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Pharmaceuticals
and
Competition:
First strike to
the
Commission?
Matthew Cole
Introduction
The Pharmaceutical industry is falling off its
patent cliff. After many years of high profit
fuelled by blockbuster drugs,1 many are losing
patent protection and as a result many big
companies in the industry may end up losing the
high profits upon which they have become
dependent. This has led to estimates that
between 2011 and 2016 $255 billion of sales are
at risk due to patent expiries.2 This sum is no
less than the GDP of a country roughly the same
as Finland. In theory these profits should be
replaced by new drugs coming through the
research pipeline of the originator drug
companies. But these are failing to be
developed.
This paper will discuss the sector inquiry
carried out by the EU Commission into the
pharmaceutical sector and show that the
Commission now has a concern for anything
that artificially hinders the access of generic
drugs to the pharmaceutical market. This
1
Blockbuster drugs are those that generate $1
Billion USD per annum globally
2
Evaluate Pharma (World Vision 2016)
3
Case T-321/05 Astrazeneca v Commission [2010]
ECR 000
4
Commission Decision of 15 January 2008
initiating inquiry under Article 17 Council
particularly includes strategies involving
intellectual property or the manipulation of
regulation to protect patented drugs or disrupt
the ability of healthcare professionals to utilise
generics and obtain their associated benefits.
This will lead on to the Commission’s
attempted enforcement of these priorities,
through, in particular, the AstraZenca case.3 It
will be shown there has been a significant
development in the way in which the
Commission can define the market in
pharmaceutical cases and that contrary to what
has been argued by some commentators there is
not a new obligation under the law to be
transparent but rather a continuing expectation
not to use ‘creative’ ways of submitting
applications that allow an undertaking to extend
patents longer than is conventionally accepted,
unless this new method is first at least
informally, brought to the attention of officials.
Finally the impact of these decisions will be
considered and it will be noted that the success
of the Commission will not only lead to further
cases being pursued in this sector but also that
undertakings will be under greater scrutiny for
any behaviour that maintains market share for
unpatented drugs but falls outside price or
innovation competition.
The sector inquiry
The pharmaceutical sector inquiry was
launched on the 15 January 20084 on the basis
that there were indications that competition in
the pharmaceutical market might not have been
working well. This was indicated by fewer new
medicines reaching the market and the apparent
delay of generic medicines reaching the
market. 5 It was also acknowledged that there
was a desire to keep public budgets under
Regulation (EC) No 1/2003 (Case No
COMP/D2/39.514)
5
Commission ‘Executive Summary of the
Pharmaceutical Sector Inquiry Report’
(Communication) COM (2009) 0351, page 2
control by ensuring access to competitively
priced medicines for public healthcare
providers.
The findings indicated that there were a number
of strategies that were being used by originator
companies to extend the commercial life of
their medicines. These include:6






Filing large numbers of patents for the
same medicine to form patent clusters;7
Dividing patents;
Litigation as a signal to deter entrants
rather than on the merits;
Patent settlements where there is a
restriction on the ability of the generic
company to produce a medicine and a
value transfer from the originator
company to the generic company;8
Originator interference with market
authorisation;9 and,
Life cycle strategies for second
generation products.
It should also be noted, with reference to the last
point, that the inquiry observed that for 40% of
the sample medicines that were investigated in
depth originator companies launched a second
generation follow product. 10 The inquiry
indicated that in order to successfully launch a
second generation product they must get a
substantial number of patients to be switched to
the new medicine prior to the market entry of
any generic versions of the first generation
product. If this was done successfully the
second generation products tended to maintain
market share, if not the inquiry suggests that
6
Ibid 10-13
This could mean there were up to 1,300 patents
across the EU for a single medicine
8
Direct payments in more than 20 settlements
exceeded €200 million
9
Claims included that the generic product was less
safe, effective or inferior quality or even that they
patent rights could be infringed even though market
authorisation bodies are not to take such arguments
into account. Where litigation was issued
originator’s claims were upheld in only 2% of the
cases.
