European Commission informs Teva of potential breach of antitrust rules

The European Commission (EC) has sent Teva Pharmaceuticals a statement of objections concerning its agreement with Cephalon, which has been preliminarily concluded as in breach of antitrust rules.

The agreement in question relates to modafinil, Cephalon’s blockbuster drug used to treat sleep disorders, and a commitment by Teva to not market its cheaper generic version of the drug.

“Market entry and competition by generic drugs is an essential element to improve the affordability of healthcare,” explained Margrethe Vestager, commissioner in charge of competition policy. “In this case, our preliminary finding is that Teva and Cephalon broke EU antitrust rules by agreeing on Cephalon paying Teva to keep its cheaper generic version of Cephalon's sleep disorder drug modafinil out of the market. It's now up to the companies to respond to our concerns.”

Cephalon originally owned the patents for modafinil and its manufacture, however, when certain patents were nearing expiration within the European Economic Area (EEA), Teva brought a cheaper generic product to market.

This resulted in a lawsuit over alleged infringements on processing patents of modafinil, which was settled in the UK and US with a worldwide agreement. As part of this agreement, Teva was to not sell its generic version of the sleep disorder drug in the EEA until October 2012, for a substantial amount of money that was transferred from Cephalon through various channels.

The EC’s preliminary view is that the monies transferred represented a ‘pay-for-delay’ incentive for Teva to not compete with Cephalon’s modafinil globally. The Statement of Objections alleges that this agreement between the two companies may have been harmful to patients within the EU and health service budgets, as a result of preventing a cheaper alternative to enter the market.

If the companies are found to have acted as alleged they will have infringed Article 101 of the Treaty on the Functioning of the European Union (TFEU) that prohibits restrictive business practices. This investigation is ongoing with further details available from the EC.