Lundbeck Fined $125.6 Million by EU Drug Delay Probe

H. Lundbeck A/S, the Nordic region’s second-largest drugmaker, was fined 93.8 million euros ($125.6 million) by the European Union in its first case over pay-for-delay deals that held back sales of cheaper generic drugs.

The European Commission, the EU’s antitrust regulator, also fined a group of generic-drug makers a total of 52.2 million euros today in Brussels. The companies reached agreements that may have slowed the availability of generic versions of Lundbeck’s antidepressant citalopram, marketed as Celexa, according to the regulator.

“Instead of competing, the generic producers agreed with Lundbeck in 2002 not to enter the market in return for substantial payments and other inducements from Lundbeck amounting to tens of millions of euros,” the commission said in a statement. “Internal documents refer to a ‘club’ being formed and ‘a pile of $$$’ to be shared among the participants.”

Antitrust regulators on both sides of the Atlantic are focusing on how settlements between companies that make branded medicines and generics producers might harm consumers. Les Laboratoires Servier and Teva Pharmaceutical Industries Ltd., the world’s largest generic-drug maker, were sent statements of objections by the EU in probes over possible delays for generic drugs last year.

Patent Settlements

“We are surprised and disappointed that the EU commission has reached this erroneous conclusion, which we totally disagree with, and it is therefore our intention to appeal,” said Ulf Wiinberg, chief executive officer of Copenhagen-based Lundbeck.

“It is wrong and extremely misleading” of the commission “to claim that these agreements have delayed the marketing of citalopram copies and thereby violated competition laws,” said Wiinberg. The agreements were meant to protect against patent infringements by the generic companies, he said.

Merck KGaA was fined 21.4 million euros, of which it will share a 7.8 million-euro penalty with Generics UK, a unit of Mylan Inc. Ranbaxy Laboratories Ltd. was fined 10.3 million euros. Zoetis Products and Xellia Pharmaceuticals, which was bought last month by Novo A/S, were jointly fined 10.5 million-euros, while AL Industrier AS was held jointly liable with them for 43,216 euros of that amount.

Ranbaxy said in e-mailed statement that the commission “misunderstood the facts” in the case and that it intends to appeal.

Possible Appeal

Lundbeck rose as much as 1.5 percent in Copenhagen trading and was trading up 1 percent at 12:58 p.m. Merck rose 1.1 percent to 124.70 euros at 12:18 p.m. in Frankfurt.

Merck is weighing an appeal, Gangolf Schrimpf, a spokesman for the company, said in a phone interview. “The fine will not have any impact on our 2013 financial result,” he said.

Watson Pharmaceutical Inc.’s Arrow unit was fined 10 million euros, of which Resolution Chemicals is jointly held liable for 823,735 euros.

The Lundbeck investigation is the EU’s first case over pay-for-delay settlements, regulators said. The EU antitrust watchdog has also sought information from companies including GlaxoSmithKline Plc over patent settlement agreements to check if any there is harm to competition.

Johnson & Johnson and Novartis AG in January were sent EU complaints over such deals that may have hampered the sale of generic versions of pain killer fentanyl in the Netherlands. The EU is also looking at an agreement by Cephalon Inc. and Teva that may have delayed generic versions of Cephalon’s product, Provigil. Teva acquired Cephalon in 2011.

‘Unacceptable’ Behavior

“It is unacceptable that a company pays off its competitors to stay out of its market and delay the entry of cheaper medicines,” EU Competition Commissioner Joaquin Almunia said in the EU statement.

Still, Almunia told journalists that drug companies may have lessened anti-competitive behavior in the wake of EU investigations into the industry.

“The overwhelming majority” of patent settlement agreements “are entirely legitimate as they do not involve practices to pay” competitors, he said. “Payment to exclude the entry into the market of a competitor” is illegal.

The EU decision is complemented by a U.S. Supreme Court decision this week that drugmakers can be sued for paying rivals to delay low-cost versions of popular medicines, said Almunia. The decision rewrites the rules governing the release of generic drugs by reversing a lower-court decision that had effectively insulated pharmaceutical companies from liability.

EFPIA ‘Concerned’

The European Federation of Pharmaceutical Industries and Associations, whose members include pharmaceutical companies such as Lundbeck, Glaxo and Pfizer Inc., said it’s “concerned” about the EU decision.

It “will only prolong patent litigation,” said EFPIA in a statement. It “weakens the protection afforded by patents and will undermine confidence in the patent system itself.”

“The EU patent system is still a mess” with no unified patent litigation mechanism available to companies, said Richard Bergstroem, EFPIA’s director general. “It is no surprise that companies settle to save legal fees and uncertainty.”

U.K. regulators have also targeted delays to generic medicines. Officials sent an antitrust complaint to Glaxo in April over concerns it may have colluded with generic-drug makers to keep copies of its Seroxat antidepressant off the market.

Antitrust watchdogs are right to investigate and ban pay-for-delay deals, Farasat Bokhari, an economist at the U.K’s University of East Anglia, said in a statement on his research into the effects of such agreements published today.

“They allow branded drug firms to charge monopoly prices and in a typical deal there may be a two to three year delay in a cheaper version becoming available,” Bokhari said.

Merck KGaA, Germany’s second-biggest drugmaker, is independent from Merck & Co.