Commission investigates potentially anti-competitive settlements…paying for delays may not pay for some!

Further to our previous post, the European Commission has recently launched an official investigation into a settlement agreement made between the US company Cephalon, and the Israeli generic medicine manufacturer, Teva. 
 
The agreement was formed in December 2005 as part of the settlement of a patent dispute between the two companies in relation to the sleeping drug modafinil (brand name Provigil®).  As part of the agreement, Teva promised not to sell its generic version of modafinil in the European market before October 2012.  The European Commission is investigating whether this settlement agreement is anti-competitive on the basis that it restricts, and therefore delays, the entry of a generic medicine into the European market.
 
The investigation has only just been announced and a finding may be some time away (depending on the complexity of the issues uncovered).  However, the announcement provides a timely reminder that settlement agreements which delay the entry of a generic medicine to the market will invite regulatory scrutiny and possibly Court action if they are found to be anti-competitive.  The European Commission has been focusing on the pharmaceutical industry since 2008 following a broader review of the sector which revealed the common industry practice of originator and generic manufacturers agreeing to delay the arrival of generic medicines to the market (such agreements are also known as “pay-for-delay” settlements).
 
We emphasise that the mere fact that an investigation has been commenced is not an indication that Cephalon or Teva have been anti-competitive.