UK watchdog fines GlaxoSmithKline, other companies 45 million pounds over generic Seroxat 'pay-for-delay' deals

The UK's Competition and Markets Authority (CMA) on Friday announced that a number of pharmaceutical companies, including GlaxoSmithKline, have been fined a total of nearly 45 million pounds ($65.3 million) for anticompetitive conduct and agreements in relation to the antidepressant Seroxat (paroxetine). Michael Grenfell, CMA's executive director for enforcement, remarked the "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."

The CMA noted that the matter covers agreements between 2001 and 2004 under which GlaxoSmithKline agreed to make payments, as well as other value transfers totalling over more than 50 million pounds ($72.7 million), to a number of companies to delay the entry of generic competition to Seroxat in the UK. Grenfell commented "this investigation shows our determination to take enforcement action against illegal anti-competitive practices in sectors big and small."

According to the CMA, GlaxoSmithKline alleged in 2001 that proposed generic versions of Seroxat from companies including Generics Limited and Alpharma would infringe its patents. GlaxoSmithKline commenced litigation against the two companies, although before the matter went to trial, the CMA said that both Generics Limited and Alpharma reached agreements whose terms prohibited them from launching generic versions of Seroxat.

The CMA ruled that GlaxoSmithKline's deals with Generics Limited and Alpharma infringed the competition law prohibition on anticompetitive agreements. In addition, the watchdog determined that GlaxoSmithKline's conduct in making payments to the companies, as well as to Teva's Norton Healthcare unit, to induce them to delay launching generic versions of Seroxat infringed the competition law prohibition on abuse of a dominant position. The CMA noted that when independent generic versions of Seroxat eventually reached the market at the end of 2003, the average price of the drug dropped by over 70 percent in two years.

In response to the decision, GlaxoSmithKline said that it disagreed with the ruling and that the agreements it reached with Generics Limited and Alpharma were to "settle costly, complex and uncertain patent disputes." GlaxoSmithKline noted "the agreements allowed the generics companies to enter the market early with a paroxetine product and ultimately enabled a saving of over 15 million pounds to the NHS," adding that it "is considering its grounds for appeal."

GlaxoSmithKline's total fine by the CMA is 37.6 million pounds ($54.7 million), while Mylan's Generics Limited division and its former parent Merck KGaA have been penalised 5.8 million pounds ($8.4 million). Further, a fine of 1.5 million pounds ($2.2 million) has been imposed on Allergan's Actavis unit, formerly Alpharma, Xellia Pharmaceuticals, formerly Alpharma, as well as Alpharma, formerly Zoetis Products.

Commenting on the ruling, Merck said "this is the first case in relation to this type of patent-settlement agreement in the UK." The German drugmaker noted that it "was not a contract party to the agreement between" Mylan and GlaxoSmithKline, adding that it will weigh whether to appeal the decision.

The fines come after the agreements were brought to the attention of the UK's Office of Fair Trading (OFT) by the European Commission in 2010. The OFT alleged in 2013 that GlaxoSmithKline along with Alpharma, Generics Limited and Norton Healthcare entered deals that acted to delay effective competition by preventing the launch of generic versions of Seroxat.

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