EU Law of Competition and Trade in the Pharmaceutical Sector [1 ed.] 1785362607, 9781785362606
This book provides a systematic analysis of the law and practice of EU competition/antitrust law and trade regulation in
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Table of contents :
Contents
Extended contents
List of figures
List of contributors
Table of cases
Table of legislation
1 Competition law and pharma: an economic perspective • Benoît Durand
2 Reverse payments: an EU and US perspective • Frank Maier-Rigaud, Nathan Blalock and Oliver Gannon
3 Article 101 TFEU: horizontal cooperation agreements in the pharmaceutical sector • Soledad Blanco Thomas, Lilia Luchianov and Thomas Weck
4 The competitive assessment of IP licensing agreements in the pharmaceutical sector • Pierre Moullet
5 Article 102 TFEU: patent filings as an abuse of dominant position after AstraZeneca: the patent–antitrust interface under a new perspective • Francisco Hernández
6 Mergers in the pharmaceutical sector • Pablo Figueroa and Alejandro Guerrero
7 Mergers in the medical devices sector • Jan Heithecker
8 Antitrust practices in pharmaceutical public procurement • Antonio Miño López
9 EU trade law and pharmaceuticals • Pascale Hecker
10 The pharmaceutical sector and parallel trade • Edurne Navarro Varona and Cristina Caballero Candelario
11 Free movement and competition in the European market for pharmaceuticals • Pedro Caro de Sousa
12 IP law and pharmaceuticals: patents and supplementary protection certificates in the pharmaceutical sector • Rais Amils
13 The EU regulatory framework for medicinal products for human use • Marc Martens and Nicolas Carbonnelle
14 Antitrust and the pharmaceutical industry in the United States • George A. Hay
15 UK competition and trade in the pharma sector • Paula Riedel
16 Competition law and pharma: China • Andrew L. Foster
17 Competition law and pharma: Spain • Helmut Brokelmann and Mariarosaria Ganino
18 The application of competition law in the pharmaceutical sector: challenges for BRICS • Maria Ioannidou and Ioannis Kokkoris
19 Product hopping: the US approach • Michael A. Carrier
20 Marketing data in the pharmaceutical sector: a competition law consideration • Pedro Callol
Index
Citation preview
JOBNAME: Law Prac - Figueroa PAGE: 1 SESS: 2 OUTPUT: Wed May 29 10:37:21 2019
EU LAW OF COMPETITION AND TRADE IN THE PHARMACEUTICAL SECTOR
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ELGAR COMPETITION LAW AND PRACTICE Series Editors: Aidan Robertson QC, Brick Court Chambers, London, UK and Elizabeth Morony, Partner, Clifford Chance LLP, London, UK The Elgar Competition Law and Practice series, is a library of works by leading practitioners, competition officials and scholars covering discrete areas of substantive law and procedure in the field of competition and antitrust. Each title is both analytical and descriptive in approach, highlighting and unpicking the legal (and economic) issues that are most critical and relevant to practice. Designed to be detailed, focused reference works, the books in this series offer an in-depth treatment and an authoritative statement on the law, economics and practice in key topics within the field, from Vertical Agreements to Antitrust Damages, from Competition and IP to Competition in Energy Markets, and from Leniency and Fines to Article 101 and Article 102. Presented in a format that allows for ease of navigation to a particular point of law, each title in the series is written by specialists in their respective fields, often with insight either from private practice or from an enforcement perspective. Under the direction and series editorship of two leading figures in competition law practice, the Elgar Competition Law and Practice series will be a forum for the highest quality work in competition law, and will form an important reference library for all practicing in the field. Titles in the series include: Competition Damages Actions in the EU Law and Practice David Ashton and David Henry Evidence, Proof and Judicial Review in EU Competition Law Fernando Castillo de la Torre and Eric Gippini Fournier Competition Damages Actions in the EU Law and Practice, Second Edition David Ashton EU Law of Competition and Trade in the Pharmaceutical Sector Edited by Pablo Figueroa and Alejandro Guerrero
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EU LAW OF COMPETITION AND TRADE IN THE PHARMACEUTICAL SECTOR
Edited by
PABLO FIGUEROA Garrido Abogados, Spain and Queen Mary University, London, UK
ALEJANDRO GUERRERO Gibson, Dunn & Crutcher LLP, Belgium
ELGAR COMPETITION LAW AND PRACTICE
Cheltenham, UK
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© The Editors and Contributors Severally 2019 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA
A catalogue record for this book is available from the British Library Library of Congress Control Number: 2019930679 This book is available electronically in the Law subject collection DOI 10.4337/9781785362613
ISBN 978 1 78536 260 6 (cased) ISBN 978 1 78536 261 3 (eBook)
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CONTENTS
Extended contents List of figures List of tables List of contributors Table of cases Table of legislation
vii xv xvi xvii xix xxxviii
1 Competition law and pharma: an economic perspective Benoît Durand
1
2 Reverse payments: an EU and US perspective Frank Maier-Rigaud, Nathan Blalock and Oliver Gannon
35
3 Article 101 TFEU: horizontal cooperation agreements in the pharmaceutical sector Soledad Blanco Thomas, Lilia Luchianov and Thomas Weck
109
4 The competitive assessment of IP licensing agreements in the pharmaceutical sector Pierre Moullet
175
5 Article 102 TFEU: patent filings as an abuse of dominant position after AstraZeneca: the patent–antitrust interface under a new perspective Francisco Hernández
219
6 Mergers in the pharmaceutical sector Pablo Figueroa and Alejandro Guerrero
247
7 Mergers in the medical devices sector Jan Heithecker
269
8 Antitrust practices in pharmaceutical public procurement Antonio Miño López
311
9 EU trade law and pharmaceuticals Pascale Hecker
377
10 The pharmaceutical sector and parallel trade Edurne Navarro Varona and Cristina Caballero Candelario
405
11 Free movement and competition in the European market for pharmaceuticals Pedro Caro de Sousa
431
12 IP law and pharmaceuticals: patents and supplementary protection certificates in the pharmaceutical sector Rais Amils
459
13 The EU regulatory framework for medicinal products for human use Marc Martens and Nicolas Carbonnelle
503
14 Antitrust and the pharmaceutical industry in the United States George A. Hay
552
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CONTENTS 15 UK competition and trade in the pharma sector Paula Riedel
578
16 Competition law and pharma: China Andrew L. Foster
615
17 Competition law and pharma: Spain Helmut Brokelmann and Mariarosaria Ganino
657
18 The application of competition law in the pharmaceutical sector: challenges for BRICS Maria Ioannidou and Ioannis Kokkoris
687
19 Product hopping: the US approach Michael A. Carrier
716
20 Marketing data in the pharmaceutical sector: a competition law consideration Pedro Callol
733
Index
761
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EXTENDED CONTENTS
List of figures List of tables List of contributors Table of cases Table of legislation 1
xv xvi xvii xix xxxviii
Competition law and pharma: an economic perspective Benoît Durand 1. 2. 3. 4. 5.
INTRODUCTION AN R&D INTENSIVE INDUSTRY THE DETERMINANTS OF R&D INTENSITY IN THE PHARMACEUTICAL INDUSTRY COMPETITION AND THE PATENT SYSTEM DELAYING THE ENTRY OF GENERICS A. Strategic use of the patent system B. Product hopping C. Disparaging the generic version 6. THE EFFECTS OF PARALLEL TRADE A. The development of parallel imports in the EEA B. The effect of parallel imports on prices C. The effect of parallel imports on innovation 7. THE DEMAND AND PRICING OF PHARMACEUTICAL PRODUCTS A. Demand for pharmaceuticals: institutional details B. Countervailing buyer power in the pharmaceutical industry C. In-hospital and out-of-hospital pricing
2
1.1 1.21 1.24 1.28 1.35 1.41 1.48 1.52 1.55 1.60 1.65 1.70 1.78 1.80 1.84 1.93
Reverse payments: an EU and US perspective Frank Maier-Rigaud, Nathan Blalock and Oliver Gannon 1. INTRODUCTION A. Overview of recent investigations by competition authorities B. Existence of beneficial reverse payment settlements C. Effects-based analysis of restrictions is required in the assessment of reverse payment settlements 2. SETTLEMENT AS THE OUTCOME OF IMPERFECT INFORMATION 3. WHAT ARE REVERSE PAYMENT SETTLEMENTS? 4. THE INCENTIVES OF ORIGINATORS AND GENERIC COMPANIES TO SETTLE A. Originators face numerous threats to profits prior to patent expiration B. Options for generic companies 5. FACT-SPECIFIC INQUIRY REQUIRED TO DETERMINE ANTICOMPETITIVENESS OF REVERSE PAYMENT SETTLEMENTS A. How do generic companies and originators evaluate the decision to enter into reverse payment settlements? An economic assessment B. How are the competitive effects of patent settlements without value transfers evaluated? C. How are the competitive effects of a reverse payment settlement evaluated with value transfers? 6. THE EUROPEAN APPROACH A. Overview of the regulatory assessment in Europe B. The Pharmaceutical Sector Inquiry
2.1 2.6 2.10 2.12 2.15 2.19 2.23 2.25 2.46 2.51 2.51 2.60 2.64 2.77 2.77 2.84
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EXTENDED CONTENTS C. Annual monitoring reports D. Reverse payment investigations E. Summary of precedent cases 7. THE US APPROACH POST-ACTAVIS A. The Actavis ruling B. Different legal assessments prior to the Supreme Court judgment C. The Supreme Court Actavis ruling compared with the EU approach D. The FTC’s monitoring of reverse payment settlements E. The effects of the Actavis ruling on reverse payment settlement lawsuits 8. CONCLUSION
3
Article 101 TFEU: horizontal cooperation agreements in the pharmaceutical sector Soledad Blanco Thomas, Lilia Luchianov and Thomas Weck 1. INTRODUCTION 2. THE APPLICABLE EU COMPETITION RULES A. Article 101 TFEU B. Applicable EU regulations, guidelines and notices relevant for the assessment of horizontal cooperation C. Safe harbours, de minimis notice and block exemptions D. Ancillary restraints E. Individual assessment 3. THE RELEVANCE OF SECTOR INQUIRIES AND OTHER STUDIES ON COMPETITION IN THE PHARMACEUTICAL SECTOR A. EU Commission’s sector inquiries B. National sector inquiries and studies 4. SPECIFIC ISSUES OF HORIZONTAL AGREEMENTS IN THE PHARMACEUTICAL SECTOR A. Preliminary concepts B. Patent settlement agreements C. Co-promotion agreements D. Market sharing agreements E. Co-marketing agreements F. Agreements concerning the use of the patent system G. Other horizontal agreements 5. COMPETITION IN NEW PHARMACEUTICAL AREAS: BIOLOGICAL AND BIOSIMILAR MEDICINES
4
3.1 3.6 3.10 3.26 3.28 3.44 3.46 3.51 3.52 3.60 3.69 3.73 3.95 3.180 3.205 3.217 3.227 3.236 3.262
The competitive assessment of IP licensing agreements in the pharmaceutical sector Pierre Moullet 1. INTRODUCTION 2. COMPETITION ENFORCEMENT IN INNOVATIVE INDUSTRIES A. Static v. dynamic competition B. Relationships between competition and IP law 3. APPLICATION OF ARTICLE 101 TFEU TO TECHNOLOGY LICENSING AGREEMENTS A. Within the TTBER B. Outside the TTBER
5
2.87 2.94 2.129 2.132 2.132 2.134 2.137 2.140 2.143 2.153
4.1 4.7 4.7 4.12 4.19 4.20 4.42
Article 102 TFEU: patent filings as an abuse of dominant position after AstraZeneca: the patent–antitrust interface under a new perspective Francisco Hernández 1. INTRODUCTION 2. THE APPLICATION OF ARTICLE 102 TFEU TO PATENT RIGHTS: THE TRADITIONAL APPROACH 3. THE NEW ANTITRUST ACTIVISM IN THE PHARMACEUTICAL MARKETS A. The Pharmaceutical Sector Inquiry, Final Report B. The judgment of the Court of Justice in AstraZeneca C. The Pfizer case 4. EUROPEAN COMPETITION LAW IN THE TWENTY-FIRST CENTURY: THE FRAMEWORK FOR A NEW PATENT–ANTITRUST INTERFACE
5.1 5.14 5.27 5.28 5.36 5.45 5.54
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EXTENDED CONTENTS 5. THE APPLICATION OF ARTICLE 102 TO PATENT FILINGS UP TO DATE: THE WEAKNESS OF THE ASTRAZENECA APPROACH 6. CONCLUSION: THE PHARMACEUTICAL MARKET EXPERIENCE – A NEW FRAME FOR THE IP–ANTITRUST INTERFACE IN EUROPE?
6
6.1 6.2 6.4 6.31 6.40 6.40 6.42 6.43 6.45 6.45 6.47 6.48 6.61 6.67
Mergers in the medical devices sector Jan Heithecker 1. INTRODUCTION AND OVERVIEW 2. MARKET DEFINITION A. Introduction and overview B. In-vitro diagnostics devices C. Diagnostic imaging devices D. Orthopaedic devices E. Cardiovascular devices F. Other medical capital goods G. Consumable medical devices H. Geographic market definition 3. COMPETITIVE ASSESSMENT A. Introduction and overview B. Horizontal concerns C. Non-horizontal concerns
8
5.92
Mergers in the pharmaceutical sector Pablo Figueroa and Alejandro Guerrero 1. INTRODUCTION 2. MARKET DEFINITION A. Product market definition for finished dose pharmaceutical products B. Markets upstream and downstream from finished pharmaceuticals 3. GEOGRAPHIC MARKET DEFINITION A. Finished pharmaceuticals B. Markets upstream of finished pharmaceuticals C. Markets downstream of finished pharmaceuticals 4. COMPETITIVE ANALYSIS IN THE PHARMACEUTICAL SECTOR A. Preliminary considerations B. The Commission’s approach to affected markets C. Key competitive drivers in the pharmaceutical markets D. Remedies and commitments in merger control 5. CONCLUSIONS
7
5.76
7.1 7.6 7.6 7.13 7.25 7.33 7.43 7.50 7.61 7.78 7.83 7.83 7.89 7.106
Antitrust practices in pharmaceutical public procurement Antonio Miño López 1. INTRODUCTION 2. BID RIGGING: CONCEPT AND ESSENTIAL FEATURES A. Concept: paradigm of cartels B. Restriction by object C. Unifying purpose and stability D. Massive harmful potential E. The non bis in idem principle F. Public policies inducing parallel behaviour: the Ethicon case 3. TYPES OF COLLUSIVE PRACTICES IN THE PUBLIC PROCUREMENT OF DRUGS AND RELATED MARKETS A. Introduction B. Information exchange C. Price fixing 4. ABUSE OF DOMINANT POSITION A. Introduction B. Market definition C. Dominant position D. Abusive practices
8.1 8.6 8.6 8.10 8.17 8.20 8.22 8.27 8.32 8.32 8.39 8.42 8.124 8.124 8.127 8.144 8.153
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EXTENDED CONTENTS 5. ANTITRUST LIABILITY OF CONTRACTING AUTHORITIES A. ECJ’s FENIN/Selex doctrine: dismissal of liability on the basis of the “not-for-the-market” use of the purchased products B. Different national solutions C. United Kingdom singularity 6. IS THERE ANY WAY TO AVOID BID RIGGING? 7. CONCLUSIONS
9
8.184 8.184 8.192 8.205 8.213 8.218
EU trade law and pharmaceuticals Pascale Hecker 1. INTRODUCTION 2. BACKGROUND: TRIPS AND ACCESS TO ESSENTIAL MEDICINES A. Harmful consequences of the entry into force of TRIPS for access to essential medicines in developing countries B. The Doha Declaration and the Waiver Decision: an attempt at mitigating the harmful effects of TRIPS C. Willingness to impose TRIPS-plus obligations on developing countries 3. AN ANALYSIS OF EU TRADE MEASURES THAT FAVOUR IP PROTECTION OVER ACCESS TO ESSENTIAL MEDICINES A. EU rules on customs enforcement of IP rights B. The EU-India free trade agreement: an example of EU’s policy with regard to the inclusion of IP chapters in bilateral trade agreements 4. AN ANALYSIS OF EU TRADE MEASURES THAT FAVOUR ACCESS TO ESSENTIAL MEDICINES OVER IP PROTECTION A. Regulation 953/2003 setting up a tiered-pricing mechanism: a very seldom used mechanism B. Regulation 816/2006 on compulsory licence of generic medicines: an unused mechanism 5. CONCLUSION
9.1 9.9 9.10 9.14 9.19 9.20 9.21 9.32 9.43 9.44 9.51 9.54
10 The pharmaceutical sector and parallel trade Edurne Navarro Varona and Cristina Caballero Candelario 1. THE PHARMACEUTICAL SECTOR AND PARALLEL TRADE A. Introduction B. Disparate prices and access to pharmaceutical products C. Concept of parallel trade D. Parallel trade in the pharmaceutical sector and competition law 2. THE ECONOMICS OF PARALLEL TRADE A. Parallel trade and consumers’ welfare B. Parallel trade and innovation 3. CONCLUSION
10.1 10.1 10.19 10.37 10.47 10.76 10.76 10.96 10.104
11 Free movement and competition in the European market for pharmaceuticals Pedro Caro de Sousa 1. INTRODUCTION 2. THE STRUCTURE OF THE EUROPEAN MARKET FOR PHARMACEUTICAL PRODUCTS A. Supply side B. Demand side 3. FREE MOVEMENT LAW AND PHARMACEUTICAL PRODUCTS A. Supply side B. Demand side 4. CONCLUSIONS – FREE MOVEMENT AND COMPETITION IN PHARMACEUTICALS
11.1 11.4 11.7 11.21 11.26 11.28 11.41 11.54
12 IP law and pharmaceuticals: patents and supplementary protection certificates in the pharmaceutical sector Rais Amils 1. INTRODUCTION 2. PATENTS IN THE PHARMACEUTICAL SECTOR A. Routes to apply for a patent
12.1 12.7 12.12
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EXTENDED CONTENTS B.
Requisites of patentability: novelty, inventive step, industrial application and sufficiency of disclosure C. Patent infringement: reference made to literal and by equivalence infringement, and to direct and contributory infringement D. Exemptions to the patentee’s ius prohibendi: experimental use and Bolar clause E. Compulsory licensing: reference to Regulation (EC) No 816/2006 of the European Parliament and of the Council of 17 May 2006 on compulsory licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public health problems 3. SUPPLEMENTARY PROTECTION CERTIFICATES FOR PHARMACEUTICAL PRODUCTS A. Scope of the SPC Regulation B. Subject-matter of protection and effects of the SPC C. Conditions to be met in order for an SPC to be granted D. Duration of an SPC E. Grounds for the invalidity of an SPC 4. CONCLUSION
12.23 12.64 12.79
12.89 12.92 12.95 12.98 12.100 12.115 12.122 12.123
13 The EU regulatory framework for medicinal products for human use Marc Martens and Nicolas Carbonnelle 1. INTRODUCTION 2. OVERVIEW OF THE EU PHARMACEUTICAL REGULATORY ENVIRONMENT AND ITS MAIN ADMINISTRATIVE ACTORS A. Legal framework B. Main stakeholders 3. MEDICINAL PRODUCTS AND BORDERLINE PRODUCTS A. Definition B. Borderline products 4. SPECIFIC CATEGORIES OF MEDICINAL PRODUCTS AND THEIR PARTICULARITIES A. Biological medicinal products B. Radiopharmaceuticals C. Homeopathic medicinal products D. Herbal medicinal products E. Traditional herbal medicinal products F. Paediatrics G. Orphan drugs 5. MARKET ACCESS FOR MEDICINAL PRODUCTS A. Common traits of the procedures: dossier requirements B. The centralised MA procedure C. The national routes D. Term of validity of an MA and renewal E. Variations and extensions F. Exceptions to the obligation to obtain a marketing authorisation G. Scientific advice and protocol assistance H. Latest developments 6. ABRIDGED PROCEDURES A. Generics B. Biosimilars C. Bibliographic procedure D. Informed consent procedure E. Hybrid procedure 7. CLINICAL TRIALS A. Applicable legislation B. The requirements under Directive 2001/20/EC C. The new Clinical Trials Regulation 8. PRICING AND REIMBURSEMENT OF MEDICINAL PRODUCTS: A NON-HARMONISED MATTER A. General points B. Provisions relating to pricing C. Provisions relating to reimbursement schemes
13.1 13.7 13.7 13.13 13.18 13.18 13.20 13.23 13.23 13.43 13.46 13.50 13.52 13.56 13.60 13.64 13.66 13.69 13.84 13.89 13.91 13.93 13.96 13.99 13.105 13.108 13.111 13.115 13.116 13.117 13.118 13.118 13.123 13.160 13.168 13.168 13.171 13.175
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EXTENDED CONTENTS 9. PHARMACOVIGILANCE A. Duties of the Member States and the EMA B. MAH obligations 10. CONCLUSION AND PERSPECTIVES
13.184 13.187 13.193 13.208
14 Antitrust and the pharmaceutical industry in the United States George A. Hay 1. INTRODUCTION 2. REVERSE PAYMENTS A. The first wave of reverse payment cases 3. PRODUCT-HOPPING A. The cases 4. EXCESSIVE PRICING 5. “INVERSION” MERGERS 6. PHARMACY-BENEFIT-MANAGER (“PBM”) MERGERS 7. CONCLUSION
14.1 14.6 14.14 14.24 14.28 14.49 14.57 14.59 14.64
15 UK competition and trade in the pharma sector Paula Riedel 1. LEGISLATION 2. INDUSTRY AND REGULATORY BACKDROP 3. COMPETITION ACT 1998 A. Napp Pharmaceutical Holdings Limited (“Napp”) B. Genzyme Limited (“Genzyme”) C. Reckitt Benckiser (“Reckitt Benckiser”) D. Paroxetine E. Phenytoin Sodium 4. MARKET STUDIES AND MARKET INVESTIGATIONS IN THE PHARMACEUTICAL SECTOR A. The control of entry regulations and retail pharmacy services in the UK (“Control of Entry market study”) B. OFT market study: the Pharmaceutical Price Regulation Scheme (“PPRS market study”) C. OFT market study: Medicines Distribution (“Medicines Distribution”)
15.1 15.8 15.16 15.16 15.44 15.60 15.76 15.104 15.127 15.128 15.136 15.144
16 Competition law and pharma: China Andrew L. Foster 1. COMPETITION LAW IN CHINA 2. RELEVANT COMPETITION AND PHARMACEUTICAL REGULATORY REGIMES A. Relevant competition legislation and extraterritorial application B. Competition enforcement in China C. Regulatory pharmaceutical pricing regime in China 3. ANTICOMPETITIVE AGREEMENTS BETWEEN COMPETITORS (HORIZONTAL) A. Relevant legislation B. Enforcement and penalties C. Significant enforcement activity in the pharmaceutical industry 4. ANTICOMPETITIVE AGREEMENTS BETWEEN TRADING PARTNERS (VERTICAL) A. Relevant legislation B. Enforcement and penalties C. Significant enforcement activity 5. MARKET DOMINANCE A. Relevant legislation B. Significant enforcement activities in the pharmaceutical industry 6. INVESTIGATIONS OF PHARMACEUTICAL PRICING BEHAVIOUR A. Relevant legislation B. Recent NDRC enforcement activity C. Other recent national and local enforcement activities 7. ADMINISTRATIVE MONOPOLY A. Relevant legislation B. Significant enforcement activity
16.1 16.4 16.4 16.7 16.14 16.15 16.15 16.22 16.26 16.30 16.30 16.35 16.39 16.48 16.48 16.66 16.73 16.74 16.92 16.98 16.102 16.102 16.106
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EXTENDED CONTENTS 8. MERGER CONTROL A. Relevant legislation B. Significant enforcement activities in the pharmaceutical industry
16.109 16.109 16.127
17 Competition law and pharma: Spain Helmut Brokelmann and Mariarosaria Ganino 1. 2. 3. 4. 5.
INTRODUCTION SPANISH COMPETITION LAW SPANISH PHARMACEUTICAL LEGISLATION APPLICABILITY OF THE COMPETITION RULES TO THE PHARMACEUTICAL SECTOR APPLICATION OF ARTICLES 101 TFEU AND 1 SCA A. Horizontal agreements B. Vertical agreements: restrictions of parallel trade 6. APPLICATION OF ARTICLES 102 TFEU AND 2 SCA A. Refusals to supply B. Conduct limiting the entry of generics C. Other unilateral conduct 7. MERGER CONTROL IN THE PHARMACEUTICAL SECTOR A. Relevant merger legislation and peculiarities of the sector B. Merger decisions in the pharmaceutical sector
17.1 17.2 17.10 17.21 17.28 17.29 17.42 17.54 17.55 17.64 17.72 17.80 17.80 17.88
18 The application of competition law in the pharmaceutical sector: challenges for BRICS Maria Ioannidou and Ioannis Kokkoris 1. INTRODUCTION 2. DEVELOPING ECONOMIES: BRICS A. Characteristics and specific needs: competition and patent clash B. Competition problems in the pharma sector in developing countries: case law 3. A VIEW FROM THE EU AND THE US A. Lessons from EU cases B. Lessons from US cases 4. A TAILORED APPROACH FOR BRICS? 5. CONCLUSION
18.1 18.6 18.6 18.19 18.43 18.43 18.65 18.71 18.76
19 Product hopping: the US approach Michael A. Carrier 1. INTRODUCTION 2. PRODUCT HOPPING A. Forms B. The Hatch-Waxman Act C. State drug product selection laws D. Timing of generic entry 3. JUDICIAL ANALYSIS A. TriCor: hard switch, nuanced analysis B. Walgreen: soft switch, simplistic approach to choice C. Suboxone: hard/soft switches, nuanced analysis D. Doryx: ignored regulatory regime E. Namenda: robust regulatory analysis, improper coercion focus 4. CONCLUSION
19.1 19.4 19.6 19.9 19.16 19.20 19.29 19.32 19.37 19.41 19.45 19.49 19.54
20 Marketing data in the pharmaceutical sector: a competition law consideration Pedro Callol 1. INTRODUCTION: DATA AND ITS KEY COMPETITIVE ROLE A. Outline of this chapter B. The rise of data as a key competitive input C. Pharmaceutical marketing related activities 2. RELEVANT MARKET ANALYSIS IN COMPETITION PRECEDENTS RELATED TO PHARMACEUTICAL MARKETING DATA 3. BUSINESS STRATEGIES RELATED TO DATA AND COMPETITION LAW A. Areas of competitive concern surrounding data
20.1 20.1 20.2 20.12 20.14 20.23 20.23
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EXTENDED CONTENTS B.
Agreements and concerted practices aimed at restricting third party access to pharmaceutical marketing data C. Unilateral conduct aimed at restricting third party access to pharmaceutical marketing data 4. DATA AND MERGER CONTROL A. The issue of merger control thresholds B. Data in merger control matters 5. CONCLUSION
Index
20.25 20.35 20.43 20.43 20.49 20.50
761
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FIGURES
2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 7.1
Patent exclusivity and possibilities for generic entry in the EU Patent exclusivity and possibilities for generic entry in the US Period in which originator pharmaceuticals recoup most of their investment The maximum and minimum acceptable payments Difference in acceptable entry dates The possible procompetitive effects of reverse payment settlements Degree of antitrust scrutiny expected for each settlement category UK weighted average prices for Perindopril GIVD Classification 2018: reagents overview
44 45 49 62 66 67 73 80 274
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TABLES
2.1 Comparing the revenue that is exposed to the expiration of patents and the estimated sales that would be generated from new drugs 2.2 Hypothetical risks facing a generic company 2.3 Number of settlements in each of the monitoring reports that the Commission reviewed 2.4 Monitored final settlements that the FTC considered to be potential reverse payment settlements 2.5 Settlements involving first filers considered to be potential reverse payment settlements 3.1 Safe harbour thresholds for horizontal agreements 10.1 Price comparisons among EU Member States for a basket of 250 products; 2010 index with UK=100
50 57 74 93 93 118 411
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CONTRIBUTORS
Rais Amils is a Senior Associate at Clifford Chance SLPU. Nathan Blalock is a Senior Consultant at NERA Economic Consulting. Soledad Blanco Thomas is a Case Handler at the Directorate General for Competition of the European Commission. Helmut Brokelmann is Managing Partner of Martínez Lage, Allendesalazar & Brokelmann, S.L.P., Madrid. Cristina Caballero Candelario is a Principal Case Officer at the UK Competition and Markets Authority. Pedro Callol is Managing Partner at Callol, Coca & Asociados, S.L.P., Spain and a Member of the Advisory Board of the American Antitrust Institute, Washington, D.C. Nicolas Carbonnelle is a Counsel at Bird & Bird LLP. Pedro Caro de Sousa is an Expert with the Directorate for Financial and Enterprise Affairs at the OECD. Michael A. Carrier is a Distinguished Professor at Rutgers Law School. Benoît Durand is a Partner at RBB Economics. Pablo Figueroa is partner and Head of EU and Competition with Garrido Abogados, Spain and is a lecturer at Queen Mary University, London. Andrew L. Foster is a Partner at the offices of Skadden, Arps, Slate, Meagher & Flom in Hong Kong. Mariarosaria Ganino is a Partner of Martínez Lage, Allendesalazar & Brokelmann, S.L.P., Madrid. Oliver Gannon is an Economist at Deutsche Bahn AG. Alejandro Guerrero is Of Counsel with Gibson, Dunn & Crutcher LLP. George A. Hay is a Charles F. Reavis Sr. Professor of Law and Professor of Economics, Cornell University, Ithaca NY USA. Pascale Hecker is a Head of Division at the European Investment Bank. She was a Référendaire at the Court of Justice of the European Union. Jan Heithecker is Of Counsel with Dentons Europe LLP. Francisco Hernández is a Professor at the University of Santiago de Compostela.
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CONTRIBUTORS Maria Ioannidou is Senior Lecturer in Competition Law, Queen Mary University of London, UK. Ioannis Kokkoris holds a Chair in Law and Economics at the Centre for Commercial Law Studies, Queen Mary University of London, UK. Lilia Luchianov is a Case Handler at the Directorate General for Competition of the European Commission. Frank Maier-Rigaud is Head of Competition Economics Europe at NERA Economic Consulting and Professor at IÉSEG School of Management (LEM-CNRS). Marc Martens is a Partner at Bird & Bird LLP. Antonio Miño López is a Professor at Universidade de Vigo. Pierre Moullet is an Associate at Sullivan & Cromwell LLP. Edurne Navarro Varona is a Partner at Uría Menéndez. Paula Riedel is a Partner at Kirkland & Ellis International LLP. Dr. Thomas Weck is Lead Analyst at the German Monopolies Commission (Monopolkommission).
