Wait three years and then two come at once aba international antitrust bulletin

International Committee │ ABA Section of Antitrust Law
October 2012 │ Vol. 3
Wait Three Years and Then Two Come at Once: European
Commission Moves Against Pharma Patent Settlements
Matthew Hall
McGuireWoods, Brussels
I n July 2012, three years after it published its final re- So far as concerns the decline of novel medicines port into competition in the pharmaceutical sector in reaching the market, the inquiry also “pointed to certain the EU, the European Commission (EC) took a signifi- company practices that might have contributed to this cant step in two pharmaceutical patent settlement cases. phenomenon.” In particular, the inquiry identified the Statements of Objections (SO) were sent to a number of companies concerning potentially anticompetitive activi- ties, including principally the use of reverse payment pat- patents aimed exclusively against the development ent settlements, relating to two products: citalopram (an antidepressant) and perindopril (a cardiovascular medi- • litigation against other originator companies; and cine). SOs, which are not public documents, are prelimi- • opposition against (mainly) secondary patents. nary statements of the EC’s case, but the fact that they have been sent indicates that the EC has substantial prima Sector inquiries such as this are a tool under EU com- petition law and therefore the main focus was on com- pany behaviour. However, the inquiry also considered the The cases are without doubt high profile since, in par- regulatory framework in the EU and highlighted three ticular, they are the first EC cases to address the use of main areas of concern: patents; marketing authorizations; reverse payment patent settlements in the pharmaceutical and pricing and reimbursement. With respect to patents, sector. However, on the facts available, they do not ap- the EC reaffirmed at the time the urgent need for the es- pear to be surprising, given the stance taken by the EC in tab­lishment of an EU patent and for a unified and spe- this area, and in particular on the issue of such settle- cialised patent litigation system in the EU. There have been general policy follow ups to the sec- Background – the EC’s 2009 Pharmaceutical
tor inquiry and in addition the EC has started a number of Sector Inquiry
competition law investigations. The competition law In July 2009, the EC published the results of its very world, however, had been waiting for a patent settlement important study into competition in the pharmaceutical case to reach a significant stage, and now it has two. sector in the EU. The EC’s main conclusions were that The EC’s Concerns in its Two July 2012 Cases
market entry of generic drugs was being unnecessarily delayed and that the number of novel medicines reaching In the citalopram case, the EC’s concern is that Lund- the market was in decline. Specifically in relation to ge- beck and several generic competitors entered into agree- nerics, on the basis of a sample of medicines that faced ments that may have hindered the entry of generic citalo- loss of exclusivity in the period 2000-2007 in 17 EU pram into markets in the EU, causing “substantial con- member states, the inquiry found that in general it took sumer harm” in the form of high prices. According to the seven months after patent expiry for generic medicines to EC, the companies concluded these agreements when arrive. The inquiry showed that “originator companies generic entry became possible in principle, because certain used a variety of instruments to extend the commercial of Lundbeck’s citalopram patents had expired. The agree- life of their products without generic entry for as long as ments foresaw substantial value transfers from Lundbeck possible.” The principal strategies identified were as fol- to the four generic competitors. In turn, the generic com- panies abstained from entering the market with generic citalopram. Lundbeck’s value transfers to the generic • patenting strategies such as patent clusters; competitors included direct payments as well as other • disputes and litigation against potential generic forms such as purchase of generic citalopram stock for destruction or guaranteed profits in a distribution agree- patent settlements with generic companies; and • various interventions before regulators and launch The EC’s concerns in the perindopril case are similar. The EC alleged that in exchange for payments by Les La- boratoires Servier, several generic companies agreed not to enter the market with their cheaper generic products AMERICAN BAR ASSOCIATION
International Committee │ ABA Section of Antitrust Law
October 2012 │ Vol. 3
and/or not to further challenge the validity of the patents petitive consumer harm. The EC considers this to be a that protected Servier’s more expensive medicine. The form of collusion or cartel since the companies involved case differs from that concerning citalopram, however, in in effect share the originator’s “monopoly rents.” that the EC’s concerns also relate to unilateral behavior by Servier, since it “appears to be” dominant in the market On the issue of Servier’s behavior, again the EC has for perindopril. Servier may have implemented a long held the view that unilateral practices of dominant “comprehensive strategy” to prevent market entry of companies, such as those aimed at shutting out generic cheaper generic versions of perindopril, when perindopril competitors from the market, can cause serious competi- was about to reach the end of its patent protection. tion problems. It is supported in this regard by case law, Among the practices allegedly used by Servier were patent including the seminal AstraZeneca case. The EC found acquisitions that could potentially shut out competitors there that the company had misused the regulatory frame- from the market and “inducing” its generic challengers to work to prevent or, at the very least, delay the market en- try of competing generic products. The EU General Court has confirmed the EC’s findings that such behavior The Cases Are in Line with Previous EC Think-
was illegal, although this is now on appeal to the EU’s highest court, the Court of Justice. However, in the It has taken the EC a long time after the 2009 sector Servier case, the EC appears to be proceeding primarily inquiry report to reach this advanced stage in a patent against the settlement agreements, with these unilateral settlement case, but from the facts available in the public practices as an ancillary or supporting activity. domain, it is not surprising that the EC has chosen to Conclusion
proceed in these two. Both concern so-called reverse pay- ment patent settlements of a particular type; the EC has The EC’s citalopram and perindopril cases are remind- long and consistently expressed the view, including in the ers to the pharmaceutical industry that the EC is still report, that if an originator company eliminates or delays watching it very carefully. Companies should consider cheaper generic competition through significant payments whether their compliance procedures need updating. or other benefits to a generic company for discontinuing Competitors potentially affected by the behavior of origi- or delaying the launch of generic medicine challenging the nator companies have an ally in the EC. It is still looking originator’s patent, this can lead to substantial anticom- AMERICAN BAR ASSOCIATION

Source: http://mcguirewoods.com/news-resources/publications/international/ec-pharma-patent-settlements.pdf