Pharmaceutical companies Teva and Cephalon gets fined by The European Commission
The European Commission has fined the pharmaceutical companies Teva and Cephalon a total of €60.5 million for a ‘pay for delay’ agreement, for several years.
The fines imposed by the European Commission on Teva and Cephalon are €30 million and €30.5 million respectively. According to EC the antitrust rules were violated by the agreement and have caused considerable harm to EU patients and healthcare systems by keeping prices high for modafinil.
Cephalon has been accused by the European Commission for persuading Teva not to enter the market, in exchange for commercial side deals that were beneficial to Teva.
Margrethe Vestager, The Executive Vice-President in charge of competition policy said
“It is illegal if pharmaceutical companies agree to buy-off competition and keep cheaper medicines out of the market. Teva’s and Cephalon’s pay-for-delay agreement harmed patients and national health systems, depriving them of more affordable medicines.”
Cephalon’s, modafinil, was its best-selling product under the brand name”Provigil” and it has been accounted for more than 40% of Cephalon’s worldwide turnover. The main patents protecting modafinil has expired in Europe by 2005.
The harm caused by pay-for-delay agreements was the delay in Teva’s entry, the most advanced generic competitor at the time of the settlement agreement; Cephalon did not face competition from cheaper medicines.
Without the “pay-for-delay” settlement agreement, Teva could have entered the market earlier and could have, in turn, pushed down the prices for modafinil.
In 2005, Teva entered the UK market for a short period and offered a price that is 50% lower than the price offered by Cephalon’s Provigil.
The current decision adopted by the European Commission is the fourth pay-for-delay decision because of the form taken by the payments. In previous cases, generic entry was delayed by means of simple cash payments.
In this instance, the mechanism was much more sophisticated, relying on a mixture of cash payments and a package of seemingly standard commercial deals.