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TABLE OF CASES EUROPEAN UNION Court of First Instance AC-Treuhand v. Commission, T-99/04, ECLI:EU:T:2008:256, [2008] ECR II-1501 ...................................................................................................................... 8.204 Airtours v. Commission, Case T-342/99 .......................................................................... 20.40 Atlantic Containers Lines AB v. Commission, Case T191/98, [2003] ECR II-3275 ..... 5.69 Bayer AG v. Commission of the European Communities, Case T-41/96, [2000] ECR I-3383 ........................................................................................................................ 10.52 BPB Industries plc v. Commission, Case T–65/89, ECLI:EU:T:1993:31 ...................... 20.41 Compagnie Maritime Belge Transports v. Commission, Case T-24/93 ......................... 20.40 Corus v. Commission, Case T-48/00, EU:T:2004:219 .................................................... 3.176 European Night Services v. Commission, Joined cases T-374/94, T-375/94, T-384/94 and T-388/94, ECLI:EU:T:1998:198 ............................................................................... 3.85 Fenin v. Commission, Case T-319/99, ECLI:EU:T:2003:50 ................... 17.22, 17.23, 17.25 GlaxoSmithKline Services v. Commission, Case T-168/01, [2006] ECR II-2969 ...... 10.101, 17.44 Irish Sugar v. Commission, Case T-228/97 ..................................................................... 20.42 LR AF 1998 A/S v. Commission, Case T23/99, ECLI:EU:T:2002:75, [2002] ECR II-1705 ........................................................................................................................ 8.68 O2 (Germany) v. Commission, Case T-328/03, ECLI:EU:T:2006:116 ........................... 3.18
Court of Justice (ECJ) AC-Treuhand AG v. Commission, Case C-194/14 P, [2015] ECLI:EU:C:2015:717 .............................................................................................. 8.201 Actavis Group PTC EHF v. Sanofi, Case C-443/12, ECLI:EU:C:2013:833 ............................................................................... 12.106, 12.114 Actavis Group PTC EHF, Actavis UK Ltd v. Boehringer Ingelheim Pharma GmbH & Co. KG, Case C-577/13, ECLI:EU:C:2015:165 .................................. 12.10, 12.114 AGS Assedic, Case C-235/95, ECLI:EU:C:1998:365 .................................................... 11.46 AKZO Chemie BV v. Commission, Case C-62/86, ECLI:EU:C:1991:286 .................. 15.24 Allen and Hanburys v. Generics, Case C-434/85, ECLI:EU:C:1987:520 ...................... 11.30 Allianz Hungária Biztosító Zrt v. Gazdasági Versenyhivatal, Case C-32/11, EU:C:2013:160, [2013] 4 CMLR 25 ....................................................... 3.17, 3.152, 18.72, 18.73, 18.74 AOK-Bundesverband v. Ichthyol Gesellschaft Cordes, Joined cases C-264/01, ECLI:EU:C:2004:150, [2004] ECR I–02493 ......................................................... 17.23 Apothekerkammer des Saarlandes, Joined cases C-171/07 and C-172/07, ECLI:EU:C:2009:316 ................................................................................... 11.25, 11.27 Aragonesa, Joined cases C-1/90 and C-176/90, ECLI:EU:C:1991:327 ......................... 11.27
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TABLE OF CASES Aseprofar and Edifa v. Commission, Case T-247/04, ECLI:EU:T:2005:327, [2005] ECR II-3449 ...................................................................................................................... 10.60 Association of Pharmaceutical Importers and others, Joined cases 266/87 and 267/87, ECLI:EU:C:1989:205 .............................................................................................. 11.40 Astellas Pharma Inc. v. Polpharma SA Pharmaceutical Works, C-661/13, ECLI:EU:C:2014:588 .............................................................................................. 12.88 Astrazeneca AB v. Comptroller General of Patents, Designs and Trade Marks, Case C-617/12, ECLI:EU:C:2013:761 .......................................................................... 12.118 AstraZeneca v. Commission, Case C-457/10 P, ECLI:EU:C:2012:770 ....... 1.89, 1.91, 1.98, 1.100, 3.229, 5.11, 5.12, 5.26, 5.36, 5.38, 5.53, 5.76, 5.79, 5.80, 5.83, 5.84, 5.88, 5.92, 5.98, 5.102, 11.58, 17.14, 18.64 Autortiesību un komunicēšanās konsultāciju ag´entūra/Latvijas Autoru apvienība v. Konkurences padome (“Latvian Copyright”), Case C-177/16, EU:C:2017:689 .......................................................................................... 15.117, 15.119 Aventis v. Kohlpharma, Case C-433/00, ECLI:EU:C:2002:510 ..................................... 11.39 Basset, Case C-402/85, ECLI:EU:C:1987:197 .................................................................. 5.23 BAT v. Commission, C35/83, ECLI:EU:C:1985:32 ....................................................... 4.107 Bayer & Maschinenfabrik Hennecke v. Heinz Süllhöfer, Case C-65/86, ECLI:EU:C:1988:448 ECJ ........................................................................... 3.179, 4.101 Beef Industry Development and Barry Brothers, Case C-209/07, ECLI:EU:C:2008:643 ................................................................................................ 3.13 Béguelin Import Co v. Import Export SA GL, Case C22/71, ECLI:EU:C:1971:113 .... 3.21 Bertelsmann and Sony Corp v. IMPALA, Case C-413/06 P ......................................... 20.40 Biogen Inc v. Smithkline Beecham Biologicals SA, Case C-181/95, ECLI:EU:C:1997:32 .............................................................................................. 12.112 Boehringer Ingelheim, Case C-348/04, ECLI:EU:C:2007:249 ........................... 11.36, 11.39 Boehringer v. Swingward, Case C-143/00, ECLI:EU:C:2002:246 ................................. 11.39 Bouchara, Case C-25/88, ECLI:EU:C:1988:551 ............................................................. 11.35 Bristol-Myers Squibb v. Paranova, Joined cases C-427/93, C-429/93 and C-436/93, ECLI:EU:C:1996:282 ............................................................. 11.29, 11.37, 11.38, 11.39 Centrafarm BV and Adriaan de Peijper v. Sterling Drug Inc., Case C-15/74, ECLI:EU:C:1974:114, [1974] ECR 1147 ................................................... 11.16, 11.29 Centrafarm and de Peijper v. Winthrop, Case C-16/74, ECLI:EU:C:1974:115 ........... 11.16, 11.29 Centrafarm v. American Home Products, Case C-3/78, EU:C:1978:174 ........................ 4.14 CEPSA, Case C-279/06, ECLI:EU:C:2008:485 ............................................................. 11.46 CICRA and Others v. Renault, Case C-53/87, ECLI:EU:C:1988:472 .................. 5.25, 5.88 Class International BV v. Colgate-Palmolive Co, Case C-405/03, EU:C:2005:616 ........ 9.27 Coditel v. Ciné-Vog Films, Case C-262/81, ECLI:EU:C:1982:334 ................................ 4.79 Commission v. Austria, Case C-424/99, ECLI:EU:C:2001:642 ..................................... 11.43 Commission v. Austria, Case C-150/00, ECLI:EU:C:2004:237, [2004] ECR I-3887 .. 13.21 Commission v. Austria, Case C-311/07, ECLI:EU:C:2008:431 ..................................... 11.43 Commission v. Bayer, Joined cases C-2/01 P and C-3/01 P, ECLI:EU:C:2004:2, [2004] ECR I-122 ....................................................................................................... 10.7, 10.50 Commission v. Belgium, Case C-249/88, ECLI:EU:C:1991:121 ............. 11.43, 11.45, 11.48 Commission v. Finland, Case C-229/00, ECLI:EU:C:2003:334 .................................... 11.43 Commission v. France, Case C-381/93, ECLI:EU:C:1994:370 ...................................... 11.53
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TABLE OF CASES Commission v. France, Case C-212/03, ECLI:EU:C:2005:313 ...................................... 11.53 Commission v. Germany, Case C-141/07, ECLI:EU:C:2008:492 ................................. 11.27 Commission v. Germany, Case C-62/90, ECLI:EU:C:1992:169 ........................ 11.27, 11.53 Commission v. Germany, Case C-387/99, [2004] ECR I-3751 ..................................... 13.21 Commission v. Ireland, Case C-95/09, ECLI:EU:C:2010:394 ......................................... 5.67 Commission v. Italy, Case C-56/87, ECLI:EU:C:1988:295 ........................................... 11.43 Commission v. Stichting Administratiekantoor Portielje, Case C-440/11 P, ECLI:EU:C:2013:514 ................................................................................................ 8.10 Compagnie maritime belge transports SA v. Commission, Case C-395/96 P ................ 20.42 Compagnie Royale Asturienne des Mines (CRAM) and Rheinzink GmbH v. Commission of the European Communities, Joined cases 29/83 and 30/83, ECLI:EU:C:1984:130 ................................................................................................ 3.13 Consten and Grundig v. Commission, Case 56/64, [1966] ECR 299 ........... 4.13, 4.79, 5.23 Daiichi Sankyo Company v. Comptroller General of Patents, Designs and Trade Marks, Case C-6/11, ECLI:EU:C:2011:781 ..................................................................... 12.102 Dalmine v. Commission, Case T-50/00, ECLI:EU:T:2004:220 ..................................... 3.176 Dansk R.rindustri A/S v. Commission, Joined Cases C-189/02 P, C-202/02 P, C-205/02 P to C-208/02 P and C-213/02 P, ECLI:EU:C:2005:408, [2005] ECR I-5425 ....... 8.97 de Peijper, Case 104/75, ECLI:EU:C:1976:67 ................................................................ 11.18 Delattre, Case C-369/88, ECLI:EU:C:1991:137, [1991] ECR I–01487 ........... 11.25, 11.27, 11.38, 13.19, 13.21 Delimits v. Henninger Brau AG, Case C-234/89, ECLI:EU:C:1991:91 .............. 3.19, 20.29 Deutsche Parkinson Vereinigung, Case C-148/15, ECLI:EU:C:2016:776 ..................... 11.44 DIP SpA v. Comune di Bassano del Grappa, LIDL Italia Srl v. Comune di Chioggia and Lingral Srl v. Comune di Chiogg, Case C-140/94 ................................................. 20.40 DocMorris, Case C-322/01, ECLI: EU:C:2003:664 ....................................................... 11.27 Dohme, Case C-400/09), ECLI:EU:C:2011:519 ............................................................ 11.39 Duphar BV v. The Netherlands State, Case 238/82, ECLI:EU:C:1984:45, [1984] ECR 523 .................................................................................................................. 10.33, 11.48 Eli Lilly and Co Ltd v. Human Genome Sciences Inc, Case C-493/12, ECLI:EU:C:2013:835 ............................................................................... 12.105, 12.106 Eurim-Pharm, Case C-347/89, ECLI:EU:C:1991:148 ........................................ 11.27, 11.36 Eurim-Pharm v. Beiersdorf, Boehringer Ingelheim and Farmitalia, Joined cases C-71/94, C-72/94 and C-73/94, ECLI:EU:C:1996:286 .................................. 11.37, 11.38, 11.39 F Hoffmann-La Roche Ltd v. Autorita Garante della Concorrenza e del Mercato, Case C-179/16, ECLI:EU:C:2018:25 ........................ 3.24, 3.229, 3.230, 3.233, 3.235, 3.255 Farmitalia Carlo Erba Srl, Case C-392/97, ECLI:EU:C:1999:416 ................ 12.101, 12.102, 12.104, 12.105 FENIN v. Commission, Case C-205/03 P, ECLI:EU:C:2006:453, [2006] ECR I-6295 ................................................................................................. 17.22, 17.23, 17.25 Ferring v. Eurim-Pharm, Case C-172/00, ECLI:EU:C:2002:86 .............. 11.17, 11.18, 11.32 Football Association Premier League, Joined cases C-403/08 and C-429/08, ECLI:EU:C:2011:631 .............................................................................................. 3.102 General Motors BV v. Commission, Case C-551/03 P, ECLI:EU:C:2006:639 .............. 3.13 Generics (UK) Ltd v. Synaptech Inc, Case C-427/09, ECLI:EU:C:2011:520 ............... 12.96 Generics (UK), Case C-307/18 . 3.88, 3.103, 3.146, 3.147, 3.148, 3.150, 3.161, 3.162, 15.95 Generics and Harris v. Smith Kline, Case C-191/90, ECLI:EU:C:1992:407 ................ 11.30
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TABLE OF CASES Generics v. Smith Kline, Case C-316/95, ECLI:EU:C:1997:347 ................................... 11.33 Georgetown University and Others v. Comptroller General of Patents, Designs and Trade Marks, Case C-422/10, ECLI:EU:C:2011:776 ........................................ 12.102, 12.114 Georgetown University v. Octrooicentrum Nederland, Case C-484/12, ECLI:EU:C:2013:828 ............................................................................................. 12.114 GlaxoSmithKline Services, Joined cases C-501/06 P, C-513/06 P, C-515/06 P and C-519/06 P, ECLI:EU:C:2009:610 ....................... 1.57, 3.17, 3.50, 3.120, 3.152, 17.44 Groupement des cartes bancaires, Case C-67/13 P, EU:C:2014:2204 ...................... 3.2, 3.13, 3.16, 8.10, 18.72, 18.73, 18.74 GSK v. Commission, Joined cases C-501/06 P, C-513/06 P, C-515/06 P and C-519/06, ECLI:EU:C:2009:610, [2009] ECR I-9291 ..................................... 10.55, 11.58, 11.60 Hässle v. Ratiopharm GmbH, Case C-127/00, ECLI:EU:C:2003:661 ........................ 12.117 Hoffmann-La Roche & Co AG v. Commission, Case 85/76, [1979] ECR 461 ............ 5.66, 20.36, 20.42 Hoffmann-La Roche v. Centrafarm, Case C-102/77, ECLI:EU:C1978:108 ......... 4.14, 5.23, 11.29, 11.39 Höfner v. Macrotron, Case C-41/90, ECLI:EU:C:1991:161, [1991] I-1979 ................. 17.23 IAZ, Joined cases C-96-102, 104, 105, 108 and 110/82, ECLI:EU:C:1983:310 ............. 3.13 IMS Health GmbH & Co OHG v. NDC Health GmbH & Co KG, Case C418/01 ECLI:EU:C:2004:257 ................................................................. 5.23, 5.25, 20.16, 20.42 Intel v. Commission, Case C-413/14 P ............................................................................ 20.42 Joined cases C-352/07 to C-356/07, C-365/07 to C-367/07 and C-400/07 Menarini Industrie Farmaceutiche Riunite Srl v. Ministero della Salute and Agenzia Italiana del Farmaco ECLI:EU:C:2009:217, [2009] ECR I-2495 ................................. 10.35, 11.43 Kingdom of Spain and Italian Republic v. Council of the European Union, Joined cases C-274/11 and C-295/11, ECLI:EU:C:2013:240 .................................................... 12.17 Kohll, Case C-158/96, ECLI:EU:C:1998:171 ........................................... 11.50, 11.51, 11.52 Kohlpharma, Case C-112/02, ECLI:EU:C:2004:208 ...................................................... 11.18 Konkurrensverket v. TeliaSonera Sverige, Case C-52/09, ECLI:EU:C:2011:83 ................ 3.6 Laboratoires Lyocentre, Case C-109/12, ECLI:EU:C:2013:626 .......................... 13.21, 13.22 Langnese-Iglo v. Commission, Case C-279/95 P, ECLI:EU:C:1998:447 ...................... 20.29 Louis Erauw-Jacquéry v. La Hesbignonne, Case C27/87, ECLI:EU:C:1988:183 ............ 4.79 Lundbeck v. Commission, Case C-591/16 P ........................ 3.88, 3.105, 3.106, 3.107, 15.97 Magill TV Guide, Re, Joined cases C-241/91 P and C-242/91 P, ECLI:EU:C:1995:98 .................................................................................................. 5.23 Medeva BV v. Comptroller General of Patents, Designs and Trade Marks, Case C-322/10, ECLI:EU:C:2011:773 ....................................................... 12.99, 12.102, 12.104, 12.109 Medical Ltd and Macfarlan Smith Ltd, Case C-324/93, EU:C:1995:84, [1995] ECR I-563 .......................................................................................................................... 10.34 Merck and Others v. Europharm, Joined cases C-267/95 and C-268/95, ECLI:EU:C:1996:468 ..................................................................................... 4.14, 11.30 Merck Sharp & Dohme Corp. v. Deutsches Patent- und Markenamt, Case C-125/10, ECLI:EU:C:2011:812 ............................................................................................. 12.120 Merck v. Stephar, Case 187/80, ECLI:EU:C:1981:180 .................................................. 11.16 Merck, Sharp & Dohme v. Paranova, Case C-443/99, ECLI:EU:C:2002:245 .............. 11.39 Monteil and Samanni, Case C60/89, ECLI:EU:C:1991:138 ............................... 11.25, 11.38 Montex Holdings Ltd v. Diesel SpA, Case C-281/05, ECLI:EU:C:2006:709 ................ 9.27
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TABLE OF CASES MPA Pharma GmbH v. Rhône-Poulenc Pharma GmbH, Case C-232/94, ECLI:EU:C:1996:289 .............................................................................................. 11.39 Neurim Pharmaceuticals Ltd v. Comptroller – General of Patents, Case C-130/11, ECLI:EU:C:2012:489 .............................................................................................. 12.97 Nicolas Decker and Caisse de Maladie des Employés Privés, Case C-120/95, ECLI:EU:C:1998:167, [1998] ECR I-1831 ..................................... 10.34, 11.50, 11.52 Novartis AG v. Actavis UK Ltd, C-442/11, ECLI:EU:C:2012:66 ................................. 12.99 Novartis AG v. Comptroller-General of Patents, Designs and Trade Marks and Ministre de l’Économie v. Millennium Pharmaceuticals Inc, Joined cases C207/03 and C252/03, ECLI:EU:C:2005:245 ............................................................................................. 12.118 Nungesser v. Commission, Case C-258/78, ECLI:EU:C:1982:211 ............ 3.102, 4.13, 4.73, 4.79, 4.91, 4.92 NV Nederlandsche Banden-Industrie Michelin v. Commission, Case 322/81 ................. 5.69 Orfanopoulos, Joined cases C-482/01 and C-493/01, ECLI:EU:C:2004:262 ................ 11.46 Orifarm and Paranova Danmark v. Merck Sharp & Dohme Corp (formerly Merck & Co Inc), Joined cases C-400/09 and C-207/10, ECLI:EU:C:2011:519 ....................... 11.39 Ottung v. Klee & Weilbach A/S, Case 320/87, ECLI:EU:C:1989:195 .................. 4.66, 4.67 Paranova Läkemedel AB and Others v. Läkemedelsverket, Case C-15/01, ECLI:EU:C:2003:256 .............................................................................................. 11.18 Paranova Oy, Case C-113/01, ECLI:EU:C:2002:755 ..................................................... 11.18 Pharmacia & Upjohn SA v. Paranova A/S, Case C379/97, ECLI:EU:C:1999:494 ....... 11.39 Pharmon v. Hoechst, Case 19/84, ECLI:EU:C:1985:304 ............................................... 11.30 Philips and Nokia, Joined cases C-446/09 and C-495/09, ECLI:EU:C:2011:796 .......... 9.27, 9.28, 9.29, 9.30 Philips and Nokia, Joined cases C-446/09 and C-495/09, EU:C:2011:796 ...................... 9.26 Pohl-Boskamp, Case C-317/05, ECLI:EU:C:2006:684 .................................................. 11.43 Polo/Lauren Co LP v. Dwidua Langgeng Pratama International Freight Forwarders, Case C-383/98, EU:C:2000:193 ......................................................................................... 9.27 Poucet and Pistre v. AGF and Cancava, Joined cases C-159/91 and C–160/91, ECLI:EU:C:1993:63, [1993] ECR I-637 ................................................................ 17.24 Pronuptia de Paris, Case C-161/84 .................................................................................... 4.92 Rhône-Poulenc, Case C-94/98, ECLI:EU:C:1999:614 ............................. 11.17, 11.18, 11.32 Roquette Freres, Case C-94/00, ECLI:EU:C:2002:603 ...................................................... 3.6 Roussel Laboratoria BV v. The Netherlands, Case 181/82, ECLI:EU:C:1983:352, [1983] ECR 3849 ......................................................... 10.32, 10.33, 11.42, 11.43, 11.46, 11.58 Sandoz Prodotti Farmaceutici SpA v. Commission of the European Communities, Case C-277/87, ECLI:EU:C:1990:6, [1990] ECR I-45 ................................................. 10.49 Schumacher, Case 215/87, ECLI:EU:C:1989:111 ................................................ 11.27, 11.53 Seattle Genetics Inc v. Österreichisches Patentamt, Case C-471/14, ECLI:EU:C:2015:659 ............................................................................................. 12.119 Servier and Others v. Commission, Case T-691/14, ECLI:EU:T:2018:922 ........ 3.88, 3.103, 3.105, 3.106, 3.132, 3.137, 3.138, 3.139, 3.140, 3.161, 3.170, 3.171, 3.207, 3.208, 3.212, 3.215, 3.239, 3.240, 4.15 Smith & Nephew Primecrown, Case C-201/94, ECLI:EU:C:1996:432 ........................ 11.18 Société Technique Miniere v. Maschinenbau Ulm GmbH, Case 56/65, ECLI:EU:C:1966:38 ......................................................................................... 3.13, 3.45
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TABLE OF CASES Sot. Lélos kai Sia EE and Others v. GlaxoSmithKline AEVE Farmakeftikon Proionton, Joined cases C-468 to 478/06, ECLI:EU:C:2008:504, [2008] ECR I-7139 .......... 10.7, 10.70, 10.71, 10.88, 11.58, 11.60, 17.60 Spain v. Council of the European Union, Case C-147/13, ECLI:EU:C:2015:299 ........ 12.17 Spain v. European Parliament and Council of the European Union, Case C-146/13, ECLI:EU:C:2015:298 .............................................................................................. 12.17 Synetairismos Farmakopoion Aitolias&Akarnanias (SYFAIT) v. GlaxoSmithKline plc, Case C-53/03, ECLI:EU:C:2005:333, [2005] ECR I-4609 ECJ .......... 10.63, 10.64, 10.102, 11.60 Synthon BV v. Merz Pharma GmbH & Co. KGaA, Case C-195/09, ECLI:EU:C:2011:518 .............................................................................................. 12.96 T-Mobile Netherlands, Case C-8/08, EU:C:2009:343 ........................................... 3.17, 3.152 The Queen and Secretary of State for the Home Department, ex parte Evans Medical Ltd and Macfarlan Smith Ltd, Case C-324/93, ECLI:EU:C:1995:84 ......................... 10.34 Union royale belge des sociétés de football association and Others v. Bosman, Case C-415/93, EU:C:1995:293 ......................................................................................... 3.69 United Brands Company v. Commission of the European Communities, Case 27/76, ECLI:EU:C:1978:22 ...................................................................... 15.30, 15.109, 15.117 University of Queensland and CSL Ltd v. Comptroller General of Patents, Designs and Trade Marks, Case C-630/10, ECLI:EU:C:2011:780 .......................................... 12.102 Völk, Case C-5/69, ECLI:EU:C:1969:35 .......................................................................... 3.21 Volvo v. Veng, Case 238/87, ECLI:EU:C:1988:477 ....................................... 5.23, 5.25, 5.88 Wellcome Foundation v. Paranova, Case C-276/05, ECLI:EU:C:2008:756 .................. 11.39 Windsurfing International, Case C-193/83, EU:C:1986:75 ECJ ..... 3.139, 3.175, 4.16, 4.65, 4.92 Yeda Research and Development Company Ltd y Aventis Holdings Inc v. Comptroller General of Patents, Designs and Trade Marks, C-518/10, ECLI:EU:C:2011:779 ............................................................................................. 12.102 Yves Saint Laurent v. Javico International, Case C306/96, ECLI:EU:C:1998:173 .......... 4.77
EFTA Pharmaq v. Intervet, Case E-16/14 ................................................................................ 12.110
General Court Arrow Group and Arrow Generics v. Commission, Case T-467/13, ECLI:EU:T:2016:450 ............................................................................................... 17.41 AstraZeneca AB v. Commission, Case T-321/05, [2007] ECLI:EU:T:2010:266, [2010] ECR II-2805 ........... 1.89, 1.91, 1.98, 1.100, 5.5, 5.36, 6.3, 15.67, 17.14, 18.64, 20.16, 20.18, 20.33, 20.42, 20.51 Biogaran v. Commission, Case T-677/14, ECLI:EU:T:2018:910 .................................... 3.88 E.ON Ruhrgas v. Commission, T-360/09, ECR, EU:T:2012:332 ................................... 3.86 EAEPC v. Commission, Case T-574/14, ECLI:EU:T:2018:605 ................................... 17.46 European Association of Euro Pharmaceutical Companies (EAEPC) v. European Commission, Case T-574/14 (pending) ................................................................... 10.61 Generics (UK) v. Commission, Case T-469/13, ECLI:EU:T:2016:454 ......................... 17.41
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TABLE OF CASES Krka v. Commission, Case T-684/14, ECLI:EU:T:2018:918 ........................................... 3.88 Lundbeck v. European Commission, Case T-472/13, ECLI:EU:T:2016:449 .......... 2.7, 2.82, 2.120, 2.121, 2.131, 2.133, 2.134, 3.77, 3.86, 3.87, 3.88, 3.98, 3.102, 3.103, 3.105, 3.106, 3.107, 3.108, 3.110, 3.111, 3.112, 3.114, 3.116, 3.118, 3.121, 3.125, 3.146, 3.166, 3.167, 3.168, 3.173, 3.174, 3.175, 3.177, 3.178, 3.207, 15.97, 17.41, 18.44, 18.47, 18.48, 18.50, 18.51, 18.52, 18.53, 18.55, 18.59, 18.60, 18.61, 18.72, 18.74, 18.75, 18.76 Lupin v. Commission, Case T-680/14, ECLI:EU:T:2018:908 ......................................... 3.88 Merck v. Commission, Case T-470/13, ECLI:EU:T:2016:452 ...................................... 17.41 Mylan Laboratories v. Commission, Case T-682/14, ECLI:EU:T:2018:907 ................... 3.88 Niche Generics v. Commission, Case T-701/14, ECLI:EU:T:2018:921 .......................... 3.88 Sun Pharmaceutical Industries v. Commission, Case T-460/13, ECLI:EU:T:2016:453 ............................................................................................... 17.41 Teva UK v. Commission, Case T-679/14, ECLI:EU:T:2018:919 .................................... 3.88 Unichem Laboratories Ltd v. Commission, Case T-705/14, ECLI:EU:T:2018:915 ........ 3.88 Visa Europe Ltd v. Commission, Case T-461/07, EU:T:2011:181 ... 3.85, 3.87, 3.106, 15.97 Xellia Pharmaceuticals and Alpharma v. Commission, Case T-471/13, ECLI:EU:T:2016:460 ............................................................................................... 17.41
European Commission Antitrust AstraZeneca, COMP/A.37.507/F3 ................................ 1.89, 1.91, 1.98, 1.100, 3.229, 4.107, 5.27, 5.36, 15.18, 15.67, 17.14, 18.4, 18.43 Boehringer, COMP/B2/39246 .......................................................................................... 18.62 Cephalon, COMP/AT.39686 ............................................................ 3.59, 18.43, 18.62, 18.63 E-books, COMP/39.847 ................................................................................................... 20.42 EAEPC/Pfizer, COMP/38293/B2 ................................................................................... 17.46 EAEPC/Pfizer, COMP/39243/B2 ................................................................................... 17.46 Fentanyl, COMP/AT.39685 ........ 2.78, 2.123, 2.124, 2.125, 2.126, 2.127, 2.128, 3.13, 3.59, 3.87, 3.91, 3.184, 3.188, 3.189, 3.190, 3.191, 3.195, 3.196, 3.198, 3.199, 3.200, 3.201, 3.202, 3.204, 15.76, 18.4, 18.43, 18.55 Glaxo Wellcome, IV.36957 .................................................................................... 10.56, 17.46 Industrial bags, COMP/38354 ............................................................................................ 8.43 Lundbeck, COMP/AT.39226 ......... 2.7, 2.20, 2.33, 2.36, 2.64, 2.69, 2.78, 2.79, 2.80, 2.110, 2.111, 2.112, 2.113, 2.114, 2.116, 2.117, 2.118, 2.119, 2.122, 3.59, 3.77, 3.98, 3.105, 3.106, 3.107, 15.76, 17.41, 18.4, 18.43, 18.44, 18.45, 18.46, 18.47 Perindopril (Servier), COMP/AT.39612 ...................... 1.90, 1.91, 2.7, 2.21, 2.34, 2.47, 2.64, 2.70, 2.78, 2.80, 2.94, 2.95, 2.96, 2.97, 2.98, 2.99, 2.100, 2.101, 2.102, 2.103, 2.104, 2.105, 2.106, 2.107, 2.109, 2.119, 2.130, 3.59, 3.77, 3.91, 3.98, 3.103, 3.124, 3.127, 3.141, 3.142, 3.143, 3.145, 3.152, 3.154, 3.155, 3.157, 3.158, 3.160, 3.247, 15.76, 15.102, 18.4, 18.43, 18.56 Spain Pharma/Pfizer, COMP/39184/B2 .......................................................................... 17.46 Spain Pharma/Pfizer, COMP/39257/B2 .......................................................................... 17.46 Swedish Match Sverige/Skandinavisk Tobakskompagni, COMP/B–2/38.381 ............... 20.42 Velcro/Alpix, IV/4.204 ...................................................................................... 4.14, 4.73, 4.92 Windsurfing International, IV/29.395 ....................... 4.14, 4.16, 4.65, 4.73, 4.89, 4.92, 4.101
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TABLE OF CASES
Decisions AOIP/Beyrard, IV/26.949, Commission Decision of 2 December 1975 ....... 4.14, 4.44, 4.65, 4.67, 4.86, 4.101 Bayer/Gist-Brocades, IV/27.073, Commission Decision of 15 December 1975 .... 4.97, 4.101 BBC Brown Boveri, IV/32.368, Commission Decision of 11 October 1988 .................... 4.77 Beecham/Park Davis, IV/28.796, Commission Decision of 17 January 1979 ................... 4.55 Boussois/Interpane, IV/31.302, Commission Decision of 15 December 1986 ....... 4.46, 4.67, 4.73, 4.80, 4.96, 4.97 Breeders’ rights – maize seed, IV/28.824, Commission Decision of 21 September 1978 ................................................................................................................... 4.14, 4.91 Burroughs-Delplanque, IV/5.400, Commission Decision of 22 December 1971 .... 4.46, 4.74 Campari, IV/28.173, Commission Decision of 23 December 1977 ...... 4.46, 4.77, 4.84, 4.86, 4.91, 4.92 Davidson Rubber, IV/17.545, Commission Decision of 9 June 1972 ............ 4.46, 4.75, 4.79, 4.98, 4.101 Delta Chemie/DDD, IV/31.498, Commission Decision of 13 October 1988 ....... 4.46, 4.75, 4.86, 4.96 Elopak/Metal Box – Odin, IV/32.009, Commission Decision of 13 July 1990 ..... 4.31, 4.46, 4.58, 4.73 Generics/AstraZeneca, AT.37507, Commission decision of 15 July 2006 ...................... 3.246 Johnson & Johnson/Guidant, M.3687, Commission decision of 25 August 2005 ......... 3.246 Kabelmetal-Luchaire, IV/21.353, Commission Decision of 18 July 1975 ..... 4.75, 4.77, 4.82, 4.96, 4.97 Mitchell Cotts/Sofiltra, IV/31.340, Commission Decision of 17 December 1986 .......... 4.46, 4.75, 4.83, 4.86, 4.87, 4.97 Moosehead/Whitbread, IV/32.736, Commission Decision of 23 March 1990 ...... 4.91, 4.100 Ordre National des Pharmaciens en France (ONP), AT.39510, Commission decision of 8 December 2010 ........................................................................................................ 3.47 Pasteur Mérieux – Merck, IV/34.776, Commission Decision of 6 October 1994 ........... 4.17, 4.55, 4.57, 4.73 Penneys, IV/29.246, Commission Decision of 23 December 231977 ............................. 4.107 Raymond – Nagoya, IV/26.813, Commission Decision of 9 June 1972 ........ 4.14, 4.46, 4.77, 4.97 Rich Products/Jus-rol, IV/31.206, Commission Decision of 22 December 1987 ... 4.46, 4.67, 4.73, 4.91, 4.96, 4.97 Rio Tinto Alcan, AT.39230, Commission Decision of 20 December 2012 ... 4.37, 4.92, 4.93 Vaessen/Moris, IV/29.290, Commission Decision of 10 January 1979 .................. 4.14, 4.101 Vitamins, AT.37512, Commission decision of 21 November 2001 ................................ 3.206
Mergers 3i/Vedici Groupe, COMP/M.5805 .................................................................................... 6.39 A&C/Grosspharma, COMP/M.2573 ....................................................................... 6.39, 6.43 Abbott/Guidant, COMP/M.4150 ......................................................... 7.43, 7.45, 7.46, 7.100 Abbott/Solvay Pharmaceuticals, COMP/M.5661 ....... 6.50, 7.13, 7.16, 7.19, 7.20, 7.24, 7.98 Actavis/Allergan, COMP/M.7480 ...................................................................................... 7.58 Agfa-Gevaert/Sterling, IV/M.1432 .................................................................. 7.25, 7.26, 7.32 Akzo/ICI, COMP/M.4779 ................................................................................................. 6.62
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Date: 28/5
JOBNAME: Law Prac - Figueroa PAGE: 9 SESS: 2 OUTPUT: Wed May 29 10:37:21 2019
TABLE OF CASES Alliance Boots/Andreae-Noris Zahn, COMP/M.6044 ...................................................... 6.39 Alliance Boots/Cardinal Health, COMP/M.4301 .................................................... 6.39, 6.43 Angelini/Phoenix/JV, COMP/M.2432 ............................................................................... 6.39 Apax/Kinetic Concepts, COMP/M.6343 .................................... 7.51, 7.71, 7.73, 7.92, 7.114 Apax/Mölnlycke, COMP/M.3816 ........................... 7.69, 7.73, 7.76, 7.80, 7.82, 7.114, 7.115 APHL/L&R/Netcare General Healthcare Group, COMP/M.4229 .... 6.39, 7.69, 7.73, 7.74, 7.75, 7.76, 7.80, 7.92, 7.114 APW/APSA/Nordic Capital/Capio, COMP/M.4367 ........ 6.39, 7.61, 7.62, 7.69, 7.73, 7.76, 7.78, 7.80, 7.81, 7.82, 7.92, 7.114 Astra/Zeneca, COMP/M.1403 .................................................................................. 6.27, 6.30 Bain/Hoechst – Dade Behring, IV/M.954 ................................................................ 7.13, 7.19 Barclays/RBS/Hillary, COMP/M.5548 .............................................................................. 6.39 Baxter International/Gambro, COMP/M.6851 ........................... 6.62, 7.55, 7.78, 7.95, 7.115 Bayer Healthcare/Roche (OTC Business), COMP/M.3544 .................................... 6.10, 6.62 Bayer/Chiron Diagnostics, IV/M.1325 .......................................... 7.13, 7.18, 7.19, 7.22, 7.24 Becton Dickinson and Company/CareFusion, COMP/M.7459 ........... 7.56, 7.63, 7.64, 7.65, 7.66, 7.70, 7.114 Boston Scientific/Guidant, COMP/M.4076 .................................................... 7.43, 7.47, 7.48 Bridgepoint/EdRCP, COMP/M.7309 .................................................. 7.57, 7.58, 7.92, 7.114 Brocacef/Mediq Netherlands, M.7494 ................................................................................ 6.43 Celesio/Sainsbury’s UK pharmacy business, M.7721 .......................................................... 6.43 Ciba-Geigy/Sandoz, IV/M.737 .................................................................................. 6.27, 6.30 CVC/Teva’s Women’s Health Business, M.8675 ......... 6.9, 6.11, 6.12, 6.13, 6.17, 6.40, 6.47 Danaher/Beckman Coulter, COMP/M.6175 ................................................... 7.13, 7.18, 7.20 Dentsply/Sirona, M.7822 ......................................................................................... 7.57, 7.111 DSM/Roche Vitamins, COMP/M.2972 ............................................................................ 6.65 DSM/Sinochem/JV, COMP/M.6113 ................................................................................. 6.32 EQT VI/BSN Medical, COMP/M.6560 ........ 7.61, 7.69, 7.72, 7.75, 7.80, 7.81, 7.92, 7.114 EQT VI/Terveystalo Healthcare, COMP/M.7058 ............. 7.61, 7.62, 7.72, 7.73, 7.74, 7.75, 7.92, 7.114 Facebook/Whatsapp, COMP/M.7217 .................................................................. 20.14, 20.46 FEDIFAR/Pfizer, COMP/38215/B2 ............................................................................... 17.46 Fresenius/Helios, COMP/M.4010 ................................................................. 7.55, 7.92, 7.114 Galenica/Fresenius Medical Care/Vifor Fresenius Medical Care Renal Pharma JV, COMP/M.6091 ............................................................................ 7.55, 7.65, 7.92, 7.114 GE/Abbott Diagnostics Division, COMP/M.4569 ..................... 7.13, 7.18, 7.19, 7.55, 7.81, 7.92, 7.114, 7.115 GE/Amersham, COMP/M.3304 ...................... 7.25, 7.25, 7.26, 7.27, 7.28, 7.30, 7.31, 7.55, 7.81, 7.92, 7.115 GE/Instrumentarium, COMP/M.3083 .......... 7.26, 7.32, 7.52, 7.53, 7.78, 7.81, 7.101, 7.112 Glaxo Wellcome/SmithKline Beecham, COMP/M.1846 ............................... 6.15, 6.27, 6.30 GlaxoSmithKline/Novartis Vaccines Business (excl. Influenza)/Novartis Consumer Health Business, COMP/M.7276 .......................................................................................... 7.60 Google/DoubleClick, COMP/M.4731 ............................................................................. 20.14 Hoffmann La Roche/Boehringer Mannheim, IV/M.950 ...................... 7.11, 7.13, 7.18, 7.19, 7.22, 7.24, 7.105, 7.115 IMS Health/Cegedim, COMP/M.7337 ................... 20.16, 20.17, 20.18, 20.19, 20.49, 20.52
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TABLE OF CASES Investor/Morgan Stanley/Mölnlycke, COMP/M.4579 .......................... 7.69, 7.73, 7.78, 7.80, 7.82, 7.92, 7.114 J&J/Actelion, COMP/M.8401 ............................................................................................ 6.66 Johnson & Johnson/DePuy, IV/M.1286 ........................................................ 7.33, 7.35, 7.104 Johnson & Johnson/Guidant, COMP/M.3687 ................... 6.61, 7.43, 7.44, 7.45, 7.46, 7.47, 7.48, 7.55, 7.100, 7.115 Johnson & Johnson/Pfizer Consumer Healthcare, COMP/M.4314 ........................ 6.62, 6.63 Johnson & Johnson/Synthes, COMP/M.6266 .................... 6.61, 7.11, 7.33, 7.38, 7.39, 7.40, 7.41, 7.42, 7.90, 7.96, 7.115 Kodak/Imation, IV/M.1298 .............................................................................. 7.11, 7.25, 7.26 La Roche/Syntex, IV/M.457 ...................................................................................... 7.13, 7.19 Lonza Group/Capsugel, COMP/M.8362 ........................................................................... 6.38 Lonza/Teva/JV, COMP/M.5479 ........................................................................................ 6.24 Medtronic/Covidien, COMP/M.7326 ..... 6.62, 7.11, 7.43, 7.44, 7.46, 7.49, 7.78, 7.85, 7.94, 7.114, 7.115 Merck/Schering-Plough, COMP/M.5502 .......................................................................... 6.50 Merck/Sigma-Aldrich, COMP/M.7435 ............................................................................. 6.33 Monsanto/Pharmacia & Upjohn, COMP/M.1835 ................................................. 6.30, 15.21 Mylan/Abbott EPD-DM, COMP/M.7379 ........ 6.5, 6.11, 6.12, 6.15, 6.19, 6.25, 6.27, 6.32, 6.34, 6.47, 6.50, 6.62 Mylan/Perrigo, M.7645 .................................................................................... 6.13, 6.27, 6.47 Nordic Capital/ConvaTec, COMP/M.5190 .................................................... 7.73, 7.82, 7.99 Nordic Capital/GHD Verwaltung, COMP/M.7323 .......... 6.39, 6.43, 7.61, 7.67, 7.73, 7.77, 7.114 Nordic Capital/Mölnlycke Clinical/Kolmi, IV/M.1075 ............................................ 7.69, 7.80 Novartis/Alcon, COMP/M.5778 ...................................................................... 6.14, 6.15, 6.63 Novartis/GlaxoSmithKline Oncology Business, COMP/M.7275 .................. 6.27, 6.29, 6.51, 6.53, 6.62 Novartis/Hexal, COMP/M.3751 ............................................................................... 6.58, 6.62 Panasonic Healthcare/Bayer’s Diabetes Care Business, COMP/M.7787 ....... 7.13, 7.18, 7.62, 7.92, 7.114 Pfizer/Hospira, M.7559 ...................... 3.264, 3.265, 3.266, 3.267, 6.9, 6.11, 6.14, 6.15, 6.18, 6.19, 6.20, 6.21, 6.22, 6.24, 6.27, 6.40, 6.64 Pfizer/Wyeth, COMP/M.5476 ............................................................... 6.19, 6.27, 6.30, 6.51 Philips/Agilent Health Care Solutions, COMP/M.2256 ................................ 7.25, 7.29, 7.93 Philips/Intermagnetics, COMP/M.4300 ...................................... 7.25, 7.28, 7.52, 7.90, 7.114 Philips/Marconi Medical Systems, COMP/M.2537 ........................................ 7.25, 7.27, 7.30 Philips/Respironics, COMP/M.5033 ................................ 7.52, 7.53, 7.59, 7.78, 7.114, 7.115 Procter & Gamble/Teva Pharmaceuticals OTC II, COMP/M.6705 ................................ 6.40 Proctor & Gamble/Teva OTC Business, COMP/M.6280 ............................. 6.15, 6.40, 6.58 Reckitt Benckiser/SSL, COMP/M.5953 ............................................................................ 6.34 Rozier/BHS, COMP/M.4788 ............................................................................................ 6.39 Sanofi-Aventis/Genzyme, COMP/M.5999 ...................................................... 6.27, 6.30, 6.59 Sanofi-Aventis/Zentiva, COMP/M.5253 ............ 6.9, 6.15, 6.19, 6.30, 6.40, 6.57, 6.60, 6.62 Sanofi-Synthélabo/Aventis, COMP/M.3354 ............................................................ 6.27, 6.30 Sanofi/Google/DMI JV, COMP/M.7813 ........................ 7.13, 7.18, 7.54, 7.92, 7.114, 7.115 Siemens/Bayer Diagnostics, COMP/M.4321 ............................................................ 7.13, 7.19
