Pay-for-Delay Agreements in the EU Pharmaceutical Industry

Abstract

This article analyses the compatibility of pay-for-delay agreements with Article 101 of the Treaty on the Functioning of the European Union, in light of the recent judgment of the General Court in H. Lundbeck A/S and Lundbeck Ltd v European Commission. These commercial agreements, also known as reverse payment settlements, are characterised by a value transfer from the originator to generic companies, which results in a delay in generic market entry. The European Commission first examined pay-for-delay agreements in the Pharmaceutical Sector Inquiry in 2009, instituting an annual patent settlements monitoring exercise and initiating proceedings against a number of pharmaceutical companies, imposing fines totalling over €580 million. In September 2016, the General Court confirmed the decision of the Commission against Lundbeck, holding that the generic undertakings involved in the pay-for-delay agreements were potential competitors of the originator company and that the agreements constituted restrictions of competition by object. The seminal decision of the court adds strength to the arguments used by the Commission in its pay-for-delay investigations, providing an apparently coherent legal framework for the assessment of these agreements. However, significant uncertainty remains in relation to the application of key concepts of competition law in the pay-for-delay context.