GSK, Alpharma and GUK fined for pay-for-delay deals

GlaxoSmithKline (GSK), Alpharma and Generics UK (GUK) face fines totalling £45 million for 'pay-for-delay' deals in relation to the supply of anti-depressant paroxetine.

The pay-for-delay agreements, intended to slow the entry of generic versions of paroxetine to the market, breach the law on anti-competitive behaviour, according to watchdog the Competition Market Authority (CMA).

GSK paid over £50 million in such agreements to protect Seroxat, its branded version of paroxetine, which was originally making over £90 million in sales in 2001.

Generic versions were being developed in 2001, resulting in litigation proceedings being initiated by GSK against GUK and Alpharma. However, before the trial even began, both companies entered into agreements with GSK deferring the generics' entry into the market.

By the end of 2003, when generics finally entered the market, they eroded the paroxetine market by around 70%.

The CMA deemed the payment agreements between GSK and its competitors as aimed at delaying entry of generic competitors into the market, infringing competition law prohibition on both anti-competitive agreements and abuse of a dominant position.

The fines – totalling £44.99 million – were divided as follows:

• GSK - £37,606,275

• Merck and GUK - £5,841,286

• Alpharma - £1,542,860.

Protecting the taxpayer

The decision made by the CMA follows in a long list of recent wider clampdowns, including the European Commission's fining of both Johnson & Johnson and Novartis over the development of a pay-for-delay scheme, as well as the US Federal Trade Commission's $1.2 billion fining of Cephalon.

Commenting on the decision, CMA Executive Director for Enforcement Michael Grenfell said: "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.

"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."

In response, GSK is considering an appeal on the grounds that its agreements were intended to settle complicated patent disputes, claiming "the agreements allowed the generics companies to enter the market early with a paroxetine product and ultimately enabled a saving of over £15m to the NHS."