The pharmaceutical industry is a strategically significant sector in which advanced, high-cost products are developed, substantial investments are made in research and development, patents, and licensing, and which plays a critical role both in protecting public health and in shaping the public economy.
In Türkiye, pharmaceutical products for human use cannot be marketed unless they are authorized by the Ministry of Health (“MoH”). To grant pharmaceutical license and marketing authorization, MoH requires pharmaceutical companies to submit the results of their pharmaceuticals’ safety and efficacy tests, along with other documents regarding the product.
In effect, pharmaceutical companies must invent and develop a pharmaceutical product through intensive and time-consuming research and development activities, then provide the results of the toxicological and pharmacological tests and clinical trials to MoH in order to commercially exploit their product. This is a long and costly process for introducing new or more effective treatments for patients.
Generic pharmaceutical companies, on the other hand, may submit abridged applications to MoH. If a data exclusivity period does not exist, they can apply for marketing authorization by referring to the original drug’s data, without submitting tests and clinical trials data. Provided that they prove the efficacy and safety of their pharmaceutical product, the abridged application process allows generic companies to obtain the same result as a drug’s inventor without going through long and costly processes. This can enhance competition in the market by offering more choice and by lowering drug prices.
However, with the entry of generic medicines into the market, the exclusivity secured through patent protection (obtained at the cost of substantial R&D investments) comes to an end, and originator pharmaceutical companies are deprived of a significant portion of their revenues.
“Pay-for-delay” (“P4D”) agreements typically occur in the pharmaceutical sector and are settlement agreements made between the originator pharmaceutical company and the generic manufacturer in the context of a patent dispute, whereby the generic party obtains an economic or commercial benefit in exchange for delaying its entry into the market for a certain period of time. This benefit may take the form of a direct cash payment, the granting of a license, the conclusion of supply or distribution agreements, or the provision of other commercially equivalent advantages.
Such agreements may serve the purpose of resolving a legitimate legal dispute between the parties and eliminating commercial uncertainty. Indeed, the lengthy, costly, and unpredictable nature of patent disputes creates a strong motivation for the parties to settle. However, from a competition law perspective, delaying the entry of a generic company into the market through economic incentives may result in the effective elimination of potential competition.
From an intellectual property (IP) law perspective, patent rights grant the holder exclusionary rights; litigation or settlement is a normal part of exercising those rights. But competition law concerns arise because such settlement agreements may delay consumer-accessible generics, extend monopoly profits beyond what would have occurred, and thereby reduce consumer welfare and distort market entry.
Therefore, such settlements are not merely considered as a “dispute resolution” mechanism; they are subject to assessment based on the nature and context of the economic arrangements they contain, specifically whether they have the effect or purpose of restricting competition. Generally, patent settlements are not immune from competition law, but neither can every settlement be automatically deemed unlawful. The critical issue is whether the benefits provided under the agreement are based on independent and reasonable commercial justification, or whether they essentially function as a mechanism to delay the entry of generics into the market.
The Competition Law Regulatory Framework in Türkiye
Under Turkish law, the core competition rules are set out in Law No. 4054 on the Protection of Competition (“Competition Law”). Article 4 of Competition Law mirrors Article 101 of Treaty on the Functioning of the European Union (TFEU) and prohibits agreements, concerted practices, and decisions of associations of undertakings that have as their object or effect the prevention, distortion, or restriction of competition within a market. Likewise, Article 6 corresponds to Article 102 TFEU and prohibits the abuse of a dominant position. The Turkish Competition Authority (“TCA”) has interpreted these provisions mostly in line with European Union (“EU”) competition law, frequently referring to EU legislation, Commission guidelines, and CJEU case law as persuasive authority.
To date, there is no published decision of the TCA that directly qualifies a settlement between an originator and a generic manufacturer as P4D arrangement. Nevertheless, the Authority has on several occasions examined agreements in the pharmaceutical sector through a lens that closely resembles the analytical framework applied in EU P4D cases. In particular, the TCA has demonstrated sensitivity to arrangements that may delay generic entry or neutralize potential competition through contractual mechanisms.
In Abbott / Eczacıbaşı[1], the earliest of these decisions, the agreement provided that a sibutramine-based product developed by Abbott would be marketed by Eczacıbaşı, while a non-compete clause prohibited Eczacıbaşı from manufacturing or selling products containing the same active substance. This restriction would remain in force for at least five years even after termination. The Board held that the clause’s stated aim—preventing rapid generic entry—could not be justified under Article 5 of Competition Law (corresponding to Art. 101/3 of TFEU). It therefore concluded that the clause enabled the originator to foreclose generic competition beyond the contract’s term.
