EU fines Ranbaxy, others for blocking cheaper drugs

European antitrust regulators fined nine drugmakers, including Denmark's Lundbeck and India's Ranbaxy, a total of 146 million euros for blocking the supply of a cheaper anti-depressant to the market, the first EU sanction against such deals.

The punishments follow a 2009 report by the European Commission on the pharmaceutical sector, which said "pay-for-delay" agreements between companies lead to consumers paying as much as 20 per cent more for their medicines.

The EU action came two days after the U.S. Supreme Court said U.S. regulators could challenge deals between brand-name drug firms and generic rivals because of the resulting higher consumer costs.

Pay-for-delay agreements involve brand-name firms paying generic companies not to market rival versions of their medicine. The generics usually cost a fraction of the original drug, though the issue is complicated by patent ownership.

In this case, Lundbeck, one of the Nordic region's largest drugmakers, was accused of paying other companies to have them delay delivering a generic version of its anti-depressant medicine citalopram to the market.

"Agreements of this type directly harm patients and national health systems, which are already under tight budgetary constraints," EU Competition Commissioner Joaquin Almunia said on Wednesday. "The Commission will not tolerate such anticompetitive practices."

The European Commission, which acts as competition regulator across the 27-member European Union, handed Lundbeck the largest fine, totalling 93.8 million euros. Lundbeck said it would appeal the EU's decision but cut its guidance for operating profits this year as a result of the fine.

The Commission fined Germany's Merck KGaA 21.4 million euros and imposed a further 7.77 million euro fine jointly on Merck and its former subsidiary Generics UK, which is now owned by U.S. generic drugmaker Mylan.

India's No. 1 pharmaceutical company, Ranbaxy, said it also plans to appeal to the EU General Court in Luxembourg, Europe's second-highest, after it was fined 10.3 million euros.

The other companies to be penalised were Arrow, Resolution Chemicals, Xellia Pharmaceuticals, Alpharma - which is now part of Zoetis Products LLC, and A.L. Industrier.

Game-changing decisions

The EU sanctions and the U.S. court decision could force a major change in the pharmaceutical industry, said Michael Carrier, a professor at New Jersey-based Rutgers Law School.

"This week could be the most important week in the history of this concerning activity: a game-changing U.S. Supreme Court decision allowing these suits to proceed and the first fines issued in the EU against this activity," he said.

The EU competition authority has two similar cases in the pipeline, one involving Israel's Teva and French drugmaker Servier, and another related to Johnson & Johnson and Novartis.

The Lundbeck case sets a precedent for EU regulatory handling of such offences, said Deutsche Bank analyst Tim Race.

"This is the first case of likely many for which we will see fines imposed," he wrote in a note.

The European Federation of Pharmaceutical Industries and Associations lobbying group said patent settlements were symptomatic of Europe's weak patent litigation system.

The Commission said the generic companies agreed with Lundbeck in 2002 not to enter the market in return for substantial payments, with internal company documents referring to forming "a club" and "a pile of $$$" to be shared.

It said Lundbeck also bought rivals' stock and destroyed it.

Since Reuters flagged the EU's decision on June 3, Lundbeck shares have lost 7.5 per cent or 220 million euros of the firm's market value, said Deutsche Bank's Race.

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