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Big Drugmakers Merge|as EU Launches Probe

(CN) - Teva Pharmaceuticals Industries announced this week it will acquire Cephalon for $6.8 billion, just days after the European Commission announced it is investigating both pharmaceutical giants for potential anticompetitive practices.

Through the acquisition, Israel-based Teva, the world's largest generic drug producer, hopes to build up its line of brand-name medications. Cephalon, a maker of pain, sleep and cancer medications based in Pennsylvania, earned nearly half of its 2009 revenue from Provigil (modafinil), a "wakefulness" medication that posted more than $1 billion in sales.

Days earlier, on April 28, the European Commission said it launched an investigation into whether a deal between the two companies violated competition rules with a deal over the medication, which is used to treat narcolepsy and other sleep disorders.

A 2005 patent-infringement settlement between the two companies stipulated that Teva would wait until October 2012 to sell a generic modafinil in the European markets.

The European Commission is looking into whether this violates antitrust rules. The commission in 2008 and 2009 launched a broad inquiry into the pharmaceutical sector over such "pay-for-delay" deals.

A ruling by the General Court of the European Union last year emerged from the investigation, upholding the commission's decision that AstraZeneca abused the patent system by delaying the release of generic medications. The commission fined Swedish and British branches of the pharmaceutical firm around $90 million for the violations.

A similar lawsuit, filed by the Federal Trade Commission against Cephalon in 2008, is still pending. The trade commission says Cephalon paid four competitors more than $200 million to prevent them from marketing generic versions of the drug in 2006.

A formulation patent for Cephalon's Provigil expired in 2006, while a patent for a more specific preparation expires in 2015.

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