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TABLE OF CASES Siemens/Dade Behring, COMP/M.4865 ...................................... 7.11, 7.13, 7.18, 7.19, 7.20 Siemens/Drägerwerk/JV, COMP/M.2861 ..................................................... 7.53, 7.78, 7.113 Smith & Nephew/Beiersdorf/JV, COMP/JV.54 ......................... 7.73, 7.74, 7.75, 7.82, 7.103 Smith & Nephew/Centerpulse, COMP/M.3146 ............................................. 7.33, 7.35, 7.37 Takeda/Nycomed, COMP/M.6278 ........................................................................... 6.32, 6.42 Telefonica UK/Vodafone UK/Everything Everywhere/JV, COMP M.6317 .................. 20.49 Teva/Allergan Generics, M.7746 .............. 6.11, 6.13, 6.14, 6.15, 6.27, 6.39, 6.40, 6.44, 6.47 Teva/Barr, COMP/M.5295 .................................. 6.9, 6.11, 6.17, 6.32, 6.42, 6.55, 6.56, 6.62 Teva/Cephalon, COMP/M.6258 ................................................... 6.34, 6.50, 6.57, 6.59, 6.60 Teva/Ratiopharm, COMP/M.5865 ..................... 6.5, 6.11, 6.12, 6.19, 6.23, 6.24, 6.25, 6.27, 6.29, 6.30, 6.32, 6.34, 6.35, 6.36, 6.39, 6.41, 6.42, 6.50, 6.55 Thermo Fisher/Phadia, COMP/M.6293 ..................................... 7.11, 7.13, 7.19, 7.81, 7.114 TPG/IMS Health, COMP/M.5736 ................................................................................. 20.16 Tyco International/US Surgical Corp, COMP/M.1223 – ................................................. 7.72 Tyco/CR Bard, COMP/M.2505 ............................................................................... 7.61, 7.81 Tyco/Mallinckrodt, COMP/M.2074 ................................................................ 7.61, 7.68, 7.81 Valeant Pharmaceutical International/Bausch & Lomb Holdings, COMP/M.6969 ......... 6.5, 6.14, 7.58 Watson/Actavis, COMP/M.6613 ........................ 6.5, 6.11, 6.34, 6.35, 6.36, 6.37, 6.42, 6.50 Yamanouchi/Fujisawa, COMP/M.3493 ............................................................................. 6.59 Zimmer/Biomet, COMP/M.7265 .............................. 6.61, 6.62, 7.11, 7.33, 7.35, 7.36, 7.37, 7.38, 7.39, 7.42, 7.78, 7.93 Zoja/CSC-ICI, IV/26.911 .................................................................................................. 6.38
Notifications EISAI/Pfizer, Case No IV/36.932/F3 ..................................................................... 3.221, 5.27 Pfizer + Hoechst Marion Roussel AG, Case No IV/37.590/F3 ........................................ 3.40
NATIONAL COURTS Australia Australian Competition and Consumer Commission v. Pfizer Australia Pty Ltd [2015] FCA 113 ....................................................................................................................... 2.5
Bosnia and Herzegovina Pharma-Maac, Bosnian Competition Council, Decision 01-02-26-36-19-II/09 ............ 8.194
Brazil Case Case Case Case
No No No No
08012.004393/2005-16 ....................................................................................... 18.21 2007.34.00.043980-0 .......................................................................................... 18.19 08012.011508/2007-91 ....................................................................................... 18.20 08012.011615/2008-08 ....................................................................................... 18.25
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TABLE OF CASES Case Case Case Case
No No No No
08012.007147/2009-40 ....................................................................................... 18.25 08012.006377/2010-25 ....................................................................................... 18.25 08012.001693/2011-91 ....................................................................................... 18.25 08012.005928/2013-12 ....................................................................................... 18.19
China Rainbow (Ruibang) Medical Equipment & Supplies Co. v. Johnson & Johnson Medical ...................................................................................................................... 16.38 Sunyard System Engineering, Anhui AIC, Administrative Penalty Decision [2015] No 2, (18 September 2015) ................................................................................................. 16.13
France Autorité de la Concorrence, Decision 07-D-49, 19 December 2007 ................................ 8.67 Autorité de la Concurrence (France), Decision No 12-D-19, 26 September 2012, relating to practices in the sector and laundering and whitening of tooth ............................... 8.158 Autorité de la Concurrence (France), Decision No 13-D-21, 18 December 2013, relating to the practices implemented in the French market for high-dosage buprenorphine marketed in urban areas ............................................................................................ 8.157 Conseil de la Concurrence, Decision No 07-D-09, 14 March 2013, relating to the practices implemented by the laboratory GlaxoSmithKline in France ................................... 8.164 Conseil de la Concurrence, Decision No 09-D-38, 17 December 2009, relating to practices implemented by Ethicon SAS, Tyco Healthcare France and the National Union of Medical Technology industries .......................................................................... 8.30, 8.31 Court of Appeals of Paris (France), First Chamber, Section H, 8 of April, 2008 .......... 8.172 Emergency transport – Autorité de la Concurrence, Decision No 09-D-35, 25 Novembre 2009, relating to practices implemented in the sector for urgent medical transportation ............................................................................................................ 8.196 Group L’Air Liquide – Conseil de la Concurrence, Decision No 03-D-01, 14 January, 2003, relating to the behaviour of the companies of Groupe L’Air Liquide in the medical gas sector ................................................................................... 8.79, 8.94, 8.180 Pharmacists of Low Normandie – Autorité de la Concurrence (France), Decision No 09-D-17, 22 April 2009, relating to the practices of the regional council of the Pharmacists’ Order in Basse Normandie .................................................................. 8.197 Sorin Biomedica France – Autorité de la Concorrence, Decision No 03-D-29, 13 June 2003 .................................................................................................................. 8.65, 8.140 Yachting repair in the Mediterranean – Autorité de la Concurrence (France), Decision No 14-D-17, 20 Novembre 2014, relating to the practices implemented in the market for maritime reparations in the Mediterranean .............................................................. 8.198
Germany Regional Court (Hamburg) Docket nos. 327 O 67/15 (Hexal), 327 O 143/15 (1A Pharma), 315 O 24/15 (Ratiopharm), 327 O 132/15 (Glenmark) and 327 O 140/15 (Aliud Pharma) .............................. 12.78
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TABLE OF CASES
Supreme Court Clinical Trials I, 1995 [1997] RPC 623 ........................................................................... 12.81 Clinical Trials II, 1997 [1998] RPC 423 ......................................................................... 12.81
Italy ARCA/Novartis-Italfarmaco, proceedings No 24770, AGCM decision of 29 January 2014 ........................................................................................................................... 3.222 ARCA/Novartis-Italfarmaco, proceedings No 25056, AGCM decision of 1 August 2014 ................................................................................................................ 3.222, 3.255 Pfizer – Antitrust v Pfizer Italia s.r.l., Pfizer Health Ab and Pfizer In, Judgment of the Italian State Council (Consiglio di Stato) of 12 February 2014, Autorità garante della concorrenza e del mercato ................................... 5.53, 5.76, 5.80, 5.84, 5.92, 5.95, 5.98 Procedures for the supply of devices for ostomy, Case 17135, AGCM decision of 3 August 2007 ............................................................................................................................. 8.69 Prodotti disinfettanti, Case 15393, AGCM decision 1639 of 26 April 2006 ......... 8.14, 8.83, 8.139, 8.201 Ratiopharm/Pfizer, Case A431, AGCM decision of 11 January 2012 ................. 17.67, 18.64 Risonanza Magnetica, Case 20904, AGCM decision I729 of 18 March 2101 – Gara d’appalto per la sanit. per le apparecchiature per la risonanza magnetica ................ 8.100 Roche-Novartis/farmaci Avastin e Lucentis, AGCM decision 24823 of 27 February 2014 ........................................................................................................................... 3.232 Test diagnostici per diabete, Case 11946, AGCM decision 1461 of 30 April 2003 ....... 8.13, 8.41
Mexico Comision Federal de Competencia Economica (Mexico), Decision of 10 March 2010, Drugs tendered by the Healthcare sector, Case 10-003-2006 ................................... 8.73
The Netherlands Novartis AG v. Sun Pharmaceutical Industries (Europe) BV, Ruling of the Court of Appeal of the Hague dated 27 January 2015, case file number: 200.1 50.713/01 ............... 12.78
Poland Judgment 23 October 2013 of the Polish Supreme Court, Polpharma S.A. Pharmaceutical Works v. Astellas Pharma Inc. Syng. akt IV CSK 92/13 ....................................... 12.88
Portugal Autoridade da Concorrencia, Decision PRC 2003/06, Abbott Laboratórios, 28 December 2004 ........................................................................................................................... 8.134
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Romania Eli Lilly – Romanian Competition Council, Decision No 15, 12 March 2008 ............. 8.114, 8.120, 8.202
Spain Abbott Laboratórios – Tribunal de Defensa de la Competencia, Decision PRC 2003/06 of 28 December 2004 ...................................................................................................... 8.47 AIO – Decision of the CNMC of 26 May 2016 in Case S/0504/14 ............................. 17.39 Atención Primaria Mallorca – Decision of the TDC of 11 October 2001 in Case R 452/00 ................................................................................................................... 17.75 Baxter – Tribunal de Defensa de la Competencia, Decision PRC 2006/13, 10 December 2010 ............................................................................................................................. 8.48 Catsalut – Authority of Catalonia, Decision of 9 December 2012 in Case 19/2010 ...... 8.199 Citicolina – Decision of the CNMC of 18 June 2014 in Case S/0479/13 .......... 17.41, 17.71 Cofarca – Decision of the TDC of 26 May 2003 in Case 539/02 .................................. 17.74 COFARES/HEFAME – Decision of the Spanish Council of Ministers of 7 July 2006 in Case C96/06 ............................................................................................................. 17.90 COFARES/HEFAME – Opinion of the TDC of 6 June 2006 in Case C96/06 .......... 17.90 Cofares/Organon – Case R 547/2002 ............................................................................... 17.56 COFAS – decision of the TDC of 1 September 2000 in Case 470/99 ............... 17.33, 17.73 COFAS – Decision of the TDC of 5 May 1997 in Case A 211/97 ................... 17.33, 17.73 Colegio de Notarios de Andalucía – Consejo de Defensa de la Competencia de Andalucía, Decision 8 June 2010, Case S/06/2010 .................................................................... 8.192 Colegio Farmacéuticos Castilla-La Mancha – Decision of the CNC of 14 March 2009 in Case 639/08 .............................................................................................................. 17.37 Compra Mínima Cofas – Decision of the TDC of 26 March 2001 in Case A 277/00 .......................................................................................................... 17.33 Decision of the CNMC of 20 July 2017 in Case S/DC/0601/17 ................................... 17.78 Distribuciones farmacéuticas – Decision of the TDC of 19 February 2004 in Case R 506/01 ................................................................................................................... 17.57 EAEPC v. Laboratorios Farmacéuticos, S/DC/0608/17 ................................................. 17.52 EAEPC/Laboratorios farmacéuticos – Decision of the CNC of 14 September 2009 in Case S/0017/07 ............................................................................................ 17.47, 17.50, 17.52 Encomenda de xestión do servizo de protección radiolóxica en hospitais do Servizo Galego de Saúde (Galaria) – Competition Council of Galicia (CGC) – Decision R 7/2014 ................................................................................................................... 8.200 Especialidades farmacéuticas genéricas – Decision of the CNC of 23 January 2014 in Case S/0437/12 ......................................................................................................... 17.5, 17.32 Estudios de Mercado Industria Farmacéutica – Decision of the CNMC of 13 July 2017 in Case S/DC/0567/15 ................................................................................................. 17.79 Farmacéuticos Formulistas 2 – Decision of the TDC of 23 May 2005 in Case R 626/04 ................................................................................................................... 17.76 FARMACIAS, Case SAMUR/01/14 .............................................................................. 17.37 FEDIFAR – Decision of the TDC of 8 January 2004 in Case 553/03 .......................... 17.30
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TABLE OF CASES FERRER/ROVI – Decision of the CNC of 14 December 2011 in Case C-0411/11 ........................................................................................................ 17.86 Football agreements – Spanish National Competititon Authority File S/0006/07, 14 April 2010 ....................................................................................... 20.30, 20.314, 20.32, 20.34 Gases medicinales – Decision of the CNMC of 13 July 2017 in Case S/DC/0561/15 ................................................................................................. 17.40 Genéricos Farmacéuticos – Decision of the TDC of 19 December 2003 in Case R 538/02 ................................................................................................................... 17.75 Glaxo Wellcome – Decision of the TDC of 30 July 1998 in Case A 228/97 ................ 17.35 GLO BIDCO/MALLINCKRODT – decision of the CNMC of 3 November 2016 in Case C/0803/16 ........................................................................................................ 17.92 GRIFOLS – ACTIVOS NOVARTIS – Decision of the CNMC of 25 March 2015 in Case C-0607/14 ........................................................................................................ 17.91 IBA MOLECULAR/ITP – Decision of the CNMC of 14 July 2016 in Case C-0766/16 ................................................................................................................. 17.92 IBA MOLECULAR/MOLYPHARMA – Decision of the CNMC of 23 October 2014 in Case C-0591-14 ........................................................................................................ 17.92 Judgment in Case 555/2013 of the Audiencia Provincial de Madrid of 7 December 2015 ........................................................................................................................... 17.63 Judgment of the Audiencia Nacional of 13 June 2011 in Case 450/2009 and judgment of the Audiencia Nacional of 5 December 2012 in Case 772/2009 ............................ 17.49 Judgment of the Audiencia Provincial de Madrid of 7 December 2015 in Case 555/2013 ................................................................................................................... 17.53 Judgment of the Juzgado de lo Merantil No 2 of Barcelona of 24 February 2010 ......... 17.62 Judgment of the Juzgado de lo Mercantil no 4 of Madrid of 12 March 2013 in Case 187/2007 ................................................................................................................... 17.62 Judgment of the Juzgado de Primera Instancia No 6 of Alcobendas of 7 May 2007, confirmed by the judgment of the Audiencia Provincial de Madrid, section 25 of 28 April 2008 ............................................................................................................ 17.62 Judgment of the Tribunal Supremo of 28 October 2015 in Case 389/2014 ................... 17.12 Judgments of the Tribunal Supremo of 3 December 2014 and 4 March 2016 ............... 17.50 Laboratorios Farmacéuticos – Decision of the CNC of 25 September 2008 in Case S/0030/07 ....................................................................................................... 17.38, 17.59 Laboratorios Farmacéuticos – Decision of the TDC of 5 December 2001 in Case R 488/01 ................................................................................................................... 17.57 Laboratorios Farmacéuticos – Decision of the TDC of 5 December 2001 in Case R 488/01, upheld on appeal by judgment of the Audiencia Nacional of 14 February 2005 in Case 79/2002 ............................................................................................................ 17.56 Laboratorios Farmacéuticos, Case R 437/00 .................................................................... 17.56 Licitaciones de Carreteras – Comisión Nacional de la Competencia, Decision of 19 October 2011, Case S/0226/10 ................................................................................................. 8.77 Materiales Radioactivos – Tribunal de Defensa de la Competencia, Decision of 16 January 2008, Case 628/07 .................................................................................................... 8.161 Novartis – Decision of 25 April 2011 in Case S/0228/10 ............................................... 17.66 Order of the Juzgado Central de Instrucción No 4 of Madrid of 29 March 2017 in Case 43/2015 ....................................................................................................................... 17.8
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TABLE OF CASES Ortopédicos Castilla-León – Tribunal de Defensa de la Competencia, Decision of 12 December 1996, Case 364/95 ................................................................ 8.25, 8.52, 8.102 PFIZER HEALTH AB y PFIZER S.L.U. – Decision of the CNMC of 13 February 2014 in Case S/0441/12 .................................................................................................... 17.91 Pfizer Health AB y Pfizer, S.L.U. – Decision of 13 February 2014 in Case S/0441/12 .................................................................................................................. 17.67 Pfizer/Cofares, Case S/DC/0546/15 ..................................................... 5.5, 5.12, 10.62, 17.52 Preparados Farmacéuticos – Decision of the CNC of 16 January 2008 in Case 628/07 ....................................................................................................................... 17.77 Procter & Gamble/Tambrands – Decision of the Spanish Council of Ministers of 14 May 1998 in Case C-29/97 .............................................................................................. 17.89 Procter & Gamble/Tambrands – Opinion of the TDC of 25 May 1998 in Case C-29/97 ..................................................................................................................... 17.89 Productos Farmacéuticos Genéricos – Decision of the CNC of 24 March 2009 in Case 649/08 ....................................................................................................................... 17.31 Productos Farmacéuticos Genéricos – Judgment of the Tribunal Supremo of 24 October 2014 in Case 1220/2011 ........................................................................................... 17.31 SAPA/Sociedades SIGMA–TAU – Decision of the CNMC of 24 April 2015 in Case C-0644/15 ................................................................................................................. 17.91 SEDIFA y GRUFARMA – Decision of the CNC of 9 June 2010 in Case S/0176/09 .................................................................................................................. 17.59 Sistema Andaluz de Salud – Decision of the CNMC of 12 January 2016 in Case S/DC/0523/14 .......................................................................................................... 17.27 Spain Pharma/Glaxo – Decision of the TDC of 13 October 2004 in Case R 611/2004 ............................................................................................................... 17.58 Spain Pharma/Pfizer – Decision of the CNC of 21 May 2009 in Case 2623/05 .......... 17.47, 17.50, 17.52 Spain Pharma/Smithkline – Decision of the TDC of 3 December 2003 in Case R 558/03, confirmed by judgment 56/2004 of the Audiencia Nacional of 10 May 2007 ....... 17.57 Spanish Supreme Court (Chamber One) Judgment No 274/11, of 27 April 2011, Cassation appeal No 72/2008 .................................................................................................... 12.24 Spanish Supreme Court, 31 March 2005, Rec. 4574/2002 ................................................ 8.47 Suministro Tiras Reactivas – Decision of the CNMC of 29 October 2015 in Case S/0472/13 .................................................................................................................. 17.40 Tribunal de Defensa de la Competencia, Decision of 22 July 2004, Case 565/03 ............ 8.51 Turno Rotatorio de Farmacias, Case S/DC/0514/14 ....................................................... 17.37 UNITED BUSINESS MEDIA/MEDICOM – Decision of the Service for the Defence of Competition of 21 April 2005 in Case N–04047 .................................................... 17.93 Vaccines against the influenza (Vacunas Antigripales) – Tribunal de Defensa de la Competencia, Decision of 30 September 1998, Case C-395/97 ............................... 8.45 Vacunas Antigripales – Decision of the TDC of 30 September1998 in Case 395/97 .... 17.36 Wellcome – Decision of 16 July 1998 in Case R 315/98 ................................................ 17.65
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TABLE OF CASES
United Kingdom Chancery Division AAH Pharmaceuticals Ltd v. Pfizer Ltd [2007] EWHC 565 (Ch) ............................. 15.146 Improver Corp v. Remington Consumer Product Ltd [1990] F.S.R. 181 ........... 12.69, 12.71 Warner-Lambert Company LLC v. Actavis Group PTC [2015] EWHC 2548 (Pat) .................................................................................................................. 12.78 Warner-Lambert Company LLC v. Actavis Group PTC [2015] EWHC 72 (Pat) ...... 12.78
Competition Appeal Tribunal Apex Asphalt and Paving Co Ltd v. OFT [2005] CAT 4 .................................................. 8.7 Flynn Pharma Ltd, Cases 1275-1276/1/12/17 .................................................. 15.115, 15.117 Generics (UK) Ltd v. CMA [2018] CAT 4 .................................................................... 3.150 Generics and Others, Cases 1251–1255/1/12/16 ............................................................. 15.95 Genzyme Ltd v. OFT [2004] CAT 4 .............................................................................. 8.151 Kier Group plc, Kier Regional Limited, Ballast Nedam NV v. OFT [2011] CAT 3 ........ 8.9 Makers UK Ltd v. OFT [2007] CAT 11 ..................................................................... 8.6, 8.7 Teva UK Ltd, Norton Healthcare Ltd v. Reckitt Benckiser Group plc, Reckitt Benckiser Healthcare (UK) Ltd, Case 1213/5/7/13 ................................................................. 15.72 Unfair pricing in respect of the supply of Phenytoin Sodium Capsules in the UK, Case CE/9742-13 .................................................................................. 15.104, 15.117, 15.126
Competition and Markets Authority Case CE/9855-14 ............................................................................................................ 15.123 Case closure statement and guidance on rebates and discounts 26 June 2014, Case CE/9855-14 .............................................................................................................. 15.76 Epanutin, Case CE/9742-13 ............................................................................................. 3.244 Paroxetine, Case CE/9531/11 .............................................. 2.9, 15.76, 15.125, 15.126, 18.56
Court of Appeal Actavis UK Ltd v. Eli Lilly & Co. [2015] EWCA Civ 555 ........................................... 12.71 Argos, Littlewoods and JJB v. OFT [2006] EWCA Civ 1318 ........................................... 8.6 Warner-Lambert Co LLC v. Actavis Group PTC EHF [2015] EWCA Civ 556 ........ 12.78 Wheatley v. Drillsafe Ltd [2001] RPC 7 CA (Civ Div) ................................................. 12.71
House of Lords Catnic Components Ltd v. Hill & Smith Ltd [1982] RPC 183 .................................... 12.71 Kirin-Amgen Inc v. Hoechst Marion Roussel Ltd [2004] UKHL 46 ............................ 12.71
Office of Fair Trading Abuse of a dominant position by Reckitt Benckiser Healthcare (UK) Limited and Reckitt Benckiser Group plc, CA98/02/2011 ............................................................ 15.60, 15.63 Bid rigging in the construction industry in England, 21 September 2009, CE/4327-04 ................................................................................................................ 8.56 Exclusionary behaviour by Genzyme Ltd, CA98/3/03 ......................................... 15.44, 15.68
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TABLE OF CASES Market sharing agreement and/or concerted practice in relation to the supply of prescription medicines to care homes in England, 20 March 2014, CE/9627/12 ...................... 8.138 Napp Pharmaceutical Holdings Limited and Subsidiaries v. Director General of Fair Trading, 1001/1/1/01 ................. 1.98, 15.37, 15.53, 15.54, 15.57, 15.63, 15.68, 15.137 Napp Pharmaceuticals Holdings Limited and Subsidiaries, CA98/2/2001 ......... 15.16, 15.17, 15.18, 15.24, 15.34 Proctor & Gamble, CE/6993/05 .................................................................................... 15.123 Reckitt Benckiser, CE/8931/08, 13 April 2011 ............................................................... 18.64
United States Abbott Labs. v. Teva Pharms. USA, Inc., 432 F. Supp. 2d 408 (D. Del. 2006) .......... 14.28, 14.30, 14.32, 14.34, 14.35, 14.40, 19.30, 19.32, 19.33, 19.34, 19.35, 19.38, 19.39, 19.40, 19.42, 19.43, 19.44, 19.45 Actos End Payor Antitrust Litigation, In re, 2015 WL 5610752, (2015) ...................... 14.21 Aggrenox Antitrust Litigation, In re, 94 F.Supp.3d 225, (2015) .................................... 14.22 American Sales Co v. Warner-Chilcott, 2012 WL 4016925, (2013) .............................. 14.23 Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, (2d Cir. 1979) ......... 14.29, 14.40, 14.45, 16.58 Cardizem CD Antitrust Litigation, In re, 332 F.3d 896 (6th Cir. 2003) ............ 2.135, 14.15 Cipro Cases I & II, In re, 348 P.3d 845, 61 Cal. 4th 116, 187 Cal. Rptr. 3d 632 (2015) ........................................................................................................................ 2.146 Cipro Cases I & II, In re, No. 4154 and 4220 (Superior Court for the County of San Diego 18 Nov. 2013) ................................................................................................ 2.146 Ciprofloxacin Hydrochloride Antitrust Litigation, In re, 544 F.3d 1323 (Fed. Cir. 2008) ......................................................................................................................... 14.15 Effexor XR Antitrust Litigation, In re, No. 3:11-cv-05479-PGS-LHG (17 Nov. 2015) ......................................................................................................................... 2.142 Federal Trade Commission v. AbbVie Inc., Civil Action No. 14-5151 (E.D. Pa. Aug. 25, 2015) ................................................................................................................ 2.13, 2.145 Federal Trade Commission v. Actavis, Inc. et al., 133 S. Ct. 2223 (2013) ....... 2.6, 2.8, 2.11, 2.58, 2.132, 2.133, 2.135, 2.136, 2.137, 2.138, 2.143, 2.144, 2.146, 2.151, 2.156, 2.167, 14.6, 14.9, 14.14, 14.15, 14.16, 18.47, 18.65, 18.66 Federal Trade Commission v. Cephalon, Inc., Civil Action No. 2: 08-cv-2141 (E.D. Pa. Apr. 15, 2015) ........................................................................................................... 2.146 Federal Trade Commission, Plaintiff v. Endo Pharmaceuticals, Inc., Case Number 2:16–cv–01440 ........................................................................................................... 14.21 FTC v. Warner Chilcott Holdings Co. No 1:05-cv 02179-CKK (D.C.C., 23 of October 2006) ......................................................................................................................... 8.175 FTC v. Watson Pharm., Inc., 677 F.3d 1298 (11th Cir. 2012), rev’d and remanded sub nom. FTC v. Actavis, Inc., 133 S. Ct. 2223 (2013) ............. 14.15, 14.19, 14.20, 14.21, 14.23, 14.40, 18.51, 18.52, 18.67, 18.68, 18.69, 18.70, 18.75 Illinois Brick v. Illinois, 431 U.S. 720 (1977) ...................................................................... 2.8 K-Dur Antitrust Litigation, In re, 686 F.3d 197 (3d Cir. 2012) .............. 2.135, 14.15, 18.67 King Drug Company of Florence v. Smithkline Beecham Corp. (Lamictal), 791 F.3d 388 (3d Cir. 2015) ........................................................................................................... 14.20 Lamictal Direct Purchaser Antitrust Litigation, In re, 18 F.Supp.3d 560, (2014) .......... 14.20
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TABLE OF CASES Lamictal, In re, No. 14-1243 (3d. Cir. June 26, 2015) .......................................... 2.22, 2.144 Lidoderm Antitrust Litigation, In re, 14-md-02521-WHO (N.D. Ca. May 3, 2018) ............................................................................................................. 2.146 Lipitor Antitrust Litigation, In re, 2013 WL 4780496, (2013) ....................................... 14.22 Lipitor Antitrust Litigation, In re, 46 F. Supp. 3d 523 (D.N.J. 2014) ........................... 2.145 Lipitor Antitrust Litigation, In re, 868 F. 3d 231 (3d. Cir. Aug, 21 2017) .................... 2.145 Loestrin 24 Fe Antitrust Litigation, In re, 45 F.Supp.3d 180, (2014) ............................ 14.20 Loestrin 24 Fe Antitrust Litigation, In re, 814 F.3d 538, (1st Cir. 2016) ...................... 14.20 Meijer, Inc. v. Barr Pharmaceuticals, Inc., 572 F. Supp. 2d 38, 43 (D.D.C. 2008) ....... 19.24 Mylan Pharmaceuticals v. Warner Chilcott (Doryx) 2015 WL 1736957 (E.D. Pa. 16 Apr. 2015) ........................................................................................ 19.45, 19.46, 19.47, 19.48 Mylan Pharmaceuticals, Inc v. Warner Chilcott plc, et al. (Case No.2:12-cv-03824-PD) ............................................................................................. 15.63 Mylan Pharmaceuticls, Inc. v. Warner Chilcott Public Ltd. Co., 2013 WL 5433528, (2013) ............................................................................................................. 14.36, 19.31 New York ex rel. Schneiderman v. Actavis PLC, 787 F.3d 638 (2d Cir. 2015) ................. 2.5 New York v. Actavis (Namenda), 787 F.3d 638 (2d Cir. 2015) ......................... 19.24, 19.31, 19.49, 19.350, 19.51, 19.52 New York v. Actavis PLC (Actavis II), 787 F.3d 638 (2d Cir. 2015) ................. 14.42, 14.48 Nexium (Esomeprazole) Antitrust Litigation, In re, 42 F. Supp. 3d 231 (D. Mass. 2014) ........................................................................................ 2.139, 2.147, 2.149, 2.150 Nexium (Esomeprazole) Antitrust Litigation, In re, 968 F.Supp.2d 367, (2013) ........... 14.20 Nexium (Esomeprazole) Antitrust Litigation, In re, Civil Action No. 12-md-02409-WGY (D. Mass. 7 Aug. 2015) ............................................................................................ 2.150 Professional Drug Co. Inc. v. Wyeth Inc., 2012 WL 4794587, (2012) .......................... 14.22 Roche Products Inc. v. Bolar Pharmaceutical Co. Inc. 733 F.2d 858 (Fed Cir 1984) ... 12.82 Schering-Plough Corp. v. FTC, 402 F.3d (11th Cir. 2005) ............................................ 14.15 Solodyn (Minocycline Hydrochloride) Antitrust Litigation, In re, l:14-md-2503-DJC (D. Mass. Apr. 5, 2018) ........................................................................................... 2.147 Suboxone (Buprenorphine Hydrochloride and Naxolone), In re, Antitrust Litig., 64F.Supp.3d 665 (E.D. Pa. 2014) .................... 14.33, 14.48, 19.31, 19.41, 19.42, 19.45 Tamoxifen Citrate Antitrust Litigation, In re, 466 F3d 187 (2d Cir. 2006) ....... 14.15, 18.69 United States v. Microsoft Corp., 253 F.3d 34, 64 (2001) ....................... 14.30, 14.32, 14.40 US FTC v. Actavis, Inc., 570 U.S. 756 (2013) ................................................................ 3.101 US v. Addyston Pipe & Steel Co., 85 F. 271, 283–84 (6th Cir. 1898) .......................... 16.58 Valley Drug Co. v. Geneva Pharm., Inc. 344 F.3d 1295 (2003) ............................ 2.11, 2.134 Verizon Communications Inc. v. Law Offices of Curtis V. Trinko, LLP, 124 S.Ct. 872, (2004) ............................................................................................................. 14.51, 14.55 Walgreen Co. v. AstraZeneca Pharm. L.P., 534 F. Supp. 2d 146 (2008) .......... 14.32, 14.35, 19.30, 19.37, 19.38, 19.40, 19.43, 19.44, 19.48 Walker process equipment, Inc v. Food Mach and Chem Corp 382 US 172 (1965) ...... 5.20 Wellbutrin XL Antitrust Litigation, In re, 133 F. Supp. 3d 734 (E.D. Pa Sep. 23, 2015) ......................................................................................................................... 2.144 Wellbutrin XL Antitrust Litigation, In re, 282 F.R.D 126, (2011) ................................ 14.23 Wellbutrin XL Antitrust Litigation, In re, 868 F. 3d 132 (3d. Cir. Aug. 9, 2017) ...... 2.144, 14.23
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TABLE OF LEGISLATION
EUROPEAN UNION Charters Charter of Fundamental Rights of the European Union [2012] OJ C326/391 Art 35 ................................................... 9.3
Decisions Council Decision 2011/167/EU of 10 March 2011 authorising enhanced cooperation in the area of the creation of unitary patent protection [2011] OJ l76/53 .......................................... 12.17
Directives Council Directive 65/65/EEC of 26 January 1965 on the approximation of provisions laid down by Law, Regulation or Administrative Action relating to proprietary medicinal products [1965] OJ 369/65 ........ 11.17, 12.92, 12.96, 12.117, 13.2, 13.3, 13.7 Commission Directive 70/50/EEC of 22 December 1969 based on the provisions of Article 33(7), on the abolition of measures which have an effect equivalent to quantitative restrictions on imports and are not covered by other provisions adopted in pursuance of the EEC Treaty [1970] OJ L13/29 ................................... 10.27 Council Directive 75/318/EEC of 20 May 1975 on the approximation of the laws of Member States relating to analytical, pharmaco-toxicological and clinical standards and protocols in
respect of the testing of proprietary medicinal products [1975] OJ L147/1 ................................ 11.17, 13.7 Second Council Directive 75/319/EEC of 20 May 1975 on the approximation of provisions laid down by Law, Regulation or Administrative Action relating to proprietary medicinal products [1975] OJ L147/13 ..... 11.17, 13.7 Art 5 ................................................. 11.19 Arts 8–13 ......................................... 11.19 First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks (Trade Marks Directive) ..................................... 11.38 Art 7 ................................................. 11.38 Council Directive 89/105/EEC of 21 December 1988 relating to the transparency of measures regulating the pricing of medicinal products for human use and their inclusion in the scope of national health insurance systems [1988] OJ L40/8 (Transparency Directive) ............ 10.27, 10.35, 11.23, 11.43, 13.169, 13.170, 13.171, 13.174, 13.175 Recital 6 ......................................... 13.170 Art 1(1) ............................................ 11.46 Art 2(1) .......................................... 13.171 Art 2(2) .......................................... 13.172 Art 5 ............................................... 13.174 Art 6 ............................................... 13.176 Art 7 ............................................... 13.182 Council Directive 89/342/EEC of 3 May 1989 extending the scope of Directives 65/65/EEC and 75/319/EEC and laying down additional provisions for
