(Reuters) - The New York Attorney General and the U.S. units of Ranbaxy Laboratories Ltd and Teva Pharmaceutical Industries Ltd have settled claims that an agreement between the two drugmakers unlawfully restricted competition.
Shares of both companies rose after they agreed to pay $150,000 each to the state of New York and refrain from similar agreements in the future as part of the settlement. The companies neither admitted nor denied the allegations.
The settlement ends an investigation into an agreement the companies signed in 2010 to sell a generic version of Pfizer Inc’s cholesterol drug Lipitor in the United States, while not challenging each other’s exclusivity rights on other generic drugs.
The agreement was drawn up as a contingency plan to allow Israel’s Teva to sell the generic Lipitor, or atorvastatin calcium, in case Ranbaxy’s version was not approved by the U.S. Food and Drug Administration before Lipitor lost its patent protection on November 30, 2011.
While India’s Ranbaxy, majority-owned by Japan’s Daiichi Sankyo Co Ltd, eventually got FDA approval in time, the agreement remained in place and could have been used to protect other drugs made by the two companies.
“Agreements between drug manufacturers to protect each other’s market positions violate fundamental principles of antitrust law, and can lead to higher drug prices,” Attorney General Eric Schneiderman said in a statement.
The agreement related to the sale of only one drug, but by including the “no-challenge” clause, the companies shielded dozens of their drugs from legal and regulatory challenges by the other, the attorney general’s office said.
The attorney general’s office however said that it had not identified any anti-competitive effects due to the agreement during its investigation.
Schneiderman said the case represents the latest application of recent legal precedent arising out of challenges to “pay-for-delay” agreements between brand-name and generic pharmaceutical manufacturers.
The so-called “pay-for-delay” deals where brand-name companies pay generic rivals not to sell their versions of a drug at a fraction of the original price caught the attention of regulators around the world because it raises patient bills and public healthcare costs.
“Ranbaxy ... continues to believe that the agreement was pro-competitive and an important part of making the product readily available to patients and the U.S. healthcare system in a timely fashion,” a Ranbaxy spokesman said in an email to Reuters.
Teva declined to comment.
“The settlement is positive for (Ranbaxy). The settlement amount will not significantly impact the company,” said Sarabjit Kour Nangra, an analyst at Angel Broking.
Ranbaxy has been banned from exporting drugs to the United States after failing to adhere to the U.S. Food and Drug Administration’s manufacturing standards.
Ranbaxy’s shares closed up about 3 percent at 362.15 rupees on Wednesday on India’s National Stock Exchange. Teva shares were up 4 percent at $47.41 in afternoon trading on the New York Stock Exchange.
Additional reporting by Vrinda Manocha and Esha Dey in Bangalore; Editing by Supriya Kurane and Savio D'Souza