UK watchdog fines GSK $54 mln over 'pay-for-delay' drug deals

* CMA says GSK delayed generic competition to Seroxat

* GSK disagrees and considering grounds for appeal

* Merck KGaA also fined as former parent of generic firm (Adds Merck comment)

By Ben Hirschler

LONDON, Feb 12 (Reuters) - Britain's competition watchdog has fined GlaxoSmithKline (Other OTC: GLAXF - news) 37.6 million pounds ($54.4 million) for market abuse in striking deals to delay the launch of cheap generic copies of its former blockbuster antidepressant Seroxat.

Generic drug companies involved, including Germany's Merck (Jakarta: 28586808.JK - news) KGaA, were also fined smaller amounts, the Competition and Markets Authority (CMA) said on Friday, bringing the total penalties to 45 million pounds.

GSK said it disagreed with the decision and was considering grounds for appeal.

The CMA move is the latest example of regulators trying to curb "pay-for-delay" deals by drug companies and follows previous actions by U.S (Other OTC: UBGXF - news) . and European antitrust authorities. The watchdog first accused GSK of anti-competitive behaviour over Seroxat in April (LSE: 0N69.L - news) 2013, but it has only now handed out fines.

"Today's decision sends out a strong message that we will tackle illegal behaviour that is designed to stifle competition at the expense of customers," CMA enforcement head Michael Grenfell said in a statement.

The case relates to agreements struck more than a decade ago. Since then the patents protecting paroxetine, the active ingredient in Seroxat, have expired and the arrangements under investigation have been terminated.

Between 2001 and 2004, the CMA said GSK paid generic drug companies over 50 million pounds with the intention of delaying the potential entry of independent competitors, thereby depriving the National Health Service (NHS) of cheaper supplies.

When independent generic copies eventually arrived at the end of 2003, average paroxetine prices dropped by more than 70 percent in two years.

GSK said it struck the deals in order to settle costly, complex and uncertain patent disputes and its action had actually brought down the cost of medicine for the state-run health service by allowing some generic competition.

"The agreements allowed the generics companies to enter the market early with a paroxetine product and ultimately enabled a saving of over 15 million pounds to the NHS," the company said.

Among the generic companies involved in the case, the CMA said it had fined Merck KGaA 5.8 million pounds, as the former parent of Generics UK (GUK), while a 1.5 million pounds penalty was imposed for infringements by Alpharma.

Merck (BSE: MERCK.BO - news) , which sold GUK to Mylan (Tel Aviv: 27249935.TA - news) in 2007, said it had not been directly involved, adding it had made adequate provision for the fine, which would have no material impact on its financial results.

The issue of brand-name pharmaceutical companies paying makers of generic drugs to drop patent challenges was at the centre of a European review of the sector in 2008-2009, which did not result in any action against GSK.

($1 = 0.6909 pounds) (Additional reporting by Nadine Schimroszik in Frankfurt; Editing by Jason Neely and Mark Potter)