On 26 November 2020, the European Commission ("Commission") announced that it had fined the pharmaceutical companies Teva and Cephalon EUR 60.5 million for agreeing to delay for several years the market entry of a cheaper generic version of Cephalon's drug for sleep disorders, modafinil, after Cephalon's main patents had expired, in breach of Article 101 TFEU (the prohibition of anticompetitive agreements).
| what you need to know - key takeaways |
- The decision completes the cycle of pay-for-delay pharmaceutical investigations launched with the Commission's 2009 sector inquiry into the pharmaceutical sector.
- To date, the Commission has fined companies in three other investigations – one concerning perindopril, a cardiovascular medicine, one concerning citalopram, an anti-depressant, and one concerning fentanyl, a painkiller.
- Opened in April 2011, this investigation has taken over nine and half years.
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Background
Modafinil is a medicine used for the treatment of excessive daytime sleepiness associated in particular with narcolepsy. It was Cephalon's best-selling product under the brand name “Provigil” and for years accounted for more than 40% of Cephalon's worldwide turnover. While the main patents protecting modafinil had expired in Europe by 2005, Cephalon still held some secondary patents related to the pharmaceutical composition of modafinil, which aimed at securing additional patent protection. Teva held its own patents relating to modafinil's production process, was ready to enter the modafinil market with its own generic version, and it had even started selling its generic in the UK.
The Commission decision
The decision concerns a patent settlement agreement whereby Cephalon induced Teva not to enter the market for with a cheaper version of modafinil (and not to challenge Cephalon's patents) in exchange for a package of commercial side-deals that were beneficial to Teva and some cash payments. The Commission's view is that generic entry brings price competition to markets that can lead to price drops of up to 90%. In this regard, the Commission has reported the following:
- Price competition: without this "pay-for-delay" agreement, Teva could have entered the market earlier and could have, in turn, pushed down prices for modafinil. For several years, this pay-for-delay agreement therefore eliminated Teva as a competitor and allowed Cephalon to continue charging high prices even if the main modafinil patent had long expired. In this connection, the Commission has stated that when Teva entered the UK market for a short period in 2005, it indeed offered a 50% lower price than the price of Cephalon's Provigil.
- Innovation: pay-for-delay agreements can also have a detrimental effect on innovation. Competition from generics stimulates pharmaceutical companies to focus their efforts on developing new drugs rather than on maximising income streams from their old drugs by artificially preserving market exclusivity.
The infringement lasted, for almost all EU Member States and EEA countries, from December 2005 to October 2011, when Teva acquired Cephalon and they became part of the same group.
Fines
The fines imposed by the Commission on Teva and Cephalon are EUR 30 million and EUR 30.5 million, respectively. As in other pay-for-delay cases, the general fines methodology does not work for generic companies, as they, by virtue of the restrictive agreement, do not realise any sales with the affected product. The Commission, therefore, imposed a fixed amount fine to Teva that is slightly below the fine for Cephalon.