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TABLE OF LEGISLATION immunological medicinal products consisting of vaccines, toxins or serums and allergens [1989] OJ L142/14 ......................................... 13.7 Council Directive 89/343/EEC of 3 May 1989 extending the scope of Directives 65/65/EEC and 75/319/EEC and laying down additional provisions for radiopharmaceuticals [1989] OJ L142/16 ......................................... 13.7 Council Directive 89/381/EEC of 14 June 1989 extending the scope of Directives 65/65/EEC and 75/319/EEC on the approximation of provisions laid down by Law, Regulation or Administrative Action relating to proprietary medicinal products and laying down special provisions for medicinal products derived from human blood or human plasma [1989] OJ L181/44 ......................................... 13.7 Council Directive 92/25/EEC of 31 March 1992 on the wholesale distribution of medicinal products for human use [1992] OJ L113/1 ......................... 13.7 Council Directive 92/27/EEC of 31 March 1992 on the labelling of medicinal products for human use and on package leaflets [1992] OJ L113/8 ........................................... 13.7 Council Directive 92/28/EEC of 31 March 1992 on the advertising of medicinal products for human use [1992] OJ L113/13 ......................................... 13.7 Council Directive 92/73/EEC of 22 September 1992 widening the scope of Directives 65/65/EEC and 75/319/EEC on the approximation of provisions laid down by Law, Regulation or Administrative Action relating to medicinal products and laying down additional provisions on homeopathic medicinal products [1992] OJ L297/8 ......................... 13.7 Council Directive 93/42/EC of 14 June 1993 concerning medical devices [1993] OJ L169/1
Art 1(2)(a) ................................... 7.1. 7.60 Directive 2001/20/EC of the European Parliament and of the Council of 4 April 2001 on the approximation of the law, regulations and administrative provisions of the Member States relating to the implementation of good clinical practice in the conduct of clinical trials on medicinal products for human use (Clinical Trials Directive) [2001] OJ L121/34 ....... 12.116, 13.57, 13.122, 13.123, 13.132, 13.134, 13.135, 13.148, 13.158, 13.159, 13.160, 13.161 Art 2(b) .......................................... 13.124 Art 2(k) .......................................... 13.123 Art 2(m) ......................................... 13.148 Art 2(n) .......................................... 13.148 Art 2(o) .......................................... 13.149 Art 3(e) ........................................... 13.124 Art 3(f) ........................................... 13.125 Art 4 ............................................... 13.127 Art 4(e) ........................................... 13.127 Art 5 ............................................... 13.127 Art 6(2) .......................................... 13.129 Art 6(5)–(7) .................................... 13.130 Art 7 .................................. 13.132, 13.133 Art 9 .................................. 13.128, 13.138 Art 10(a) ......................................... 13.142 Art 10(b) ........................... 13.144, 13.146 Art 13(3) ........................................ 13.135 Art 14 ............................................. 13.136 Arts 16–18 ...................................... 13.149 Directive 2001/82/EC of the European Parliament and of the Council of 6 November 2001 on the Community code relating to veterinary medicinal products [2001] OJ L311/1 ....... 11.17, 12.92, 12.95, 12.100, 12.108, 12.117 Title III .......................................... 12.110 Art 8 ............................................... 12.110 Art 26.3 .......................................... 12.110
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TABLE OF LEGISLATION Art 102 ........................................... 13.187 Art 103 ........................................... 13.191 Art 104(1) ...................................... 13.193 Art 104(3) ...................................... 13.194 Art 107b(1) .................................... 13.200 Art 107c(2) ..................................... 13.201 Arts 107i to 107k ........................... 13.203 Annex I ............................... 13.67, 13.158 Annex I Pt IV ....................... 13.32, 13.33 Directive 2002/98/EC of the European Parliament and of the Council of 27 January 2003 setting standards of quality and safety for the collection, testing, processing, storage and distribution of human blood and blood components and amending Directive 2001/83/EC [2003] OJ L33/30 ................................... 13.30 Directive 2004/18/EC of the European Parliament and of the Council of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts and public service contracts [2004] OJ L134/114 ............ 8.1, 8.220 Directive 2004/27/EC of the European Parliament and of the Council of 31 March 2004 amending Directive 2001/83/EC on the Community code relating to medicinal products for human use [2004] OJ L136/34 ............. 12.84, 12.100, 13.111 Art 8 ................................................. 12.82 Art 10(6) ............................................ 3.75 Directive 2007/47/EC of the European Parliament and of the Council of 5 September 2007 amending Council Directive 90/385/EEC on the approximation of the laws of the Member States relating to active implantable medical devices, Council Directive 93/42/EEC concerning medical devices and Directive 98/8/EC concerning the placing of biocidal products on the market [2007] OJ L247/21 ........................................... 7.1
Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001, on the Community code relating to medicinal products for human use, as amended by Directive 2004/27/EC [2001] OJ L311/67 ...... 3.75, 10.93, 11.17, 11.19, 12.84, 12.92, 12.95, 12.100, 12.108, 12.116, 12.117, 12.118, 13.3, 13.7, 13.32, 13.57, 13.102, 13.186 Art 1.2 .............................................. 12.91 Art 10.1 ............................................ 12.84 Art 10.6 ................................. 12.82, 12.88 Art 54(a) ........................................... 17.11 Community Code relating to medicinal products for human use .............. 13.21, 13.22, 13.43, 13.45, 13.48, 13.51, 13.64, 13.94, 13.186, 13.191, 13.193, 13.196, 13.201, 13.203 Title IX Ch 4 ................................. 13.206 Art 1(2) ............................................ 13.18 Art 1(4) ............................................ 13.25 Art 1(5) ............................................ 13.46 Art 1(6) ............................................ 13.43 Art 1(7) ............................................ 13.45 Art 1(8) ............................................ 13.45 Art 1(9) ............................................ 13.45 Art 1(10) .......................................... 13.28 Art 1(30) .......................................... 13.50 Art 1(31) .......................................... 13.50 Art 1(32) .......................................... 13.50 Art 2(2) ............................................ 13.21 Art 4(5) ................................. 13.36, 13.37 Art 6 ................................................. 13.55 Art 6(1) ............................................ 13.94 Art 6(2) ............................................ 13.94 Art 7 ................................................. 13.45 Art 10 ................... 13.108, 13.109, 13.116 Art 10a ........................................... 13.202 Art 10(4) ........................................ 13.111 Art 14 ............................................... 13.48 Art 16(a)(1) ........................... 13.52, 13.53 Art 16(a)(2) ...................................... 13.54 Art 16(2) .......................................... 13.49 Art 24(4) .......................................... 13.89 Art 101 ........................................... 13.187
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TABLE OF LEGISLATION Art 35(2) .......................................... 8.148 Art 42.4 ............................................ 8.135 Art 47 ............................................... 8.132 Art 49 .................................... 8.132, 8.141 Art 51 ............................................... 8.132 Art 63 ................................................. 8.91 Art 71 ...................................... 8.91, 8.109 Art 71.2 .............................................. 8.60 Art 91 ................................................... 8.1 Annex V, Pt BI, para.7 .................... 8.141
Directive 2009/53/EC of the European Parliament and of the Council of 18 June 2009 amending Directive 2001/82/EC and Directive 2001/83/EC as regards variations to the terms of marketing authorisations for medicinal products [2009] OJ L168/33 ....................................... 11.17 Directive 2009/120/EC amending Directive 2001/83/EC of the European Parliament and of the Council on the Community code relating to medicinal products for human use as regards advanced therapy medicinal products [2009] OJ L242/3 ....................... 13.32 Directive 2010/84/EU of the European Parliament and of the Council of 15 December 2010 amending, as regards pharmacovigilance, Directive 2001/83/EC on the Community code relating to medicinal products for human use [2010] OJ L348/74 ..................................... 13.186 Directive 2011/62/EU of the European Parliament and of the Council of 8 June 2001 amending Directive 2001/83/EC on the Community code relating to medicinal products for human use, as regards the prevention of the entry into the legal supply chain of falsified medicinal products [2011] OJ L174/74 (Falsified Medicines Directive) ..................................... 10.93 Directive 2014/24/EU of the European Parliament and of the Council of 26 February 2014 on public procurement and repealing Directive 2004/18/EC [2014] OJ L94/65 .... 8.1, 8.98, 8.219 Recital 59 ......................................... 8.220 Art 1 ..................................................... 8.1 Art 2.1(11) ......................................... 8.91 Art 2.1(12) ......................................... 8.91 Art 5(4)(d) ........................................ 8.219 Art 12 ............................................... 8.200 Art 19 ................................................. 8.91 Art 32.2(a) .......................................... 8.58
Notices Commission Notice on the Definition of the Relevant Market for the purposes of Community competition law [1997] OJ C372/5 ......... 3.19, 3.84, 7.6, 8.128
Regulations EEC Council Regulation No 17/62: First Regulation implementing Articles 85 and 86 of the Treaty [1962] OJ 13/204 ........................................... 16.1 Regulation (EEC) No 1408/71 of the Council of 14 June 1971 on the application of social security schemes to employed persons and their families moving within the Community [1971] OJ L149/2 ........................ 11.23, 11.50 Art 22 ...............................................11.50 Regulation (EEC) No 2821/71 of the Council of 20 December 1971 on application of Article 85(3) of the Treaty to categories of agreements, decisions and concerted practices [1971] OJ L285/46 ....................... 3.27 Regulation (EEC) No 1768/92 of 18 June 1992 concerning the creation of a supplementary protection certificate for medicinal products [1992] OJ L182/1 ........ 1.34, 2.159, 3.220, 12.94, 12.116, 12.117, 13.57, 17.70, 18.64 Art 1 .......................................... 3.81, 3.82 Art 3 ............................................... 12.117 Art 3(b) .......................................... 12.117 Art 8(1)(a)(iv) ................................. 12.117
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TABLE OF LEGISLATION Art 2 ................................................... 9.46 Art 3 ................................................... 9.46 Art 4(2) .............................................. 9.46 Art 7 ................................................... 9.46 Art 8 ................................................... 9.45 Annex II ............................................. 9.47 Annex III ........................................... 9.46 Annex IV ........................................... 9.47 Annex V ............................................. 9.46 Regulation (EC) No 1383/2003 of 22 July 2003 concerning customs action against goods suspected of infringing certain intellectual property rights and the measures to be taken against goods found to have infringed such rights [2003] OJ L196/7 ...... 9.22, 9.23, 9.25, 9.30, 9.41 Recital 8 .................................... 9.28, 9.30 Art 1(1)(b) .......................................... 9.22 Art 2(b) .............................................. 9.22 Art 2(c)(i) ........................................... 9.22 Art 2(c)(ii) .......................................... 9.22 Art 2(c)(iii) ......................................... 9.22 Art 2(c)(iv) ......................................... 9.22 Art 2(c)(v) .......................................... 9.22 Art 11(1) ............................................ 9.22 Art 17(b) ............................................ 9.22 Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings [2004] OJ L24/1 (EC Merger Regulation) ..... 6.65, 7.4, 7.100, 8.147, 17.81, 20.45 Art 2 ................................................... 7.90 Art 2(2) ................................................ 7.4 Art 2(3) ................................................ 7.4 Art 4(5) ............................................ 20.45 Regulation (EC) No 726/2004 of the European Parliament and of the Council of 31 March 2004 laying down Community procedures for the authorisation and supervision of medicinal products for human and veterinary use and establishing a European Medicines Agency [2004] OJ L136/1 .......... 11.17, 12.116, 13.32, 13.40, 13.69, 13.71, 13.72, 13.102
Art 8(1)(c) ...................................... 12.117 Art 19 ............................................. 12.117 Art 19(1) ........................................ 12.117 Council Regulation (EEC) No 2309/93 of 22 July 1993 laying down Community procedures for the authorization and supervision of medicinal products for human veterinary use and establishing a European Agency for the Evaluation of Medicinal Products [1993] OJ L214/1 .............................. 13.13, 13.69 Regulation (EC) No 3295/94 of 22 December 1994 laying down measures to prohibit the release for free circulation, export, re-export or entry for a suspensive procedure of counterfeit and pirated goods [1994] OJ L341/8 ..................................... 9.22 Regulation (EC) No 1610/96 of the European Parliament and of the Council of 23 July 1996 concerning the creation of a supplementary protection certificate for plant protection products [1996] OJ L198/30 ....................................... 12.94 Regulation (EC) No 141/2000 of the European Parliament and of the Council of 16 December 1999 on orphan medicinal products [2000] OJ L18/1 ................................ 13.60, 15.47 Art 8(2) ............................................ 13.63 Art 8(3) ............................................ 13.63 Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty [2003] OJ L1/1 ............. 3.8, 3.27, 3.40 Art 3 ................................................... 17.3 Art 11(6) .......................................... 17.78 Council Regulation (EC) No 953/2003 of 26 May 2003 to avoid trade diversion into the European Union of certain key medicines [2003] OJ L135/5 ..... 9.43, 9.44, 9.45, 9.46, 9.47, 9.48, 9.49, 9.50 Recital 9 ............................................. 9.45 Art 1(2)(a) .......................................... 9.47
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TABLE OF LEGISLATION Art 3(2) ............................................ 13.72 Art 6 ................................................. 13.79 Art 10 ............................................... 13.78 Art 14 ............................................... 13.78 Art 14(7) .......................................... 13.78 Art 14(8) .......................................... 13.78 Art 19 ............................................... 13.78 Art 20 ............................................... 13.78 Art 57 ............................................... 13.96 Annex .................................... 13.71, 13.72 Commission Regulation (EC) No 802/2004 of 7 April 2004 implementing Council Regulation (EC) No 139/2004 on the control of concentrations between undertakings [2004] OJ L133/1 ... 6.65 Regulation (EC) No 816/2006 of the European Parliament and of the Council of 17 May 2006 on compulsory licensing of patents relating to the manufacture of pharmaceutical products for export to countries with public health problems [2006] OJ L157/1 ...... 9.43, 9.51, 9.52, 9.53, 12.89, 12.90, 12.91 Art 1 ................................................. 12.91 Art 2(1) ............................................ 12.91 Art 4 ................................................. 12.91 Art 5 ................................................... 9.52 Art 6(3)(a) .......................................... 9.52 Art 6(3)(c) .......................................... 9.52 Art 6(3)(f) .......................................... 9.52 Art 7 ................................................... 9.52 Art 8(1)(b)(ii) ..................................... 9.52 Art 10(2) ............................................ 9.52 Art 10(3)(b) ........................................ 9.52 Art 10(3)(d) ........................................ 9.52 Art 10(4) ............................................ 9.52 Art 13 ............................................... 12.91 Art 14 ............................................... 12.91 Regulation (EC) No 1901/2006 of the European Parliament and of the Council of 12 December 2006 on medicinal products for paediatric use and amending Regulation (EEC) No 1768/92, Directive 2001/20/EC, Directive 2001/83/EC and Regulation (EC) No 726/2004 [2006] OJ L378/1
Title V .............................................. 13.59 Recital 4 ......................................... 12.116 Art 36 ...................... 12.116, 13.57, 13.59 Regulation (EC) No 1394/2007 of the European Parliament and of the Council on advanced therapy medicinal products and amending Directive 2001/83/EC and Regulation (EC) No 726/2004 [2007] OJ L324/121 .............. 13.32, 13.33, 13.35, 13.36, 13.38, 13.39, 13.40, 13.42 Art 2(1) ............................................ 13.35 Art 2(1)(b) ........................................ 13.33 Art 2(1)(d) ........................................ 13.35 Art 6 ................................................. 13.35 Art 9 ................................................. 13.35 Annex I ............................................ 13.34 Commission Regulation (EC) No 1234/2008 of 24 November 2008 concerning the examination of variations to the terms of marketing authorisations for medicinal products for human use and veterinary medicinal products [2008] OJ L334/7 ......................................... 13.91 Art 10 ............................................... 13.92 Annex I ............................................ 13.91 Council Regulation (EC) No 207/2009 of 26 February 2009 on the Community trade mark [2009] OJ L78/1 ........ 9.31 Art 9(4) .............................................. 9.31 Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplementary protection certificate for medicinal products [2009] OJ L152/1) ......... 4.3, 12.6, 12.96, 12.102, 12.112, 12.117, 12.127, 18.64 Preamble ........................................... 12.93 Recital 4 ........................................... 12.94 Recital 6 ........................................... 12.94 Art 1 ................................................. 12.95 Art 1(b) .......................................... 12.114 Art 1(c) ............................... 12.95, 12.114 Art 2 .................................... 12.95, 12.110 Art 3 .................... 12.100, 12.117, 12.122
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TABLE OF LEGISLATION Art 3(a) ............... 12.101, 12.103, 12.104, 12.105, 12.106, 12.107, 12.114 Art 3(b) ... 12.108, 12.109, 12.110, 12.118 Art 3(c) ............................. 12.111, 12.113 Art 3(d) ............................... 12.97, 12.110 Art 4 ................................................. 12.99 Art 5 ................................................. 12.99 Art 7 ............................................... 12.121 Art 8 ............................................... 12.121 Art 13 ..... 12.115, 12.117, 12.118, 12.120 Art 13.1 .......................................... 12.119 Art 15 ............................................. 12.122 Commission Regulation (EU) No 330/2010 of 20 April 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of vertical agreements and concerted practices [2010] OJ L102/1 ............. 4.28, 4.77, 4.85, 20.27 Art 3.1 .............................................. 20.27 Commission Regulation (EU) No 1217/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of research and development agreements [2010] OJ L335/36 ... 3.27, 3.35, 3.252 Art 1(1) .............................................. 3.35 Art 1(1)(i) ......................................... 3.249 Art 1(1)(p) .......................................... 3.35 Art 3(2) .............................................. 3.35 Art 3(3) .............................................. 3.35 Art 3(4) .............................................. 3.36 Art 3(5) .............................................. 3.36 Art 4 ................................................... 3.37 Art 4(2) .............................................. 3.32 Art 4(3) .............................................. 3.32 Art 5(a) ............................................ 3.252 Art 5(b)(iv) ....................................... 3.252 Art 6 ................................................... 3.28 Commission Regulation (EU) No 1218/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty to categories of specialisation
agreements [2010] OJ L335/43 ................................ 3.27, 3.28 Art 1(1) .............................................. 3.41 Art 2(2) .............................................. 3.41 Art 2(3) .............................................. 3.41 Art 3 ................................................... 3.32 Commission implementing regulation (EU) No 520/2012 of 19 June 2012 on the performance of pharmacovigilance activities provided for in Regulation (EC) No 726/2004 of the European Parliament and of the Council and Directive 2001/83/EC of the European Parliament and of the Council [2012] OJ L159/5 ................................. 13.103 Art 25 ............................................. 13.102 Art 26 ............................................. 13.102 Regulation (EU) No 1257/2012 of the European Parliament and of the Council of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection [2012] OJ L361/1 ................... 11.10, 12.16, 12.17 Art 18 ............................................... 12.17 Council Regulation (EU) No 1260/2012 of 17 December 2012 implementing enhanced cooperation in the area of the creation of unitary patent protection with regard to the applicable translation arrangements [2012] OJ L361/89 ......... 11.10, 12.16, 12.17 Art 7 ................................................. 12.17 Regulation (EU) No 608/2013 of the European Parliament and of the Council of 12 June 2013 concerning customs enforcement of intellectual property rights and repealing Council Regulation (EC) No 1383/2003 [2013] OJ L181/15 .......................... 9.30, 9.41 Recital 10 ........................................... 9.30 Recital 11 ........................................... 9.30 Art 2(1) .............................................. 9.30
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TABLE OF LEGISLATION Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements [2014] OJ L93/17 ..... 3.27, 4.1, 4.5, 4.19, 4.20, 4.21, 4.22, 4.23, 4.24, 4.25, 4.26, 4.28, 4.30, 4.31, 4.35, 4.40, 4.42, 4.55, 4.72, 4.73, 4.85, 4.88, 4.90, 4.99, 4.111 Recital 6 ............................................. 4.24 Art 1(1)(b) .......................................... 4.21 Art 1(1)(c) ................................. 4.20, 4.25 Art 1(1)(i) ......................................... 3.249 Art 2(2) ............................................ 3.249 Art 3 ................................................... 3.32 Art 4(1)(c) ........................................ 3.226 Art 4(1)(d) ............................ 3.226, 3.249 Art 5 ................................................... 3.28 Art 5(2) ............................................ 3.249 Art 8(e) .............................................. 4.38 Regulation (EU) No 536/2014 of the European Parliament and of the Council of 16 April 2014 on clinical trials on medicinal products for human use (Clinical Trials Regulation) [2014] OJ L158/1 ...... 13.122, 13.160, 13.161, 13.162, 13.163, 13.164, 13.167 Regulation (EU) No 2015/2424 of the European Parliament and of the Council of 16 December 2015 amending Council Regulation (EC) No 207/2009 on the Community trade mark, and repealing Commission Regulation (EC) No 2869/95 on the fees payable to the Office for Harmonization in the Internal Market (Trade Marks and Designs) [2015] OJ L341/21 ......................................... 9.31
Treaties and conventions Community Patent Convention (Luxembourg 15 December 1975) Art 31(b) .......................................... 12.80
European Patent Convention (EPC) ... 12.5, 12.14, 12.18, 12.19, 12.22, 12.24, 12.47, 12.50 Art 52.1 ................................. 12.10, 12.43 Art 54 ............................................... 12.38 Art 54.1 ............................................ 12.25 Art 54.2 ............................................ 12.26 Art 54.3 ............................................ 12.26 Art 54.5 ................................. 12.48, 12.49 Art 56 ............. 12.35, 12.36, 12.37, 12.38 Art 57 ............................................... 12.44 Art 63 ............................................... 2.158 Art 69 .......... 12.66, 12.69, 12.71, 12.101, 12.103, 12.105 Art 69.1 ............................................ 12.65 Art 83 ........................ 12.56, 12.57, 12.59 Art 87 ............................................... 12.31 Art 138 ............................................. 12.61 Art 138.2 .......................................... 12.62 Art 138.3 .......................................... 12.63 Art 164 ............................................. 12.66 European Patent Convention 2000 .... 12.47, 12.48, 12.66 Art 53 ............................................... 12.47 Art 54.5 ............................................ 12.50 Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the European Community, signed at Lisbon, 13 December 2007 (Lisbon Treaty) [2007] OJ C306/1 ............................................ 9.3 Art 3 ..................................................... 9.3 Art 3(1) ................................................ 9.3 Art 3(5) ................................................ 9.3 Treaty Establishing the European Community (EC Treaty) ............ 10.60 Art 81 ...................................... 3.10, 17.43 Art 82 ................. 1.51, 5.69, 20.37, 20.42 Art 152 ................................................. 9.3 Treaty on the Functioning of the European Union [2012] OJ C326/47) (TFEU) ....................................... 20.27 Art 34 ............................................... 11.27 Art 36 .................................... 11.27, 11.29
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TABLE OF LEGISLATION Art 101 ......... 1.45, 1.57, 2.69, 2.77, 2.78, 2.94, 2.128, 3.1, 3.2, 3.5, 3.8, 3.10, 3.14, 3.16, 3.26, 3.27, 3.30, 3.44, 3.53, 3.71, 3.84, 3.102, 3.103, 3.138, 3.149, 3.161, 3.172, 3.176, 3.181, 3.182, 3.218, 3.221, 3.229, 3.232, 3.233, 3.246, 3.247, 3.262, 3.263, 4.1, 4.6, 4.9, 4.13, 4.15, 4.19, 4.37, 4.49, 4.75, 4.77, 4.107, 5.25, 7.100, 8.15, 8.16, 8.43, 8.45, 8.82, 8.93, 8.184, 10.47, 10.48, 10.49, 10.52, 10.55, 10.58, 10.61, 15.1, 15.2, 15.77, 15.87, 15.93, 15.125, 15.146, 16.15, 16.22, 17.3, 17.4, 17.21, 17.24, 17.41, 17.43, 17.44, 17.49, 17.50, 17.71, 18.46, 18.56, 20.28, 20.30, 20.35 Art 101(1) ...... 3.9, 3.11, 3.13, 3.14, 3.15, 3.16, 3.17, 3.21, 3.23, 3.24, 3.27, 3.28, 3.29, 3.33, 3.69, 3.78, 3.92, 3.93, 3.104, 3.107, 3.108, 3.123, 3.124, 3.137, 3.143, 3.145, 3.155, 3.162, 3.179, 3.183, 3.187, 3.203, 3.205, 3.256, 4.13, 4.14, 4.26, 4.44, 4.45, 4.59, 4.67, 4.73, 4.75, 4.78, 4.79, 4.82, 4.83, 4.86, 4.87, 4.89, 4.91, 4.92, 4.97, 4.101, 4.107, 4.108, 4.109, 8.204, 18.48 Art 101(1)(a) .................................... 8.102 Art 101(2) .......................................... 3.23 Art 101(3) ...... 1.57, 3.9, 3.16, 3.24, 3.27, 3.29, 3.46, 3.47, 3.48, 3.50, 3.99, 3.104, 3.163, 3.164, 3.166, 3.170, 3.171, 3.182, 3.201 3.218, 3.235, 3.251, 4.11, 4.14, 4.26, 4.27, 4.42, 4.44, 4.66, 4.69, 4.75, 4.77, 4.79, 4.82, 4.83, 4.86, 4.92, 4.101, 4.111, 4.115, 15.100, 17.43, 17.45, 17.49, 17.51, 20.27 Art 102 ..... 1.99, 2.94, 3.53, 3.123, 3.145, 3.229, 4.19, 4.54, 4.107, 5.8, 5.11, 5.12, 5.14, 5.18, 5.19, 5.23, 5.25, 5.40, 5.41, 5.42, 5.43, 5.46, 5.62, 5.68, 5.69, 5.72, 5.73, 5.74, 5.75, 5.94, 5.95, 8.93, 8.184, 10.47, 10.63, 15.1, 15.2, 15.61, 15.76, 15.104, 15.113, 15.125, 15.147, 17.3, 17.4,
Art Art Art Art Art Art
17.21, 17.23, 17.24, 17.55, 17.62, 17.70, 17.71, 17.79, 18.46, 18.56, 18.64, 20.16, 20.33, 20.35, 20.40, 20.42 106(2) ............................. 8.211, 8.212 168 ............................................... 3.75 168(1) ............................................ 9.3 168(3) ............................................ 9.3 168(7) .......................................... 11.5 267 .................................. 10.69, 15.95
FOREIGN LEGISLATION Brazil Law No 12529 of 30 November 2011 ............................................. 18.10 Decree No.7723/2012 of 7 May 2012 ............................................. 18.23
China Law of the People’s Republic of China Against Unfair Competition (promulgated 2 September 1993, effective 1 December 1993) ......... 16.4, 16.6, 16.77, 16.129 Art 10 ............................................. 16.126 Law of the People’s Republic of China on Lawyers (promulgated 15 May 1996, effective 1 January 1997, amended 28 October 2007) Art 38 ............................................... 16.12 Pricing Law of the People’s Republic of China, adopted at the 29th Meeting of the Standing Committee of the Eighth National People’s Congress on 29 December 1997 and promulgated by Order No 92 of the President of the People’s Republic of China on 29 December 1997 .............. 16.4, 16.6, 16.25, 16.77 Art 2 ................................................... 16.6 Art 40 ............................................... 16.25
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TABLE OF LEGISLATION Law of the People’s Republic of China on Bid Invitation and Bidding (promulgated 30 August 1999, effective 1 January 2000) ............... 16.4 Drug Administration Law 2001 ......... 16.14, 16.74, 16.78 Art 55 ............................................... 16.14 Anti-Monopoly Law of the People’s Republic of China, adopted at the 29th Meeting of the Standing Committee of the National People’s Congress on 30 August 2007 ...... 16.1, 16.4, 16.5, 16.6, 16.7, 16.9, 16.13, 16.15, 16.18, 16.24, 16.25, 16.30, 16.37, 16.38, 16.46, 16.48, 16.52, 16.54, 16.59, 16.63, 16.65, 16.71, 16.77, 16.83, 16.95, 16.102, 16.106, 16.115, 16.120, 16.129, 18.13 Chapter V ...................................... 16.102 Art 1 ................................................... 16.5 Art 2 ................................................... 16.6 Art 7 ........................................ 16.5, 16.65 Art 8 ................................................... 16.5 Art 10 ................................................. 16.7 Art 11 ................................................. 16.5 Art 12 ...................................... 16.5, 16.52 Art 13 ............ 16.15, 16.16, 16.17, 16.18, 16.20, 16.21, 16.22, 16.23, 16.24 Art 14 ............ 16.30, 16.31, 16.32, 16.33, 16.34, 16.35, 16.38, 16.40, 16.44, 16.45 Art 14(1) .......................................... 16.42 Art 14(2) .......................................... 16.42 Art 14(3) .......................................... 16.30 Art 15 ............. 16.20, 16.21, 16.33, 16.34 Art 17 ........................ 16.48, 16.49, 16.57 Art 17(1) .......................................... 16.61 Art 17(3) .......................................... 16.67 Art 18 .................................... 16.55, 16.56 Art 19 .................................... 16.48, 16.54 Art 20 ................................ 16.110, 16.111 Art 21 ............................................. 16.110 Art 22 ............................................. 16.115 Art 24 ............................................. 16.123 Art 25 ............................................. 16.123 Art 26 ............................................. 16.123 Art 27 ............................................. 16.116
Art 27(5) ........................................ 16.117 Art 28 ................................ 16.110, 16.116 Art 38 ................................................. 16.9 Art 39 ...................................... 16.9, 16.10 Art 39(1) ............................................ 16.9 Art 39(5) .......................................... 16.10 Art 40 ............................................... 16.11 Art 41 ............................................... 16.12 Art 42 .................................... 16.12, 16.13 Art 46 ........................ 16.24, 16.35, 16.36 Art 47 ............................................... 16.62 Art 49 ............................................... 16.37 Art 50 ........................ 16.23, 16.38, 16.45 Art 52 ............................................... 16.13 Art 54 ............................................. 16.126 Regulation of the State Council on the Notification Thresholds for Concentrations of Undertakings 2008 Art 4 ............................................... 16.112 Arts 4–5 ......................................... 16.113
Germany Patent Act Section 11 No.2 ............................... 12.88 Section 11 No.2b ............................. 12.88
India Competition Act of 2002 .................... 18.12 Monopolies and Restrictive Trade Practices Act of 1969 ................................. 18.12
Poland Industrial Property Act of 30 June 2000 Art 69(1)(4) ...................................... 12.88
Romania Competition Act Art 9 ................................................. 8.122
Russian Federation Federal Law No. 45–FZ of 8 March 2015 ............................................. 18.11
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TABLE OF LEGISLATION Criminal Code Art 178 ............................................. 18.11 Federal Law on Circulation of Medicines dated 12 April 2010, No. 61-FZ .......................................... 18.28
Slovenia Competition Protection Act Art 6 ................................................... 8.82
Spain Constitution Art 38 ............................................... 10.62 Patent Act 11/1986, 20 March ........... 12.90 Art 87.2 ............................................ 12.90 Law 25/1990 Art 100 ............................................. 10.23 Medicines Act 1990 ............................. 17.10 Art 2(1) ............................................ 17.62 Art 68(1) .......................................... 17.62 Art 70 ............................................... 17.62 Art 100 ............................................. 17.43 Royal Decree 271/1990 ....................... 17.11 Royal Decree 1416/1994 ..................... 17.16 Royal Decree 725/2003 ....................... 10.60 Competition Defence Act 15/2007 ...... 17.2, 17.3, 17.5, 17.7, 20.30 Art 1 ....... 17.3, 17.4, 17.21, 17.35, 17.37, 17.38, 17.41, 17.49, 17.52, 17.59, 17.71, 17.75, 20.30, 20.35 Art 1(1) ............................................ 17.52 Art 1(1)(a) ........................................ 8.102 Art 1(1)(c) ........................................ 8.102 Art 1(3) ............................................ 17.52 Art 2 ....... 17.3, 17.4, 17.21, 17.54, 17.55, 17.59, 17.62, 17.70, 17.71, 17.75, 17.79 Art 3 ............................ 17.5, 17.32, 17.65 Royal Decree 1345/2007 ..................... 17.10 Royal Decree 823/2008 ....................... 17.13 Act on Guarantees and Rational Use of Medicinal Products and Medical
Devices 2006 ........ 17.10, 17.11, 17.14, 17.17, 17.43, 17.47 Art 3(1) ............................................ 17.62 Art 67 ............................................... 17.13 Art 67(1) .......................................... 17.62 Art 69 ............................................... 17.62 Art 90 ........................ 17.38, 17.47, 17.59 Art 94 ............................................... 17.11 Act 3/2013 ............................................. 17.2 Royal Decree 870/2013 ....................... 17.16 Royal Decree 782/2013 ....................... 17.13 Royal Decree 177/2014 ....................... 17.12 Royal Legislative Decree 1/2015 ......... 17.10 Patent Act 24/2015 .............................. 12.90 Law 48/2015 ........................................ 17.11
South Africa Medicines and Related Substances Control Amendment Act 1997, Republic of South Africa Government Gazette No 18505, Act No 90, 1997 (12 December 1997) ............................ 9.13 Competition Act, 1998 (Act No 89 of 1998) ............................................ 18.14
United States Sherman Antitrust Act of 1890 .... 2.8, 14.1, 14.52, 14.54, 14.55, 16.22, 19.50 Section 1 ............ 2.69, 14.1, 14.14, 14.44, 14.54 Sections 1 to 7 ................................... 14.1 Section 2 ... 5.20, 5.21, 14.1, 14.32, 14.34, 14.35, 14.44, 14.51, 14.54, 14.55, 19.33 Clayton Antitrust Act of 1914 ............ 14.54 s 7 ....................................................... 14.1 Federal Trade Commission Act of 1914 ............................................... 14.1 s 5 ..................... 14.1, 14.54, 14.55, 14.56 Multidistrict Litigation Statute (28 U.S.C.§ 1407) ................................. 2.8
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TABLE OF LEGISLATION Drug Price Competition and Patent Restoration Act of 1984 Pub. L. No. 98–417, 98 Stat. 1585 (codified as amended at 21 U.S.C. § 355) (Hatch-Waxman Act) ......... 2.13, 2.20, 2.47, 2.61, 2.140, 2.141, 2.149, 2.156, 2.162, 2.163, 2.164, 2.165, 2.166, 2.168, 2.169, 2.170, 2.172, 14.3, 14.9, 14.10, 14.11, 14.16, 14.20, 14.28, 14.30, 19.2, 19.9, 19.10, 19.11, 19.12, 19.13, 19.14, 19.21, 19.39, 19.50, 19.55 s 21 U.S.C. § 355(j)(5)(B)(iii) ........... 2.28 s 21 U.S.C. § 355(j)(5)(B)(iv) ............ 2.47 s 35 U.S.C. § 156(c)(1) (2012) ........ 2.163 s 35 U.S.C. § 156(c)(2) (2011) ........ 2.163 s 35 U.S.C. § 156(c)(3) (2012) ........ 2.163 s 35 U.S.C. § 156(g)(4)(A) (2011) ....................................... 2.163 s 21 U.S.C. § 355(c)(3)(E)(ii) (2011) ....................................... 2.164 s 21 U.S.C. § 355(c)(3)(E)(iii) (2011) ....................................... 2.164 s 21 U.S.C. § 355(j)(5)(B)(iii) (2011) ....................................... 2.164 s 21 U.S.C. § 355(j)(2) (2011) ........ 2.165 s 35 U.S.C. § 271(e)(2) (2011) ........ 2.165 s 21 U.S.C. § 355(j)(2)(A)(vii)(I)–(IV) (2011) ....................................... 2.166 s 21 U.S.C. § 355(j)(5)(B)(iv) (2011) ....................................... 2.166 s 42 U.S.C. § 262(i)(2) (2011) ........ 2.168 s 42 U.S.C. § 262(i)(3) (2011) ........ 2.168 s 42 U.S.C. § 262(k)(7) (2011) ....... 2.169 s 271(e)(1)(2004) .............................. 19.12 s 355(j)(5)(B)(iv) .............................. 19.13 s 355(j)(2)(A)(vii) ............................. 19.13 Medicare Prescription Drug, Improvement, and Modernization Act of 2003 ............................................. 2.140 Biologics Price Competition and Innovation Act of 2009 .......... 2.162, 2.168, 2.169, 2.170, 2.171, 2.172
