European Commission fines six companies

Servier and five generic companies hit with nearly $574 million in penalties for curbing entry of cheaper versions of antihypertensive medicine

Jeffrey Bouley
BRUSSELS, Belgium—On July 9, the European Commission (EC) announced that it had imposed fines totaling €427.7 million (approximately $574 million) on the French pharmaceutical company Servier and five producers of generic medicines—namely, Niche/Unichem, Matrix (now part of Mylan), Teva, Krka and Lupin—for concluding a series of deals that the EC maintains were all aimed at protecting Servier’s bestselling blood pressure medicine perindopril from price competition by generics in the European Union (EU).
 
“Through a technology acquisition and a series of patent settlements with generic rivals,” the EC reported, “Servier implemented a strategy to exclude competitors and delay the entry of cheaper generic medicines to the detriment of public budgets and patients in breach of EU antitrust rules.”
 
Perindopril is a blockbuster pharmaceutical, the EC says, and used to be Servier’s best-selling product, adding that Servier held “significant market power in the market for the perindopril molecule, as no antihypertensive medicines other than the generic versions of perindopril were able to meaningfully constrain Servier’s sales and prices.”
 
Servier’s patent for the perindopril molecule expired, for the most part, in 2003, although generic competitors continued to face roadblocks in the form of a number of secondary patents relating to processes and form.
 
In order to enter the market and overcome the remaining obstacles, generic companies sought access to patent-free products or challenged Servier’s patents that they believed were unduly blocking them. There were very few sources of non-protected technology, the EC explains. In 2004, it notes, Servier acquired the most advanced one, forcing a number of generic projects to stop and therefore delaying their entry.
 
According to the EC, “Servier recognized that this acquisition merely sought to ‘strengthen the defense mechanism’ and the technology was never put to use.
 
Generic producers then decided to challenge Servier’s patents before courts. However, between 2005 and 2007, “virtually each time a generic company came close to entering the market, Servier and the company in question settled the challenge,” the EC says. “This was not an ordinary transaction where two parties decide to settle a patent claim outside of court to save time and costs. Here, the generic companies agreed to abstain from competing in exchange for a share of Servier’s rent. This happened at least five times between 2005 and 2007. One generic company acknowledged that it was being ‘bought out of perindopril.’ Another insisted that ‘any settlement will have to be for significant sums,’ to which it also referred as a ‘pile of cash.’
 
In total, cash payments from Servier to generics amounted to several tens of million euros, the EC claims. In one case, Servier offered a generic company a license for seven national markets; in return, the EC says, “the generic company agreed to ‘sacrifice’ all other EU markets and stop efforts to launch its perindopril there. Servier thus gained the certainty that the generic producers would stay out of the national markets and refrain from legal challenges for the duration of the agreements.”
 
The EC notes that it is both legitimate and desirable to apply for patents, including so-called “process patents,” to enforce them, to transfer technologies and to settle litigation. However, the EC maintains that Servier misused such legitimate tools by shutting out a competing technology and buying out a number of competitors that had developed cheaper medicines to avoid competing on their own merits.
 
Such behavior violates EU antitrust rules that prohibit the abuse of a dominant market position.
 
“Servier had a strategy to systematically buy out any competitive threats to make sure that they stayed out of the market. Such behavior is clearly anti-competitive and abusive,” said EC Vice President Joaquín Almunia, who is in charge of competition policy, in an official statement. “Competitors cannot agree to share markets or market rents instead of competing, even when these agreements are in the form of patent settlements. Such practices directly harm patients, national health systems and taxpayers. Pharmaceutical companies should focus their efforts on innovating and competing rather than attempting to extract extra rents from patients.”
 
Specifically, the EC fined Servier €331 million, Lupin €40 million, Mylan €17.2 million, Teva €15.6 million, Unichem just under €14 million and Krka €10 million.
 
In an issued statement, Servier spokesperson Lucy Vincent insisted that “generic entry hasn’t been delayed,” and said her 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.”
 
A spokesperson for Teva, Raz Meirman, noted in a statement that “We stand by our belief that Teva did not engage into any anti-competitive behavior” and added that Teva might appeal the decision before the General Court of the EU.

Jeffrey Bouley

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