Abstract
This chapter analyses the novelties in the EU competition law in pharmaceutical sector. Decisions in cases Lundbeck, Servier and J&J/Novartis reveal the Commission’s approach to intellectual property and regulatory issues which delay the market entry of generic pharmaceuticals. This contribution exposes and analyses a recent practice applied by pharmaceutical undertakings as part of their strategy to keep the dominant position in the market. It involves settlements between producers of original and generic pharmaceuticals, under which the producers of original pharmaceuticals undertake the obligation to pay generic producers in exchange for delay of market entry of generic pharmaceuticals. Such settlements are called reverse patent settlements or so-called ‘pay for delay’ settlements.
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Notes
- 1.
See Desogus (2011), p. 28 and further.
- 2.
Communication from the Commission, Executive Summary of the Pharmaceutical Sector Inquiry Report, 8. July 2009, http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/communication_en.pdf. Accessed 28 February 2017.
- 3.
See Hull and Clancy (2016).
- 4.
In this context, the judgment of the Paris Court of Appeal from 2014 is especially interesting. It was determined that Sanofi Aventis has abused its dominant position by denigrating generic versions of its blockbuster Plavix. The fine to be paid in this case was extremely high, EUR 40.6 million. The court has confirmed the decision of the French competition agency, which has determined that Sanofi Aventis was involved in a campaign aimed at systematic decrease of the use of the generic version of Plavix. Sanofi Aventis claimed that generic producers use different types of salts than the original medicine and that there are contraindications for the use of generic medicines in combination with aspirin. Sanofi Aventis has tried to defend this practice by arguing that they are required to reveal true information. However, the court emphasised that it is not about the content of information, but the way it was provided. The aim of their policy was to raise doubts in the use of generic products. They even required from doctors to write ‘non replaceable’ on their prescriptions and have instructed the pharmacists to provide their version of generic medicine, if generic medicine was prescribed. The court has highlighted that the abuse can take a wide variety of forms in practice, including denigration of potential or actual competitors. It emphasises that doctors are not keen on changing their established practice of prescribing verified medicines and they are always cautious about potential risks. Any dissemination of negative information or insinuation that generic medicines can represent a risk is capable of discouraging doctors and pharmacists from prescribing and issuing such medicines, if they have another option. It is especially problematic that Sanofi Aventis was distributing unverified and ambiguous information. In this case, advertising campaign was deemed abusive. It has caused enormous damages to the French social security system. Given the specificity of competition in this sector, it seems it is only a matter of time before another national agency receives similar complaint. Hull and Clancy (2016), p. 154.
- 5.
Mische et al. (2014), pp. 1910–1911.
- 6.
In the case of parallel trade, one must always consider the wider context of internal market, controls provided by Articles 101 and 102 TFEU (Treaty on the Functioning of the European Union, Consolidated version 2016, OJ C 202 7 June 2016), and also intellectual property rules. Pharmaceutical companies cannot prohibit parallel trade by invoking the breach of intellectual property. It is established that internal market is the core of the EU, and the Commission and EU courts have always criticised undertakings who tried to prevent parallel trade. Traditionally, the courts have always considered limitations of parallel trade as a restriction of competition by object under Article 101 of the TFEU. The exceptions from Article 101(3) TFEU apply rarely. This view still prevails. However, lately the courts’ standpoints have started to change.
- 7.
The best illustration of the existing challenges is perhaps the case against Pfizer. The facts are the following: the procedure started in 2005, when a Spanish medicines wholesaler complained about Pfizer’s policy aimed at restricting parallel trade. Pfizer has imposed lower prices for medicines destined for use in the Spanish health system and for medicines sold elsewhere, especially those destined for export. Commission has referred the matter to be decided by the Spanish competition authority, emphasising similarities with the case Glaxo which was decided by the Court of Justice of the EU. It concerned dual pricing and it was determined that it violates Article 101 TFEU.