7
originators had difficulty convincing medical
practitioners to switch to the new product.11
In response to this the sector inquiry stated that
any action by public authorities in
pharmaceuticals should aim to create a more
competitive environment and that where
appropriate the Commission would make “full
use of its powers under antitrust rules”. 12
Although the report acknowledged the
requirement of both Intellectual Property rights
and competition for a healthy pharmaceutical
market, it also stated that that did not mean that
the exercise of Intellectual Property rights
would be immune from the reach of
competition law intervention. 13 It was also
highlighted that delays in the entry into the
market of generic drugs was a particular point
of concern. This appeared to be the case
regardless of whether the delay was caused by
obstruction or by agreement.14 As such it was
made clear that the Commission would be
seeking to apply increased scrutiny under
European Competition law and would be
seeking to bring specific cases where
appropriate.15
The Case Law
The sector inquiry indicated that the
Commission and the national authorities were
already pursuing cases in the pharmaceutical
sector. These included NAPP in the UK, 16
Commission ‘Executive Summary of the
Pharmaceutical Sector Inquiry Report’
(Communication) COM (2009) 0351, page 14
11
Ibid 15
12
Ibid 18
13
Ibid 18
14
ibid 19-20
15
ibid 27; note other suggestions were also made,
however since these are outside the ambit of
Competition law they will not be covered here.
16
Decision of the director general of faire trading,
No CA98/2/2001 of 30 March 2001, NAPP
pharmaceutical holdings and subsidiaries
10
Arrow Génériques in France,17 Glaxo-Principi
Attivi in Italy 18 and the Commission itself
pursuing Astrazeneca.19 What can be seen from
these cases is that the competition law
enforcement authorities appear willing to tackle
‘grey’ areas that perhaps would not be thought
of as conventional competition law abuses.
National Cases
In each of these cases a different method of
restricting generic drugs was challenged. In
NAPP, the undertaking sought to take
advantage of the patterns of drug prescription in
the UK NHS. In was noted by NAPP that
General Practitioners in the community were
less likely to change the drugs that a specialist
hospital doctor had prescribed due to either
their lack of experience with available
alternative drugs or a tendency to avoid
“experimenting” with different brands. 20 In
order to exploit this NAPP heavily discounted
its product (slow relief morphine) when selling
it to hospitals, sometimes charging less than the
cost of the raw materials for the product.
However when selling to community providers
they maintained the price at pre-patent expiry
prices.21 This meant their product continued to
be used in the community even though they
were charging monopoly prices. NAPP was
found to have abused its dominant position.
This appears to establish the manipulation of
prescribing structures and patterns as an abuse
of a dominant position.22
undertook a course of defamation against
Arrow's generic drug among pharmacists, even
before its entry on the market. They also
significantly changed the business conditions
with which they traded with pharmacies when
the generic drug entered the market (direct
selling, stock saturation, more favourable
payment deadlines for pharmacies, payment for
non contractual services and substantial
amounts). Schering was fined and required to
publicly restore confidence in the generic by
publishing at their own cost a text reminding
pharmacists of the bioequivalence of generic
drugs 23 in two medical magazines, and the
possible substitution by pharmacists as soon as
they are listed.
