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General Court rules on ‘pay for delay’ agreements in Servier


On 12 December 2018, the General Court handed down judgments in Case T-677/14 Biogaran v Commission EU:T:2018:910, Case T-679/14 Teva UK v Commission EU:T:2018:919, Case T-680/14 Lupin v Commission EU:T:2018:908, Case T-682/14 Mylan Laboratories and Mylan v Commission EU:T:2018:907, Case T-684/14 Krka v Commission EU:T:2018:918, Case T-701/14 Niche Generics v Commission EU:T:2018:921, Case T-705/14 Unichem Laboratories v Commission EU:T:2018:915 and Case T-691/14 Servier v Commission EU:T:2018:922.

This is the second time that the General Court has considered so-called ‘pay for delay’ agreements, under which a manufacturer of branded drugs typically settles a dispute with a generic drug producer by paying it to delay the launch of its product.  Views differ about the merits of such deals.  Some argue that they stifle competition from cheaper generic drugs, to the detriment of patients and those financing the healthcare system.  Others point to the benefits of such deals, arguing that they are a legitimate means of protecting patent rights and settling disputes and litigation.

In the Servier case the Commission decided that the patent settlement agreements concluded between Servier and the generic companies prevented or delayed entry of generic versions of the pharmaceutical known as perindopril. The Commission found that those agreements had the object and effect of restricting or distorting competition.  The Commission also found that Servier’s conduct amounted to an abuse of its dominant position.

The General Court held that agreements settling patent disputes or litigation are not necessarily contrary to EU competition law.  Where, however, a patent holder agrees to grant a generic company advantages inducing it to refrain from entering the market or challenging a patent, the agreement should be regarded as a market exclusion agreement that has the object of restricting competition.  In those circumstances the Court considered that it is the inducement, rather than the strength of the disputed patent, that is the reason for the restrictions of competition.

The General Court held that the settlements entered into by Servier with Niche, Unichem, Matrix, Teva and Lupin had the object of restricting competition and were unlawful.  The Court held, however, that the Commission had not proved an inducement by Servier in exchange for Krka's withdrawal from the market. The General Court therefore set aside the fines imposed on Servier and Krka in respect of that agreement.

Finally, the General Court found that the Commission erred in its definition of the relevant product market, noting that other medicines of the same therapeutic class exerted competitive pressure on perindopril.  As a result, the Court, annulled the fine imposed on Servier for its alleged abuse of dominance.

The judgments appear below:

Mark Hoskins QC and Victoria Wakefield appeared for Lupin Ltd; David Bailey appeared for the European Commission.