However, despite the similarities in factual background, the Spanish competition authority has decided during 2009 that Pfizer did not violate Article 101 TFEU. According to that decision, Pfizer did not have two prices, but only one, more precisely, the higher one. Lower price was a necessary consequence of applying the Spanish medicines’ price fixing regulations. The decision was surprising, especially because it departs from the opinion of the EU courts. This can be explained by different effects of parallel trade. Of course, the wholesaler appealed and the Spanish courts have accepted his arguments. They held that Pfizer’s pricing and supply conditions fall under Article 101 TFEU and represent restriction of competition by object and effect. The Spanish Supreme court annulled the decision and referred the matter back to the Spanish competition authority to re-examine the issue. The Spanish competition authority has adopted a new decision on 19 January 2017. It has concluded that there was no breach of Competition Law (particularly Article 1 Spanish Competition Law) by the supply contracts signed by Pfizer. The 2015 decision is based on internal regulations on the Spanish medicines’ price fixing regulations. It examines the different systems of fixing the prices of medicines in Spain (for example, in relation to which medicines does the State intervene; which prices may be freely fixed by companies; what is the wholesale price and the final price fixed by pharmacies?). The system regulation varies depending on who finances the product (in most cases the Spanish State through its agency). The conclusion is that Pfizer determines the product prices of medicines that are not subject to intervention by the Spanish State, but this price could vary considering different degree of rebates given to wholesalers. See Resolución (Expte. S/DC/0546/15 PFIZER/COFARES), 19.1.2017 as well as Mische et al. (2014), p. 1919.
- 8.
On different opinions see Drake et al. (2014).
- 9.
- 10.
Hemphill (2006), pp. 1562–1563.
- 11.
- 12.
Clancy et al. (2013), p. 9.
- 13.
See more: Connor (2015), p. 2.
- 14.
Clancy et al. (2013), p. 10.
- 15.
Communication from the Commission, Executive Summary of the Pharmaceutical Sector Inquiry Report, 8. July 2009, http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/communication_en.pdf. Accessed 28 February 2017.
- 16.
Report on the Monitoring of Patent Settlements, (period: January–December 2015), http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/patent_settlements_report7_en.pdf. Accessed 25 February 2017.
- 17.
See more on this subject: Schmid (2012), pp. 367–375.
- 18.
Case AT.39226—Lundbeck, Commission decision of 19.6.2013, C (2013) 3803 final.
- 19.
Lundbeck, para 3.
- 20.
Lundbeck, paras. 4–5.
- 21.
Clancy et al. (2013), p. 10.
- 22.
European Commission, press release, Brussels, 19 June 2013, http://europa.eu/rapid/press-release_IP-13-563_en.htm. Accessed 2 March 2017.
- 23.
Case T-472/13, H. Lundbeck A/S and Lundbeck Ltd v European Commission [2016].
- 24.
Case 15/74, Centrafarm BV and others/Sterling Drug [1974] ECR 01147.
- 25.
Case 65/86, Bayer/Süllhöfer [1988] ECR 05249.
- 26.
Mische et al. (2014), pp. 1914–1915.
- 27.
Commission Decision of 9.7.2014, AT.39612 Perindopril (Servier), C (2014) 4955 final.
- 28.
European Commission, Antitrust: Commission fines Servier and five generic companies for curbing entry of cheaper versions of cardiovascular medicine, press release, Brussels, 9 July 2014, http://europa.eu/rapid/press-release_IP-14-799_en.htm. Accessed 3 January 2017.
- 29.
See para. 27 of Communication from the Commission—Guidelines on the Application of Article 81(3) of the Treaty, OJ C 101 of 27.4.2004 and Servier, para. 1211 and further.
- 30.
Guidelines on the Application of Article 81(3) of the Treaty, para 29.
- 31.
European Commission, Case AT:39685, Fentanyl of 10.12.2013, C (2013) 8870 final. See more in Westin and Healy (2014), pp. 402–412.
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Pošćić, A. (2019). The Reverse Payment Settlements in the European Pharmaceutical Market. In: Bodiroga-Vukobrat, N., Rukavina, D., Pavelić, K., Sander, G.G. (eds) Personalized Medicine in Healthcare Systems. Europeanization and Globalization, vol 5. Springer, Cham. https://doi.org/10.1007/978-3-030-16465-2_20
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