Landmark judgment on competition law challenge to pay-for-delay deals

05/02/20

The Court of Justice has given its judgment in Case C-307/18 Generics (UK) Ltd v Competition and Markets Authority, a preliminary ruling on whether agreements to settle patent litigation in the pharmaceutical sector may constitute infringements of competition law. The case arose from appeals to the Competition Appeal Tribunal (CAT), then referred to the CJEU for a preliminary ruling.

In February 2016 the CMA imposed fines totalling £44.99 million on GlaxoSmithKline, Generics (UK) and Alpharma for allegedly agreeing to make payments and other value transfers to delay the entry of generic competitors into the UK market for paroxetine, an anti-depressant medicine.

In June 2018 the CAT decided to refer ten questions to the CJEU asking whether a patent settlement agreement in the pharmaceutical sector may constitute a restriction of competition by object or effect, and whether entering into such agreements may constitute an abuse of a dominant position.

Of particular significance was the Court's answer to the CAT’s questions as to whether these agreements had the object of restricting competition. The Court held that settlement agreements whereby a manufacturer of generic medicines undertakes not to enter the market or challenge a patent in return for transfers of value have the object of restricting competition if it is clear that the net gain from the transfers of value can have no explanation other than the commercial interest of the parties not to engage in competition on the merits, and unless the settlement agreement is accompanied by proven pro-competitive effects capable of giving rise to a reasonable doubt that it causes a sufficient degree of harm to competition.

The judgment also provides useful guidance on the concepts of potential competition, restrictions of competition by effect, the relevant product market and abuse of dominance.

The judgment is here.