GlaxoSmithKline Receives $54.4 Million Fine In UK For Pay-For-Delay Deal

According to a statement released by the UK’s Competition and Markets Authority (CMA) on Friday, the agency has fined GlaxoSmithKline for a pay-for-delay deal made over 10 years ago. The authority was formed 2 years ago – in 2014 – and the $54.4 million (£37.6 million) fine handed out to GlaxoSmithKline was the first pay-for-delay decision the agency has made.

The CMA ruled that between 2001 and 2004, GlaxoSmithKline payed generic drugmakers more than £50 million to delay the UK launch of generic versions of the company’s antidepressant, Seroxat (paroxetine). In the absence of a generic over that period, the UK’s National Health System (NHS) paid more for the drug.

According to the CMA’s announcement regarding the fines, sales of Seroxat totaled £90 million in 2001; once the generics hit the market in late 2003, they were priced 70 percent cheaper compared to the branded version of the drug. The generic drugmakers involved included Generics (UK) Limited and Alpharma Limited.

“These ‘pay-for-delay’ agreements deferred the competition that the threat of independent generic entry could offer, and potentially deprived the National Health Service of the significant price falls that generally result from generic competition,” the authority said in their announcement. “The CMA has found that GlaxoSmithKline’s agreements with each of Generics UK and Alpharma infringed the competition law prohibition on anti-competitive agreements.”

GlaxoSmithKline denies doing anything wrong and maintains that the agreements were made in an effort to settle costly lawsuits with the generic makers. “The agreements allowed the generics companies to enter the market early with a paroxetine product and ultimately enabled a saving of over £15 million,” GlaxoSmithKline commented in an email to Bloomberg.

Regulators in both the UK and the US have been targeting these cases in recent years. In 2013, the European commission issued a $22 million fine to Johnson & Johnson and Novartis for preventing a generic version of fentanyl – a painkiller used by cancer patients – from hitting the market. The US Federal Trade Commission (FTC) has also pursued a number of these types of cases.

While GlaxoSmithKline was the instigator in the deal with the generic drugmakers, it’s not the only company receiving a fine. The CMA has also issued a £5.8 million fine to Generics UK – now owned by Mylan – along with its previous parent company, Merck KGaA. Actavis – the spinoff company of Alpharma – was fined £1.5 million.

“This is the first case in relation to this type of patent-settlement agreement in the UK,” said Merck KGaA in a letter to Bloomberg. “Merck was not a contract party to the agreement between Mylan and GlaxoSmithKline, and was held jointly liable as the former owner of Generics (UK) Ltd, now Mylan.”