Servier to Teva Fined $583 Million on Generic-Drug Delays

Les Laboratoires Servier and five makers of generic drugs, including Teva Pharmaceutical Industries Ltd., were fined 427.7 million euros ($583 million) by the European Union over agreements that delayed the release of cheaper versions of a hypertension treatment.

Servier, the inventor of the drug, received the largest penalty at 331 million euros for hampering the generic entry of perindopril. Teva, the world’s biggest maker of generic medicines, was fined 15.6 million euros.

“For four years, the patients and national health systems were deprived” of access to lower-cost versions of the medicine, EU Competition Commissioner Joaquin Almunia told reporters today in Brussels. Suresnes, France-based Servier made payments to generic-drug producers in exchange for the certainty they wouldn’t enter the market and would refrain from legal challenges for the duration of the agreement, he said.

Pay-to-delay deals have been under regulatory scrutiny on both sides of the Atlantic amid concerns they may thwart efforts to reduce 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 sales of those products plummet the moment an alternative appears.

Accord Payments

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.

The EU case against Servier was two-pronged. The French company is accused of delaying generic entry by acquiring competing technologies to produce perindopril and also entering into settlements with generic rivals.

Generic-drug producers received cash payments totaling “several tens of millions” of euros from Servier, the European Commission said.

“The generic companies agreed to abstain from competing in exchange for a share of Servier’s rent,” the Brussels-based commission, the EU’s antitrust regulator, said in a statement. “One generic company acknowledged that it was being ‘bought out of perindopril.’”

Fine Allocations

Krka Group d.d., Slovenia’s biggest drugmaker, was fined 10 million euros over the drug-delay pact. Mylan Laboratories Ltd., formerly Matrix Laboratories Ltd., shared a 17.2 million-euro fine with parent Canonsburg, Pennsylvania-based Mylan Inc. Mumbai-based Unichem Laboratories Ltd. and its Niche Generics arm were penalized a combined 14 million euros. Lupin Ltd. was fined 40 million euros.

The companies all said they disagree with the commission’s assessment. Servier, Krka, Unichem and Mylan said they plan to appeal the decision in EU courts. Petach Tikva, Israel-based Teva and Mumbai-based Lupin said they’re considering an appeal.

“Generic entry hasn’t been delayed,” Lucy Vincent, a Servier spokeswoman, said in a statement. The French company “has acted in a transparent and legitimate way to defend its patents, which are essential if we are to continue the development of innovative medicines for the benefit of patients.”

Perindopril’s Revenue

Servier’s revenue from perindopril exceeded $1 billion a year in 2006 and 2007, Almunia said. The company had total revenue of 4.2 billion euros in 2013.

“We stand by our belief that Teva did not engage into any anti-competitive behavior,” Raz Meirman, a spokesman for the Israeli company, said in an e-mail.

Mylan considers “the settlement agreement was legal,” spokeswoman Nina Devlin said in an e-mail. Shamsher Gorawara, a spokesman at Lupin, said the Indian company is “very disappointed with the European Commission’s findings.” Unichem considers the fined “wholly unjustified,” according to a company statement.

Krka 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 agreement 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.

Patent Validity

Krka “still believes it did not breach the rules of the anticompetitive agreement because the patent for the pharmaceutical form of perindopril that Krka intended to market was valid until mid-May 2009,” the Novo Mesto-based company said in an e-mailed statement.

The commission 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.

Two of the EU’s cases led to fines last year. One centered on a painkiller developed by Johnson & Johnson and another focused on an antidepressant produced by H. Lundbeck A/S.