The Court of Justice of the European Union (CJEU) has ruled that pharmaceutical pay-for-delay agreements may violate the Treaty on the Functioning of the European Union(TFEU), in comments passed down on January 30, 2020. 

It clarifies a recent UK Competition Appeal Tribunal ruling on whether a settlement agreement with respect to a dispute between the holder of a pharmaceutical patent and a manufacturer of generic medicines is contrary to EU competition law. 

A January, 30 2020 decision on the Generics (UK) versus Competition and Markets Authority (CMA) (C-307/18) case at the CJEU ruled that such agreements—where a pharmaceutical patent holder pays generics producers not to enter, or delay entry into, a specific market—may violate Articles 101 and 102 of the TFEU. 

“The court observes that, taking into consideration the possible cumulative effects that are restrictive of competition of the various agreements, the conclusion of those agreements, in so far as it is part of an overall contract-oriented strategy, has a significant foreclosure effect on the market, depriving the consumer of the benefits of entry into that market of potential competitors manufacturing their own medicine and, therefore, reserving that market directly or indirectly to the manufacturer of the originator medicine concerned,” said a CJEU statement. 

The UK’s Competition Appeal Tribunal asked the CJEU for a preliminary ruling for the purposes of its examination of the lawfulness of a decision imposed by the UK’s CMA, on various manufacturers of generic medicines and the pharmaceutical group GlaxoSmithKline (GSK) concerning settlement agreements regarding several patent disputes. 

About 20 years ago, several manufacturers of generics began making preparations to produce a version of the active ingredient of paroxetine (marketed under the brands Seroxat, Paxil), an anti-depressant medicine. The drug was developed and patented by GSK, but the patent lapsed in 1999. 

Soon after that, GSK brought several infringement proceedings against generic manufacturers, leading to settlement agreements where generic manufacturers chose to temporarily refrain from entering the market with their own medicines – in return for payments from GSK. 

However, the CMA argued that the agreements infringed the prohibition on concluding agreements that restrict competition and constituted, on the part of GSK, an abuse of its dominant position in the relevant market. 

The UK government imposed a penalty of £37 million ($48.6 million) on GSK for “anti-competitive conduct”. The CMA had concluded that, between 2001 and 2004, GSK agreed deals with two generic drug makers to pay more than £50 million to prevent the launch of generic versions of Seroxat. 

At the time of the deals, Seroxat was known as a ‘blockbuster’ drug. In 2001 UK sales exceeded £90 million, according to the CMA.

GSK challenged the fine before the UK’s Competition Appeal Tribunal, which requested guidance from the CJEU on whether the settlements might constitute a restriction of competition and constitute an abuse of a dominant position in the market.