European regulators believe that Teva and Cephalon breached antitrust rules with an agreement that effectively delayed the entry of generic competition to the latter’s blockbuster sleep disorder drug modafinil.

Following an investigation the European Commission says its preliminary findings are that Cephalon paid Teva not to market a cheaper generic version of the drug, sold by Cephalon under the brand name Provigil, as per an agreement being referred to as ‘pay-for-delay’.

Teva put its copycat form on the UK market for a short time after certain patents protecting the drug owned by Cephalon expired, but it was removed from shelves after a world-wide agreement was reached between the firms following a patent infringement litigation.

As part of this agreement Teva agreed not to sell its generic modafinil products in the EEA until October 2012, receiving in exchange “a substantial transfer of value” from Cephalon through a series of cash payments and various other agreements.

The Commission's preliminary view is that the transferred value served as a significant pay-for-delay inducement for Teva not to compete with Cephalon's modafinil worldwide, which “may have caused substantial harm to EU patients and health service budgets”.

If confirmed, this behaviour would infringe Article 101 of the Treaty on the Functioning of the European Union (TFEU) that prohibits restrictive business practices.

"Market entry and competition by generic drugs is an essential element to improve the affordability of healthcare,” said Margrethe Vestager, Commissioner in charge of competition policy. “It's now up to the companies to respond to our concerns."

Teva, which acquired Cephalon in 2011, could reportedly be facing a fine of up to 10 percent of global revenue if found guilty of the charges.