Patient Protection and American Affordable Care Act of 2010 ............. 2.162, 14.58
INTERNATIONAL CONVENTIONS Paris Convention for the Protection of Industrial Property (20 March 1883) ............................................ 12.31
UK LEGISLATION Statutes Monopolies and Restrictive Practices (Inquiry and Control) Act 1948 ... 15.5 Fair Trading Act 1973 ........................... 15.1 Restrictive Trade Practices Act 1976 ... 15.1, 15.2 Resale Prices Act 1976 ................. 15.1, 15.2 Competition Act 1980 ................ 15.1, 15.19 Competition Act 1998 ....... 15.2, 15.5, 15.6, 15.16, 15.17, 15.19, 15.44, 15.59, 15.60, 15.78, 15.122, 15.151 Ch I ..... 15.2, 15.77, 15.78, 15.87, 15.146 Ch II ..... 15.2, 15.16, 15.37, 15.60, 15.61, 15.77, 15.78, 15.113, 15.146, 18.64 s 2 ........................................................15.2 s 2(1) .................................................. 8.80 s 9 ....................................................15.100 s 18 ..................................................... 15.2 s 18(2)(a) ........................................ 15.104 s 40A .............................................. 15.104 s 46 ...................................... 15.95, 15.115 Enterprise Act 2002 ..................... 15.3, 15.6 s 5 ....................................................15.136 National Health Service Act 2006 ..... 15.13, 15.14 Enterprise and Regulatory Reform Act 2013 ............................................... 15.4
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TABLE OF LEGISLATION Annex 1C ........................................... 12.4 WTO Agreement on Trade Related Aspects of Intellectual Property Rights 1995 (TRIPS) .................... 9.4, 9.7, 9.8, 9.9, 9.10, 9.11, 9.12, 9.13, 9.14, 9.15, 9.16, 9.17, 9.18, 9.19, 9.22, 9.24, 9.30, 9.33, 9.34, 9.36, 9.38, 9.40, 9.41, 9.42, 12.4, 12.10, 12.11, 12.73, 12.91, 18.15, 18.23, 18.34 Art 4 ................................................... 9.35 Art 7 ................................................... 9.12 Art 8 .......................................... 9.12, 18.5 Art 27 ............... 9.11, 12.10, 12.23, 12.43 Art 28 ............................................... 12.73 Art 28.2 ............................................ 12.89 Art 30 ............................................... 12.79 Art 31 .......... 9.12, 9.13, 9.52, 12.89, 18.5 Art 31(b) ............................................ 9.13 Art 31(f) ........................... 9.13, 9.15, 9.16 Art 31bis ............................................ 9.18 Art 33 ........................................ 9.11, 12.4 Art 40 ................................................. 18.5 Art 46 ................................................. 9.22 Art 51 ................................................. 9.22 Art 59 ................................................. 9.22 Art 65 ............................................... 12.10 Art 66 ............................................... 12.10
Health Service Medical Supplies (Costs) Act 2017 ................................ 15.14, 15.120
Statutory instruments Competition Act 1998 (Land and Vertical Agreements Exclusion) Order 2000 (SI 2000/310) .................................... 15.93 National Health Service (Procurement, Patient Choice and Competition) (No 2) Regulations 2013 (SI 2013/500) .................................... 8.209 reg 10 ......................... 8.209, 8.211, 8.212
UNITED NATIONS UN Resolution 53/202, 17 December 1998, A/RES/53/202 ................................ 9.1 UN Millennium Declaration, UN Resolution 55/2, A/RES/55/2 ........ 9.1
WORLD TRADE ORGANIZATION Marrakesh Agreement Establishing the World Trade Organization (WTO) (Morocco 15 April 1994)
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1 COMPETITION LAW AND PHARMA: AN ECONOMIC PERSPECTIVE Benoît Durand
1. INTRODUCTION
1.1
2. AN R&D INTENSIVE INDUSTRY
A. The development of parallel imports in the EEA B. The effect of parallel imports on prices C. The effect of parallel imports on innovation
1.21
3. THE DETERMINANTS OF R&D INTENSITY IN THE PHARMACEUTICAL INDUSTRY 1.24 4. COMPETITION AND THE PATENT SYSTEM
1.28
5. DELAYING THE ENTRY OF GENERICS A. Strategic use of the patent system B. Product hopping C. Disparaging the generic version
1.35 1.41 1.48 1.52
6. THE EFFECTS OF PARALLEL TRADE
1.55
7. THE DEMAND AND PRICING OF PHARMACEUTICAL PRODUCTS A. Demand for pharmaceuticals: institutional details B. Countervailing buyer power in the pharmaceutical industry C. In-hospital and out-of-hospital pricing
1.60 1.65 1.70
1.78 1.80 1.84 1.93
1. INTRODUCTION The pharmaceutical industry has been under the scrutiny of competition 1.1 watchdogs. In 2009, the European Commission published the final report of its Sector Inquiry, in which it laid out a number of concerns about the state of competition. In particular, the Commission found that some practices of originator companies had the objective or effect of stifling competition, notably against generics. Since 2009, the Commission but also some National Competition Authorities have stepped up enforcement activities in this sector, justifying notably their intervention by the need to keep public health budgets under control and to maintain widespread access to affordable medicines. The importance of the pharmaceutical industry is beyond dispute. Pharma- 1.2 ceutical companies have contributed to the development of medical treatments, improving human health and quality of life, and extending the human lifespan. Over the last 15 years, life expectancy at birth in the EU-28 increased 1
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Chapter 1 COMPETITION LAW AND PHARMA: AN ECONOMIC PERSPECTIVE
by 2.9 years, from 77.7 to 80.6 years (2015).1 Even though not all of this progress can be attributed to the pharmaceutical industry, it nevertheless plays a significant role in developing new treatments. 1.3 In parallel, the economic importance of the industry has also risen. The European Federation of Pharmaceutical Industries and Association (EFPIA) estimates that the size of the pharmaceutical market in Europe has grown from EUR 89 billion in 2000 to an estimated EUR 202 billion in 2016, which suggests that in 16 years, industry revenues (measured at ex-factory prices) have more than doubled.2 This size increase is due in part to the rise in the consumption of pharmaceuticals. For example, in the Organisation for Economic Co-operation and Development (OECD), between 2000 and 2015, the use of antihypertensive, antidiabetic and antidepressant medications nearly doubled, while the use of cholesterol-lowering drugs nearly quadrupled.3 1.4 Today in Europe, spending on pharmaceuticals, even though it varies across countries, is substantial. For example, in the European Union in 2014, spending ranged from 0.52 and 0.70 per cent of gross domestic product (GDP) for Luxembourg and Denmark respectively to 2.11 and 2.17 per cent for Hungary and Greece respectively.4 1.5 In light of its economic importance, it is legitimate that competition authorities monitor the state of competition of the pharmaceutical industry closely. After all, anticompetitive practices and anticompetitive mergers could have a substantial impact on economic welfare, affecting millions of European consumers. However, each economic sector has its own idiosyncrasies, and these particular features must be (and are typically) taken into account by competition authorities in their investigation. The pharmaceutical sector is no exception.
1
Eurostat: Mortality and life expectancy statistics. http://ec.europa.eu/eurostat/statistics-explained/index.php/ Mortality_and_life_expectancy_statistics#Life_expectancy_at_birth_is_slightly_decreasing, accessed on 29 May 2018. European Federation of Pharmaceutical Industries and Associations, The Pharmaceutical Industry in Figures, Key Data, 2017, page 3. www.efpia.eu/media/219735/efpia-pharmafigures2017_statisticbroch_v04-final.pdf, accessed on 28 May 2018. OECD, Health at a Glance: Europe 2017, page 192. https://read.oecd-ilibrary.org/social-issues-migrationhealth/health-at-a-glance-2017_health_glance-2017-en, accessed on 28 May 2018. OECD, Pharmaceutical Spending Total, Percentage of GDP, 2015, https://data.oecd.org/healthres/ pharmaceutical-spending.htm#indicator-chart, accessed on 28 May 2018. Spending in the USA was 2.07 per cent of GDP in 2015. The data include prescription drugs and over the counter (OTC) drugs.
2
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1. INTRODUCTION
The pharmaceutical industry is highly innovative, and it will stay this way so 1.6 long as companies continue to have the ability and incentive to fund investment on research and development (R&D). In Europe alone, the industry is spending billions of euros on R&D to bring new treatments. Because of the highly uncertain nature of R&D investments in this industry—there are typically many failures and few successes—and the information asymmetries between pharmaceutical firms and the financial markets, pharmaceutical companies generally have to fund their own research activities. R&D investments are largely encouraged by patent protection, which grants 1.7 pharmaceutical companies the exclusive right to exploit their innovation for a period of 20 years. During this period of exclusivity, the originator companies are shielded from competition by copycats—to be precise, competitors manufacturing therapeutically equivalent generic versions of the molecule. The revenue earned during the period of exclusivity serves (i) to recoup the initial investments undertaken to develop the successful drug (including the losses incurred through failed attempts), which also includes a competitive return on the cost of capital, and (ii) to finance future research to develop new treatments. In practice, however, because it takes several years to bring a medicine to the market, originators do not benefit from the full period of exclusivity granted by the patent though this is sometimes mitigated by patent extensions, as will be discussed in more detail below. In this chapter we discuss three competition issues from an economic perspec- 1.8 tive, highlighting in particular how the specificities of the industry, notably the importance of innovation, affects the assessment of competition and market outcomes. First, there is a tension between the short-term benefits of price competition 1.9 and the long-term benefit of innovation. Price competition leads to lower prices which immediately benefit consumers. However, as profits are eroded this reduces the funds available for R&D as well as the incentive to finance R&D. While this is not specific to the pharmaceutical sector, its strong focus on R&D renders the tension especially salient. As a result, a reduction in investments could be expected to have longer-term negative consequences in terms of innovation in the industry. The patent system, and its various extensions specific to the pharmaceutical 1.10 industry, have attempted to settle this trade-off. Under the exclusivity granted by patent protection, branded medicines are sold at a premium, enabling companies to earn “supra-competitive” profits, which serve to motivate and finance R&D investments. When the patent protection ends, because of their 3
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Chapter 1 COMPETITION LAW AND PHARMA: AN ECONOMIC PERSPECTIVE
lower prices, generic medicines, which are therapeutically equivalent, tend to acquire the largest portion of the market, eating away revenue from the originator companies. Unsurprisingly, pharmaceutical companies have an incentive to prolong the period of exclusivity to fend off competition from generics. While originator companies may seek to prolong the period of exclusivity, competition authorities have taken the stance that these practices are anticompetitive, as they deprive patients from accessing lower price medicines; inevitably, this intervention reduces the ability and incentive of companies to fund future research. 1.11 Second, there is a tension between the price setting of medicines, which varies across Member States, and the objective of market integration in Europe, which is supported by the principle of free movement of goods. 1.12 Differential pricing, also known as price discrimination, enables manufacturers to sell their products at different prices in different countries. Confronted with national regulators who exert various degrees of control on prices, pharmaceutical companies sell medicines at very different price levels across countries within the European Economic Area (EEA). A recent study compared ex-factory reference prices in Europe, Australia and New Zealand for 14 medicines, and found that for most of the selected medicines, the price of the product in the highest-priced country was at least twice the price of the medicine in the country with the lowest price.5 Such a practice leads to higher profits, which not only maintains the incentive to finance R&D but also, in the case of the pharmaceutical industry, these profits can be used to fund R&D activities. Indeed, while price disparities between countries may increase the revenues of originator companies, in turn they also contribute to the raising of funds for future research. However, parallel imports can in principle undermine firms’ ability to earn revenue in high-price countries. In response, originator companies may exert some control over distributors and wholesalers to prevent the emergence of parallel imports, but these measures may be viewed as restricting trade between Member States—running counter to the objective of the single market. 1.13 The objective of market integration calls for unfettered trade movements, ultimately leading to an equalisation of prices across Member States. Parallel imports of prescription medicines from low-price countries to high-price countries would have the effect of lowering prices in the high-price country. 5
Sabine Vogler, Kate Kilpatrick and Zaheer-Ud-Din Babar, “Analysis of Medicine Prices in New Zealand and 16 European Countries” (2015) 18(4) Value in Health 484–92.
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1. INTRODUCTION
This would seemingly benefit consumers and national health insurance organisations in the high-price countries. In practice, though, parallel imports in the pharmaceutical industry need not 1.14 always bring such a clear benefit. (a)
(b)
(c)
First, there appears to be no strong evidence that parallel imports actually reduce the price of medicine to consumers in high-price countries. Because in most countries the price of medicine is regulated, the profit of arbitrage is not passed on to consumers, but rather kept by the distribution chain. In other words, consumers still pay the same regulated price, whether the product is sold directly by the originator company, or sourced from a distributor from the low-price country. Second, to curb profit erosion in high-price countries resulting from parallel imports of prescription medicines, pharmaceutical companies may no longer supply low-price countries. Indeed, originator companies may trade off the low profits in the low-price country against the risk that parallel imports will erode the higher profits in the high-price country, and hence stop supplying the low-price country. Third, the short-term benefit of affordability in high-income countries that may result from parallel imports may come at the expense of less innovation as overall industry profits are reduced. However, fearing the reaction of pharmaceutical companies, regulators in the low-price countries may loosen price regulation, thereby cutting distributors’ incentive to re-export medicines, which in turn protects innovation.
Finally, the exercise of market power, which is the primary focus of com- 1.15 petition law investigations, requires—as in other industries—a thorough examination of the facts of each case. In the pharmaceutical sector this cannot simply hinge on whether originator companies are protected by patents. Competition authorities have the task of determining whether firms hold significant market power; that is, whether firms’ exercise of market power is so large that they can be deemed dominant, and/or whether practices, agreements or mergers enable firms to acquire additional market power, thereby reaping supra-competitive profits at the detriment of consumers. By definition, a firm has market power if it finds it profitable to raise prices above marginal cost. The ability to raise prices depends on the extent to which consumers can substitute to other suppliers. In particular, this depends on consumer behaviour, that is, how consumers would react to a relative price increase.6 6
The ability of consumers to switch between products is referred to in economics as demand side substitution.
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1.16 Because originator companies are protected by patents, at least for a period of time, they appear to hold “monopoly power” over the supply of their patented medicines. That is, patients have no alternative but to purchase the medicine that is prescribed for their treatment. Once the patent expires, generic versions become available, and the pricing power of originator companies diminishes. However, even when medicines are patented, it cannot be presumed that originator companies necessarily hold substantial market power, without examining the nature of demand. 1.17 The demand for pharmaceutical products is unusual in many respects. In general, patients do not pay for the cost of healthcare or they pay only part of the cost as medical expenses are covered by national health insurance schemes, which typically insure residents against the risk of illness. Due to the existence of medical insurance, many health care services are therefore provided to the patients at effectively zero or low monetary prices, and so the standard economic model predicts that demand should not be price sensitive. This is even more so since doctors decide the treatment and the amount of medicines that patients need, typically without regard for their cost. On this count, pharmaceutical companies should have strong pricing power. 1.18 However, in most European countries, the price of medicines that patients purchase in pharmacies is the outcome of negotiation between the national regulator and pharmaceutical companies. Because each regulator represents millions of potential patients, it should have monopsony power. That is, to sell medicines in one country, pharmaceutical companies have no choice but to negotiate with that regulator to obtain approval. 1.19 In principle, this should give that regulator strong bargaining power, putting downward pressure on prices. The reality is often more complex. The negotiating power of these regulators is weakened by the fact that (i) often they have no control over the quantities of medicines consumed since only doctors prescribe treatment and (ii) they can hardly afford to refuse to reimburse medicines that have demonstrated therapeutic value. 1.20 In sharp contrast, hospitals that negotiate directly with manufacturers can obtain better prices. Unlike national health insurance organisations, hospitals may be able to influence doctors and recommend medicines, in particular when they have a choice between patented medicines that can be used to treat the same illness. Given that they have more room to manoeuvre, hospitals may thus fully exploit competition between branded medicines (inter-brand competition) and also between the originator products and their generic version. 6
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2. AN R&D INTENSIVE INDUSTRY
2. AN R&D INTENSIVE INDUSTRY The intensity of R&D activities is one of the major features that sets apart the 1.21 pharmaceutical industry from other industries. According to the European Commission, pharmaceuticals and biotech combined is one of the most intensive R&D industries in Europe.7 EFPIA, the industry association, estimates that the pharmaceutical industry invested EUR 35,000 million in R&D in Europe in 2016.8 In 2015, investment in R&D in the United States amounted to USD 47,051 million (or EUR 44,086 million). This clearly indicates that the European pharmaceutical industry is committed nearly as much as the American industry to the development of new medicines. Pharmaceutical companies invest these large sums to turn fundamental 1.22 research into innovative treatment, leading to new medicines for the benefit of patients. It is undisputed that innovation in human treatment is a major source of human progress. For instance, the eradication of smallpox, mostly through vaccination, has saved tens, possibly hundreds of millions of lives.9 On a different scale, the death rate from cardiovascular diseases has been steadily declining due in large part to new medicines such as cholesterol-lowering treatments. For the past 15 years, every year the US Federal Drug Administration (FDA) approved between 17 and 45 new medicines.10 Although it is difficult to quantify the welfare benefits of pharmaceutical innovations, they are likely to be vast. Without the significant R&D efforts of originator companies and other 1.23 stakeholders (e.g., hospitals, universities and governments) the development of innovative treatment would be greatly reduced. For this reason, it is important to maintain the industry’s ability and incentive to continue investing in R&D. This point is becoming even more pressing as the cost of developing new medicines has increased considerably over time: a recent study shows the average total cost per approved new compound has increased yearly by 8.5 per
7
8 9
10
European Commission, JRC/DG RTD, EU Industrial R&D Investment Scoreboard 2017, http://iri.jrc. ec.europa.eu/scoreboard17.html. In 2017, Pharmaceuticals & Biotechnology was third with 13.7 per cent of R&D intensity behind IT Hardware with 15.7 per cent and Biotechnology with 24 per cent. European Federation of Pharmaceutical Industries and Associations, supra note 2. World Health Organization, Smallpox, Eradicating an Ancient Scourge, www.who.int/about/bugs_drugs_ smoke_chapter_1_smallpox.pdf, accessed on 13 March 2016. It is estimated that around 300 million people died from smallpox during the twentieth century alone. Biopharmaceutical Research Industry, Biopharmaceutical Research Industry 2016 Profile, www.phrma.org/sites/ default/files/pdf/biopharmaceutical-industry-profile.pdf.
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cent above inflation.11 One objective of competition rules should therefore be to encourage R&D activities.
3. THE DETERMINANTS OF R&D INTENSITY IN THE PHARMACEUTICAL INDUSTRY 1.24 To understand how competition rules may affect innovation, it is helpful to point to the two main factors that determine R&D investments in the pharmaceutical industry: expected returns on investment and cash flows. We briefly discuss each of them in turn. 1.25 Expected returns (a)
(b)
Like any other investment decision, the amount that pharmaceutical companies will invest in R&D activities depends on their expected returns. In theory, a firm will pursue investment projects only when their expected return is greater than the cost of capital required. This implies that when expected returns increase, holding cost of capital required constant, spending on R&D will typically go up. However, against this background, the cost of developing new medicines has been rising steadily. A recent study by DiMasi et al. (2016) based on R&D costs of 106 randomly selected new drugs shows that development costs in the United States have tripled since 2003.12 This is explained in large part because the process is becoming lengthier (often taking more than a decade) and failure rates for medicines tested on human subjects have been increasing. In this context, it is important to maintain the level of returns for firms to continue investing.
1.26 Cash flow (a)
11
Cash flow is another important driver of R&D intensity. This is because almost all R&D investments in the pharmaceutical industry are selffinanced.13 Due to the highly uncertain nature of these investments, they entail enormous risks; as a result, investors request high premiums. In particular, the outcome of R&D is very uncertain. The chances of isolating a substance with therapeutic value are relatively small, with Joseph DiMasi, Henry G. Grabowski and Ronald W. Hansen, “Innovation in the Pharmaceutical Industry: New Estimates of R&D Costs” (2016) 47 Journal of Health Economics 20–33. Ibid. OECD, Pharmaceutical Pricing Policies in a Global Market, OECD Health Policy Studies, page 192 (2008).
12 13
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3. THE DETERMINANTS OF R&D INTENSITY IN THE PHARMACEUTICAL INDUSTRY
(b)
(c)
(d)
several estimates ranging from one in 5,000 to one in 10,000.14 Even drugs that have made it to the stage of clinical testing have low chances of being approved.15 This is a lengthy process: typically more than ten years pass between the time a pharmaceutical company makes a discovery and the time the medicine is brought to market. Additionally, the market is characterised by a high degree of asymmetric information: in general, pharmaceutical companies have better information about the likelihood of success and the nature of the research project than outside investors. This makes internal funding relatively more attractive than access to capital markets (i.e., debt or equity financing). In other words, the perceived expected returns are larger to the firm than to outside investors. Academic research actually confirms that these two drivers, expected returns and availability of cash flows, impact positively R&D intensity (which is measured by dividing R&D expenditures with sales). That is, more cash flow and/or higher expected returns translate into more R&D spending (per every euro of sales). Grabowski and Vernon (2000),16 using data from 11 major drug companies over the period 1974–94 show that cash flow is an important determinant of R&D intensity. Concomitantly, they also find evidence that expected return is another important factor. These findings were corroborated by Vernon (2005) using data from 14 firms between 1994 and 1997.17 1.27
The pricing of medicines and R&D spending (a)
(b)
14
15 16 17
Because expected returns and cash flow depend on the (expected) price of medicines, there is an indirect link between pricing and R&D intensity. That is, higher price levels would lead to more investments, and thus potentially more innovation. A number of studies suggest that indeed prices affect R&D spending in the pharmaceutical sector. Giaccotto et al. (2005) estimate the impact of changes in subscription medicine prices on industry-level R&D intensity European Commission, Pharmaceutical Sector Inquiry, Final Report, 8 July 2009, http://ec.europa.eu/ competition/sectors/pharmaceuticals/inquiry/staff_working_paper_part1.pdf, para. 161, accessed on 17 December 2015. DiMasi, et al., supra note 11. The probability of being approved, conditional on having entered clinical testing, is in the 10–20 per cent range. Henry G. Grabowski and John A. Vernon, “The Determinants of Pharmaceutical Research and Development Expenditures” (2000) 10(1–2) Journal of Evolutionary Economics 201–15. John A. Vernon, “Examining the Link Between Price Regulation and Pharmaceutical R&D Investment” (2005) 14(1) Health Economics 1–16.
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Chapter 1 COMPETITION LAW AND PHARMA: AN ECONOMIC PERSPECTIVE
in the United States from 1952 to 2001.18 They find that a ten per cent increase in the growth of real drug prices is associated with nearly a six per cent increase in the growth of R&D intensity. Using cross-sectional data, Civan and Maloney (2009) show that when prices are higher prices in a therapeutic category, this is associated with a larger number of drugs in the development pipeline.19 Golec and Vernon (2006) directly compare the US and EU markets and find that European consumers enjoyed smaller drug price inflation during 1986 and 2004 but at the cost of 46 fewer new drugs introduced by EU firms.20
4. COMPETITION AND THE PATENT SYSTEM 1.28 In general, competition leads to lower prices, which benefit consumers. However, prices and R&D investments tend to be positively correlated, which means that (expected) prices at high levels is likely to generate more innovation than otherwise would be the case. 1.29 Indeed, firms undertake R&D investments to develop new products, but will do so only if they expect returns that are sufficiently high.21 This, in particular, requires that prices be sufficiently high to earn revenue that covers all R&D fixed costs and yields a competitive return. Innovation is high but so are prices. But, if rivals can copy the innovation, competition will ensue, leading to lower prices and a widespread dissemination of innovation, which would benefit society. The innovator, however, would expect much lower returns, to the point that R&D investments may no longer be profitable. In this case, prices are low but so is innovation. 1.30 The relationship between innovation and prices creates some tension for policy makers. It is not possible to have vigorous competition pushing prices to the bottom, while at the same time expect firms to heavily invest in R&D. There is a clear trade-off, and government may need to balance the benefit that arises from short-term competition (low prices and massive consumption) 18
19 20 21
Carmelo Giaccotto, Rexford E. Santerre and John A. Vernon, “Drug Prices and Research and Development Investment Behavior in the Pharmaceutical Industry” (2005) 48(1) The Journal of Law and Economics 195–214. Abdulkadir Civan and Michael T. Maloney, “The Effect of Price on Pharmaceutical R&D” (2009) 9(1) The BE Journal of Economic Analysis & Policy Article 15. Joseph H. Golec and John A. Vernon, European Pharmaceutical Price Regulation, Firm Profitability, and R&D Spending (2006), National Bureau of Economic Research No. w12676. Investors compare returns, and would always prefer investment opportunities that yield higher return (that is, if two opportunities are equally risky, they would always choose the opportunity that provides the higher return). Hence firms would not pursue R&D activities if the expected return is too low.
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4. COMPETITION AND THE PATENT SYSTEM
with the benefit of long-term competition (R&D investments that produce new products). To stimulate innovation, it appears necessary to sacrifice short-term competition and thus low prices, at least temporarily. This is what the patent system seeks to achieve. To encourage R&D investments, intellectual property rights (IPRs) protect originators from competitors that would want to have a free ride and copy the innovation. As a result, patent holders have the exclusive right to exploit their innovation. The patent system seeks to maintain the balance between these two opposite 1.31 effects. By granting patent holders exclusivity rights to exploit their innovation, the patent system prevents other firms from free-riding on the investments of those who carry the load of R&D activities, thereby limiting competition while allowing innovators to charge “monopoly” prices. In principle during this period of exclusivity investors have sufficient time to recoup their investments. After 20 years the patent falls into the public domain, and anyone can legally copy the innovation. Typically, at that moment the successful innovation becomes cheaper (as anyone can legally produce it), and thus widespread. The patent system therefore promotes innovation by initially granting exclusivity and later its dissemination at lower prices by removing the exclusivity and making the innovation freely available. Limiting or prolonging the period of exclusivity would alter this trade-off and the welfare effects would need to be carefully weighted. This classic trade-off applies to the pharmaceutical industry, although it is 1.32 exacerbated by the sheer importance of innovation in this sector. As indicated above the pharmaceutical companies invest large sums to develop new treatments. Investing in the search of new medicines is not only a risky venture—it often fails—but it is also a lengthy and costly process. Nevertheless, pharmaceutical companies have continued to invest because they benefit from the temporary exclusive rights to exploit their innovations bestowed by the patent system. While holding a temporary “monopoly” position, pharmaceutical companies may obtain a sufficiently high price on the supply of successful medicines to recoup their initial investments and also amass enough cash to fund ongoing and future investments. In fact, for many pharmaceutical companies, the bulk of their revenues are derived from a few blockbuster drugs, which serve to finance their entire R&D activities.22 The patent system gives pharmaceutical companies exclusivity for 20 years 1.33 from the date of filing. However, it takes many years to develop medicines 22
European Commission, supra note 14, Table 2. As much as 55 per cent of global turnover may be generated by a single blockbuster medicine.
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after the patent has been filed. This lengthy process involves several development phases, including notably a pre-clinical development phase and then, if successful, a long period of clinical trials. Only when that stage has passed, the drug originator can apply for a marketing authorisation. All in all, it often takes more than ten years between the time the patent on the molecule is filed and when the medicine reaches the market.23 1.34 The relatively short period of effective exclusivity that pharmaceutical companies enjoy selling medicines may be considered a handicap. It reduces the return of investment and limits the accumulation of cash flow. Because the pharmaceutical industry finances its own R&D investment, by construction, this limits the industry’s ability to fund future research. To address this issue, a Supplementary Protection Certificate has been introduced in the European Union. To ensure that medicines have a long-enough exclusivity timespan, the certificate ensures up to five additional years of protection. Importantly, the total period of exclusivity, starting from the marketing authorisation of the product, cannot exceed 15 years.24
5. DELAYING THE ENTRY OF GENERICS 1.35 As set out above, there is tension between the short-term benefit brought by price competition and the long-term positive effect of product innovation on welfare. In sectors where innovation is important, finding the right balance between these two effects is critical. 1.36 Once a patent expires in the pharmaceutical industry, generic companies launch, boosting competition by cutting prices substantially. A generic medicine is a copy of the originator drug; that is, it has the same active pharmaceutical ingredient, and is thus in principle a perfect substitute. Generic companies have to obtain a marketing authorisation, through filing an “abridged application”, which only needs to prove that their product is bioequivalent25 to a previously authorised medicine—typically that of the 23 24
25
European Federation of Pharmaceutical Industries and Associations, supra note 2. Council Regulation (EEC) No 1768/92 (18 June 1992) concerning the creation of a supplementary protection certificate for medicinal products, http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri= CELEX:31992R1768:EN:HTML. European Medicines Agency, Guidelines on the Investigation of Bioequivalence (2010), www.ema.europa.eu/ docs/en_GB/document_library/Scientific_guideline/2010/01/WC500070039.pdf, accessed on 18 April 2016. “Two medicinal products containing the same active substance are considered bioequivalent if they are pharmaceutically equivalent or pharmaceutical alternatives and their bio availabilities (rate and extent) after administration in the same molar dose lie within acceptable predefined limits.”
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5. DELAYING THE ENTRY OF GENERICS
originator.26 Generic companies can slash prices because they spend less on R&D, they incur smaller other fixed costs (promotion, branding, etc.), and their main cost is manufacturing.27 The benefits of price competition after a generic launch are well documented. 1.37 Following the sector inquiry, the European Commission underscores the benefit of competition by generic medicines, which contributes to reducing medicine prices substantially. In particular, this effect benefits public budgets (including health care expenditures), keeping them under control while ensuring widespread access to medicines.28 Competition authorities have been concerned that pharmaceutical companies 1.38 may engage in practices that seek to prolong the exclusivity period of patented drugs, thereby altering the terms of the trade-off set out by the existing legal system. Specifically, in the final report of the sector inquiry, the European Commission found that originator companies have had recourse to various tactics to delay entry of generics. By stifling generic competition and unduly extending their protection, pharmaceutical companies allegedly harm the economy. However, in light of the trade-off described above, the effects of the 1.39 practices that we present below may be ambiguous. This is because, even if these practices limit price competition (some clearly more than others), by allowing pharmaceutical companies to continue reaping “monopoly” rents, at the same time, any additional cash flows may help financing future research, notably in light of rising cost.29 In this context, a strict application of competition rules without having regards to long-term benefits of innovation may be short-sighted.
26 27 28
European Commission, supra note 14, para. 322. Ibid, page 40. European Commission, Communication from the Commission, Executive Summary of the Pharmaceutical Sector Inquiry, Final Report, http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/communication_en.pdf, page 8, accessed on 18 December 2015: the price at which generic companies enter the market was, on average, 25% lower than the price of the originator medicines prior to the loss of exclusivity. Two years after entry, prices of generic medicines were on average 40% below the former originator price. Also the prices of originator products appear to drop following generic entry. The market share (in volume terms) of the generic companies was about 30% at the end of the first year and 45% after two years. In other words, any delay will have a significant cost/revenue impact.
29
DiMasi, et al., supra note 11. Using data from 106 randomly selected new drugs, DiMasi et al. show that the cost of developing drugs has increased over time.