In Glaxo Principi, a more conventional type of
abuse occurred. GlaxoSmithKline refused to
grant a licence to FIS a chemical company
making active ingredients, for manufacturing
Sumatriptan Succinate. The Italian authorities
confirmed that this was an abuse of a dominant
position.24
Astrazeneca v Commission
This case concerned Losec, a highly successful
drug owned by AstraZeneca that was about to
come off patent. Astrazeneca employed two
main strategies in order to maintain the market
share of Losec and exclude competition:

In Arrow Génériques, Schering-Plough was the
dominant firm for the sale of buprenorphine in
French pharmacies (‘Subutex’). Schering
17
Judgement of the Cour de Cassation of 13
January 2009, Pourvoi no P 08-12.510
18
Decision of Autoritá Garante della Concorrenza e
del Mercato of 8 February 2006, No 15175 (Case
A363 – Glaxo-Principi Attivi)
19
Case CMP/A 37.507/F3 – Astrazeneca (15 June
2005), General Court T-321-05
20
Decision of the director general of faire trading,
No CA98/2/2001 of 30 March 2001, NAPP
pharmaceutical holdings and subsidiaries, paras
104-109
21
Ibid, paras 191
22
Deregistration of the drug’s market
authorisation across various European
Countries;
For another example of this sort of abuse see:
OFT Press releases 2011 – ‘OFT issues decision in
Reckitt Benckiser case’ 53/11 (13 April 2011)
23
Le quotidien du médecin and Le moniteur du
pharmacien
24
Interestingly no fine was imposed because during
the course of the inquiry GSK granted a number of
additional procedural licences whereby Glaxo
saved FIS the time that they would have required to
research an effective manufacturing process for the
chemical. This allowed FIS to offer the chemical to
manufacturers as early as if Glaxo had not refused
to grant a licence in the first place.

Seeking a Supplementary Protection
Certificate to maximise the period of
patent protection.
as to prevent or make more difficult the entry of
competitors on the market, in the absence of
grounds relating to the defence of [their]
legitimate interests”.29
Market authorisation
AstraZeneca applied to several countries to
have market authorisation removed for their
product Losec while they were launching Losec
MUPS which was still under patent. At the
relevant time EU directives 25 allowed drug
manufacturers to by-pass the requirement of
physico-chemical, biological, microbiological,
pharmacological, toxicological and clinical
trials if the medicinal product was already in
use in the Members State. Further, a previous
Judgement, also involving Astrazeneca, 26 had
stated that in order for this abridged procedure
to apply it was necessary and sufficient for the
marketing authorisation of the medicinal
product to be in force in the Member State on
the date of the application. Therefore by
seeking deregistration of their market
authorisation Astrazeneca prevented generic
manufacturers from being able to rely on the
abridged procedure. This would delay their
entry into the market. Also while Losec itself
would not be available, Losec MUPS capsules
would be available for purchase from
AstraZeneca, 27 potentially forcing many users
of Losec to switch to using Losec MUPS.
The Commission “considered that an
undertaking in a dominant position which has
specific entitlement, such as a marketing
authorisation, has a duty to make reasonable use
of it and not to use it with the clear purpose of
excluding competitors” 28 and “[Astrazeneca]
cannot use regulatory procedures in such a way
25
Directive 65/65 Article 4 paragraph 3 point 8
Case C-223/01 AstraZeneca v
Lægemiddelstyrelsen [2003] ECR |11908, para 49,
58
27
Case T-321/05 Astrazeneca v Commission [2010]
ECR 000, para 619
28
Astrazeneca (Case COMP/A.37.507/F3)
Commission Decision 2006/857/EC [2005] OJ L
332/24, para 624
29
ibid, para 672; The Court did find in favour of
AZ in one matter but that was based on failing to
26
Supplementary
Certificate
Protection
Supplementary Protection Certificates (SPCs)
are for extending the period of a patent by the
amount of time between filing a patent
application and the grant of authorisation to
place that product on the market.30 In essence,
their purpose is to extend the length of the
patent by the duration of time between filing the
patent and actually being able to sell the product
in the open market. It was found that
Astrazeneca had misled patent offices in several
countries in order to artificially extend the
period for which Patent protection was
provided through the use of SPCs. Their
conduct was considered to be solely for the
purpose of keeping manufacturers of generic
products, wrongfully, away from the market by
acquiring SPCs in a manner contrary to the
regulation.31 AstraZeneca contended that their
behaviour was not intended to mislead, but
rather they gave dates based upon a theory that
they could use the ‘effective marketing
authorisation date’ rather than the ‘technical
marketing authorisation date’,32 the later being
conventionally understood to be the appropriate
date. They did not expressly inform the relevant
patent offices of their alternative interpretation
of the regulation and argued that they were not
obliged to do so either.33
establish that the behaviour in question was
actually capable of preventing parallel imports in
two specific countries, rather than declaring their
behaviour generally to be acceptable if it had in
fact achieved the effect the Commission alleged it
had.
