EU court confirms €60m fine for Teva
Luxemboug court agrees with European Commission that ‘beneficial arrangement’ between Teva and Cephalon delayed generic market entry of sleep disorder drug | Teva and subsidiary Cephalon to pay around €30m each plus costs.
Teva Pharmaceuticals and its subsidiary Cephalon have lost their bid to overturn a European Commission decision that handed them a €60.5 million ($63.8 million) fine for an illegal deal that delayed market entry of Teva’s generic version of a sleep disorder drug.
Yesterday (October 18) in Luxembourg, the EU General Court rejected the firms’ claims that the decision should be annulled and the fine cancelled or reduced, and ordered them to pay costs.
The contested fine related to a “package of commercial side-deals” between Teva and Cephalon as part of a patent settlement agreement in 2005 over modafinil, a wake-promoting agent used to treat sleep conditions.
At the time, Cephalon held patent rights relating to modafinil, and had initiated infringement proceedings against Teva in the US and UK over generics of the drug.
The deal that ended court proceedings between the firms included a number of transactions; a license for IP rights from Teva to Cephalon; an agreement for Teva to supply Cephalon with the modafinil active pharmaceutical ingredient (API); payments from Cephalon to Teva for avoided litigation costs; Teva to distribute Cephalon’s products in the UK; and a license from Cephalon to Teva in connection with a treatment for Parkinson’s disease.
The agreement contained ‘restrictive clauses’, namely that Teva would not compete with Cephalon in the modafinil market or challenge Cephalon’s modafinil patent rights.
According to the European Commission, the deal constituted a “pay-for-delay” arrangement that removed Teva as a competitor and allowed Cephalon to continue charging high prices despite its main patents for modafinil expiring.
In 2020, the Commission fined Teva €30 million and Cephalon €30.5 million for the agreement. Cephalon was acquired by Teva in 2011.
A ‘plausible’ explanation
Appealing to the EU court, Teva and Cephalon argued that each commercial transaction in the settlement agreement was justified independently of the restrictive clauses, and had a ‘plausible’ explanation other than solely as consideration for Teva’s delayed entry into the modafinil market.
These arguments included that Cephalon was facing a risk of undersupply of the modafinil API, and that Teva was a “logical partner” to meet that need since it had production capabilities from its own efforts to launch modafinil products.
They told the court that contrary to the Commission’s findings, the settlement agreement contributed to improving the production or distribution of generic medicines, citing earlier availability of the Parkinson’s disease medicine, and claiming that more modafinil products would be available through the additional API capacity.
Court upholds antitrust view
In its judgment, the Court found no fault with the Commission’s analysis of the agreement between the firms as violating antitrust rules.
It was “highly unlikely” that Cephalon would have chosen its closest competitor, Teva, as its exclusive UK distributor without the settlement agreement, the Court said.
Judges were unconvinced that Cephalon had been facing a supply issue of the API, stating that the Commission was right to conclude that undersupply concerns “were not a plausible explanation for Cephalon entering into the agreement”.
Teva’s commitment was “an agreement concerning its market conduct”, they concluded, upholding the Commission’s view that the deal was outside the scope of the patents and ultimately delayed Teva’s entry into the modafinil markets.
The case was Teva Pharmaceuticals and Cephalon v European Commission.
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