In Allergan/Abdi İbrahim[2], TCA reviewed a logistics and distribution agreement under which Abdi İbrahim became the exclusive distributor of Allergan’s products and was barred from competing for five years, including by producing generics. TCA noted that Abdi İbrahim, as the closest potential generic entrant with extensive product knowledge, would lose any incentive to develop competing products. It questioned why Allergan, having assumed marketing and promotion, retained Abdi İbrahim solely for physical distribution. Although other generics could still enter, the clause effectively blocked Abdi İbrahim’s entry. TCA therefore granted individual exemption only on condition that the non-compete clause be removed. At this point, it can be said that TCA questioned whether the contract has any objective other than what is stated in the agreement.
While none of these decisions explicitly characterize the conduct as P4D, they collectively demonstrate that the Authority is prepared to look beyond form and assess the economic reality and competitive impact of complex contractual arrangements in IP-intensive markets. These decisions indicate that, even in the absence of a formal P4D precedent, Turkish competition enforcement is conceptually aligned with the EU approach: agreements that alter market entry dynamics, neutralize competitive threats, or allocate markets through economic inducements are likely to attract close scrutiny under Article 4 of Competition Law.
The Court of Justice of the European Union (“CJEU”) Approach to Pay-for-Delay Agreements
The EU framework governing P4D agreements has evolved through a coherent line of previous jurisprudence, maturing and systemized in the recent Teva Pharmaceutical Industries and Cephalon v Commission (Case C-2/24 P)[3] judgment.
In Teva/Cephalon, CJEU upheld the Commission’s finding that a 2005 settlement agreement between Cephalon, the originator of modafinil, and Teva, a generic manufacturer, infringed Article 101 of TFEU. The agreement ended ongoing patent litigation and included non-compete and non-challenge clauses preventing Teva from entering the modafinil market independently. Alongside those restrictions, the parties concluded a package of commercial arrangements—licenses, API supply, data access, distribution rights, and payments framed as litigation cost compensation. The Commission characterized this structure as P4D arrangement and imposed fines, which were confirmed by the General Court.
On appeal, Teva and Cephalon argued that the commercial transactions had legitimate, independent rationales and that the General Court had applied an impermissible counterfactual test. CJEU rejected these arguments. Building on Generics (UK) and Servier, CJEU held that a settlement constitutes a restriction “by object” where the transfers of value can have no plausible explanation other than inducing the generic to refrain from competition on the merits. While not every value transfer is unlawful—compensation for litigation costs or genuine remuneration for the actual and proven supply of goods or services may be justified, the decisive question is whether the net gain functions as an incentive for non-entry. CJEU also confirmed that it is not necessary to examine the effects of an agreement once its anticompetitive object has been established.
Crucially, the Court emphasized that settlement agreements must be assessed as a whole. Competition authorities are entitled to look through formal structures and evaluate whether a bundle of interlinked transactions departs from normal market conditions and serves as consideration for restrictive clauses. The existence of patents and litigation does not shield such arrangements from scrutiny: challenges to patents form part of “normal competition” in innovation-driven markets. Teva/Cephalon therefore crystallizes the EU doctrine that patent settlements remain legitimate only insofar as they resolve disputes without purchasing the absence of competition. Once delay is bought— whether in cash or in kind, the agreement moves from lawful dispute resolution into cartel territory.
Implications and Concluding Thoughts
P4D agreements sit at a delicate intersection: they may accelerate certainty for parties, reduce litigation cost and risk, and facilitate settlement, but they may also delay generic entry, reduce consumer welfare, extend monopoly pricing, and distort innovative incentives. From a competition law standpoint, these agreements may amount to market allocation or exclusionary practices and attract scrutiny. From an IP law standpoint, they may abuse exclusionary rights by using settlement to exclude competition rather than resolve legitimate rights disputes.In Türkiye, though no published decision yet condemns a P4D arrangement, the TCA’s policy pronouncements show that such arrangements are under watch. Companies in the pharmaceutical (and by analogy, other IP‐intensive) sectors should thus assume that settlement/licensing/distribution agreements involving payment from originator to challenger and delays to entry will be subject to scrutiny. They should ensure sound documentation of the purpose of the settlement, realistic assessment of litigation risk, linkage of payment to legitimate service or license rather than mere delay, and transparency in the economics of the deal.
In light of the TCA’s established practices, it is reasonable to expect that any future assessment of pay-for-delay arrangements in Türkiye will likely follow the CJEU’s jurisprudence. Indeed, the Authority may adopt an even stricter stance, given its traditionally robust approach to exclusionary practices. The existing case law already signals that contractual structures capable of postponing market entry or neutralizing competitive pressure will not be treated as neutral commercial arrangements. Accordingly, undertakings in IP-intensive sectors should proceed on the assumption that P4D–type mechanisms are unlikely to find shelter under Turkish competition law.
[1] TCA decision dated 15.03.2007 numbered 07-23/227-75
[2] TCA decision dated 17.06.2010 numbered 10-44/784-261
[3] https://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:62024CJ0002
