Economy
European Commission imposes €60.5 million fine on Teva and Cephalon
The European Commission has fined the pharmaceutical companies Teva (€30 million) and Cephalon (€30.5 million) a total of €60.5 million for a ‘pay for delay’ agreement it maintained for over six years.
Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “It is illegal if pharmaceutical companies agree to buy-off competition and keep cheaper medicines out of the market. Teva's and Cephalon's pay-for-delay agreement harmed patients and national health systems, depriving them of more affordable medicines.”
The European Commission accuses Cephalon of inducing Teva not to enter the market, in exchange for a package of commercial side-deals that were beneficial to Teva and some cash payments.
Cephalon's drug for sleep disorders, modafinil, was its best-selling product under the brand name “Provigil” and for years accounted for more than 40% of Cephalon's worldwide turnover. The main patents protecting modafinil had expired in Europe by 2005.
The entry of generic drugs into a market usually brings dramatic price drops of up to 90%. When Teva entered the UK market for a short period in 2005, its price was half of Cephalon's Provigil.
The Commission investigation found that for several years, a ‘pay-for-delay’ agreement eliminated Teva as a competitor allowing Cephalon to continue charging high prices even though its patent had expired.
Today's decision is the fourth pay-for-delay decision that the Commission has adopted. It is significant, because of the form taken by the payments. In previous cases, generic entry was delayed by means of simple cash payments. In this instance, the mechanism was much more sophisticated, relying on a mixture of cash payments and a package of seemingly standard commercial deals. This is a clear signal that the Commission will look beyond the form a payment takes.
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