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1.40 Below we briefly introduce some of the practices that may potentially stifle competition from generic companies. A. Strategic use of the patent system 1.41 Competition authorities have been concerned that originators may seek to game the patent system to prolong the exclusivity period. Indeed, while patents provide a protection against the free-riding of non-innovators, they can also provide the means to hamper competition. As highlighted, inter alia, by Lemley and Shapiro (2005), all patents are not equal: some are more likely to be valid—upheld in court—than others.30 This implies that even so-called “weak” patents, if not challenged, would prevent generic entry. The Commission highlights a number of strategies, related to patents, that pharmaceutical companies may use to keep generic medicines out of the market. 1.42 One such strategy is to file patents related to ancillary characteristics of an already patented product, which should expire as late as possible after the end of the base patent(s). Hemphill and Sampat (2012) report that one antidepressant had as much as ten such patents, which would have extended its protection for 16 years had it not been for a successful challenge.31 These are sometimes called “patent clusters” or “patent thickets”.32 The practice is not problematic if the patents cover real innovations; if, on the other hand, the patents are weak and numerous, they may succeed in extending protection even though they rest on dubious claims. The reason why even weak patents may succeed in lengthening the protection is that challenging them is akin to a “public good”: if one generic supplier succeeds in overturning the patent, all other generic suppliers will benefit without incurring any cost, free-riding therefore on the efforts of the challenger. In this context, none of the suppliers will actually challenge the patent unless they can coordinate to share the costs, which appears unlikely.33 30
Mark A. Lemley and Carl Shapiro, “Probabilistic Patents” (2005) 19(2) Journal of Economic Perspectives 75–98; Carl Shapiro, “Antitrust Limits to Patent Settlement” (2003) 34(2) RAND Journal of Economics 391–411, page 395: What the patent grant actually gives the patent holder is the right to sue to prevent others from infringing the patent. Nothing in the patent grant guarantees that the patent will be declared valid, or that the defendant in the patent suit will be found to have infringed. In other words, all real patents are less strong than the idealized patent grant usually imagined in economic theory.
31 32
33
C. Scott Hemphill and Bhaven N. Sampat, “Evergreening, Patent Challenges, and Effective Market Life in Pharmaceuticals” (2012) 21(2) Journal of Health Economics 327–39. European Commission, Final Results of the Commission Pharmaceutical Sector Inquiry: Competition and Regulatory Concerns to Address, Competition Policy Newsletter, No. 3 (2009), http://ec.europa.eu/ competition/publications/cpn/cpn2009_3.pdf. See Lemley and Shapiro, supra note 30.
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Another strategy concerns agreements to settle a patent dispute but include a 1.43 so-called “reverse payment”. This occurs when the originator pharmaceutical company, as part of a settlement agreement, transfers “value” to the generic company, either via a straight cash payment or through a distributor agreement.34 Although settlement agreements are generally viewed positively since they avoid a lengthy judicial process, reducing both congestion in courts and legal costs, “reverse payment” settlements may actually prolong the exclusivity period for the benefit of the originator and at the expense of consumers, at least in the short term. Competition authorities, notably the US Federal Trade Commission and the European Commission, tend to view these agreements as cartel arrangements in which the originator shares part of the monopoly rent with potential competitor(s). However, upon closer inspection, not all agreements with a reverse payment necessarily lead to a restriction of price competition.35 On the one hand, if the originator pays generic companies to postpone entry because it holds a weak patent, meaning that it would certainly lose a court challenge, in all likelihood entry would be delayed. That is, the originator would expect that without such payment, generic competition would likely start before the patent expires. In this case, the settlement has clear short-term anticompetitive intent and effects. On the other hand, even though the patent holder has a strong patent, it may prefer settling the dispute, avoiding the risk of losing the court challenge. One reason why the originator pays the generic company is due to risk aversion, which weakens its bargaining position. Because pharmaceutical companies often depend on the revenue from one or two blockbuster medicines, losing in court could have detrimental effects on their ability to finance future research. Even if it is likely to win in court, the originator does not want to take any risk because of the potentially huge financial loss that this may entail.36 Interestingly, the strategy of “paying” generic companies to delay entry appears 1.44 much more expensive in the EU than in the United States. This is due to 34
35 36
In general, the generic company would have to obtain a licence, and potentially pay a royalty to the originator. However, in this case the payment goes from the originator to the generic company, hence the term “reverse payment”. See Shapiro, supra note 30. Barry C. Harris, Kevin M. Murphy, Robert D. Willig and Mattew B. Wright, “Activating Actavis: a More Complete Story” (2014) 28(2) Antitrust 83–9. Economists talk of risk aversion when an individual (or a firm) prefers a sure pay-off to an equivalent, but uncertain, pay-off. For instance, suppose that an originator will earn EUR 100 million if he retains the exclusivity. He would be risk-averse if he preferred to pay more than EUR one million to settle a litigation that has a one per cent chance of overturning its exclusivity. He would be risk-neutral if he agreed to pay only EUR one million and risk-loving if he would pay only less than EUR one million. Although not related to the pharmaceutical industry, in the dispute between Windows and Lindows, there was a small risk that Microsoft might lose its “Windows” trademark. Rather than take that small but extremely costly risk, Microsoft chose to settle and paid Lindows to change its name.
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legislation in the United States, or at least its interpretation, whereby the first generic firm to obtain FDA approval is granted an exclusivity period of 180 days.37 To get the approval, however, the firm must “declare that its product does not infringe the relevant patents or that the relevant patents are invalid”,38 which typically leads to litigation. Whether or not the first generic company succeeds in challenging the patent, the patent holder can settle with the first entrant on a date of entry, while also guaranteeing the 180 days’ exclusivity period. The cost advantage resides in that a settlement with the first generic supplier implies that all other generic companies must wait to enter until the 180 days expire. In short, by settling with the first entrant, the patent holder blocks everyone else.39 In the EU, instead, there is no such exclusivity rule and an originator may have to settle with multiple generic firms, hence increasing the cost of “pay for delay” for the originator. 1.45 The European Commission found this practice illegal in three separate cases.40 In 2013, the Commission concluded that the settlement between Lundbeck and several generic suppliers delayed entry of cheaper versions of citalopram, an antidepressant, and thus infringed article 101 TFEU. The Commission found that Lundbeck agreed to make a payment, to buy the stock of the generic medicine (to destroy it) and to enter into a distribution agreement which would have benefited the generic supplier. Importantly, the Commission considered the settlement as a “by object” infringement and it therefore did not investigate the effects of the settlement. The decision was appealed before the General Court, which in September 2016 sided with the Commission.41 1.46 In December 2013, the Commission fined Johnson & Johnson (J&J) and Novartis because of an anticompetitive agreement that delayed entry of a 37
38
39 40
41
U.S. Department of Health and Human Services, Food and Drug Administration, Centre for Drug Evaluation and Research (CDER), Guidance for Industry: 180-Day Generic Drug Exclusivity Under the Hatch-Waxman Amendments to the Federal Food, Drug and Cosmetic Act (June 1998), www.fda.gov/downloads/ Drugs/…/Guidances/ucm079342.pdf. FTC, Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers Billions (January 2010), www.ftc.gov/sites/ default/files/documents/reports/pay-delay-how-drug-company-pay-offs-cost-consumers-billions-federaltrade-commission-staff-study/100112payfordelayrpt.pdf. C. Scott Hemphill and Mark A. Lemley, “Earning Exclusivity: Generic Drug Incentives and the HatchWaxman Act” (2011) 77(3) Antitrust Law Journal 947–89. Damien Geradin, Douglas H. Ginsburg and Safty Graham, Reverse Payment Patent Settlements in the European Union and the United States, George Mason Legal Studies Research Paper No. LS 15-22 (2015). This situation is also known as a “reverse-payment patent settlement”. General Court of the European Union, Judgments in Case T-460/13, T- 467/13, T-469/13, T-470/13, T-471/13, and T-472/13, Press Release No 90/16 (8 September 2016), http://curia.europa.eu/jcms/upload/ docs/application/pdf/2016-09/cp160090en.pdf. On 8 September 2016 the General Court of the European Union dismissed the actions brought by Lundbeck and the generic companies and confirmed the fines of almost EUR 150 million imposed on them.
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cheaper generic version of the pain-killer fentanyl. Janssen-Cilag, a J&J Dutch subsidiary, concluded a co-promotion agreement with Sandoz, a Novartis subsidiary that was about to launch a generic version of fentanyl. The agreement stipulated that Sandoz in exchange for its cooperation would receive monthly payments, but also it would not launch the generic product. According to the Commission, the payments gave Sandoz strong incentive not to enter the market as these payments exceeded profits that could be expected from selling the generic version. The decision was not appealed. Finally, Servier and five producers of generic medicines were fined EUR 427.7 1.47 million in 2014 by the Commission, which considered that the various settlement agreements among the producers led to the protection of Servier’s bestselling blood pressure medicine, perindopril. Specifically, the Commission considered that these agreements consisted of “buying out” potential competitors so that they would not launch their generic version of Servier’s medicine.42 The General Court upheld the Commission’s decision, but the parties have appealed and judgment of the Court of Justice of the European Union is still pending at the time of writing. B. Product hopping Another practice that may potentially delay the entry of generics is “product 1.48 hopping”.43 When originators make changes to the composition of their product, such that the new version is not exactly a bioequivalent to the old one, such action may actually block generic entry. This is because the originator withdraws the older version of its product from the market, thereby forcing patients to switch to the new one. When the generic companies enter, however, they cannot compete to the same extent with the new version since they are only bioequivalent with the old product. Indeed, doctors and/or pharmacists may not be in a position to propose the generic version to patients. This practice may enable the originator to escape generic competition. Although this practice surely protects the originator from aggressive price 1.49 competition, however, the new version of the medicine may also bring about “genuine” therapeutic benefits that the old version did not provide. As a result, 42
43
European Commission, Antitrust: Commission Fines Servier and Five Generic Companies for Curbing Entry of Cheaper Versions of Cardiovascular Medicine, Press Release Database, 9 July 2014; Commission decision relating to a proceeding under Article 101 and Article 102 of the Treaty on the Functioning of the European Union, Case AT.39612—Perindopril (Servier), 9 July 2014. Jessie Cheng, “An Antitrust Analysis of Product Hopping in the Pharmaceutical Industry” (2008) 108 Columbia Law Review 1471–515.
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the gap between the old and new medicine may be substantial enough that the new one may not be considered a substitute. 1.50 In the UK, in 2011 the OFT found that Reckitt Benckiser Healthcare had abused its dominant position for using such a strategy. Specifically, the OFT concluded that Reckitt withdrew its Gaviscon Original Liquid medicine from the NHS prescription channel after the product’s patent had expired but before the publication of the generic name for it, so that more prescriptions would be issued for its alternative product, Gaviscon Advance Liquid.44 1.51 In 2005, the Commission concluded that AstraZeneca abused its dominant position by deregistering a version of Losec, a proton pump inhibitor and a very successful medicine, used for gastrointestinal-acid-related diseases, to delay entry of its generic version. Specifically, the Commission considered that the withdrawal from the market of Losec capsules in Denmark, Norway and Sweden, whilst AstraZenaca was launching Losec tablets, had the objective of delaying entry of competitors. Indeed, by deregistering Losec capsules, AstraZeneca removed the reference market authorisation on which generic firms and parallel traders could rely to enter the market. The Commission found that this move was part of a strategy to delay the market authorisation of generic companies, which were going to launch capsules.45 C. Disparaging the generic version 1.52 The originator companies may use other practices to delay or limit the scope of generic entry, notably by challenging the bioequivalence of the generic version, thereby undermining its reputation. 1.53 In the final report of the sector inquiry, the European Commission found instances where the originator companies claimed that generic medicines are less safe, less effective and of inferior quality. In particular, originators lobbied national marketing authorisation bodies, which resulted in prolonging of the
44
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Decision of the Office of Fair Trading: Abuse of a dominant position by Reckitt Benckiser Healthcare (UK) Limited and Reckitt Benckiser Group plc Decision No. CA98/02/2011 Case CE/8931/08, 12 April 2011, https://assets.publishing.service.gov.uk/media/555de4bbe5274a7084000156/rb-decision.pdf. Commission Decision relating to a proceeding under Article 82 of the EC Treaty and Article 54 of the EEA Agreement, Case Comp/A. 37.507/F3 – Astra Zeneca (15 June 2005), http://ec.europa.eu/competition/ antitrust/cases/dec_docs/37507/37507_193_6.pdf. The Commission also considered that AstraZeneca provided misleading information in a number of Member States (before patent offices and national courts) when applying for extra protection for omeprazole, the active substance of Losec. Originators may extend the protection by applying for supplementary protection certificates (SPCs), whereby the basic patent protection for active substances in medicines can be extended by a maximum of five years.
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6. THE EFFECTS OF PARALLEL TRADE
authorisation procedures. The Commission estimated that in these cases, the process took an additional four months. Originator companies may also organise information campaigns targeting 1.54 decision makers, such as doctors who prescribe medicines and pharmacies who dispense the medicine. The objective of these campaigns is to question the bioequivalence of the generic version, thus casting doubt on their efficacy, and even in some cases their safety. The French Competition Authority fined Sanofi-Aventis and Schering-Plough EUR 40.6 and EUR 15.3 million respectively in two different decisions, notably for abusing their dominant positions. In each case, the Authority concluded that the originator ran a campaign to discourage doctors to prescribe and pharmacists to dispense rival generic versions. In the case of Sanofi-Aventis, the Authority considered that representatives of the drug originator visited doctors and pharmacies to cast doubt on the efficacy of a generic version of Plavix®, which is used to treat complications from atherothrombosis. In the case of Schering-Plough, the Authority found that the originator had a plan against a generic version of Subutex®, a medicine for the treatment of opiate addiction. The plan was to spread an alarmist message to doctors and pharmacists on the risks of prescribing or dispensing a generic version supplied by Arrow, even though Schering-Plough had no evidence to justify this position.
6. THE EFFECTS OF PARALLEL TRADE In a nutshell, parallel trade is defined as the activity of reselling a product that 1.55 is protected by intellectual property (IP) in another country without the consent of the IP owner. In some countries, and notably the United States, parallel imports of patent protected medicines are illegal. However, within the EEA, parallel trade is legal, albeit regulated.46 The IP protection is exhausted, that is, patent holders have no control of the resale of their products within the EU after the first sale. This implies that after an originator sells the prescription medicine in a Member State that medicine can in principle be resold in any other Member State within the EEA. In practice pharmaceutical companies can do little to prevent parallel imports 1.56 within the EU. First, because of price control, notably in low-price countries, they cannot raise prices, and close the gap in the price differential to reduce the incentive of distributors to re-export medicines in high-price countries. 46
Within the single market, there are no legal barriers to trade for distributors. The only requirement is a Parallel Import Product Licence.
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Chapter 1 COMPETITION LAW AND PHARMA: AN ECONOMIC PERSPECTIVE
1.57 Other practices that seek to limit parallel trade have been deemed to contravene EU competition rules. One approach that circumvents domestic price control consists of setting up a dual pricing system in low-price countries, whereby distributors pay a higher price for medicines that are re-exported. This pricing policy, however, is a breach of competition law. GlaxoSmithKline (GSK) applied a dual price system so that wholesalers in Spain had to pay higher prices for medicines they intended to export to countries with higher prices than for medicines to be sold domestically. This way parallel traders would not undermine GSK revenue in high-price countries, notably in the UK. Specifically, that system lowered the incentive of Spanish wholesalers to re-export GSK products. This measure, according to the European Commission, restricted competition under Article 101 TFEU, as it runs contrary to the goal of EU market integration, and the principle of free movement of goods. One of the objectives of the EU Treaty is the creation of a single market, without any trade restriction. As a result, when firms’ control over their distributors also hampers trade between Member States, these practices are often deemed illegal. The Court of Justice, however, considered that the special characteristics of the pharmaceutical market might have warranted an exemption under Article 101(3) TFEU,47 which the Commission had not investigated.48 1.58 Alternatively, pharmaceutical companies may attempt to reduce supply in the low-price country, a move that could be costly in terms of revenue and that may also trigger an investigation for abuse of dominant position. In November 2000 GSK stopped meeting the orders of the Greek wholesalers who bought medicines for distribution in Greece and export to other Member States. The wholesalers sued GSK, and eventually the Court of Justice affirmed that a pharmaceutical company is abusing its dominant position if it refuses to meet the ordinary orders with the objective of preventing parallel trade.49 Nevertheless, the Court considered that pharmaceutical companies must be in a position to protect their own commercial interests if they are confronted with orders that are out of the ordinary.
47
48
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Consolidated version of the Treaty on the Functioning of the European Union [2008] OJ 115, (9 May 2008) P. 0088 – 0089. http://eur-lex.europa.eu/legal-content/EN/TXT/HTML/?uri=CELEX:12008E101&from= en. See Article 101(3) TFEU. Judgment of the Court of Justice, C-501/06P – GlaxoSmithKline Services and Others v. Commission and Others, paras 104 and following (6 October 2009), http://curia.europa.eu/juris/document/document.jsf;jsessionid= 9ea7d0f130d57c0d28d737704035b579fb09400f37d4.e34KaxiLc3eQc40LaxqMbN4Oc3iSe0?text=&docid=7 7866&pageIndex=0&doclang=EN&mode=lst&dir=&occ=first&part=1&cid=849725, accessed on 17 December 2015. Press Release No 65/08, Judgment of the Court of Justice in Cases C-468/06 to C-478/06, Sot.Lélos kai Sia EE and Others v. GlaxoSmithKline AEVE Farmakeftikon Proïonton (16 September 2008).
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Although the legal debate on parallel trade of prescription medicines appears 1.59 to be settled in Europe, its economic impact on pharmaceutical markets in the EEA is not clear cut. To date, there is no compelling evidence that parallel trade has led to a reduction in the price of prescription medicines, whilst there might be a risk that this activity undermines innovation. A. The development of parallel imports in the EEA As parallel trade is legal in the EEA, traders have had the opportunity to take 1.60 advantage of significant cross-national price differences to resell prescription medicines from low-price to high-price countries. In spite of the single market objective, the supply of pharmaceutical products 1.61 is separated into national markets, with the consequence that the same medicine is sold at very different prices. Kanavos and Costa-Font (2005) report price differences of many pharmaceutical products and country pairs of between 100 per cent and 300 per cent. Prices are highest in countries such as Germany, the United Kingdom, the Netherlands and Denmark.50 This is due to an array of factors, notably different national regulation and the existence of separate national health insurance systems, which leads pharmaceutical companies to negotiate prices of prescription medicines with individual national health regulators. The outcome of the negotiation typically results either in a price ceiling or in a price formula that applies in the country but not outside. At the end of the day, these bilateral negotiations lead to different price levels across Member States for the same medicine.51 Distributors of pharmaceutical products can take advantage of the significant 1.62 price differentials within the EEA. Parallel imports consist of medicines that are bought by “traders” in a low-price country, re-packaged, re-labelled and then distributed in a high-price country. In fact, distributors in low-price countries, who are authorised to sell there, can ship the medicine without the authorisation of the manufacturer in high-income countries. In general, export countries are located in Eastern and South Eastern Europe 1.63 (Greece, Hungary, Romania, Bulgaria, Italy, Spain and Portugal) and import
50 51
Panos Kanavos and Joan Costa-Font, “Pharmaceutical Parallel Trade in Europe: Stakeholder and Competition Effects” (2005) 20(44) Economic Policy 751–98. The introduction of reference pricing, which consists of determining price level on the basis of a basket of similar medicines (or the same ones), in other countries may contribute to price convergence in the EU.
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Chapter 1 COMPETITION LAW AND PHARMA: AN ECONOMIC PERSPECTIVE
countries are in the North (Germany, Great Britain, Sweden, the Netherlands, Denmark, Ireland, Norway and Finland).52 All in all, parallel imports represent a substantial share of sales in some high-price countries. EFPIA estimates that in 2014 the share of parallel imports was 25.2 per cent in Denmark, 18.7 per cent in Sweden, 10.6 per cent in the Netherlands, 10.3 per cent in Germany, 7.9 per cent in the UK and seven per cent in Ireland.53 1.64 The activity of parallel imports has been encouraged by governments in high-price Member States. In the UK, the Netherlands and Norway, pharmacists have been given a financial incentive to dispense cheaper, imported prescription medicines. For example, in the UK or the Netherlands, pharmacists earn part of the savings that accrued from using parallel imports instead of locally sourced medicines.54 In Denmark, Sweden and Germany, pharmacists are compelled to inform patients that cheaper parallel imports are available. B. The effect of parallel imports on prices 1.65 In principle, parallel imports of prescription medicines are expected to lower prices in high-price countries. This is because distributors in low-price countries, who act as arbitrageurs, re-export the medicine at a discount, and they will continue to do so until there is no longer a profit to be made, which in theory is the case when the price between the two countries reaches the same level. In practice, this does not happen in part because “traders” incur some costs, notably for distributing and packaging the medicines in the high-price countries. Nevertheless, distributors in low-price countries have an incentive to supply high-price countries if the price differential covers also the cost of re-exporting medicines. 1.66 As indicated above, the price difference that prevails across countries in the EEA is the result of negotiation with a national government. In economics, when a product is sold at a different price without cost justification, this is called “price discrimination”. This describes a situation where firms charge different prices for the same product to different customers. Price discrimination arises when the firm can take advantage of the fact that a well-identified customer group is willing to pay more for the product in question than other 52 53 54
Florian Scholz, Heinz-Werner Schulte and Frank Weißenfeldt, Parallel Trade: Which Factors Determine the Flow of Goods in Europe?, IMSHEALTH (2015). European Federation of Pharmaceutical Industries and Associations, supra note 2. Margaret K. Kyle, “Parallel Trade in Pharmaceuticals: Firm Responses and Competition Policy”, in International Antitrust Law & Policy (2009), Juris Publishing for the Fordham Competition Law, edited by Barry Hawk, Chapter 13.
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6. THE EFFECTS OF PARALLEL TRADE
customers. Assuming it is able to do so, the firm can then charge a higher price to the group of customers with strong product preference, while setting a lower price for others. In the case of prescription medicines, the price is typically higher in high-income countries, as payers there are willing to pay more. The practice of price discrimination has two potential positive effects. First, by 1.67 setting different prices to different customer groups, this strategy allows firms to expand revenue and gross profit, enabling them to repay fixed cost investment; a feature that is pertinent in the pharmaceutical sector.55 Second, although some customers pay more while others pay less, the overall impact on consumer welfare can be positive as the firm serves customers who would otherwise not be able to afford the product in question.56 Price discrimination is effective only when arbitrage between customer groups 1.68 is not possible. That is, low-price customers cannot resell the product in question to high-price customers. Parallel imports are a form of arbitrage, which in principle should lead to prices of prescription medicines converging within the EEA, notably by pushing down prices in high-price countries. Although parallel imports are expected to result in lower prices in some countries, in principle they may not necessarily have a positive impact on welfare.57 As Malueg and Schwartz (1994) show, when there are large differences in demand across countries, firms may stop supplying low-price countries, and in this case parallel trade reduces consumer welfare. The legality of parallel imports therefore poses a risk that pharmaceutical companies may not supply expensive medicines in low-price countries. Because arbitrage is expected to reduce prices, parallel imports are often 1.69 welcome in countries where the government is concerned by the affordability of medicines. However, the available empirical evidence suggests that parallel imports in the pharmaceutical markets do not necessarily lead to price reductions for the benefit of health insurance.58 For example, Kanavos and Costa-Font (2005) show that medicines that are re-exported in high income 55
56 57 58
Hal R. Varian, “Price Discrimination”, in Handbook of Industrial Organization, Vol. 1 (1989), edited by Richard Schmalensee and Robert Willig, Elsevier, 597–654. Varian argues that Stigler’s definition of price discrimination is more accurate since a firm could charge different prices for the same goods because of logistic/transport cost. Stigler’s definition can be summarised with the following example. If a hard-cover book sells for $15 and the same book costs $5 in paperback, there is a presumption of price discrimination as the difference in cost (binding costs) is not enough to explain the price difference. Jean Tirole, Industrial Organization (1988), MIT Press, 185. See David A. Malueg and Marius Schwartz, “Parallel Imports, Demand Dispersion, and International Price Discrimination” (1994) 37(3–4) Journal of International Economics 167–95. European Commission, Competitiveness of the EU Market and Industry for Pharmaceuticals: Volume I, 2009. See page 95 onwards for a comparison of many empirical studies.
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countries do not contribute to lower prices. This is because prices of medicines are largely regulated, and thus any profit that is generated from arbitrage actually benefits parallel traders (and other parties in the distribution chain, for example pharmacists).59 Kanavos and Vandoros (2010) examine prices of 19 drugs between 1997 and 2002 in six high-price countries, namely Denmark, Germany, the Netherlands, Norway, Sweden and the UK, in which parallel trade is encouraged as a way to introduce more competition.60 Their results indicate that parallel trade has no impact on the retail price of drugs in these countries. Kyle et al. (2008) compare price dispersion of more than 1,000 medicines in 36 therapeutic categories between EU countries, where parallel imports are legal, and countries where they are not.61 Their results show that the legalisation of parallel trade has had no effect on prices in Europe. They note, however, that in Europe patients are typically not very price sensitive whilst in most countries pharmacists have no incentive to substitute cheaper versions of the prescription medicines. As a result, both patients and pharmacists might not respond to the introduction of cheaper imports. Conversely, Duso et al. (2014) in a study that focuses on 700 anti-diabetic drugs sold in Germany find that parallel imports decrease the average price of patented medicines by 11 per cent but have had no effect on prices for generic versions.62 C. The effect of parallel imports on innovation 1.70 By reducing the profit of pharmaceutical companies in high-price countries, parallel imports can be expected to undermine their ability and incentive to invest, leading therefore to fewer innovations and ultimately reducing welfare.
59
See Kanavos and Costa-Font, supra note 50. The authors empirically estimate the effects of pharmaceutical parallel trade in the EU and find (page 752): that the gains from parallel trade accrue mostly to the distribution chain rather than to health insurance and consumers. This is because in destination countries parallel traded drugs are priced just below originally sourced drugs. We also test to see whether parallel trade has a competition impact on prices in destination countries and find that it does not. Such competition effects as there are in pharmaceuticals come mainly from the presence of generics. Accordingly, instead of a convergence to the bottom in EU pharmaceutical prices, the evidence points at ‘convergence to the top’. This is explained by the fact that drug prices are subjected to regulation in individual countries, and by the limited incentives of purchasers to respond to price differentials.
60 61
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Panos Kanavos and Sotiris Vandoros, “Competition in Prescription Drug Markets: is Parallel Trade the Answer?” (2010) 31(5) Managerial and Decision Economics 325–38. Margaret K. Kyle, Jennifer S. Allsbrook and Kevin A. Schulman, “Does Reimportation Reduce Price Differences for Prescription Drugs? Lessons from the European Union” (2008) 43 Health Services Research 1308–24. Tomaso Duso, Annika Herr and Moritz Suppliet, “The Welfare Impact of Parallel Imports: A Structural Approach Applied to the German Market for Oral Anti-Diabetics” (2014) 23(9) Health Economics 1036–57.
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However, this conclusion may be reversed when the regulator in the low-price country adjusts its policy when parallel trade is authorised. Several academic studies, on the basis of formal economic modelling, high- 1.71 light the risk that as parallel trade erodes profit of pharmaceutical companies, these companies would invest less in R&D, thereby potentially reducing global welfare even though cheaper imports may result in lower prices in the short run. Valletti and Szymanski (2006) and Li and Maskus (2006) show that as parallel trade cuts the profits of pharmaceutical companies, firms’ ability and incentive to invest in R&D falls. Even though parallel imports push prices down, these short-term gains may be easily offset by the long-term loss of innovation.63 These studies assume that pharmaceutical companies set prices freely, and in 1.72 this case, liberalisation of parallel trade is always expected to eat some profit. In reality, however, prices of prescription medicines are regulated. More specifically, the price of subscription medicines is the outcome of negotiations between a national regulator and pharmaceutical companies. In particular, in low-price countries, regulators tend to impose a price ceiling that creates a wedge with prices prevailing in other Member States. With parallel trade, regulators in low-price countries may have an incentive to adjust the price ceiling upward, which would act against parallel trade. In this context, it is no longer clear that parallel trade itself causes a reduction in innovation. Other academic studies have considered the effect of parallel trade in more 1.73 realistic settings where national regulators set prices. In this case, the regulatory response of the low-price country plays a key role in determining the overall effect of parallel trade on R&D investments. In particular, if pharmaceutical companies have bargaining power vis-à-vis the low-price country and/or if the low-price country acknowledges the risk of supply interruptions and/or global under-investment in R&D, there might not be any reduction in innovation. Studies have considered the effect of parallel trade in different settings. Given 1.74 these considerations, the effect of parallel trade on price regulation must be 63
Tommaso M. Valletti and Stefan Szymanski, “Parallel Trade, International Exhaustion and Intellectual Property Rights: A Welfare Analysis” (2006) 54(4) The Journal of Industrial Economics 499–526, and Changying Li and Keith E. Maskus, “The Impact of Parallel Imports on Investments in Cost-Reducing Research and Development” (2005) 68(2) Journal of International Economics 443–55. Neither study considers the case of price regulation but assumes that the price differential between low-price and high-price countries arises from price discrimination. Assuming that regulated price caps in the high-price country can be undermined by cheaper imports (direct) or that competitive pressure leads manufacturers to lower their prices below the cap (indirect), the results apply in both contexts.
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taken into account to evaluate whether pharmaceutical firms’ profits are decreasing under parallel trade. For instance, Pecorino (2002) assumes that negotiations between the regulator in the low-price country and a pharmaceutical firm take the form of a Nash bargaining game.64 Knowing that parallel trade will diminish its profits in the high-price country, the firm will make fewer price concessions in the negotiations with the low-price country; in other words, it will bargain harder. Subject to the model assumptions (e.g., linear demand), profits will always rise, unless the foreign regulator has all the bargaining power; then prices will remain unchanged. 1.75 Using a more elaborate model, Grossman and Lai (2008) show that with parallel trade the pace of innovation may be faster. This is because the low-price country will alter its policy under parallel trade, and loosen price regulation, allowing the pharmaceutical company to earn more profit.65 First, the low-price country runs the risk of not being supplied at all if a firm earns higher profits by selling only in the high-price market. Second, the low-price country is no longer able to free-ride on the contributions made by the high-price country if arbitrage reduces profits in the high-price country through cheaper imports. At the end of the day, the adjustment in regulation has the effect of raising consumer welfare in the high-price country as well as the firms’ profits but reducing consumer welfare in the low-price country. 1.76 Bennato and Valletti (2014) reach the same conclusion but emphasise the importance of commitment for the regulator in the low-price country.66 If the regulator is unable to credibly commit not to set the price ceiling at marginal cost (so that the pharmaceutical company makes no profit) once R&D expenditures have been sunk, then we have a classic hold-up situation: the pharmaceutical firm knows that it cannot expect to earn any profit on the low-price market and thus will only serve the high-price country. This reduces consumer surplus in both countries because R&D expenditures are lower and the low-price country is not served. The regulator in the low-price country will therefore commit not to extract the pharmaceutical company rent, loosening price regulation, which in turn will favour innovation.
64 65 66
Paul Pecorino, “Should the US Allow Prescription Drug Reimports from Canada?” (2002) 21(4) Journal of Health Economics 699–708. Gene M. Grossman and Edwin L‐C. Lai, “Parallel Imports and Price Controls” (2008) 39(2) The Rand Journal of Economics 378–402. Anna Rita Bennato and Tommaso Valletti, “Pharmaceutical Innovation and Parallel Trade” (2014) 33 International Journal of Industrial Organization 83–92.
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At the end of the day, whether parallel imports undermine innovation in the 1.77 pharmaceutical industry is an empirical question. In particular, it will depend on the extent to which price regulation is stringent in the exporting countries.
7. THE DEMAND AND PRICING OF PHARMACEUTICAL PRODUCTS The extent to which consumers can substitute to other products is a critical 1.78 determinant of market power, and thus affects the price level that manufacturers can charge. That is, when firms raise prices and few consumers switch away, prices can be set significantly above cost, and in this case firms hold significant market power. However, when the demand side is made of large and sophisticated buyers, they may be able to resist price increases. When a large sophisticated buyer decides to take its business elsewhere, it can impose a significant loss on its suppliers. Confronted with such a threat, suppliers may be forced to set lower prices. Buyer power is an important aspect in the assessment of competition law investigations. In particular, countervailing buyer power may defeat the price increase of mergers or undermine market power of firms that hold large market shares, suggesting that these firms are not dominant after all.67 In the pharmaceutical industry, the demand side has unusual characteristics. 1.79 As we will see below, the institutional arrangements play an important role. The millions of separate patients, whose individual demand is negligible, are not actually those who pay for the medicines. Instead, national health insurers act on behalf of a country’s residents and negotiate prices with manufacturers. This position should give them enough bargaining strength to undermine the pricing power of originator companies. However, as explained below, the bargaining power of national health insurance might not be as high as one might expect. Furthermore, and perhaps surprisingly, hospitals, which are smaller in scale, often obtain better prices for medicines. A. Demand for pharmaceuticals: institutional details As we explain in this section the demand for prescription medicines appears to 1.80 be largely price inelastic (that is, insensitive to price changes), which should confer pharmaceutical companies significant market power. 67
See EC Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of concentrations between undertakings at paras. 64–67, http://eur-lex.europa.eu/legal-content/EN/TXT/ HTML/?uri=CELEX:52004XC0205(02)&from=EN.
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1.81 The nature of the demand for medicines is similar to that of the overall demand for health care. Individual demand for health care has specific characteristics that make it different from demand for other goods. In particular, individuals’ need for health care is irregular and largely unpredictable. Patients acquire medicines to cure illness and restore their health. Not everyone requires the same level of health care, and in many ways illness is often difficult to predict. Importantly, illness is a risk to individuals, affecting—sometimes gravely—their earning ability.68 Like other types of risk, however, it can be insured. 1.82 In Europe, health insurance, which covers individuals for their medical expenses, is in principle statutory. That is, all citizens are in theory covered for the cost of healthcare. The universal coverage is partly driven by the realisation that the individual consumption of health care also provides benefits to others. For example, inoculation against a contagious disease provides protection and clearly generates a private benefit—to the person receiving the inoculation—as well as an external one—to those who are protected from catching the disease because others around him are inoculated. However, few would want to pay for the inoculation only to protect others. In this context, the demand for health care is less than the socially efficient quantity. There are other social considerations as well, and as a result health insurance schemes vary across Member States. Additionally, demand is not always driven by consumer preferences. This is because patients are generally not informed about illnesses, diagnoses and the effectiveness of therapies and medicines. When ill, people go to see a doctor (whether a general practitioner (GP) or a specialist) who prescribes a treatment and the amount of medicines to be consumed. Demand for medicine is thus driven not by what consumers want, but by what patients need to become healthy again, and these treatments and medicines are selected by doctors. As a result, without health insurance the patient may not be willing (or able) to pay for treatment, as these unpredictable expenses may correspond to a significant portion of a household budget. 1.83 Patients do not pay for medicines, or only pay for a portion of them (in many countries, a small co-payment implies that patients bear a portion of the cost). In Europe national health insurances are established by national legislation and insure residents against the cost of health care. In some cases, patients also have complementary insurance, which pays for the portion that the national 68
Kenneth J. Arrow, “Uncertainty and the Welfare Economics of Medical Care” (1963) 53(5) The American Economic Review 941–73. Arrow argues that uncertainty and imperfect marketability of information lead to the absence of some markets for risk-bearing and consequently to a reduction in welfare. This will be recognised to a certain extent by society, and nonmarket social institutions will arise to bridge the gap (pages 946–47).
