Competition Crackdown

The UK Competition and Markets Authority (CMA) has handed out a £37.6 million fine to GSK for paying out “value transfers totaling over 50 million pounds” to competitors between 2001 and 2004 to delay the introduction of generic versions of its branded anti-depressant drug, Seroxat (paroxetine). Apparently, Generics UK (GUK) and Alpharma Limited were ready to enter the market with a generic version of GSK’s Seroxat in 2001. GSK alleged that their generic products would infringe its patents, and commenced litigation proceedings against GUK and Alpharma. But before the litigation went to trial, GUK and Alpharma each entered into agreements with GSK that prohibited their entry into the UK paroxetine market.

In a press release (1), the CMA stated, “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.” When independent generic entry eventually took place at the end of 2003, average paroxetine prices dropped by over 70 percent in two years, according to CMA. And the generics companies didn’t get off lightly either; the CMA has fined Merck KGaA (as the former parent of GUK) £5.8 million (~$8.4 million) and Alpharma £1.5 million (~$2.2 million). The decision to fine GSK comes after the UK Office of Fair Trading – the CMA’s forerunner – made the original allegations in April 2013 (2). The OFT suggested that if GSK was found to be in breach of the Competition Act 1998 (which prohibits practices that prevent, restrict or distort competition in the UK) could be fined up to 10 percent of its worldwide turnover. Its European counterpart, Article 101 of the Treaty on the Functioning of the European Union (TFEU), covers equivalent agreements that may affect trade between EU Member States. But the pay-for-delay issue was at the center of a European review of the sector in 2008-2009 and did not result in any action against GSK. GSK said it disagreed with the CMA’s decision and was considering grounds for appeal.

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