UK's CMA imposes fine of $ 54 mn on GSK for anti-competitive conduct

UK's Competition and Markets Authority (CMA) has imposed fines totalling Pound 45 million (about $ 72 mn) on a number of pharmaceutical companies for anti-competitive conduct and agreements in relation to the supply of paroxetine (an anti-depressant medicine). As per the order, CMA has asked GlaxoSmithKline Plc (GSK), the supplier of branded paroxetine, to pay Pound 37.6 million ($54.33 million) as fine.
 
The CMA’s decision relates to conduct and agreements between 2001 and 2004 in which GlaxoSmithKline agreed to make payments and other value transfers totalling over Pound 50 million to suppliers of generic versions of paroxetine. The CMA has found that these payments and other value transfers were aimed at delaying the potential entry of generic competitors into the UK market for paroxetine.
   
In 2001, a number of pharmaceutical companies - including Generics UK Limited (GUK) and Alpharma Limited - were taking steps to enter the UK market for paroxetine with a generic version. GSK’s own branded version of paroxetine, Seroxat, was a ‘blockbuster’ product. In the UK, 4.2 million prescriptions were issued for Seroxat in 2000 and Seroxat sales exceeded Pound 90 million in 2001. At the time GSK held certain patents in relation to paroxetine.
 
GSK challenged these pharmaceutical companies, alleging that their generic products would infringe its patents, and commenced litigation proceedings against GUK and Alpharma. Before that litigation went to trial, GUK and Alpharma each entered into agreements with GSK, which included terms prohibiting their independent entry into the UK paroxetine market.
 
These ‘pay-for-delay’ agreements deferred the competition that the threat of independent generic entry could offer, and potentially deprived the National Health Service of the significant price falls that generally result from generic competition. In this case, when independent generic entry eventually took place at the end of 2003, average paroxetine prices dropped by over 70 percent in 2 years.
 
The CMA has found that GSK’s agreements with each of GUK and Alpharma infringed the competition law prohibition on anti-competitive agreements. The CMA has also found that GSK’s conduct, in making payments to GUK, Alpharma and one further company, Norton Healthcare Limited (IVAX), to induce them to delay their efforts to enter the UK paroxetine market independently of GSK, infringed the competition law prohibition on abuse of a dominant position.
 
The CMA has imposed fines totalling Pound 44.99 million on the companies directly involved in the infringements. While GSK was fined for Pound 37.6 million, Alpharma has been ordered to pay Pound 1.54 million. With respect to GUK’s infringement, total fines of Pound 5,841,286 was imposed on Merck KGaA (GUK’s former parent) and GUK.
 
Michael Grenfell, the CMA’s executive director for enforcement, 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. This investigation shows our determination to take enforcement action against illegal anti-competitive practices in sectors big and small. 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.”