Pharmaceuticals firms fined £45m by UK competition watchdog

The UK’s primary competition and consumer authority, the CMA, revealed on Friday that it has imposed fines totalling GBP45m on several pharmaceutical companies, which relate to anti-competitive conduct and agreements in relation to the supply of an anti-depressant medicine between 2001 and 2004.

During this period, GlaxoSmithKline plc (GSK), a supplier of Seroxat, an anti-depressant medicine called paroxetine, made payments and other value transfers to suppliers of generic versions of paroxetine, which totalled more than GBP50m. The CMA has found that these payments and other value transfers were intended to delay generic paroxetine competitors entering the UK market.

The CMA’s findings revealed that in 2001, pharmaceutical companies such as Generics (UK) Limited (GUK) and Alpharma Limited (Alpharma) were attempting to enter the UK market for paroxetine with a generic version. At that time, GSK’s version of paroxetine was known as a ‘blockbuster’ product, with 4.2 million prescriptions issued for Seroxat in the UK during 2000. GSK held certain patents in relation to paroxetine and its Seroxat sales exceeded GBP90m in 2001.

According to the CMA, GSK alleged that its patents would be infringed by the other generic products and began litigation proceedings against GUK and Alpharma. Ahead of that litigation 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, potentially depriving the National Health Service of significant price falls that usually result from generic competition. The CMA added that when the independent generic entry of paroxetine eventually took place at the end of 2003, average paroxetine prices had fallen by over 70% in two years.

GSK’s agreements with both GUK and Alpharma have been found to have infringed the competition law prohibition on anti-competitive agreements and it has been fined a total of GBP37,606,275.

Also, the CMA said GSK’s conduct infringed the competition law prohibition on abuse of a dominant position, by making payments to GUK, Alpharma and another company, Norton Healthcare Limited (IVAX), to induce them to delay their efforts to enter the UK paroxetine market independently of GSK.

In relation to GUK’s infringement, the CMA has imposed total fines of GBP5,841,286 on Merck KGaA (GUK’s former parent) and GUK, while Alpharma’s infringement has resulted in total fines of GBP1,542,860 being 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, CMA executive director for Enforcement, commented:

“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.”

The BBC reported that GSK disagreed with the ruling and was considering appealing.

A company spokesperson was quoted as saying:

“GSK and the generics companies entered into these agreements at the time in order to settle costly, complex and uncertain patent disputes.

“The agreements allowed the generics companies to enter the market early with a paroxetine product and ultimately enabled a saving of over GBP15m to the NHS.”