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scheme does not cover. This implies that neither those who receive the medicines—patients—nor those who prescribe them—doctors—are the ones paying for them.69 At best, patients pay a fraction of the price. Unsurprisingly, demand for medicines therefore appears rather price inelastic. As doctors are not the ones paying, even a substantial price increase would not lead doctors to prescribe less or a different medicine, or to diminish consumers’ intakes. B. Countervailing buyer power in the pharmaceutical industry Even though patients use medicines, they do not pay for them. Instead, 1.84 national health insurances pay in their place. Unlike patients who are numerous, national health insurance providers are large organisations that cover, and thus pay for, millions of patients. In this sense, health insurance providers can be considered as “large buyers”. In fact, in many European countries, there is a single national insurance. Given their size, these insurance providers may a priori be expected to exert a significant constraint on the price of medicine. The key issue with buyer power is thus whether the large customers have the 1.85 ability to resist a price increase. Large buyers who hold significant bargaining power are able to inflict substantial losses on suppliers in the event that commercial negotiations between the supplier and the purchaser were to break down. In this context, suppliers would prefer abiding by the terms proposed by buyers. Ultimately, buyers have strong bargaining power when the harm inflicted to suppliers is larger than what they would suffer in the event that the parties walk away. Specifically, the strength of bargaining power depends on the valuation of the customer’s outside option (what the customer would acquire instead of purchasing goods from the supplier in question) and the supplier’s own outside option.70 69
70
In economics, the term “moral hazard” refers to situations where one party (e.g., the doctor) makes decisions without having to bear the financial consequences of these decisions. The “principal–agent” problem is one type of moral hazard where the interests of the principal (e.g., the hospital or the national health system) may differ from the interests of the agent (e.g., the doctor), and this hence leads to outcomes that are not favoured by the principal. Both conditions are necessary: for example, many consumers have alternative options (outside options) for buying a product (other suppliers of the same product or other products), but this will not enable them to pay lower prices (at least not substantially). This is due to the fact that sellers generally also have many other outside options (other consumers). So, buyer power must imply that the seller has few outside options. See Roman Inderst and Greg Shaffer, “Retail Mergers, Buyer Power and Product Variety” (2007) 117(516) The Economic Journal 45–67; Sara Fisher Ellison and Christopher M. Snyder, “Countervailing Power in Wholesale Pharmaceuticals” (2010) 58(1) The Journal of Industrial Economics 32–53; Justus Haucap, Ulrich Heishoff, Gordon J. Klein, Dennis Rickert and Christian Wey, Bargaining Power in Manufacturer-Retailer Relationships (2013) DICE Discussion Paper No. 107; Christian Köhler and Christian Rammer, Buyer Power and Suppliers’ Incentives to Innovate (2012) ZEW-Centre for European Economic Research Discussion Paper No 12-058; Roman Inderst and Christian Wey, Buyer Power and Supplier Incentives (2003) WZB, Markets and Political Economy Working Paper No. SP II 5.
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1.86 Because of the particular nature of the demand for pharmaceutical products, assessing buyer power in the pharmaceutical industry is somewhat different from the case with suppliers and buyers in other industries. In particular, although the situation varies by country, in Europe typically the price of medicine is negotiated between a national regulator (or the national health insurer) and pharmaceutical companies.71 These regulators act on behalf of all residents and thus can be considered as “monopsonists”. That is, pharmaceutical companies have no choice but to deal with the national regulator if they wish to sell their products in that particular country. In principle, this position should give the regulator substantial bargaining power.72 1.87 Although regulators are expected to hold significant clout over the pharmaceutical industry, the situation is more complex than what it might appear. In particular, regulators do not have direct control over the consumption of medicines. This means that, unlike a large, sophisticated buyer, they cannot credibly threaten to reduce quantity demanded. In fact, consumption of medicines depends largely on doctors who do not typically prescribe therapies and medicines on the basis of price. That is, if prices were to increase, this would not change the doctor’s choice. As a professional, the doctor may intrinsically want to give the best care possible, whatever the costs, because (s)he does not face the financial consequences. This particular feature contributes greatly to undermining the negotiating power of regulators. 1.88 In some countries, regulators have attempted to restore some of the bargaining power using entry of generics, which are therapeutically equivalent to the 71 72
Kai Ruggeri and Ellen Nolte, Pharmaceutical Pricing – The Use of External Reference Pricing (2013) RAND Corporation RR-240-DH. Finance and NHS/Medicines, Pharmacy and Industry Group, The Pharmaceutical Price Regulation Scheme 2014 (December 2013), www.gov.uk/government/publications/pharmaceutical-price-regulation-scheme2014, accessed on 18 December 2015. When negotiating prices, regulators have regard in particular to the therapeutic value of the medicine and in many cases to the price set in other European countries (i.e., external reference pricing). For example, in the UK, prices for prescription drugs in the NHS are set through discussion between the Association of the British Pharmaceutical Industry (ABPI) and the government. The agreement is open to non-members of the ABPI. OEBIG, Health Economics, Surveying, Assessing and Analysing the Pharmaceutical Sector in the 25 Member States, July 2006. In France and in other countries, medicine prices are negotiated between the government and the industry. As part of these negotiations, the price must be consistent with the prices in the main EU Member States. Civitas, Healthcare Systems: France, www.digitalezorg.nl/digitale/uploads/2015/03/France-Health-system. pdf, accessed on 18 December 2015 and www.french-property.com/news/french_health/prescription_ medicines_price_information/. This means that the initial price is not lower than what is observed in Germany, Italy, Spain and the UK. Civitas, Healthcare Systems: Germany, www.digitalezorg.nl/digitale/uploads/2015/03/germany.pdf, accessed on 18 December 2015; Ruggeri and Nolte, supra note 71, accessed on 18 December 2015. In Germany in principle, medicine prices are determined by the pharmaceutical manufacturers, but they are subject to a complex set of regulations regarding reimbursement, which affects the price that manufacturers can charge.
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originator’s product. In these cases, the government imposes on doctors and pharmacists the obligation to prescribe and sell only (the cheapest) generics when possible. Doctors and/or patients may however resist such changes, thereby weakening the negotiating power of government agencies. As doctors are ultimately the ones responsible for the health of their patients, they may be in a position to successfully resist these changes. In the AstraZeneca decision, the Commission concluded that the negotiation 1.89 power of regulators is not strong enough to undermine the market power of originator companies. In particular, the outside option of the agencies is rather unattractive when they negotiate the price of new and innovative medicines. They cannot credibly threaten not to authorise new treatments. In more economic terms, the outside option of government agencies is much worse than that of the originator and, hence, abstaining from the trade is more costly for the former than for the latter. Specifically the Commission considers:73 arguments about “buyer power” constituting an element conducive to lack of dominance are exaggerated. The health system may negotiate a price for a medicine, but it cannot normally determine the quantity of the medicine that will be bought, as the decision is mainly taken by a third party (normally the prescribing doctors and, to a limited extent, the final consumer). Within the EEA measures are often taken to encourage doctors to prescribe more cost-effective medicines but their effects are often limited … since the national health system is also entrusted with the responsibility of ensuring the availability of the best medicines in order to protect public health, its bargaining power differs radically between a situation where it negotiates the price of genuinely innovative medicine from a situation where it negotiates the price of line extensions or other products in the same class of medicines. In general the health system cannot simply prevent or unduly delay the marketing of an innovative product through demands which can be perceived to be excessive.
In addition, the Commission considers another factor, which further weakens 1.90 the position of regulators when negotiating prices with pharmaceutical companies. Governments are cognisant of the fact that originator companies have to reap sufficient profit to continue funding R&D activities, which are essential to bring new treatment. In the perindopril decision the Commission also relates the absence of buyer power to the objective (of governments) to sustain R&D:74 the public authorities did not effectively react to the entries of cheaper generic versions of other antihypertensive medicines, nor to the fact that Servier were able to steadily increase its absolute profits from perindopril until the arrival of generic perindopril. 73 74
AstraZeneca, supra note 45, paras 558–59. Perindopril, supra note 42, paras 2590–91.
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This is understandable, since by intervening the public authorities would risk creating an inter-temporal inconsistency in their policy towards the entire pharmaceutical sector that would potentially be damaging for the general incentives to innovate in that sector …
1.91 On the other hand, pharmaceutical companies appear to hold some bargaining power. This is because originator companies are global companies, and thus they can always consider not to supply a particular country if they do not consider the terms sufficiently attractive. In AstraZeneca, the Commission considered exactly this point as conducing to the conclusion that the originator had substantial bargaining power given that AstraZeneca did not supply certain countries.75,76 1.92 In practice, the bargaining power of pharmaceutical companies varies depending on the size of the market as well as the importance of the medicine at issue. Not selling in one particular country would lower their profit, but this loss might be smaller in comparison to what a country would lose if a particular medicine was not supplied. C. In-hospital and out-of-hospital pricing 1.93 Hospitals purchase medicines directly, which they administer to patients. Because private hospitals, as well as public hospitals, are under budgetary constraints, they seek to cut costs, which gives them an incentive to purchase the cheapest medicine whenever possible. 1.94 As customers, hospitals can exert more buyer power than regulators because hospitals actually have some control over the choice of medicines as well as the quantity they purchase. That is, a hospital can more credibly threaten not to use a particular medicine, or at least reduce its consumption. 1.95 Although the situation varies across countries, increasingly hospitals dictate the choice of medicines and/or medical equipment. That is, the hospital is both the buyer and the decision maker regarding medicines. This means that this segment of the (pharmaceutical) market is generally more competitive than the out-of-hospital segment. That is, even for patented medicines, hospitals may consider different options if the medicines have the same therapeutic use, exploiting competition in earnest. In particular, hospitals 75 76
AstraZeneca, supra note 45, para. 557. See also Perindopril, supra note 42, paras 2587 and 2589 (with reference to the AstraZeneca case). AstraZeneca, supra note 45, para. 561; Perindopril, supra note 42, paras 2590–91.
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organise bidding contests for some of their suppliers.77 For example, in Germany, hospitals form purchasing groups in order to increase their negotiating power by guaranteeing higher volumes. Ellison and Snyder (2010) present evidence using US data that having supplier 1.96 competition is a necessary condition for large buyers to obtain discounts.78 Their analysis shows that large drugstore chains receive no discounts for patented medicines relative to small independent chains, a result that can be attributed to the fact that drugstores, whether large chains or small independents, have no control over the choice of medicine nor the quantities since they have to serve consumers who are following their doctors’ prescription. In contrast, the results show clearly that hospitals and health maintenance organisations, which can induce doctors to prescribe alternative medicines, obtain significant discounts relative to drugstores even when it comes to patented medicines. Casual observations suggest that in-hospital prices of medicine are lower than 1.97 out-of-hospital prices (i.e., medicines bought at pharmacies).79 This suggests that hospitals are able to exercise more leverage on originator companies, or in other words that suppliers of medicines have less market power when selling to this segment. The Napp case in the UK and the AstraZeneca case in the Netherlands hinged 1.98 on the pricing differential of the same medicine between hospitals and pharmacies. Specifically, the authorities investigated whether the low price charged in the hospital segment was strategic, with the aim to exclude rivals. As in-hospital patients tend to stick to the prescribed medicine once out of the hospital, patients will pay a higher price in the out-of-hospital segment. Interestingly the two investigations ended with different conclusions. In the UK, the OFT fined Napp for excessive out-of-hospital prices, concluding that Napp had a dominant position (a market share of 90 per cent) in the market defined as “the supply of sustained release morphine (MST) capsules and tablets in the UK”.80 77
78 79 80
European Commission, supra note 14, para. 1486. The Commission refers to an OECD study, in which it was concluded that significant savings in the case of purchasing power (through public health insurers) can be realised by tendering systems and if there are multiple sources for the product (like generics). See Ellison and Snyder, supra note 70. Gisela Hostenkamp, “The Market for Hospital Pharmaceuticals in Denmark” (2011) 1(1) Nordic Journal of Health Economics 61–77. Competition Appeal Tribunal, Case No. 1001/1/1/01, para. 152 (15 January 2002), http://webarchive. nationalarchives.gov.uk/20140402142426/http://www.catribunal.org.uk/237-565/1001-1-1-01-Napp-Pharma ceutical-Holdings-Limited-and-Subsidiaries.html accessed on 16 December 2015.
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1.99 In the Netherlands, the inquiry focused on “exclusionary behaviour in hospital”. AstraZeneca offered Nexium to Dutch hospitals at a deep discount, whereas patients outside of hospitals had to pay a much higher price when buying the drug at pharmacies. The Netherlands Authority for Consumers and Markets (ACM) suspected that AstraZeneca offered this drug to hospitals at below-cost price in order to make it unattractive for certain generic competitors to enter the market. These generic competitors offer cheaper heartburn drugs (generic versions) outside of hospitals. Patients tend to continue to use the same brand that they had been given in the hospital, and GPs are inclined to prescribe the same brand. ACM suspected that, as a result thereof, AstraZeneca faced little competition. AstraZeneca was thus able to offer Nexium at much higher prices outside of hospitals. This way, the losses incurred by offering Nexium to hospitals at a deep discount could thus be offset. The investigation was closed because the authority could not establish that AstraZeneca held a dominant position in the hospital segment.81 1.100 What transpires from these cases is that prices in the hospital segment appear to be more competitive, which is consistent with the observation developed above. That is, hospitals have the ability to influence doctors’ decisions and thus have the possibility to switch medicines, thereby imposing constraints on the price charged by the originator companies. The take-away point is that the price differential between in-hospital and out-of-hospital segments indicates that, in the former, originator companies hold less market power, casting doubt on whether they hold any dominant position. This is precisely the conclusion reached by the ACM in the AstraZeneca case.
81
Netherlands Competition Authority, Case No 7069, Summary (24 September 2014), www.acm.nl/en/ publications/publication/13595/No-abuse-of-a-dominant-position-by-AstraZeneca/, accessed on 16 December 2015: In the legal assessment, ACM first of all faced the question of whether AstraZeneca, with regard to Nexium, enjoyed a dominant position on any market within the meaning of Section 24 Mw and Article 102 TFEU. This was not the case in the hospital market. Yet, in the Statement of Objections, a separate community market had been identified, consisting of users who, due to the spillover effect, were bound to Nexium. The arguments that AstraZeneca put forward regarding, among other aspects, substitution, therapeutic effectiveness and switching behavior of PPI users, have raised reasonable doubts about the conclusion that a group of Nexium users was bound to Nexium through the spillover effect to such an extent and on such a scale that, with regard to this group, AstraZeneca was able to behave independently of its competitors within the meaning of Section 24 Mw and Article 102 TFEU. Taking everything into consideration, ACM comes to the conclusion that, based on the facts at hand, it cannot be sufficiently established that AstraZeneca enjoyed a dominant position on a separate relevant market as defined in the Statement of Objections.
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2 REVERSE PAYMENTS: AN EU AND US PERSPECTIVE Frank Maier-Rigaud, Nathan Blalock and Oliver Gannon*
1. INTRODUCTION A. Overview of recent investigations by competition authorities B. Existence of beneficial reverse payment settlements C. Effects-based analysis of restrictions is required in the assessment of reverse payment settlements
2.12
2. SETTLEMENT AS THE OUTCOME OF IMPERFECT INFORMATION
2.15
3. WHAT ARE REVERSE PAYMENT SETTLEMENTS?
2.19
B.
How are the competitive effects of patent settlements without value transfers evaluated? 2.60 C. How are the competitive effects of a reverse payment settlement evaluated with value transfers? 2.64
2.1 2.6 2.10
6. THE EUROPEAN APPROACH 2.77 A. Overview of the regulatory assessment in Europe 2.77 B. The Pharmaceutical Sector Inquiry 2.84 C. Annual monitoring reports 2.87 D. Reverse payment investigations 2.94 E. Summary of precedent cases 2.129
4. THE INCENTIVES OF ORIGINATORS AND GENERIC COMPANIES TO SETTLE 2.23 A. Originators face numerous threats to profits prior to patent expiration 2.25 B. Options for generic companies 2.46 5. FACT-SPECIFIC INQUIRY REQUIRED TO DETERMINE ANTICOMPETITIVENESS OF REVERSE PAYMENT SETTLEMENTS 2.51 A. How do generic companies and originators evaluate the decision to enter into reverse payment settlements? An economic assessment 2.51
*
7. THE US APPROACH POST-ACTAVIS A. The Actavis ruling B. Different legal assessments prior to the Supreme Court judgment C. The Supreme Court Actavis ruling compared with the EU approach D. The FTC’s monitoring of reverse payment settlements E. The effects of the Actavis ruling on reverse payment settlement lawsuits
2.132 2.132
2.143
8. CONCLUSION
2.153
2.134 2.137 2.140
The authors would like to thank Sumanth Addanki, Jeff Daskin, Philipp Heller and Remi Maier-Rigaud for comments on an earlier draft. Disclaimer: Frank Maier-Rigaud was involved in the Pharmaceutical Sector Inquiry conducted by the European Commission and also led the inspection teams in some of the large European Commission cases in this sector. The views expressed are the authors’ own and not necessarily those of the European Commission or their respective organisations.
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1. INTRODUCTION 2.1 Competition authorities in the EU and the US have paid close attention to reverse payment settlements in the pharmaceutical industry. A reverse payment settlement is a type of patent settlement in which some form of value (reverse payment) is transferred from an originator company (“originator”)1 to a generic company to end litigation contesting a patent’s validity or to prevent a generic company from entering the market. In return, the time of the generic company’s2 entry in the market may be delayed relative to the date of entry that could have occurred if litigation was pursued. The generic company’s challenge to the validity of the originator’s patent may also be withdrawn. As a result, the originator is able to maintain patent exclusivity and the corresponding supra-competitive level of profits for a longer period of time as agreed upon by the parties to the settlement. 2.2 In the context of the pharmaceutical industry, reverse payment settlements (and patent settlements in general) have arisen owing to the nuances in the European and American patent systems that allow generic companies to enter the market either after the originator’s patent(s) has (have) expired, the originator’s patent(s) is (are) found to be invalid or that the generic version of the pharmaceutical product is found not to infringe the originator’s patent. In Europe, originator companies have a period of up to 25 years in which they are entitled to patent exclusivity. During and after this period of patent exclusivity, generic companies are able to challenge the validity of patents concerning both the molecule and the production processes filed by the originator companies. Process patents can be filed at any time during or after the patent exclusivity period of the originator’s primary patents. Under certain circumstances, this can afford additional patent protection to originator companies. 2.3 In the US, patent laws provide a 20-year term of exclusivity from the date of filing. The Hatch-Waxman Act alters the effective term of exclusivity for pharmaceutical products according to a variety of factors, such as whether the pharmaceutical product is a new chemical entity and the amount of time the patent is in effect prior to receiving regulatory approval for sale of the pharmaceutical product.3 The Hatch-Waxman Act also establishes rules for 1 2
3
Companies that are active in R&D, manufacturing and marketing of patented medicines. Companies that are active in the development of an identical/equivalent medicine to an economically successful originator product. These companies seek to bring their product to the market as soon as the originator’s product loses exclusivity. Although the patent and entry issues facing biological products differ from those of small molecule pharmaceuticals, reference to generic companies in this chapter is intended to include companies that develop biosimilar versions of biological products. See Appendix 1.
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1. INTRODUCTION
generic entry that incentivise generic producers to challenge the validity of originators’ patents. In particular, generic companies that certify the first claim that an originator’s patent is invalid or that their generic pharmaceutical product does not infringe the originator’s product can receive a 180-day period of generic exclusivity. This period of generic exclusivity results in increased challenges to originator patents and, thus, increased instances of patent litigation during which parties may choose to engage in settlement negotiations. A reverse payment settlement is one type of settlement that originator and generic companies can agree to. Reverse payment settlements can take various forms. In essence, a reverse 2.4 payment settlement will contain some kind of restriction on the market entry of generic companies. This could include, for instance, a non-challenge or non-compete clause where the generic company refrains from entering the market until the originator’s patent expires. Settlements may also include licences where the generic company may not be free to independently commercialise its product.4 In return for the restrictions, reverse payment settlements will include a value transfer from the originator to the generic company that could be in the form of:5 Direct monetary payments to purchase an asset (i.e. the generic company’s own stock of the products); Distribution agreements; Favourable terms in a “side-deal” in which the originator company grants a commercial benefit to the generic company; or A licensing deal. Reverse payment settlements are just one of the strategies that originator 2.5 companies may utilise to preserve profits for patent protected pharmaceutical products.6 These settlements can protect substantial profits generated by originators’ pharmaceutical products; especially in the case of “blockbuster”
4 5 6
European Commission, “6th Report on the Monitoring of Patent Settlements” (DG Competition) COM (2015), para. 9. Ibid para. 12. Originator pharmaceutical companies can implement a range of strategies designed to preserve their profits, e.g. evergreening which entails shifting patients to a slightly modified version of an existing drug owing to the pending expiry of the originator’s patent on the pharmaceutical product. For a further discussion regarding the different strategies pursued by originator companies to protect revenues around the time of patent expiry see Robin Feldman and Evan Frondorf, “Drug Wars: A New Generation of Generic Pharmaceutical Delay” (2016) 53 Harvard Journal on Legislation 499.
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pharmaceutical products.7 Competition authorities have launched investigations into the wider profit-preserving strategies of pharmaceutical companies that adversely affect generic entry after patent expiration.8 The focus of this chapter is exclusively on reverse payment settlements. A. Overview of recent investigations by competition authorities 2.6 The debate surrounding the legality of reverse payment settlements under competition law relates to the tension between Intellectual Property (“IP”) and competition law. IP law could be considered inherently at odds with the underlying goals of competition law. IP law may confer a monopoly position to a patent-holder through a patent.9 The patent-holder has the possibility to charge supra-competitive prices. The exclusivity granted to the patent-holder incentivises welfare-enhancing innovation. Thus, the originator retains a temporary legal right to exclusivity and hence higher profits. In contrast, under competition law, innovation is typically viewed as the outcome of rivalry between competing companies.10 US courts have responded to this tension by recognising a need to “balance the privileges of [the originator] and its licensees under the patent grants with the prohibitions of [competition laws] against combinations and attempts to monopolize”.11
7 8
9 10
11
Blockbusters are a type of pharmaceutical product that generates substantial revenue often due to limited substitutability with other treatments. The Australian Competition and Consumer Commission (“ACCC”) initiated proceedings against Pfizer on 13 January 2014 for an alleged misuse of its market power as the patent for Atorvastatin, a pharmaceutical product used to lower cholesterol, was due to expire. The ACCC alleged that, prior to the expiration of its patent, Pfizer offered discounts to pharmacies for Atorvastatin in return for advance orders of Pfizer’s generic version of Atorvastatin. On 25 February 2015, the Federal Court of Australia dismissed the case against Pfizer (the ACCC is currently appealing the decision of the Federal Court). See Australian Competition and Consumer Commission v. Pfizer Australia Pty Ltd (2015) FCA 113 (25 February 2015). The state of New York prevailed against Actavis PLC and Forest Laboratories LLC in a suit related to potential “product hopping” on the Alzheimer’s drug Namenda. See New York ex rel. Schneiderman v. Actavis PLC, 787 F.3d 638 (2d Cir. 2015). Product hopping relates to a practice of withdrawing a branded version of a drug at approximately the same time that a different formulation of the drug is launched in order to forestall generic entry. As noted by Harmon (2001), not every patent is a monopoly and not every patent confers market power. See Robert L. Harmon, Patents and the Federal Court (5th edn, BNA Books 2001). A similar discussion relating to IP and competition law is framed in terms of the need to balance lower costs for consumers and the need to provide a reward for “skill, foresight and industry” to induce innovation in Hemphill (2006). See C. Scott Hemphill, “Paying for Delay: Pharmaceutical Patent Settlement as a Regulatory Design Problem” (2006) 81 New York University Law Review 1553. In the economics literature, Aghion et al. (2005) found that there was an inverted U-Shape between competition and innovation. They found that competition may increase the incremental profit from innovating; however, competition may reduce incentives for laggards. See Philippe Aghion et al., “Competition and Innovation: An Inverted-U Relationship” (2005) 120(2) The Quarterly Journal of Economics 701. Federal Trade Commission v. Actavis, Inc. et al., 133 S. Ct. 2223, at 2231 (2013).
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1. INTRODUCTION
The European Commission (“Commission”) has been proactive in investi- 2.7 gating reverse payment settlements following its sector inquiry into the pharmaceutical industry in 2009.12 Recent Commission decisions regarding reverse payment settlements have found “by object” infringements of Article 101 and led to large fines for both originator and generic companies, such as in the Lundbeck13 and the Servier14 cases.15 General Court of the European Union upheld the Commission’s decision in Lundbeck.16 In the US, health systems, patients17 and antitrust enforcers have filed 2.8 numerous lawsuits in federal and state courts over the past decade. The Federal Trade Commission (“FTC”) has vigorously opposed several reverse payment settlements by appealing lower court decisions and challenging reverse payment settlements directly. This culminated in the Supreme Court’s landmark Actavis decision in 2013.18 Although the final verdict on the case has yet to be delivered, the decision has changed the legal landscape greatly for ongoing and newly filed lawsuits related to reverse payment settlements. Investigations have also commenced in other jurisdictions beyond the EU and 2.9 the US. In August 2014, it was reported that the Indian competition authority opened an investigation into pharmaceutical patent agreements involving foreign and domestic firms.19 The United Kingdom’s Competition and Markets Authority (“CMA”) has launched several investigations against pharmaceutical companies into alleged anticompetitive agreements. This 12 13 14
15
16 17
18 19
European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009). Lundbeck was fined EUR 93.8 million and several generic manufacturers were fined a total of EUR 52.2 million. See Case COMP/AT.39226 – Lundbeck [2013]. Servier was fined EUR 330 million (including the fine for the violation of Article 102) and five generic manufacturers were fined a total of EUR 97.7 million. See Case COMP/AT.39612 – Perindopril (Servier) [2014]. In the Servier case, the Commission also led an investigation into a possible abuse of dominance (Article 102). The focus of this chapter will be on possible infringements of Article 101 in the EU. The Commission has also conducted investigations into alleged anticompetitive agreements between Teva and Cephalon. European Commission, http://europa.eu/rapid/press-release_IP-17-2063_en.htm, accessed 11 February 2018. Judgment of General Court from 8 September 2016, Case T-472/13 Lundbeck v. European Commission. In the US, civil litigation seeking damages from reverse payment settlements may be brought under the Sherman Antitrust Act by direct purchasers. Direct purchasers may include entities such as wholesalers, insurers, pharmacy benefits managers, pharmacies and hospitals. Illinois Brick v. Illinois, 431 U.S. 720 (1977), prevents indirect purchasers from claiming damages under the Sherman Antitrust Act. Indirect purchasers, which include patients but may also include businesses such as those that purchase from wholesalers, may bring claims of damages passed on by direct purchasers under the antitrust laws of individual states. These may then be consolidated under the Multidistrict Litigation Statute (28 U.S.C. § 1407). Federal Trade Commission v. Actavis, Inc. et al., 133 S. Ct. 2223 (2013). Ed Silverman, “India Becomes the Latest Country to Probe Pay to Delay Deals” Wall Street Journal (4 August 2014) http://blogs.wsj.com/pharmalot/2014/08/04/india-becomes-the-latest-country-to-probepay-to-delay-deals/, accessed 11 January 2016.
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Chapter 2 REVERSE PAYMENTS: AN EU AND US PERSPECTIVE
included a decision against a number of pharmaceutical companies that allegedly entered into agreements that prevented independent entry of generic versions of paroxetine, an anti-depressant medicine.20 B. Existence of beneficial reverse payment settlements 2.10 Despite numerous antitrust investigations and the negative publicity surrounding reverse payment settlements, certain reverse payment settlements can benefit both patients and healthcare systems. A settlement would be beneficial if it enabled the market entry of generic companies at an earlier date than would have been possible if the parties had proceeded with litigation contesting the patent’s validity (“a beneficial reverse payment settlement ”). In this scenario, the period of exclusivity, in which the originator’s patent would be uncontested, is diminished relative to the statutory length of the patent. The generic company benefits from the settlement and is able to enter the market sooner than would have been the case without the settlement. 2.11 The discussion of reverse payment settlements in competition circles on both sides of the Atlantic has at times overlooked the possible benefits of these settlements. Prior to the Actavis ruling, rather than account for potential procompetitive effects of reverse payment settlements, many US district court judges simply considered reverse payment settlements to be within the exclusionary potential of patent-holders and, therefore, immune to antitrust challenge.21 Although the US Supreme Court overturned this reasoning, the Actavis ruling highlighted the need to weigh the procompetitive features of settlements against their potential harm. In contrast to the US courts, the Commission has thus far emphasised the potential harm caused by reverse payment settlements in preventing potential competitors from entering the market in its enforcement action. C. Effects-based analysis of restrictions is required in the assessment of reverse payment settlements 2.12 As reverse payment settlements do not always lead to anticompetitive harm, an effects-based analysis is important to identify the possible beneficial effects of each settlement. Reverse payment settlements are borne out of a dispute between originator and generic companies regarding either the validity of the originator’s patents or whether the generic companies’ product(s) infringe(s) 20 21
The CMA fines totaled £44.99 million. See Paroxetine – Case CE/9531-11 [2016] Competition and Markets Authority. Valley Drug Co. v. Geneva Pharm., Inc. 344 F.3d 1294, at 1311 (2003).
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1. INTRODUCTION
the patents of the originator’s product(s). The originator may have various patents covering the compound and the processes used to create the pharmaceutical product in question.22 As a result, if a generic company seeks to launch its version of the originator’s pharmaceutical product, the originator company may launch infringement litigation to prevent the generic company from entering the market. The generic company would respond by seeking a declaration that its product does not infringe the patent.23 Therefore, the strength of the patent is at the heart of litigation between the originator and generic company. To assess the possible beneficial effects of a reverse payment settlement and 2.13 whether the settlement violated competition law, a complete analysis would draw on the expertise of both IP and competition economists. This analysis would assess: 1. 2.
The probability of generic market entry if litigation had continued (i.e. the patent(s) in question is (are) found to be invalid); Whether the date at which entry was permitted as part of the reverse payment settlement was earlier than the expected date of entry had the parties continued with their litigation or if the settlement did not exist.24
This chapter will critically review the approach of EU and US competition 2.14 authorities in the assessment of reverse payment settlements in the pharmaceutical industry by analysing recent antitrust investigations conducted in both jurisdictions. It is generally recognised that anticompetitive outcomes are possible from reverse payment settlements. On the basis of precedent cases and economic literature, it will be argued that originators and generic companies may also be incentivised to enter into reverse payment settlements that benefit both patients and healthcare systems. Particularly in the case of the 22
23 24
The originator may have a cluster of patents around the pharmaceutical product. The period of market exclusivity for the originator’s pharmaceutical product may be extended beyond the patent of the compound through process patents. This creates a “patent cluster” around the product. See European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 476. European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 580. In certain cases, competition law may help to protect the market entry of generic companies under vexatious litigation. If the generic company is forced to enter a settlement although the litigation pursued by the originator is without merits, then the assessment of the settlement and the course of litigation in this scenario may need to be analysed. That is, in the case of vexatious litigation, the counterfactual scenario of no infringement litigation may be a relevant benchmark for analysis of competitive effects. Vexatious litigation in the US, referred to as “sham” litigation, is of particular concern due to the rules laid out in the Hatch-Waxman Act, discussed below. For example, in Federal Trade Commission v. AbbVie Inc., et al., the FTC alleged that originators “initiated sham patent infringement litigation against Teva in the District of Delaware for the sole purpose of delaying the entry of its generic drug into the AndroGel market”. See Federal Trade Commission v. AbbVie Inc., et al., 2:14-cv-05151 (25 August 2015).
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Chapter 2 REVERSE PAYMENTS: AN EU AND US PERSPECTIVE
counterfactual, driven mainly by the respective patent framework (and its inadequacies), is such that there is room for welfare improving settlements.
2. SETTLEMENT AS THE OUTCOME OF IMPERFECT INFORMATION 2.15 The recourse to settlements during patent disputes arises owing to imperfections in information between patent bodies,25 originator and generic companies, as well as courts. Under perfect information, patent litigation, and thus settlement, would be unnecessary. Patent bodies with perfect information would not grant invalid patents to originators that generic companies would be able to challenge successfully in court. Originators with perfect information would construct their patent applications to maximise the breadth of patent protection permitted by the patent system. Symmetrically informed potential generic competitors would neither infringe upon nor legally challenge originators’ patents because courts with perfect information would rule against them. In practice, however, all four groups are afflicted by some degree of uncertainty as to the true validity and breadth of originators’ patents.26 2.16 Given the (statutory) limitations of patent bodies in investigating applications, they may grant patents that do not fully satisfy the respective criteria for a patent to be granted. Likewise, originators can, in good faith, file patent applications with errors or fail to fully address the patent breadth legally available to their inventions. Motivated generic companies search for imperfections not identified by the patent office and raise their challenges in the court. They may also claim to have found a non-infringing method to circumvent the originator’s patent. 2.17 Furthermore, generic companies are not perfectly informed about whether their patent challenges will be upheld by courts or, alternatively, if courts will rule against originators’ infringement lawsuits claiming infringement by generic work-arounds. Patent courts develop their understanding of the patents at issue as the lawsuits progress. 2.18 These uncertainties, and the ongoing costs of litigating patent disputes, give rise to incentives for originator and generic companies to engage in settlement negotiations. Rational evaluation of the potential outcomes of litigation based on beliefs about the true validity and breadth of the patent at issue can lead to 25 26
Patent granting organisations. Of course, if an originator knowingly commits patent fraud, then it is not afflicted by imperfect information about the invalidity of its patent.
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3. WHAT ARE REVERSE PAYMENT SETTLEMENTS?
settlement offers by both sides related to what they believe will be more beneficial than allowing litigation to continue. These inherent uncertainties may then give rise to procompetitive settlements involving reverse payments.
