EU Commission fines Johnson & Johnson and Novartis for concluding a pay-for-delay agreement

Joaquin Almunia

On Tuesday, the EU Commission announced that it imposed fines of € 10,798,000 on Johnson & Johnson and € 5,493,000 on Novartis, finding that two subsidiaries of the pharmaceutical companies had concluded an unlawful pay-for-delay agreement in 2005, delaying the market entry of a generic version of the pain-killer fentanyl in the Netherlands. Commission Vice-President Joaquin Almunia issued a severe statement, noting that:

Johnson & Johnson paid Novartis to delay the entry of a generic pain killer. The two companies shockingly deprived patients in the Netherlands, including people suffering from cancer, from access to a cheaper version of this medicine. Today's decision should make pharmaceutical companies think twice before engaging into such anticompetitive practices, which harm both patients and taxpayers.

Johnson & Johnson, which originally developed and commercialized fentanyl-based drugs in the 1960s, held a patent on a fentanyl depot patch (a device which administers a predefined dose of fentanyl through the skin). In the Netherlands, the patent was due to expire in July 2005. At the time, Sandoz, a subsidiary of Novartis, was preparing to enter the market with a generic fentanyl depot patch and it had already produced the necessary packaging material. Instead of launching its generic version of the brand drug, however, Sandoz concluded a 'co-promotion agreement' with Janssen-Cilag, a Dutch subsidiary of the patent holder, by which the latter agreed to make monthly payments exceeding the profits that Sandoz expected to obtain from selling its generic product. The agreement remained in force until December 2006, when a third company commercialized a generic fentanyl patch.

The Commission opened a formal investigation on 18 October 2011, to verify whether the 'co-promotion agreement' concluded between Janssen-Cilag and Sandoz was compatible with Article 101 TFEU. On 31 January 2013, it sent a Statement of Objections to all the companies involved, taking the preliminary view that the agreement had unlawfully delayed the entry of a cheaper generic drug for a period of seventeen months, allowing the patent holder to keep the market prices for fentanyl in the Netherlands artificially high.

In the press release issued on Tuesday, the Commission confirmed its previous findings, noting that internal documents of the two companies suggested that the agreement was concluded to preserve Johnson and Johnson's monopoly in the relevant market, allowing Sandoz to receive its 'part of [the] cake'. According to the same documents, the companies colluded in order 'not to have a depot generic on the market and in that way to keep the high current price'. The investigators also found that Janssen-Cilag did not consider any other potential partners for the 'co-promotion agreement' and that Sandoz did not engage in any meaningful promotion activity.

The actual decision has not been made public yet, but readers should be able to find a redacted version here, in the following weeks. According to the Financial Times, Johnson & Johnson and Novartis reject the Commission's conclusions, although the latter is quoted as saying that it 'look[s] forward to putting this historical matter behind'. Both companies are likely to appeal the decision, in order to prevent it from becoming res iudicata under Art. 16 of Regulation 1/2003, which would turn the decision into binding proof, before any national court, that the behavior took place and was illegal (see Joined Cases C-295/04 to 298/04).