EC fines Teva and Cephalon €60.5 million over pay-for-delay deal

The European Commission (EC) has fined Teva and Cephalon €60.5 million for agreeing to a “pay-for-delay” deal, for several years, of the market entry of a cheaper generic version of Cephalon’s drug for sleep disorders, modafinil, after the company’s main patents had expired. The fines imposed by the EC on Teva and Cephalon are €30 million and €30.5 million, respectively. According to the EC, the agreement violated EU antitrust rules and caused substantial harm to EU patients and healthcare systems by keeping prices high for modafinil.

The EC says that the agreement was concluded before Cephalon became a subsidiary of Teva. The infringement lasted from December 2005 to October 2011, when Teva acquired Cephalon and they became part of the same group.

The decision concerns a patent settlement agreement whereby Cephalon induced Teva not to enter the market with a cheaper version of modafinil, in exchange for a package of commercial side-deals that were beneficial to Teva and some cash payments. Teva held its own patents relating to modafinil’s production process, was ready to enter the modafinil market with its own generic version and it had even started selling its generic in the UK. Then, it agreed with Cephalon to stop its market entry and not to challenge Cephalon’s patents.

The EC investigation has concluded that for several years, this pay-for-delay agreement eliminated Teva as a competitor and allowed Cephalon to continue charging high prices even if the main modafinil patent had expired.

The EC further states that the delay in Teva’s entry, the most advanced generic competitor at the time of the settlement agreement, meant that Cephalon did not face competition from cheaper medicines. Without the pay-for-delay settlement agreement, Teva could have entered the market earlier and could have pushed down prices for modafinil.

EC Executive Vice-President Margrethe Vestager, in charge of competition policy, said: “It is illegal if pharmaceutical companies agree to buy-off competition and keep cheaper medicines out of the market. Even when their agreements are in the form of patent settlements or other seemingly normal commercial transactions. Teva’s and Cephalon’s pay-for-delay agreement harmed patients and national health systems, depriving them of more affordable medicines.”