On 8 September 2016, the General Court of the EU adopted for the first time a judgment in a pay-for-delay case in the pharmaceutical industry. The Court thereby confirmed the decision of the European Commission of 19 June 2013 whereby it imposed a total fine of €146 million on Lundbeck and four manufacturers of generic drugs (Alpharma, Arrow, Merck KGaA/Generics UK and Ranbaxy).
In October 2003, the Konkurrenceog Forbrugerstyrelsen (Danish competition and consumer authority) informed the European Commission about certain agreements between Lundbeck and the manufacturers mentioned above. These manufacturers accepted limitations on the market access of their products, in exchange for a significant amount of money. More specifically, the manufacturers agreed to uphold the placing of the generic version of the drug citalopram (an antidepressant) on the European market during the whole period of the agreement.
The European Commission discovered that this was not the only case, and launched an extensive investigation into the pharmaceutical industry. The Lundbeck case is one of three pay-for-delay cases revealed by this investigation and the first one being judged by the Court.
In 2013, the Commission concluded that these kinds of agreement between competitors constitute violations of competition ‘by object’ (by their very nature). Therefore, there was no need to investigate the restrictive effects of these agreements on competition in the European drugs market.
Faced with a high fine, Lundbeck appealed the Commission’s decision before the General Court and requested in first instance for the decision to be annulled and if not, to at least reduce the fine significantly.
In its recent judgment, the Court rejected the appeal entirely, which marks a clear victory for the European regulatory authorities in their fight against these pay-for-delay agreements that try to exclude generic products from the European market.
According to the Court, the Commission stated legitimately that the very object of such agreements was to eliminate competition. Moreover, Lundbeck could not justify why these agreements were necessary for the protection of its intellectual property rights. According to the Court, an alleged violation of these rights could always have been challenged before national courts.
It is the first time a European court has ruled on a pay-for-delay agreement, and when stating that these kinds of agreement constitute restrictions of competition ‘by object’ (without the requirement to investigate the anticompetitive effects), Europe differs from the United States, where the US Supreme Court decided in 2013 that these agreements do not contain a presumption of illegality.
As the stakes are high for the various parties, this judgment will probably not remain without consequence and a second appeal before the European Highest Court of Justice is likely to follow. At that stage, it will no longer be possible to challenge the facts of the case, but the confirmation by the General Court of the Commission’s legal reasoning could be the subject of further scrutiny.
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Annabelle Lepièce
Partner, Brussels
annabelle.lepiece@cms-db.com
Bruno Fonteyn
Senior Associate, Brussels
bruno.fonteyn@cms-db.com
Hanne Baeyens
Associate, Brussels
hanne.baeyens@cms-db.com
Delphine Phan
Junior Associate, Brussels
delphine.phan@cms-db.com
