On November 26, 2020, the Commission fined Teva and Cephalon a total of €60.5 million for entering into a pay-for-delay agreement in relation to a sleep disorder drug. This arrangement is alleged to have helped maintain high prices for several years, to the detriment of patients and healthcare systems.[1]


Modafinil, sold under the brand name ‘Provigil,’ is a medicine used for the treatment of excessive daytime sleepiness associated with narcolepsy. The product was a best-seller, accounting for more than 40% of Cephalon’s worldwide turnover. By 2005, Provigil lost patent exclusivity in the EU for its main patents. Shortly after, Teva introduced a materially cheaper generic version in the United Kingdom and was ready to expand to the rest of the EU. Cephalon sued for alleged breach of Cephalon’s secondary patents related to the pharmaceutical composition of modafinil.

This led to a 2005 worldwide patent settlement agreement between the parties. Teva agreed not to sell its generic modafinil products in Europe until October 2012 and not to challenge Cephalon’s patents. In exchange, Cephalon offered Teva certain cash payments and a package of commercial side deals, including a distribution agreement, the acquisition of a license for a certain number of Teva’s modafinil patents, purchase of raw materials from Teva, and access to valuable clinical data for an unrelated medicine to treat the Parkinson disease. In October 2011, Teva acquired Cephalon.

The Commission opened formal proceedings in April 2011[2] and sent the parties an SO in July 2017, alleging that the agreement constituted a pay- for-delay arrangement in violation of Article 101 TFEU.[3] Moreover, a similar action was brought by the U.S. Federal Trade Commission in 2008 and settled in 2015.[4]

Pay-For-Delay Agreement

The Commission acknowledged that patent settlements, including payments, are generally legitimate. But this is not the case of a ‘pay-for-delay’ arrangement.[5] The Commission’s investigation allegedly revealed that both parties had doubts as to the strength of Cephalon’s secondary patents and entered into the settlement agreement for anti-competitive reasons.

Both parties benefited from the arrangement. Cephalon eliminated its most advanced generic competitor at the time, which enabled it to maintain higher prices for its best-selling medicine. Teva obtained a substantial value transfer from Cephalon through a number of attractive commercial deals which, absent the settlement, would not have been concluded, or would only have been concluded on less advantageous terms.

Accordingly, the Commission considered that the arrangement infringed Article 101 TFEU and imposed a fine on Teva and Cephalon of €30 million and €30.5 million respectively.[6] Through the ‘pay-for-delay’ arrangement, Teva did not realize any sales, the value of which normally forms the starting position for any fine calculation. The Commission therefore imposed on Teva a fixed fine amount that essentially mirrored that of Cephalon.

Patent Settlements in the Pharma Sector

The Commission’s Teva decision is the latest pay-for-delay decision stemming from the Commission’s 2009 pharma sector inquiry, which also included cases against Lundbeck (2013),[7] Johnson & Johnson (2013),[8] and Servier (2014).[9] Teva publicly announced its intention to appeal to the EU General Court.[10]

[1]              European Commission Press Release, November 26, 2020, “Antitrust: Commission fines Teva and Cephalon €60.5 million for delaying entry of cheaper generic medicine,” available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2220.

[2]              European Commission Press Release, April 28, 2011, “Antitrust: Commission opens investigation against pharmaceutical companies Cephalon and Teva,” available at: https://ec.europa.eu/commission/presscorner/detail/en/IP_11_ 511.

[3]              European Commission Press Release, July 17, 2017, “Antitrust: Commission sends Statement of Objections to Teva on ‘pay for delay’ pharma agreement,” available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_17_2063.

[4]              See, Federal Trade Commission Press Releases, “FTC Settlement of Cephalon Pay for Delay Case Ensures $1.2 Billion in Ill-Gotten Gains Relinquished; Refunds Will Go To Purchasers Affected By Anticompetitive Tactics,” available at: https://www.ftc.gov/news-events/press-releases/2015/05/ftc- settlement-cephalon-pay-delay-case-ensures-12-billion-ill.

[5]              It is of no importance whether the arrangements are “in the form of patent settlements or other seemingly normal commercial transactions” (see European Commission Press Release, November 26, 2020, “Antitrust: Commission fines Teva and Cephalon €60.5 million for delaying entry of cheaper generic medicine,” available at: https://ec.europa.eu/commission/presscorner/detail/en/ip_20_2220).

[6]              In calculating the fines, the Commission took into account the long duration of the infringement (from December 2005 to October 2011) and its gravity. See the Commission’s 2006 Fining Guidelines (available at https://ec.europa.eu/competition/antitrust/legislation/fines.html).

[7]              Lundbeck (Case COMP/AT.39226), Commission decision of June 19, 2013; Lundbeck v. Commission (Case T-472/13) EU:T:2016:449; Lundbeck v. Commission (Case C-591/16 P).

[8]              Fentanyl (Case COMP/ AT.39685), Commission decision of December 10, 2013.

[9]              Perindopril (Servier) (Case COMP/AT.39612), Commission decision of July 9, 2014; Servier v. Commission (Case T-691/14) EU:T:2018:922; and Commission v. Servier and Others (Case C-176/19 P) (pending).

[10]             Teva said in a statement of November 26, 2020 that “We continue to believe the modafinil patent settlement agreement did not infringe EU competition law in relation to the principles laid out by the EU’s court of justice. We are planning to file an appeal.”