News / 2020
The judgment of the CJEU in a case involving pay-for-delay agreements
On January 30, 2020 the Court of Justice of the European Union announced its judgment in the case: Generics (UK) and others (C-307/18). It is worth to take a closer look at its decision, since it is the first time when the Court has taken position on pay-for-delay agreements which are quite commonly made between subjects that are present in pharmaceutical markets.
What is the goal of pay-for-delay agreements
First of all, it is necessary to remark that when it comes to a pay-for-delay agreement, its parties are: a holder of a pharmaceutical patent, as well as a producer of generic drugs. Under such an agreement, the patent holder commits to pay a compensation in a specified amount to a producer of generics, while the latter refrains — temporarily or permanently — from entering the market.
The agreements made by the pharmaceutical group GlaxoSmithKline
Such an agreement — actually, to be more precise: three agreements — were signed in the case that has been reviewed by the CJEU. The pharmaceutical group GlaxoSmithKline (GSK) was a holder of a patent for an active pharmaceutical ingredient of the anti-depressant medication paroxetine, as well as of secondary patents that protected some processes for manufacturing of this ingredient. The patent for a main ingredient expired in 1999. GSK however, not willing to relinquish its special position in the market that it was able to enjoy thanks to the patent protection, challenged the actions of producers of generics who were preparing themselves to enter the market — what resulted in reaching the aforementioned agreements in years 2001-2003. The agreements contained mostly provisions regarding distribution: GSK was supposed to pay a compensation to producers, while they were obliged under those deals to cease manufacturing, importing and selling paroxetine in Great Britain, since then they were allowed to sell exclusively the substance produced by GSK.
The agreements signed by GSK attracted the attention of the British Competition and Markets Authority. Upon its evaluation of agreements, the Competition and Markets Authority determined that in fact they were detrimental to competition and GSK abused its dominant position, which led it to impose on parties of those deals fines amounting to 44,99 million pounds. The case reached the second instance where it fell under the competence of the Competition Appeal Tribunal (the British appellate court in the field of competition law). The Tribunal has decided to refer the case to the CJEU for a preliminary ruling, thus initiating proceedings before the Court in Luxembourg. The CJEU provided an elaborate and very thorough analysis of a legal status of such agreements in the light of prohibitions of Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU).