£45m penalties for anti-competitive practice
GSK heads firms fined over ‘pay for delay’ drug deals
The Competition and Markets Authority imposed the penalty over conduct and agreements between 2001 and 2004 in which GlaxoSmithKline paid competitors of its branded anti-depressant drug paroxetine £50 million to delay their potential entry into the UK market.
In 2001, a number of pharmaceutical companies – including Generic and Alpharma – were taking steps to enter the UK market for paroxetine with a generic version.
GSK’s own branded version of paroxetine, Seroxat, was a ‘blockbuster’ product. In the UK, 4.2 million prescriptions were issued for Seroxat in 2000 and Seroxat sales exceeded £90 million in 2001. At the time GSK held certain patents in relation to paroxetine.
GSK challenged these pharmaceutical companies, alleging that their generic products would infringe its patents, and commenced litigation proceedings against GUK and Alpharma. Before that litigation went to trial, GUK and Alpharma each entered into agreements with GSK, which included terms prohibiting their independent entry into the UK paroxetine market.
These ‘pay-for-delay’ agreements deferred the competition that the threat of independent generic entry could offer, and potentially deprived the National Health Service of the significant price falls that generally result from generic competition. In this case, when independent generic entry eventually took place at the end of 2003, average paroxetine prices dropped by over 70% in 2 years.
The CMA found that GSK’s agreements with each of GUK and Alpharma infringed the competition law prohibition on anti-competitive agreements. The CMA has also found that GSK’s conduct, in making payments to GUK, Alpharma and one further company, Norton Healthcare, to induce them to delay their efforts to enter the UK paroxetine market independently of GSK, infringed the competition law prohibition on abuse of a dominant position.
The CMA has imposed fines totalling £44.99 million on the companies directly involved in the infringements, and, where relevant, on their parent companies or successors to these companies:
- GSK’s total fine is £37, 606, 275
- In respect of GUK’s infringement, total fines of £5, 841, 286 have been imposed on Merck KGaA (GUK’s former parent) and GUK
- In respect of Alpharma’s infringement, total fines of £1, 542, 860 have been imposed on Actavis UK Limited (formerly Alpharma Limited), Xellia Pharmaceuticals ApS (formerly Alpharma ApS) and Alpharma LLC (formerly Zoetis Products LLC, Alpharma LLC and Alpharma Inc).
Michael Grenfell, the CMA’s executive director for enforcement, said: “Today’s decision sends out a strong message that we will tackle illegal behaviour that is designed to stifle competition at the expense of customers – in this case, the NHS and, ultimately, taxpayers.
“This investigation shows our determination to take enforcement action against illegal anti-competitive practices in sectors big and small. 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.”