The European Commission has informed pharmaceutical company Teva of its preliminary view that an agreement concluded with Cephalon was in breach of EU antitrust rules. Under the agreement, Teva committed not to market a cheaper generic version of Cephalon’s drug for sleep disorders, modafinil.
Margrethe Vestager, Commissioner in charge of competition policy, said: “Market entry and competition by generic drugs is an essential element to improve the affordability of healthcare. In this case, our preliminary finding is that Teva and Cephalon broke EU antitrust rules by agreeing on Cephalon paying Teva to keep its cheaper generic version of Cephalon’s sleep disorder drug modafinil out of the market. It’s now up to the companies to respond to our concerns.”
Modafinil was a blockbuster drug used to treat sleep disorders. Cephalon owned the patents for the drug and its manufacture. After certain Cephalon patents on the modafinil compound expired in the European Economic Area (EEA), Teva entered the UK market for a short period of time with a cheaper generic product.
Following a lawsuit concerning an alleged infringement of Cephalon’s processing patents on modafinil, the companies settled their litigation in the UK and the US with a world-wide agreement. As part of this agreement Teva undertook not to sell its generic modafinil products in the EEA until October 2012. In exchange, Teva received a substantial transfer of value from Cephalon through a series of cash payments and various other agreements.
The Commission’s preliminary view is that the transferred value served as a significant pay-for-delay inducement for Teva not to compete with Cephalon’s modafinil worldwide, including in the European Economic Area. The Statement of Objections alleges that the patent settlement agreement between Cephalon and Teva may have caused substantial harm to EU patients and health service budgets. This is because they may have delayed the entry of a cheaper generic medicine, leading to higher prices for modafinil.
This behaviour, if confirmed, would infringe Article 101 of the Treaty on the Functioning of the European Union (TFEU) that prohibits restrictive business practices.
The Statement of Objections issued today is addressed to Teva Pharmaceutical Industries Ltd. and its subsidiary Cephalon Inc. The sending of a Statement of Objections does not prejudge the outcome of the investigation.