Dark clouds coalesce for generic drug maker as Court adviser indicates European Commission fines for anti-competitive behaviour should be upheld. The European Court of Justice ruling in the Lundbeck case will follow with it's main ruling in coming months.
A pay-for-delay settlement is a type of agreement in settlement of litigation according to which significant value transfers from a patent owner (say the manufacturer of the originator medicine) to a defendant (say a generic drug manufacturer), in return for which the defendant delays market entry. Such agreements give rise to antitrust concerns and have been under close scrutiny in both the US and Europe for a number of years, with the pharmaceutical sector attracting particular attention.
In a previous case dealing with this issue, two generics companies had made preparations to enter the market supplying a drug A. Those preparations were halted by the innovator (patent owner) who sued them for infringing its process patents for making A. In response, the generics manufacturers claimed that the innovator's patents were invalid.
Before the patent litigation proceedings were concluded, the innovator offered payments to both generics companies. The payments were conditional upon them not further pursuing their invalidity claims and not making, importing, or supplying generic versions of A in the UK. Further, the innovator allegedly arranged agreements between the generics companies the innovator's sole distributor of A in the UK. According to the agreements with the distributor, the generics would be supplied with an agreed amount of drug A, which the generics companies could sell in the UK.
Considered together the agreements covered both the settlement of the patent litigation as well as the delay of market entry of generic competition. In practice the innovator was deemed to have abused it's dominant position in the market, although there were many nuanced considerations involved in arriving at this conclusion.
Most in the sector have been avoiding similar types of agreements for a considerable time now but finding optimised exchanges of promises to settle litigation in relatively complex commercial landscapes is a topic of continuing interest. Some very interesting questions remain about the balance between ligitimate monopolies afforded by patents and the checks and balances provided by competition law. The reasoning behind the Lundbeck decision, when it comes, will be closely examined.
“Lundbeck adduced no evidence capable of demonstrating that its value transfers to the manufacturers of generic medicinal products were made in exchange for any consideration from the latter aside from their undertaking not to enter the market,” she said.