30
Case T-321/05 Astrazeneca v Commission [2010]
ECR 000 para 295
31
Ibid Para 608
32
ibid para 395
33
ibid para 432
However, their claim not to have intended to
mislead appeared undermined by various
circumstances around their applications.
Astrazeneca was inconsistent in its use of
technical
authorisation
and
effective
authorisation dates. It only used the effective
marketing authorisation date for those drugs
where the technical authorisation date would
have brought them outside the appropriate time
window that would allow them to be granted an
SPC. Astrazeneca claimed that different dates
were used for different drugs because the record
keeping method of the company made it
difficult for Astrazeneca to find out the
effective marketing authorisation date for
various drugs. 34 Therefore, where they were
assured that the technical authorisation date was
sufficient, they used this date as it took less
resources to check and they used the effective
marketing authorisation date only where it was
necessary as the technical authorisation date
was too late, which justified the additional
effort to find the date. However, if
Astrazeneca’s theory was right, and the
effective marketing authorisation date was in
fact the appropriate date, this would have meant
that where they used a technical authorisation
date, they would have been granted an SPC for
a shorter duration than that to which it believed
it was entitled. 35 Although not raised by the
Court, it can be argued that this extra time under
patent protection would have justified the time
taken to ascertain the effective market
authorisation date for all their drugs, if
Astrazeneca truly believed that effective market
authorisation was the appropriate date.
date was given in such a manner that there was
no reason it would invite questions from the
patent offices. Further while the imprecise
nature of the date mentioned regarding the
marketing
authorisation
granted
in
Luxembourg 36 successfully drew requests for
clarity, Astrazeneca refrained from disclosing
with the requisite transparency, first, all the
relevant dates, 37 and, second, their
interpretation of Regulation No 1768/92 that
underlay the dates given for France and
Luxembourg. 38 This absence of disclosure
prompted many patent offices to consider the
date of the technical marketing authorisation in
Luxembourg (16 Nov 1987) to be the date of
first marketing authority and granted the SPC
on that basis. At first it was considered by their
Dutch patent attorney that there was no
possibility of being able to correct the date and
Astrazeneca decided that it would take no
action on the matter. However, later the Dutch
patent attorney informed Astrazeneca that he
had contacted an official at the Dutch Patent
office to try to find out if the information could
be corrected.39 Astrazeneca replied that it was
‘startled’ to learn that the Dutch patent attorney
had contacted the patent office in view of what
had been agreed. Astrazeneca stated that it did
not agree with the proposal to make a formal
request for correction of the SPC, because such
action could lead to “unpredictable and
undesirable results”. 40 The Court considered
this “unacceptable behaviour” for an
undertaking in a dominant position.41
AstraZeneca also failed to disclose the
appropriate dates in relation to marketing
authorisation in France and Luxembourg.
While Astrazeneca claimed that they intended
to discuss the dates that it provided, the French
Generally speaking the main effect
Astrazeneca is to establish the misuse
regulatory procedures as a target
competition law. 42 However, there are
34
ibid para 396
ibid para 407
36
“March 1988”
37
in particular the date of authorisation issued in
France on 15 April 1987
35
Astrazeneca’s Effect
38
of
of
for
in
Case T-321/05 Astrazeneca v Commission [2010]
ECR 000 para 495
39
Ibid para 526
40
ibid para 527
41
ibid para 533
42
ibid para 672
addition two other major factors that will now
impact the pharmaceutical industry:
Market definition
One of the main impacts of Astrazeneca is the
change in the market definition process for
pharmaceutical products. This is because when
the Commission was considering what the
appropriate market was, it chose to place
emphasis on the mode of action of the drug
rather than its therapeutic use. 43 Therefore
although H2 Blockers were used to treat the
same problems as Losec they were not included
in the same market for reasons that included,
but not limited to, the biochemical action in
which the drugs worked. Unlike H2 Blockers,
Losec was a Proton Pump Inhibitor (PPI) which
meant it worked in a totally different way to the
H2 Blockers. This meant that the H2 Blockers
and Losec were considered different markets
even though H2 Blockers had previously been
used to treat similar problems. This suggests
that the Commission is going to be far more
likely to consider any undertaking with a
pharmaceutical product that uses a novel
biochemical action that is protected by patent as
possessing market power.
