by the European Commission for hampering the generic entry of perindopril, a cardiovascular drug, said three people familiar with the case, who asked not to be identified because the decision isn’t public. The fines are expected by the end of July when the EU regulator begins a vacation period, they said.
Pay-to-delay deals have been under regulatory scrutiny on both sides of the Atlantic amid concerns they may thwart lower health-care costs for patients and taxpayers. The disputed settlements are a by-product of the economics of the industry, where branded medicine companies can reap billions of dollars from blockbuster drugs -- and then see those sales plummet the moment an alternative appears.
“The deals which are done are not necessarily shady,” said David Taylor, professor at University College London’s school of pharmacy. “However, it needs clarification.”
“On the one hand we want innovation and we want people to be rewarded and to keep investing, on the other hand we all want them to be cheap,” Taylor said. “Part of all this is a transitional process about deciding what’s right.”
To protect patents and prevent generic drugmakers from getting regulatory approval for copies, drug companies often file suits against them. Subsequent settlements can involve them paying generic firms to keep products off the market. If a brand-name manufacturer with $100 million in annual sales can pay a generic rival $20 million to wait an extra year, both companies come out ahead -- at the expense of the sick.
Teva, based in Petach Tikva, Israel, and Antoine Colombani, a commission spokesman in Brussels, declined to comment. Servier, based in Suresnes, France, didn’t immediately respond to requests for comment.
The Brussels-based antitrust agency started a broad inquiry of the pharmaceutical industry in 2008 -- finding that companies use a variety of techniques to delay the introduction of generics “for as long as possible.” On the back of the inquiry, several antitrust probes were opened.
The Servier case is two-pronged. The French company was accused by the commission in a 2012 antitrust complaint of abusing its market power to soak up competing technologies to produce perindopril, delaying generic entry.
The EU’s complaint, known as a statement of objection, also alleged that Servier forced generic companies Teva, Krka Group d.d., Mylan Inc.’s Matrix Laboratories, Unichem Laboratories Ltd.’s Niche Generics Ltd. and Lupin Ltd. into settlements to protect the exclusivity of perindopril.
Krka, Slovenia’s biggest drugmaker, settled a legal dispute with Servier in 2006 over the right to sell the blood-pressure treatment in countries including the U.K. The out-of-court settlement barred Krka from selling the drug in Britain. In return, Servier agreed to drop related lawsuits in Slovenia and Hungary, Krka said at the time.
That settlement enabled Krka to continue selling perindopril in Slovenia, Hungary, Poland, Lithuania and the Czech Republic.
Servier’s patent was valid until May 2009, Krka said in an e-mail. “An earlier manufacturing and launching of the product would have meant infringement of Servier’s exclusionary rights,” the Slovenian company said.
“Krka believes it did not have a duty to take an action to revoke the patent granted by the European patent authorities,” the company said. Finding other solutions that enabled Krka to enter certain EU markets without risk was “entirely lawful,” it said.
Krka shares dropped as much as 1.2 percent in Ljubljana trading.
Lupin, an Indian maker of drugs, said in 2007 it received 20 million euros from Servier for patent rights.
Servier and its generic competitors were unable to convince the EU’s antitrust arm to drop its complaint in their written and oral responses to the complaint.
The fining decision is being reviewed by officials in several commission departments, including the industry unit, two of the people said. If no major concern comes up during the consultation, the fines should be announced by the end of July, they said.
Lupin, Mylan and Unichem representatives declined to comment on the EU decision.
EU antitrust regulators have offered limited guidance on drug patent settlements prior to rules on technology transfer which took effect last month. Instead, the commission has been laying down the law via probes. Two of the EU’s cases led to fines last year -- one centered around a pain killer developed by Johnson & Johnson and another focused on an antidepressant produced by H. Lundbeck A/S.
To contact the editors responsible for this story: Anthony Aarons at email@example.com Peter Chapman