GSK’s conduct, in making payments to induce companies to delay their efforts to enter the UK paroxetine market infringed the competition law prohibition on abuse of a dominant position
The Competition and Markets Authority (CMA) in the UK has fined a number of pharmaceutical companies for anticompetitive conduct and agreements in relation to the supply of paroxetine, marketed by GlaxoSmithKline as the antidepressant Seroxat.
The CMA’s decision relates to conduct and agreements between 2001 and 2004 in which GSK agreed to make payments and other value transfers totalling over £50m to suppliers of generic versions of paroxetine. The CMA has found that these payments and other value transfers were aimed at delaying the potential entry of generic competitors into the UK market for paroxetine – s-called 'pay-for-delay' agreements.
In 2001, a number of pharmaceutical companies – including Generics (UK) Limited (GUK) and Alpharma Limited – were taking steps to enter the UK market for paroxetine with a generic version. During the period in question, Seroxat was one of GSK’s best-selling medicines and was used to treat, among other conditions, depression and anxiety disorders. In the UK, 4.2 million prescriptions were issued for Seroxat in 2000 and Seroxat sales exceeded £90m in 2001. At the time GSK held certain patents in relation to paroxetine.
GSK challenged these pharmaceutical companies, alleging that their generic products would infringe its patents, and commenced litigation proceedings against GUK and Alpharma. Before that litigation went to trial, GUK and Alpharma each entered into agreements with GSK, which included terms prohibiting their independent entry into the UK paroxetine market.
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. In this case, when independent generic entry eventually took place at the end of 2003, average paroxetine prices dropped by more than 70% in two years.
The CMA has found that GSK’s agreements with each of GUK and Alpharma infringed the competition law prohibition on anticompetitive agreements. It has also found that GSK’s conduct, in making payments to GUK, Alpharma and one further company, Norton Healthcare Limited (IVAX), to induce them to delay their efforts to enter the UK paroxetine market independently of GSK, infringed the competition law prohibition on abuse of a dominant position.
The CMA has imposed fines totalling £44.99m on the companies directly involved in the infringements and, where relevant, on their parent companies or successors. In calculating financial penalties, the CMA takes into account a number of factors including seriousness of the infringement(s), turnover in the relevant market and any mitigating and/or aggravating factors.
The total fines imposed are as follows:
Originally, Norton Healthcare Limited (formerly IVAX Pharmaceuticals UK) and its parent at the time IVAX LLC (formerly IVAX Corporation) were subject to this investigation. However, the CMA has not found Norton Healthcare Limited or IVAX LLC has infringed competition law and consequently no fine has been imposed on either entity.
'Today’s decision sends out a strong message that we will tackle illegal behaviour that is designed to stifle competition at the expense of customers - in this case, the NHS and, ultimately, taxpayers,' said Michael Grenfell, the CMA’s Executive Director for Enforcement. 'This investigation shows our determination to take enforcement action against illegal anticompetitive practices in sectors big and small.
'Cracking down on these practices is essential to protect consumers, to encourage legitimate business activity that such practices stifle, and to stimulate innovation and growth.'