European Officials Say Drug Makers Paid to Delay Generic Version

The case focuses on monthly payments that a Netherlands-based subsidiary of the American company Johnson Johnson made to Sandoz, a unit of the Swiss company Novartis. While the companies have said the payments were legitimate, the European Union’s antitrust chief said Thursday that the money probably changed hands to keep lower-cost versions of a drug called fentanyl off the market in the Netherlands.

European authorities are “determined to fight undue delays in the market entry of generic medicines,” Joaquín Almunia, the E.U. competition commissioner, said in a statement Thursday.

His office would not disclose the amount of money the Johnson Johnson unit in the Netherlands, Janssen-Cilag, paid to Sandoz. Nor would officials indicate whether the investigation would go beyond the Netherlands.

Fentanyl is widely used in Europe and the United States, typically paid for by government-provided health plans or, in many cases in the United States, by private insurance. Although the pricing of such drugs is usually negotiated behind closed doors, generic versions are typically much cheaper.

Mr. Almunia warned pharmaceutical companies against practices that raised costs for European governments, squeezed by austerity and an economic slowdown, which must buy medicines for state supported health care plans. It is “important to make sure that pharmaceutical companies do not free-ride our welfare state and health insurance systems, especially in this period of constraints on public spending,” he said.

A goal of European authorities has been to increase patient access to less costly medicines as name-brand drug patents worth tens of billions of euros expire. The end of a drug’s patent protection — typically up to 25 years in Europe — can hurt a pharmaceutical company’s bottom line, but benefits governments and private insurers by lowering their costs.

Patent expirations also open opportunities for generic competitors, which is why in some cases drug makers have been accused of paying generic competitors to delay bringing their products to market.

A preliminary investigation by Mr. Almunia’s office found that Janssen-Cilag made the payments to stop Novartis from selling generic fentanyl in the Netherlands for more than a year, from July 2005 until December 2006. That kept prices artificially high, according to the European Commission, the Union’s administrative body that enforces antitrust law.

Both companies will have the chance to formally respond to the accusation.

The commission, which first announced the inquiry in October 2011, can fine companies up to 10 percent of their annual global sales for antitrust abuses. Penalties are typically lower, though, because officials usually base fines on sales of the main product involved in the case, and then increase the amount based on the duration of the offense and other factors.

Fentanyl is a painkiller that is stronger than morphine, according to the commission. In skin-patch form, which is the type at issue in the investigation, the drug is used to relieve moderate to severe pain that lasts for a long time, does not go away and cannot be treated with other medications, according to the Web site of the U.S. National Library of Medicine. In lozenge form, fentanyl is used to treat sudden episodes of pain, known as breakthrough pain, in cancer patients who are already taking other painkillers, according to the Web site of Cephalon, a company owned by Teva of Israel, which markets the drug under the Actiq brand.

A spokesman for the Johnson Johnson subsidiary said in a statement that the company had not acted improperly. “Janssen continues to believe that these arrangements were legitimate,” the spokesman, Stefan Gijssels, said Thursday. “Janssen supports a sustainable health care system, where patients have access to both innovative and generic drugs,” he said.

Sandoz said in a statement that it and “Novartis operate to the highest of standards and take the position of the commission seriously.” It also indicated that it and Novartis would seek to rebut the accusations made by the commission by using their “rights of defense as provided for in the process.”

The case is the latest in a series of actions by authorities in Europe and the United States to crack down on so-called pay-to-delay tactics by pharmaceutical companies, and comes at a time when the biggest name-brand drug makers are losing billions of dollars in sales to generic competition as best-selling drugs lose their patent protection.

In the United States, the Supreme Court is scheduled in March to take up the issue of whether such deals in the pharmaceutical sector violate antitrust law.

Article source: http://www.nytimes.com/2013/02/01/business/global/eu-says-drug-makers-paid-to-delay-generic-version.html?partner=rss&emc=rss