BMI View: The Lundbeck case sets a precedent for both EU and US regulatory handling of drug company anticompetitive practices. The fine imposed on Lundbeck by the EU came two days after the US Supreme Court said US regulators could challenge deals between drugmakers because of the resulting higher consumer costs. We believe the authorities' increasing focus on pay-for-delay deals aligns with government focus on increasing patient consumption of lower value generic medicines in the face of strained public finances and escalating healthcare budgets.
The European Union (EU) has fined Lundbeck EUR93.8mn (US$123.9mn) for blocking the supply of generic versions of its anti-depressant citalopram. A five-year investigation carried out by the European Commission provided evidence that Lundbeck paid a number of drugmakers and purchased stocks of the generic drugs to inhibit their sale - in effect offering companies guaranteed profits, rather than permitting competition that would have lead to a decline in the price of citalopram, once its patent expired in 2002. The ruling also imposed fines of a total EUR52mn (US$68mn) on the recipients, including Merck KGaA (EUR21.4mn, US$28.2mn), Arrow (EUR10.0mn, US$13.0mn), Zoetis (EUR10.5mn, US$13.5mn)) and Ranbaxy (EUR10.3mn, US$13.2mn).
Lundbeck said it will appeal the EU's decision but has cut its guidance for operating profits this year as a result of the fine - from a range of DKK1.2bn and DKK1.7bn (US$213mn to US$300mn) against a previous forecast before the fine of DKK1.9bn (US$336mn) to DKK2.4bn (US$424mn). As of June 3 2013 (when Reuters first reported the fine), Lundbeck's shares have declined by 6.5% (from DKK109.2 on June 3 to DKK102.1 on June 19).
|Fine Hits Company Valuation|
|Lundbeck Share Price On The Copenhagen Stock Exchange (DKK)|
Drugmakers Under Scrutiny: Pay-For-Delay Agreements Are Illegal
In 2012, EU antitrust regulators charged French drugmaker Servier, Israel's Teva and four other firms with blocking the entry of a generic version of Coversyl (perindopril).
In January 2013, the EU accused Johnson & Johnson and Novartis of colluding to delay the availability of generic versions of pain killer Duragesic (fentanyl) in the Netherlands.
In 2011, the EU started an investigation looking into at an agreement by Cephalon and Teva that may have delayed the availability of generic versions of Cephalon's Provigil (modafinil).