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"Pay-for-delay" generic drug deals fall after EU crackdown

Monday, 9 Dec 2013 | 8:01 AM ET

* Fewer potentially problematic patent settlements in EU

* Follows crackdown on deals that delay cheaper generics

* 7 pct of 2012 deals involved payment vs 22 pct in 2000-08

LONDON, Dec 9 (Reuters) - A crackdown by regulators on deals between drugmakers that unfairly delay the launch of cheap generic medicines appears to be working, with data on Monday showing firms in Europe are avoiding settlements involving pay-offs.

Generic drug firms regularly challenge the validity of branded drug patents - especially when patents are nearing the end of their life - and some companies owning the original brands have been paying rivals not to market generic versions of them.

The practice has brought criticism from around the world because it inflates consumers' bills and pushes up public healthcare costs.

In recent years, the European Commission has taken a particularly tough line and new figures suggest that its strategy is paying off, with so-called "pay-for-delay" deals now far less common.

The report found the vast majority of settlements now do not include payments to the generic firm.

The Commission said the number of deals involving a transfer of value from the originator to the generic company decreased to just 7 percent of the total in 2012 from an average of 22 percent between 2000 and the first half of 2008.

Overall, 183 patent settlements were concluded between originator and generic companies in 2012, up from 120 in 2011, but few of these gave rise to antitrust concerns.

New legal provisions in Portugal, where the government has been pushing for greater use of generics, also contributed to the increase in overall settlements. Without this factor, there was a smaller increase to 125 cases in 2012 from 120 in 2011.

The Commission said in a statement that the data showed its 2009 inquiry into the sector had not stopped firms from settling patent disputes, and in most cases they were able to do so without running into problems under EU antitrust rules.

The European Commission has taken sanctions against several specific companies for settlements that breach antitrust rules. In June, it fined Lundbeck and eight others - and two people familiar with the matter said last month it was also set to fine Johnson & Johnson and Novartis.

The Commission has another two other pay-for-delay cases in the pipeline involving Teva and its subsidiary Cephalon, and privately owned French drugmaker Servier.