GSK accused in Britain of paying rivals to delay generic versions of Paxil

New York TimesApril 19, 2013 

Britain Earns GlaxoSmithKline

This Wednesday, April 28, 2010, file photo. shows the GlaxoSmithKline offices in London.

KIRSTY WIGGLESWORTH — AP

— British antitrust authorities accused the pharmaceuticals giant GlaxoSmithKline on Friday of paying three rivals to delay the introduction of a generic version of an antidepressant drug. It is the latest in a series of similar cases that are drawing scrutiny from regulators on both sides of the Atlantic.

Britain’s Office of Fair Trading alleged that GlaxoSmithKline – which has its U.S. headquarters in Research Triangle Park – had abused its dominant position in the market, kept prices artificially high and denied “significant cost savings” to Britain’s state-run health provider, the National Health Service.

The British case centers on efforts by three companies, Alpharma, Generics (U.K.) and Norton Healthcare, to market an alternative to Seroxat, GlaxoSmithKline’s brand of paroxetine. The company sells it in the United States under the brand name Paxil.

In recent years, regulators in Europe and the United States have paid greater attention to “pay for delay” deals, suspecting that they may allow pharmaceutical companies to make big profits by exploiting a brief but lucrative period of monopoly over the supply of a product.

“These are blockbuster drugs,” said Farasat Bokhari, a senior lecturer in economics at the University of East Anglia, “so if they are on the market without generics challenging them, then companies can maintain high, monopoly, profits.”

“As soon as generic entry takes place,” Bokhari added, “prices drop significantly, sometimes by up to 70 to 80 percent.”

GlaxoSmithKline, according to British authorities, warned the three companies that their generic equivalents would infringe a patent. To resolve the dispute, each of the rivals concluded one or more agreements with GlaxoSmithKline, the Office of Fair Trading said.

“The O.F.T.’s provisional view is that these agreements included substantial payments from GlaxoSmithKline to the generic companies in return for their commitment to delay their plans to supply paroxetine independently,” the regulator said. The agreements with the three companies collectively spanned the years 2001 to 2004, it said.

GlaxoSmithKline said it believed “very strongly” that it had “acted within the law, as the holder of valid patents for paroxetine, in entering the agreements under investigation.”

“These arrangements resulted in other paroxetine products entering the market before GSK’s patents had expired,” the company said. “We have cooperated fully with the Office of Fair Trading in this investigation.”

The company noted that EU regulators had reviewed the matters covered by the agreements twice and decided to take no action.

U.S. Supreme Court case

The practice of brand-name drug companies paying generic manufacturers to delay selling their copycat versions has also come under scrutiny in the United States, where the Federal Trade Commission has argued that the practice violates antitrust law.

The matter is currently before the U.S. Supreme Court, which is considering whether a settlement between Solvay Pharmaceuticals, which developed the testosterone treatment AndroGel, and Actavis, which created a generic version, was illegal.

Brand-name and generic companies have argued that companies have a right to protect their intellectual property, and that the payments actually saved consumers money by bringing the generic versions to markets earlier than they normally would have. But the FTC has argued that the opposite is true and that the payments are delaying cheaper versions from entering the market.

The British regulator cited no estimate of the National Health Service’s costs resulting from GSK’s alleged deals. But pay-for-delay agreements cost American consumers an estimated $3.5 billion a year, according to the FTC It says that in 2012 the number of “potentially anticompetitive patent dispute settlements” between branded and generic drug companies increased to 40, from 28 the year before.

Since the period in question in the British inquiry, various generic versions of paroxetine have reached the market. But at the time Seroxat was one of GlaxoSmithKline’s best-selling drugs and was used to treat, among other conditions, depression and anxiety disorders, the Office of Fair Trading said.

“The introduction of generic medicines can lead to strong competition on price, which can drive savings for the NHS, to the benefit of patients and, ultimately, taxpayers,” said Ann Pope, senior director of services, infrastructure and public markets at the Office of Fair Trading. “It is therefore particularly important that the O.F.T. fully investigates concerns that independent generic entry may have been delayed in this case.”

Just a first step

The action Friday was the first step in formal proceedings: the issuance of a statement of objections. The parties, including the three generic companies, can make written and oral responses.

“No assumption should be made at this stage that there has been an infringement of competition law,” Pope said. “We will carefully consider the parties’ representations to the statement of objections before deciding whether competition law has in fact been infringed.”

A company can in theory be fined up to 10 percent of its worldwide revenue, though penalties rarely are so great.

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