GlaxoSmithKline could face a multi-million-pound fine over allegations it paid other drug companies to slow down production of cheaper versions of its most profitable anti-depressant, burdening taxpayers with inflated costs for the tax-funded National Health Service (NHS) medicines.

The Office of Fair Trading (OFT) has launched an investigation into GSK, alleging it abused its market dominance by agreeing so-called ‘pay for delay’ agreements between 2001 and 2004 to protect the position of its drug Seroxat.

The regulator claims Alpharma, Genetics UK and Norton Healthcare were paid by GSK to delay production of cheaper copycat versions of the drug which could have saved the NHS millions.

GSK, the U.K.’s largest pharmaceutical company, admitted agreements were reached but said they did not lead to delays in the generic versions coming to market.

If the OFT proves its case, it could hit GSK with a fine worth 30 per cent of its U.K. turnover during 2001-04, which averaged £1.4 billion a year.

This is the first time the OFT has launched a ‘pay for delay’ case, but the regulator imposed a record-breaking £10.2 million fine on Reckitt Benckiser in 2010 after the household products firm admitted it had abused its market dominance in the supply of heartburn medicines to the NHS. In January, 2013, the U.S. Federal Trade Commission estimated that overpriced drugs resulting from such deals cost American taxpayers $3.5 billion each year.

In 2001 alone, the NHS spent £100 million on the drug, paroxetine, branded by GSK as Seroxat.

The OFT investigation comes as regulators on both sides of the Atlantic focus on accusations that pharmaceutical companies are clinging to monopolies in bestselling drugs.

The European Commission recently launched inquiries into Johnson and Johnson and Novartis over alleged market abuse between their Dutch subsidiaries.

Seroxat, which is still available on the NHS, was launched in the early 1990s and became one of the world’s biggest-selling drugs, overtaking Prozac. However, the patent came to an end in 2004 and generic, cheaper versions flooded the market, hitting GSK’s profits.

In 2000, global sales of Seroxat, which is marketed as Paxil in the U.S., were valued at £1.5 billion, falling off to £374 million by 2012.

A GSK spokesman said: “GSK supports fair competition and we very strongly believe that we acted within the law, as the holder of valid patents for paroxetine, in entering the agreements under investigation.

“These arrangements actually resulted in generic versions of paroxetine entering the market before GSK’s patents had expired.” — © Guardian Newspapers Limited, 2013