European Commission sanctions first ever pharmaceuticals cartel and scores victory in pay-for-delay appeal

This marks the first time that the EC has sanctioned companies for participating in a cartel in the pharmaceutical sector and in relation to API.

The participants were either producers or distributors of SNBB. According to the EC, between 2005 and 2019 they coordinated and agreed on the minimum sale price of SNBB to distributors and generic drug manufacturers. They also agreed to allocate quotas and exchanged commercially sensitive information.

Each of the fined companies confirmed their involvement in the cartel and agreed to settle the case. A sixth received full immunity from fines after reporting the conduct to the EC. Proceedings are ongoing against another company that decided not to settle. 

Notably, the EC announced that it cooperated with the Swiss and Australian antitrust authorities during the investigation. This confirms an ongoing global trend for agencies to coordinate on antitrust cases.

Outside the cartel sphere, this month we also saw the General Court uphold the EC’s decision to fine Teva and Cephalon for a “pay for delay” pharmaceutical patent settlement agreement.

In 2020, the EC found that Teva and Cephalon (now Teva’s subsidiary) agreed to delay the market entry of a cheaper generic version of Cephalon's drug for sleep disorders, modafinil, after its main patents had expired (read more in our alert). Under a patent settlement agreement, Teva committed not to enter modafinil markets in exchange for a package of commercial side-deals and some cash payments. As a result, Teva was eliminated from the market and Cephalon continued charging high prices for its drug. 

The EC fined the companies a total of EUR60.5m. Teva and Cephalon appealed the decision, arguing that the EC had made legal and factual errors by characterising the settlement agreements as a restriction of competition.

The General Court found that the EC had not erred in the legal tests that it applied. In particular, the court:

• ruled that the EC correctly established that each of the commercial transactions had no other purpose than to induce Teva to agree to the restrictive clauses 
• rejected the companies’ arguments that the settlement agreement allowed Teva to enter the market before the expiry of Cephalon’s secondary patents linked to modafinil, and therefore had pro-competitive effects – the court agreed with the EC that Teva’s entry to the modafinil markets must be characterized “as a delayed, controlled and limited entry” 
• confirmed, following previous case law, that EU antitrust rules are designed to protect not only existing competition, but also potential competition and potential restrictive effects on competition may be considered as long as they are “sufficiently appreciable”  
• dismissed the companies’ arguments that no fines should have been imposed – the court was clear that the companies “could not have been unaware of the fact that entering into the settlement agreement, in so far as it contained non-compete and non-challenge clauses, was problematic under EU competition law”

Together, these cases put pharmaceutical companies on notice that antitrust enforcement in the sector remains a priority for the EC. Commenting on the EC’s cartel decision, Commissioner Reynders highlights the importance of the sector, noting that “competition is essential to provide access to affordable medicines”.