Transparency
After Astrazeneca being condemned for being
less that explicit about its method of calculating
certain dates in its application for SPCs some
commentators have suggested that this will cast
uncertainty around the level of ‘transparency’
required when dealing with regulators.44 They
have suggested that there is now a new
obligation to be transparent. This isn’t likely to
be the case. As above discussed, Astrazeneca
used a new way of measuring the time from
which registration of their drug took place in
order to allow them to apply for longer
43
Ibid para 149
Pat Treacy, Elizabeth Davidson, Is navigating
Competition law set to become trickier for
Pharmaceutical Companies? LNB News
29/05/2012 121 Page 2; Kristina Nordlander,
Patrick Harrison, ‘General Court’s AstraZeneca
judgement set to embolden Commission’ (2010) 2
CPI Antitrust Journal 2, 5
44
protection based on a theory that the first
marketing authorisation date could be used
rather than first technical authorisation date.
Much of their behaviour as described by the
court appears to have been conducted in such a
fashion as to avoid informing the Patent offices
of their novel theory and avoiding questions
that would have revealed their new way of
calculating the dates. For example, when the
UK patent office pressed them and they were
required to explain the dates used in their
application, the patent office rejected the
application, and Astrazeneca immediately
withdrew their application from the Danish
patent office because of the contact between the
two national patent offices45 and yet continued
to make misleading statements to other patent
offices.46
Clearly then, there is less of an obligation for
transparency, and more an obligation not to
pursue ‘creative’ interpretations of the law that
convey upon a drug longer patent protection
than that to which it is normally entitled. Or if
an undertaking does choose to pursue an
alternative theory of regulation to that which
has been customarily followed in the past, they
are merely required to bring this to the attention
of the relevant patent office and correct any
mistakes that the office has made due to
misinterpretation if they become aware of them.
This is particularly the case if an interpretation
confers additional patent protection.
Appeal
Until recently only the opinion of Advocate
General Mazák was available. 47 This was
largely supportive of both the end result and the
legal methodology involved in Astrazeneca.
45
Case T-321/05 Astrazeneca v Commission [2010]
ECR 000 para 595
46
ibid para 596
47
Case C-457/10 Astrazeneca v Commission
[2012] ECR 000 Opinion of AG Mazák, paras 28,
32, 51, 68, 79, 97 (regarding fines 108-110)
Now however, it can be seen that this has also
been supported by the Court of Justice.
The Court of Justice supported the General
Court by dismissing all of the appeals and doing
so almost entirely on the basis of the previously
iterated reasoning of the lower court. The Court
of Justice added little to the reasoning and
referred a great deal to the General Court’s
decision. Hardly elaborating beyond two of the
grounds of appeal:
1. The third ground in relation to the
information given to procure SPCs; and,
2. The sixth ground in relation to the
deregistration of Astrazeneca’s market
authorisation for Losec.
