UPDATE 2-EU cracks down on pay-for-delay pharma deals

Wed Jul 25, 2012 10:56pm IST

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* EU Commission acts against "pay-for-delay" deals

* EU seeking to cut Europe's drugs bill

* Regulatory action against Servier in coming days

* Merck, Ranbaxy, others also charged

By Foo Yun Chee

BRUSSELS, July 25 (Reuters) - EU antitrust regulators charged nine drug companies on Wednesday with blocking the entry of cheaper generic medicines into the market, in a move that could shave tens of billions of euros off the continent's drugs bill.

The charges - against German drugmaker Merck KGaA, Danish peer Lundbeck and seven other firms - are the first by the EU watchdog against "pay-for-delay" - where brand-name companies pay generic competitors to abstain from putting their rival drugs on the market.

The European Commission said the tactic breached EU antitrust rules, and warned French drugmaker Servier and several generic rivals of further action in the coming days for a similar offence, related to another medicine.

Following a high-profile inquiry into the sector in 2009, the Commission said that such delays led to European consumers paying 20 percent more for drugs, a large slice of the 214 billion euros ($259.44 billion) it estimated Europe spends on drugs yearly.

Wednesday's move is a sign of EU Competition Commissioner Joaquin Almunia's sensitivity to the impact of antitrust enforcement on the wider European economy at a time of very low growth or recession.

The Commission has been stepping up scrutiny of settlements between drug companies in recent years over concerns some may prevent consumers from obtaining lower-priced medicines.

COSTLY MEDICAL BILLS

Almunia's latest crackdown could have a significant impact on EU governments' medical costs, said Nicolas Petit, a professor at the University of Liege Law School.

"Generics firms help to bring down prices," said Petit. "It makes sense to try to put pressure on companies to bring down drug prices in a crisis and relieve national budgets from costly medical bills."

Companies can be fined up to 10 percent of their turnover if found guilty of breaching EU rules. Lundbeck reported 16 billion Danish crowns ($2.60 billion) in revenues last year, while Merck posted sales of 10.3 billion euros.

The Commission said Lundbeck's action together with four generic competitors related to the antidepressant citalopram.

"The companies entered into agreements that foresaw substantial value transfers from Lundbeck to its four generic competitors, who subsequently abstained from entering the market with generic citalopram," the Commission said in a statement.

"The value transfers included direct payments from Lundbeck to the generic competitors and also occurred in other forms, such as the purchase of generic citalopram stock for destruction or guaranteed profits in a distribution agreement," it said.

"Lundbeck vigorously opposes any allegation of wrongdoing and does not believe its practice has violated European competition law," the Danish company responded in a statement.

A Merck spokesman said the company would analyse the Commission's complaint.

The EU watchdog also sent the "statement of objections" or charge sheet to Generics UK, Arrow, Resolution Chemicals, Xellia Pharmaceuticals, Alpharma, A.L. Industrier and Ranbaxy .

Almunia said similar charges related to another medicine would be sent to French drugmaker Servier and several generic rivals in the coming days.

"Servier and several generic competitors entered into agreements which may have hindered the entry of generic perindopril into markets in the EU," the regulators said.

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