The Third ground
The Court took the opportunity to strongly
oppose the reasoning of Astrazeneca on the
third ground in relation to SPC certificates. The
Court did not say that there was some sort of
new responsibility to be transparent. Rather, the
Court stated that where an alternative
interpretation of regulation is being applied by
an undertaking the onus is on that undertaking
to disclose the relevant information to the
patent offices in order to allow them to decide
which is the appropriate interpretation. 48 To
allow otherwise, it stated, would be tantamount
to allowing an undertaking in a dominant
position that considers that it has a legally
defensible interpretation of a regulation that
would provide it with some right, to lay claim
to that right, and seek to obtain it using almost
any means, even if that includes making
48
Case C-457/10 P Astrazeneca v Commission
[2012] ECR 000, para 95
49
Case C-457/10 P Astrazeneca v Commission
[2012] ECR 000, para 98
50
Case C-457/10 P Astrazeneca v Commission
[2012] ECR 000, para 149
51
Kristina Nordlander, Patrick Harrison, ‘General
Court’s AstraZeneca judgement set to embolden
Commission’ (2010) 2 CPI Antitrust Journal 2 “it
seems clear that the Commission will be
emboldened in its pursuit of alleged abuses of
dominance”; Sebastian Moore, Rachel Montagnon,
‘AstraZeneca’s SPC and deregistration practices
misleading representations with the aim of
leading public authorities into error. The Court
said such an approach is “manifestly not
consistent with competition on the merits”.49
The Sixth ground
Astrazeneca argued that by preventing it from
deregistering its Market Authorisation the
Court was carrying out the “effective
expropriation” of a right. This was rebutted on
the basis that possibility of deregistering a
Market Authorisation was not the equivalent to
a property right. As such when this option was
taken from a dominant undertaking as a result
of its special responsibility when it is trying to
make entry into a market more difficult without
objective justification this was merely a
restriction of the options available to it under
European Union Law, rather than expropriation
of rights. 50
Looking to the future
With the result of the Astrazeneca case finally
delivered by the Court of Justice it appears
likely that this will allow the Commission to
pursue other undertakings with renewed vigour.
After the General Court’s decision the
consensus among commentators was that this
would give the Commission further mandate to
pursue other investigations with the benefit of
the support of the court.51 This is finally likely
to be true now that the highest appeal has been
decided.
This raises the question; what cases may be
seen in future? The current Commission
‘abuses of dominant position’’(2010) 5(10) Journal
of Intellectual Property Law & Practice 687, 689
““Following the pharmaceutical sector inquiry,
comparatively few actions were initiated. It may be
that the Commission was awaiting a Court ruling of
this sort in order to bolster its position before
embarking on further investigations”; David W.
Hull ‘The AstraZeneca Judgment: Implications for
IP and Regulatory Strategies’(2010) 1(6) Journal of
European Competition Law & Practice 500, 504
“The Astrazeneca judgement could lead the
Commission to alter its tone and pursue a more
aggressive enforcement strategy”.
investigations that may turn out to be pursued
include:
•
•
•
•
Competition law and one of the original aims of
the sector inquiry.
Lundbeck –citalopram52
Servier –perindopril53
Cephalon and Teva –Modafinil54
Johnson & Johnson -Fentanyl55
The Commission may also feel bolstered by the
apparently positive response from health
professionals. Some practitioners have called
for further competition investigations to deal
with other pharmaceutical pricing issues. For
example, with regard to orphan drug pricing,
one article stated that “an article 102
investigation route could offer the most direct
and effective mechanism to curb excessive
pricing even if no abuse is ultimately found.”56
Whether or not this opinion is legally accurate
it certainly suggests that the medical
community view competition intervention in
the pharmaceutical market favourably.
Ultimately then pharmaceutical companies may
be concerned about what ways they can
compete without fearing intervention. There
appears to be a change in strategy among some
pharmaceutical firms that, should it
successfully help maintain originator market
share, may be adopted more widely. In 2006
Merck slashed prices of Zocor when its patent
protection expired. Pfizer appears to be
following suit with Lipitor. It has also pursued
deals with health insurers and pharmacy
benefits managers in the US and undercut
generic prices. The deals themselves are
already coming under scrutiny in the US and
could be likely to attract adverse attention over
here too. The strategy that is unassailable
however, is undercutting generic manufacturers
on price, after all this is part of the purpose of
52
Commission Press release IP/10/08
(7/JAN/2010)
53
Commission MEMO/09/322 (8/JUL/2009) (this
may also be followed up by national litigation in
the UK)
54
Commission Press release IP/11/511
(28/APR/2011
55
Commission Press release IP/11/1228
(21/OCT/2011)
56
Jonathan C. P. Roos, Hanna I Hyry, Timothy M
Cox, Orphan drug pricing may warrant a
competition law investigation’ (2010) 341 BMJ
1084, 1086