3. WHAT ARE REVERSE PAYMENT SETTLEMENTS? Reverse payment settlements in the pharmaceutical industry can take a wide 2.19 variety of forms. Each settlement, however, shares common characteristics. Prior to patent expiry, litigation between generic companies and originators may begin owing to possible disputes between originators and generic companies regarding the validity of the originator’s patent(s).27 If, at the end of litigation, the originator’s patent(s) is (are) found to be invalid (or not infringed), the generic version of the pharmaceutical product, which was claimed to infringe the originator’s patent(s), would be allowed to enter the market. In every reverse payment settlement, the patent-holder believes that there is a 2.20 likelihood greater than zero that the generic firm’s product does not infringe the originator’s patent(s). For example, in the pharmaceutical industry, an originator may create a patent cluster to defend against generic market entry.28 This can include filing process patents (or secondary patents)29 around the compound patent (or primary patent(s))30 in order to extend the commercial life of the pharmaceutical product and delay generic market entry. Generic companies that produce Active Pharmaceutical Ingredients (“API”) may either focus their efforts on inventing new production processes for pharmaceutical products whose compound patents are due to expire or challenge the process patents granted to the originator.31 Thus, a chance may exist that either the generic version of the pharmaceutical product is found to not 27 28
29
30 31
European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 582. In Europe, originators in the pharmaceutical industry are afforded market exclusivity of up to 25 years from the point of filing the patent application. This accounts for the time it takes for pharmaceutical companies to commercialise a pharmaceutical product. In the US, the exclusivity period is determined by rules laid out in the Hatch-Waxman Act. As a general matter, originators are prevented from having more than 14 years of exclusivity from the date of regulatory approval assuming that it takes more than six years from the filing of their patent to the granting of approval. Process patents mostly concern formulations, processes and non-formulation products, such as salts, polymorphic forms, particles, solvates and hydrates. See European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 489. The Commission (2009) found that blockbuster medicines can be protected by up to nearly 100 INN-specific EPO patented bundles and applications. In one case, this led to 1300 patents and applications across EU Member States. See European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 488. This type of patent concerns the Active Pharmaceutical Ingredient. Case COMP/AT.39226 – Lundbeck [2013], para. 72.
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Chapter 2 REVERSE PAYMENTS: AN EU AND US PERSPECTIVE
infringe the originator’s patents or the patents filed by the originator are invalid as shown in Figure 2.1 (for the EU) and Figure 2.2 (for the US).32 Except in the presence of a countersuit, the generic firm begins this process with no claim of damages against the patent-holder. n
tio
sa ori
th
Au
Figure 2.1 Patent exclusivity and possibilities for generic entry in the EU 2.21 A reverse payment settlement could then be pursued by the parties for a variety of reasons.33 Generally, a settlement to patent litigation helps to reduce uncertainty related to court outcomes and to avoid litigation costs. Regulators and civil plaintiffs who challenge reverse payment settlements as violations of competition law allege that the underlying motivation of the settlement is to preserve supra-competitive profits and to share the surplus between the originator and generic company. It may also be alleged that generic companies are motivated to limit competition after their entry. For example, reverse payment settlements could be used to inhibit generic entry by companies not 32
33
Statistically, generic companies won 74% of litigation cases that resulted in a ruling for process patents. See European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 628. This compares to a generic win rate of 62% of litigation cases for all types of patents. See European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), p. 238. For a further discussion of the patent systems in the EU and US, see Appendix 1. The Commission discusses the incentives to enter a reverse payment settlement for both originators and generic companies in the Servier case of 2014. See Case COMP/AT.39612 – Perindopril (Servier) [2014], paras. 1147–48.
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3. WHAT ARE REVERSE PAYMENT SETTLEMENTS?
on
ati
s ori
th
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Figure 2.2 Patent exclusivity and possibilities for generic entry in the US party to the patent challenge. This would avoid free-riding from other generics if the patent is deemed invalid.34 Generic companies may also perceive value from the settlement in the form of negotiating commitments not to launch authorised generics. Typically, a reverse payment settlement will specify that the originator will 2.22 terminate the litigation and that the generic company will either not enter the market or will enter the market only under certain conditions in exchange for a value transfer. The terms of entry offered to generic companies may specify a date prior to the patent’s expiry date from which point the generic companies can compete independently of the patent-holder or agreements relating to the licensing, marketing or manufacture of the patent-holder’s pharmaceutical until the patent expires. The value transfer to the generic company may consist
34
Generic companies may wait until the originator’s patent is invalid before entering the market without incurring the expense of litigating the originator. The price of the reference pharmaceutical product (and, thereby, the expected profit of the generic company party to the litigation) upon entry would fall as more generic companies enter the market.
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Chapter 2 REVERSE PAYMENTS: AN EU AND US PERSPECTIVE
of cash, stock purchases, physical inventory, forgiveness of liabilities, as well as contingencies for generic entry by producers not party to the settlement.35
4. THE INCENTIVES OF ORIGINATORS AND GENERIC COMPANIES TO SETTLE 2.23 Originator pharmaceutical companies need to continue to innovate and create new drugs in fields where the returns to vast investments in Research and Development (“R&D”) are uncertain. A valid patent entitles innovating companies a period of exclusivity whereby they are able to recoup returns on their investment. Generic companies are motivated to enter the market as soon as possible to earn higher returns when there are fewer competitors upon entry, to initiate cash flow to recover generic development costs and continue to finance the development of other generic pharmaceutical products. These incentives are further influenced by a variety of factors, discussed in more detail below, that can affect the terms of reverse payment settlements. 2.24 The following section describes the key pressures on originators and generic companies that have facilitated the development of reverse payment settlements. A. Originators face numerous threats to profits prior to patent expiration 2.25 The use of reverse payment settlements to end litigation concerning a patent’s validity between an originator and generic company has coincided with increasing costs and innovation pressures placed upon originator pharmaceutical companies. Likewise, competition from other pharmaceutical products used to treat the same conditions and financial stresses from development of new pharmaceuticals or the end of the profitable life of other pharmaceutical products can influence an originator’s incentives to engage in a reverse payment settlement. The originator’s decision to offer a reverse payment settlement can depend on a combination of factors that affect the profits of a pharmaceutical product during the period of exclusivity granted by a patent.
35
US courts have also considered whether clauses that restrict originators from launching their own generic version of a pharmaceutical are a form of value transfer. Although an originator would not launch a generic to compete with the brand in the absence of generic competition from third parties, generic firms may perceive value in the promise of reduced competition after generic entry. The US Third Circuit Court has rejected the idea that originators have the right to leverage the threat of an authorised generic to induce a patent challenger’s delay. See In re Lamictal, No. 14-1243, at 38 (3d. Cir. June 26, 2015).
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4. THE INCENTIVES OF ORIGINATORS AND GENERIC COMPANIES TO SETTLE
i. Costs in bringing new pharmaceuticals to market have increased dramatically
Over the last three decades, the costs of developing an approved pharma- 2.26 ceutical product have substantially increased. According to Lai et al. (2012), the cost of one approved new pharmaceutical product in the US in 1979 was USD 100 million.36 In 2011, the costs totaled USD 1.9 billion, an increase of 1900%. A similar trend has also been noted in Europe by the Commission.37 Wang (2012) cites that it takes between 12 and 15 years to commercialise a safe and effective drug.38 Originators are expected to invest substantially in R&D in the hope of creating the latest blockbuster drug. Owing to heightened concern over safety in the US, DiMasi and Grabowski (2012), note that there is speculation that these out-of-pocket costs for development and development times will increase.39 Shareholders, accordingly, expect substantial returns to be generated from these investments. Thus, a sudden and unexpected decline in revenue resulting from a successful patent challenge may potentially result in substantial harm to ongoing R&D efforts and, as a result, shareholders’ decisions to invest in the company.40 The methods used by originator companies to obtain patent exclusivity for 2.27 pharmaceutical products can be categorised as follows: Fundamental innovation involves the discovery of a New Chemical Entity (“NCE”) that requires substantial R&D investment and where the commercial returns of pharmaceutical products are uncertain.41 Incremental innovation relates to the development of existing products to treat new therapeutic areas or improve upon existing treatments. Acquisition allows drug companies to obtain NCEs or incremental innovation from other companies involved in the creation of products. The substantial costs associated with R&D are recouped by the originator 2.28 during patent exclusivity, as shown in Figure 2.3. This figure provides a 36 37 38 39
40 41
Jeremy Lai et al., Pharmaceuticals for Beginners 2012 (Deutsche Bank Markets Research, 2012). European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 79. Yaning Wang, “Extracting Knowledge from Failed Development Programmes” (2012) 26(2) Pharmaceutical Medicine 91. Joseph DiMasi and Henry Grabowski, “R&D Costs and Returns to New Drug Development: A Review of the Evidence” in Patricia Danzon and Sean Nicholson (eds), The Oxford Handbook of the Economics of the Biopharmaceutical Industry (Oxford University Press 2012) 43. The originator may need to generate enough returns on existing patented products in order to have resources available to finance any further R&D efforts. According to Wang (2012), only 10–16% of new molecular entities (NMEs) that entered phase I eventually reached the market. At phase III of development, after costs of discovering and developing the product were incurred, the attrition rate is 50%. See Yaning Wang, “Extracting Knowledge from Failed Development Programmes” (2012) 26(2) Pharmaceutical Medicine 91.
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stylised interpretation of the investment and revenue lifecycle of an originator’s pharmaceutical. A generic challenge to an originator’s patent can, in theory, occur immediately following patent filing.42 As a result, a generic’s challenge to an originator’s patent could potentially disrupt revenue early in the cash flow lifecycle. The point at which generic entry could feasibly occur in this lifecycle will impact the terms of the reverse payment settlement. 2.29 Owing to the variety of types of R&D conducted and high probability that a particular product is never commercialised, patent protection provides an important mechanism for originator companies to generate returns on their investments for products that were commercialised during their periods of patent exclusivity. These returns allow originators to recoup the (often) substantial costs associated with R&D concerning both the molecules that were commercialised and molecules that were never commercialised. ii. Effect of loss of exclusivity of blockbusters on originator’s profits
2.30 Originator companies face the challenge of having to find new revenue channels as the patents for previous top selling blockbuster products near their expiration. Substantial revenues are generated from patents that are due to expire in the next few years by large originator pharmaceutical companies. As noted by the Commission (2009), blockbusters offer profit margins of up to 80% and are crucial for the financial performance of originator companies.43 2.31 The revenues for newly launched drugs are forecast to fail to fill this void for many of the originators, as shown in column (c) of Table 2.1. AstraZeneca, for example, is forecast to lose nearly 38% of its 2011 revenue in 2016. According to research by Global Data, pharmaceutical companies are due to lose around USD 65 billion by 2019 due to patent expiration.44 Therefore, originator companies face strong incentives to protect the exclusivity of patented blockbuster pharmaceutical products to prevent further exposure to revenue shortfalls.
42
43 44
Although a patent can be challenged after being filed, regulatory approval for the generic entrant to market their version of the pharmaceutical product may be delayed. For example, in the US the Hatch-Waxman Act allows for an automatic 30-month waiting period prior to approval of an application for approval of a generic pharmaceutical product if the patent-holder challenges the generic company’s certification that the patent is invalid or not infringed and the courts have not yet ruled on the patent-holder’s challenge. Section 21 U.S.C. § 355(j)(5)(B)(iii). See also Appendix 1. Additional delays to generic challenges may result from statutory exclusivity periods. European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 68. Tom Robinson, “Pharma to Lose $69 Billion in Five Years as Patents Expire” (Pharmafile) (London, 12 December 2014) www.pharmafile.com/news/196386/pharma-lose-69-billion-five-years-patents-expire, accessed 24 June 2015.
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4. THE INCENTIVES OF ORIGINATORS AND GENERIC COMPANIES TO SETTLE Net Discounted Cash Flow
Peak sales
Positive (+)
Impact of competition generics, OTC
Period of Return
Product launch
Product uptake
Break Even
Time Period of Investment
Projected break even point
Negative (–)
Incorporates coststo-date, including licensing-in costs
Proof of concept/Phase II
Source: Own figure based on Nigel Gregson et al., “Pricing Medicines: Theory and Practice, Challenges and Opportunities” 4 (2005) Nature Review Drug Discovery 121.
Figure 2.3 Period in which originator pharmaceuticals recoup most of their investment As noted above, the costs to replace blockbuster products with new high- 2.32 margin pharmaceutical products have also increased. Innovation pursued by pharmaceutical companies is fraught with an extremely high attrition rate of discovered molecules that may never become commercialised. Returns from successful blockbuster pharmaceutical products not only need to cover the development of the drug itself but also the development costs of failed drugs that never were successfully commercialised. As multiple originator companies target a narrowing field of conditions with potential prospects for a blockbuster, the likelihood of direct competition with other innovative products for a successful launch increases.
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Source:
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/ 2012 2013 2012 2014
Europe 37.9 7.9 10.4 23.5 14.4 35 14.1 United States 63.4 50.3 33.2 8.8
(d)
3,675 760 4,065 N/A
1,072 2,223 4,219 1,748 2,445 2,749 2,161
$ millio n
Expected 2016 sales from new launches
(e)
2012 2014 2012 N/A
2012 2013 2013 2014 2012 2012 2012
Key launch year
(f)
( %)
17.3 3.1 8.5 N/A
3.2 9.3 12.8 3.0 19.7 7.4 4.6
Expected 2016 sales of launched drugs as percentage of 2011 sales
(g)
( %)
-73 -94 -75 N/A
-92 18 -9 -87 37 -76 -67
Lost revenues (between 2011 and 2016) as percentage of revenue from new products in 2016
Own analysis based on figures in Jeremy Lai et al., Pharmaceuticals for Beginners 2012 (Deutsche Bank Markets Research, 2012).
13,478 12,219 15,950 5,920
Bristol-Myers Squibb Eli Lilly Merck P fizer
2012 2014 2013 2012 2014 2015 2015
(c)
12,734 1,889 4,634 13,741 1,782 11,243 6,549
( %) (b)
(a)
Major expiry year
Percentage of 2011 sales lost compared to expected 2016 revenue
$ million
AstraZeneca Bayer Pharm GlaxoSmithKline Novartis Novo Nordisk Roche Sanofi
Company
Expected 2011 sales exposed to patent expiry in 2016
Table 2.1 Comparing the revenue that is exposed to the expiration of patents and the estimated sales that would be generated from new drugs
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iii. Erosion of originator’s profit from early generic entry
The period of patent exclusivity granted to an originator allows the originator 2.33 to recover the costs of developing pharmaceutical products and earn margins. The threat of early generic entry into the market if a patent is invalidated or circumvented can have serious consequences on the ability of the originator to recoup their investment costs. As noted in the case of Lundbeck, “the very significant price reductions that normally and irreversibly result from widespread generic entry … poses a significant competitive threat to the incumbent originator undertaking”.45 If generic companies are able to enter the market and compete with originator 2.34 companies, competition is typically based on price in many European countries as generic companies seek to attract suppliers, pharmacies, prescribers, patients and health insurers with lower prices for their generic versions of the reference pharmaceutical products.46 Likewise, in the US, mandatory generic substitution laws in a majority of states typically results in a rapid erosion of originator’s sales.47 Thus, the profit margins for a reference pharmaceutical product typically fall drastically after patent exclusivity ends and generic companies enter the market.48 Once generic products are allowed to enter the market, substantial price 2.35 benefits are conferred to patients and (national) health systems. As part of the Commission’s Sector Inquiry into the pharmaceutical industry, the Commission (2009) found that generic entry did not always take place as early as it could have. Thus, healthcare systems and patients could have realised savings potentially earlier than they did. In the reviewed sample of pharmaceutical 45 46
47
48
Case COMP/AT.39226 – Lundbeck [2013], para. 615. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1148. In seven EU Member States, generic substitution (from a brand medicine to the cheaper generic version of the same active ingredient(s)) is obligatory, indicative in 15 and disallowed in five EU Member States; European Commission, ‘Costcontainment policies in public pharmaceutical spending in the EU’ (Directorate General for Economic and Financial Affairs) COM Economic Papers 461, 39. See e.g., State regulations on generic substitution. Pharmacist’s Letter/Prescriber’s Letter (2006;22(9): 220901), http://pharmacistsletter.therapeuticresearch.com/pl/ArticleDD.aspx?nidchk=1&cs=&s=PL&pt=2 &segment=1186&dd=220901, accessed 17 December 2015. In a study conducted by Schulenburg et al. (2011), the introduction of generic versions of ACE inhibitors (“Angiotensin-converting-enzyme inhibitor”) were found to gradually decrease price rather than having a dramatic immediate effect in Denmark, France, Germany, Netherlands, Sweden and the United Kingdom. The study also showed that different mechanisms used to contain the price of pharmaceutical products in the post-patent market had varying degrees of success. The authors found that mandatory generic substitution and regressive pharmacist mark-ups have a strong negative effect on originator prices. Conversely, the impact of demand-side effects on originator prices (such as improving information to Doctors and Pharmacists about which generic drugs could be used instead of originator products) were less evident. See also Fritz von der Schulenburg et al., “The Effects of Drug Market Regulation on Pharmaceutical Prices in Europe: Overview and Evidence from the Market of ACE Inhibitors” (2011) 1 Health Economics Review 1.
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products that had lost exclusivity from 2000 to 2007, generic alternatives entered, on the basis of a weighted average, more than seven months after the loss of patent exclusivity for the originator’s pharmaceutical product.49 For the highest selling pharmaceutical products, entry took place about four months after the end of patent exclusivity.50 2.36 Delays to generic entry can have major effects on the price and revenues generated by the pharmaceutical product in question. On average, from 2000 to 2007, generic companies entered the market at a price 25% lower than the originator’s price prior to the loss of exclusivity (e.g., patent expiration) during the first year of generic entry.51 Two years after generic entry, prices were, on average, 40% lower than the previous price set by the originator during market exclusivity.52 The effect of generic entry on prices and revenues is further supported by Lundbeck’s evaluation of the impact of generic entry on its patented drug, Citalopram. Lundbeck estimated in February 1998 that it would lose 28% of its market share in the first year of generic entry. Five years after generic entry, Lundbeck forecasted that it would lose 70% market share within various EEA markets.53 The Commission found that the defensive strategies of originator companies against generic entry, that sought to extend the commercial life of their patented products, contributed to the delay in generic entry.54 If generic entry had occurred immediately upon the loss of the International Nonproprietary Name’s (“INN”) patent exclusivity (without any delays from either generic or originator companies), EUR 3 billion could have been saved.55 2.37 Similar patterns have been observed in the US. A study by the Congressional Budget Office estimated that the US government saved approximately USD 33 billion as a result of generic substitution in 2007.56 Savings through generic substitution are made possible by the lower prices with which generic companies enter the market. Reiffen and Ward (2005) find that first generic entrant’s prices are on average 88% of the pre-expiry branded price and that the average price falls to 63% of the branded price when there are 11 or more 49 50 51 52 53 54
55 56
European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 1559. Ibid para. 1559. Ibid para. 1560. Ibid para. 1560. Case COMP/AT.39226 – Lundbeck [2013], para. 615 footnote 1112. Defensive strategies include filing for a large number of process patents, engaging in litigation with generic companies, entering settlements with generic companies and intervening in national approvals for generic medicines. See European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 1558. European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 1561. Congressional Budget Office “Effects of Using Generic Drugs on Medicare’s Prescription Drug Spending” (Washington DC, Pub. No. 4043, September 2010).
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generic entrants.57 Through more generic entrants, the price of pharmaceutical products can be continually eroded as confirmed by Olson and Wendling (2013). The authors find that each additional generic competitor for a product reduces prices by roughly 10% to 30%.58 Additionally, generic entry erodes the sales volumes of the originator pharma- 2.38 ceutical product. Grabowski et al. (2013) found that the rate at which the originators’ volumes erode after generic entry has increased in recent years. Originators’ new molecular entities (“NME”) facing first generic entry in 2011–2012 retained an average of only 16% of units it sold during patent exclusivity one year after the entry of generic companies. For NMEs with sales greater than USD 250 million (in 2008 dollars) prior to first generic entry, the erosion of originators was even more pronounced. For these NMEs, the originator’s product retained only 11% of units it sold during patent exclusivity a year after generic products entered the market.59 Competition authorities, however, need to strike a balance between protecting 2.39 the gains from innovation for originator companies and lower prices through generic entry that reduces health care costs when assessing potential competition law violations. The immediate price benefits for purchasers from generic entry prior to patent expiration may be achieved at the expense of reducing the incentives for originator companies to continue to invest, innovate and create new pharmaceutical products. If patents in certain treatment types are easily invalidated by generic companies, investment decisions of originator firms may be redirected to treatment areas where patents are stronger. An aversion to invest in research on treatments with weak patent rights could harm the very patients that require new ground breaking pharmaceutical products. iv. Patent exclusivity does not imply market exclusivity
Patent exclusivity does not necessarily imply a monopoly position in the 2.40 relevant market.60 Competing, non-infringing, products developed by rival originators to treat the same illnesses continue to enter the market even during 57 58
59 60
David Reiffen and Michael Ward, “Generic Drug Industry Dynamics” (2005) 87(1) Review of Economics and Statistics 37. Luke Olson and Brett Wendling, “The Effect of Generic Drug Competition on Generic Drug Prices During the Hatch-Waxman 180-Day Exclusivity Period” (Federal Trade Commission, Working Paper No. 317, Washington, April 2013). Henry Grabowski et al., “Recent Trends in Brand-Name and Generic Drug Competition’ (2013) 17(3) Journal of Medical Economics 207. On the other hand, a relevant market in which an originator holds exclusivity through a patent and does not face competition from other therapies to treat the same illness is more likely to exhibit monopolistic traits.
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a pharmaceutical product’s period of patent exclusivity. Based on pharmaceutical products recently launched, the lead time in which pharmaceutical companies are the “first in class” is shortening.61 For example, according to Lai et al. (2012), the time between the first in class to the first branded imitator for Inderal (released in 1967) was over ten years.62 The first imitator for Celebrex, launched in 1999, was released six months later. 2.41 Competition between originator firms seeking to bring potential blockbusters to the market is ever increasing. If originator pharmaceutical companies are successful in bringing a blockbuster product to the market then this can lead to substantial windfalls. However, if a competing, non-infringing, product is launched that can treat the same illnesses then the potential revenue generated by a supposed “blockbuster” could be substantially lower. Therefore, the period in which pharmaceutical companies can generate returns to cover large R&D investments may be even shorter than the patent exclusivity term as originators compete to develop treatments for the same illnesses. 2.42 The competition between originator firms typically takes three forms. First, originators may compete to bring innovative and ground-breaking products to the market before other competitors for which few alternative pharmaceutical products exist. These products are often known as first in class; and the most successful of these products are termed blockbusters. Originators who succeed in launching a blockbuster may, under certain circumstances, hold monopoly power over the pricing of a pharmaceutical product during the exclusivity period.63 2.43 Second, originators may compete directly when their pharmaceutical products can be prescribed for the same treatment. Direct competition reduces the potential returns to the originator during the exclusivity period of its patent(s). Competition in these circumstances typically takes place on quality and sales promotion rather than on price. Unlike blockbuster pharmaceutical products, sustained marketing efforts may be required to maintain a price premium. Addanki and Butler (2013) analogise that an originator pharmaceutical that lacks monopoly power “is little different from branded white bread being more expensive than a private label of equal or even greater objective quality: the premium is not a reflection of monopoly power, but is merely the economic 61 62 63
The term “first in class” implies the first company to bring a new pharmaceutical product with limited substitutes to the market. Lai et al., supra note 36, 13. Factors such as regulation and the availability of non-pharmaceutical treatments could also impact an originator’s monopoly power. A detailed review of the market for a pharmaceutical product is required to determine potential market power.
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return to advertising/promotional efforts”.64 Sales of the pharmaceutical products facing direct competition could fall if the originator reduces promotional efforts during the period of patent exclusivity. Third, originators may compete via incremental innovation. This can include 2.44 follow-on modifications in molecular structures or delivery methods of existing products throughout the life of a product.65 Incremental innovation can change the dynamic of competition even in more mature therapeutic categories. Unlike in the typical case of direct competition, an incremental innovation can confer additional benefits to patients that allow for monopoly pricing to be sustained until alternative treatments are developed. As a result, incremental innovation may, under certain circumstances, alter the evaluation of market power in settlement discussions between originators and generic companies. A fact based, case-specific inquiry is required to understand the extent of market power commanded by the originator’s pharmaceutical product. As will be discussed in more detail below, the relevant market for the reference 2.45 pharmaceutical product needs to be adequately defined. Once the relevant market is defined, the originator’s market power can be assessed. An evaluation of the originator’s market power is important to understand the competitive effects of a reverse payment settlement. B. Options for generic companies Both the generic company and originator are afflicted by information asym- 2.46 metries with regard to the strength of the patent in question, the current and expected state of the market and the outcome of the litigation. The generic company’s decision to challenge the patent, continue litigation and enter the market is based on a probabilistic assessment of these factors. The generic company’s decision to continue litigation is further influenced by 2.47 the possible entry of other generic suppliers if a patent is invalidated and, relatedly, its profitability in the post-patent market. The first generic company in the market benefits from a first mover advantage in terms of duopolistic prices, together with the originator company, it is able to offer for the reference product before other generic companies enter in the post-patent 64 65
Sumanth Addanki and Henry N. Butler, “Activating Actavis: Economic Issues in Applying the Rule of Reason to Reverse Payment Settlements” (2013) 15 Minnesota Journal of Law, Science & Technology 77. Albert Wertheimer et al., “Too Many Drugs? The Clinical and Economic Value of Incremental Innovations” (2001) 14 Investing in Health: The Social and Economic Benefits of Health Care Innovation 77.
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market.66 In the US, the incentive to be the first mover is particularly strong as the first generic entrant may receive a 180-day exclusivity period under the Hatch-Waxman Act.67 Immediately following the end of the 180-day period, however, further generic entry may be rapid and particularly intense if it is relatively easy to copy the originator’s drug or the share of sales available to new entrants is relatively large. According to Lai et al. (2012), branded drugs with sales of more than USD 25 million are more likely to attract generic entrants.68 Thus, more generic entrants entering the post-patent market leads to a greater erosion of the duopolistic price level of the pharmaceutical product. 2.48 As part of the decision to enter a reverse payment settlement, the generic company weighs the expected profit from continuing litigation against the expected profit from a reverse payment settlement. Thus, given the threat of entry by multiple generic companies, if an originator’s patent is invalidated, a reverse payment settlement may provide additional value to the generic company in the form of generic exclusivity. That is, the generic company’s expected profit from continuing litigation accounts for the uncertainty in the number of generic entrants that would enter the market if the originator’s patent became invalid. If several generic companies enter the market, then the weighted price of the reference pharmaceutical product would decrease further, thereby reducing the profits for each company in the post-patent market.69 In the hypothetical example shown in Table 2.2, the expected return for the generic company pursuing litigation is lower (EUR 0.4 million) than the expected, and certain, profits from the settlement offer of EUR 3 million.70 Thus, assuming the generic company is risk neutral or risk averse, the generic firm would prefer a settlement.
66 67 68 69 70
This was for example noted by the Commission in the case of Servier. See Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1183. Section 21 U.S.C. § 355(j)(5)(B)(iv). Lai et al., supra note 36, 70. The calculation of the average includes both the brand name version and the generic version of the INN molecule under consideration. Although profits from settlement are treated as certain in this example, there may be risk associated with settlement. Other generic companies may attempt to challenge the originator’s patent after observing settlement by the first generic company. If subsequent challenges to the originator’s patent prevail, depending on the terms of the settlement, the value of the settlement to the generic company may decrease. A rational firm would account for this risk when negotiating the terms of its settlement.
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Table 2.2
Hypothetical risks facing a generic company Scenario
Profit over two years ($ million)
Pro bability
Generic company invalidates patent and the market becomes a duopoly. Generic company invalidates patent and three other generic firms enter the market. P atent is validated Settlement offer – generic company allowed to enter after one year.
0.1
10
0.4
1
0. 5
–2
1
3
Note: If the patent is validated and the generic company is unable to enter the market then this will cost the generic company USD 2 million. Source: Own analysis.
Generic companies are incentivised to enter reverse payment settlements 2.49 during the market exclusivity of the originator’s pharmaceutical product owing to the uncertain returns that they may generate should they continue in litigation against the originator’s patent. Reverse payment settlements may offer a more secure revenue stream to generic companies for the life of the settlement (as shown in Table 2.2) rather than risk market entry where revenues are heavily dependent upon the number of generic entrants. As with the originator, the generic company may be liquidity constrained due to costs associated with: Development costs in creating a generic version of the originator pharmaceutical product; Seeking market authorisations for the pharmaceutical product; and Litigation challenging the originator’s patent. As a result, the potential that the patent is found to be valid carries the 2.50 additional cost to the generic company of maintaining operations with no revenue while it waits for patent expiration. Addanki and Daskin (2008) note that reverse payment settlements may serve as a cash injection to maintain ongoing operations until generic entry is feasible.71 As will be discussed below, in certain circumstances, patients and health care systems may find a reverse payment settlement under these circumstances particularly beneficial. If the originator’s patent is upheld, the liquidity constrained generic company may become insolvent prior to patent expiration. This may lead to a lack of generic entry in the market when the originator’s patent(s) expire(s). 71
Sumanth Addanki and Alan J. Daskin, “Patent Settlement Agreements” in Wayne D. Collins and Joseph Angland (eds), Issues in Competition Law and Policy (ABA Book Publishing 2008).
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5. FACT-SPECIFIC INQUIRY REQUIRED TO DETERMINE ANTICOMPETITIVENESS OF REVERSE PAYMENT SETTLEMENTS A. How do generic companies and originators evaluate the decision to enter into reverse payment settlements? An economic assessment 2.51 It is widely accepted that an essential element to the analysis of the competitive effects of a reverse payment settlement is the expected date of generic entry at the time that the settlement was reached.72 Litigation challenging the validity of a patent can lead to one of two outcomes, that either the patent is invalidated or upheld. The expected date of generic entry is the probability weighted average of the two dates as shown below in Box 2.1. BOX 2.1
EXPECTED ENTRY DATES
Suppose that the remaining life of a patent is ten years and it will take two years for courts to reach a verdict on the validity of the patent.73 If the probability that the originator prevails and the patent is found to be valid is 50%, then, at the time of settlement discussions with each generic company that could feasibly enter, the expected date of generic entry is six years.74 In this example, a settlement that permits generic entry earlier than six years (whilst the patent would remain valid during this period) would be considered procompetitive and therefore beneficial to health care systems and patients. A generic entry date after six years may delay reductions in price and cause anticompetitive harm to health care systems and patients.
2.52 When a reverse payment is included in the settlement, it is appropriate to evaluate the minimum and maximum bounds of the payments offered that are acceptable to both the patent-holder and the generic company. The size of reverse payment that the patent-holder could reasonably offer the generic firm (regardless of whether the payment infringes competition law) is bounded by characteristics of the patent dispute and the expected entry date of the generic
72 73
74
See e.g., Carl Shapiro, “Antitrust Limits to Patent Settlements” (2003) 34 RAND Journal of Economics 391; Addanki and Daskin, supra note 71. The date of trial verdict is also uncertain. A rational firm would evaluate the date of trial verdict similar to the overall expected date of entry; that is, the expected date of trial verdict is the probability weighted average of potential verdict dates. Here, we simplify the analysis to assume that both parties have already determined the expected verdict date and agree on the probabilities. More specifically, this calculation is the probability of prevailing at trial times the number of years until patent expiry plus the probability that the patent is found invalid times the number of years until a verdict is reached. In this example, 50%*10 years + 50%*2 years = 6 years.
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companies. The quantum of the value transfer from the originator to the generic company is influenced by: Expected costs of litigation; The strength of the patent – the susceptibility of the patent to be contested by the generic firms. This includes analysing whether the patent was previously upheld; The remaining length of the patent; Expected profits to be earned during the remaining period of exclusivity; Expected profits after generic entry, including potential revenue from an authorised generic;75 The financial resources of the generic company to maintain litigation; and The extent to which the originator is risk averse or risk neutral.76 Taking these factors into consideration, and possibly other case-specific 2.53 factors, the maximum feasible offer for a reverse payment is the amount for which the originator would be indifferent between settling and proceeding with litigation. At the maximum feasible offer, holding the date of entry constant, a higher demand for payment by the generic company would incentivise the originator to continue with litigation. Similarly, at the maximum feasible offer, a demand by the generic company for an earlier entry date would incentivise the originator to continue with litigation. The minimum bound on payments represents the lowest amount required for 2.54 the generic company to accept the settlement. Fundamental to the generic company’s decision is a comparison of profits that may be earned through a settlement relative to the expected profits that a generic company would be expected to earn should litigation continue. Thus, factors influencing the
75
76
Note that the expected profits after generic entry are influenced by the number of generic entrants. As the originator does not have the authority to decide which particular generic companies enter other than an authorised generic it is likely to take the number of generic entrants as given (although the order in which they enter may be determined by local laws). The circumstances in which the originator can exclude a generic company from entry by not directly settling with it are limited to situations in which the originator’s patent is valid and only a subset of generic companies have discovered a means of circumventing it. As a matter of theory, risk aversion results in firms trading off expected profits (i.e. probability weighted profits from risky alternative outcomes) for guaranteed profits. A firm that demonstrates risk aversion would agree to a settlement date before the expected entry date. Addanki and Daskin (2008) build a mathematical model of settlement decisions that implements risk aversion in the form of log preferences. See Addanki and Daskin, supra note 71.
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minimum amount the originator would need to transfer for the generic company to consider accepting the settlement include the following:77 Expected costs of litigation; The strength of the patent – the susceptibility of the patent to be contested by the generic firms. This includes considering whether the patent was previously upheld; The remaining length of the patent; Expected profits in the period during which the generic company is one of the companies awarded the right to market drugs prior to the entry of other generic companies;78 Expected profits in the post-patent market during which generic companies are free to enter upon receiving the appropriate market authorisations;79 Expected profits after the generic company has entered under the terms of the settlement and before the patent expires (or is treated as invalid);80 The effect on the generic company’s profits of an authorised generic launched by the originator; The financial resources of the generic company to continue operations should the patent be upheld in litigation; and The extent to which the generic company is risk averse or risk neutral.
77 78
79
80
Some of the factors listed are also part of the originator’s evaluation of the settlement, but the generic company’s beliefs for these factors may differ. In the US, the FDA explicitly limits the set of generic competitors that can market a drug for 180 days. Olson and Wendling (2013) find that “an additional competitor lowers generic drug prices by a greater extent during the 180-day exclusivity period than outside of it”. See Olson and Wendling, supra note 58. The expected profits in the post-patent market for the reference product will depend upon the number of entrants into the market. Caves et al. (1991) studied the effects of patent expiration and subsequent entry of generic drugs during 1976–87. Caves et al. (1991) found that the prices of innovative drugs fall to approximately 17% of the branded producer’s pre-entry price as generic companies enter the market. As more generic companies enter the market, the price of the reference product further declines as they seek to win market share at the expense of the originator’s product. Caves et al. (1991) note that the effect of additional generic competitors is “noticeably stronger” on generic prices than on the prices of branded products (post-patent expiration). See Richard Caves et al., “Patent Expiration, Entry and Competition in the U.S. Pharmaceutical Industry” (1991) 01/1991 Brookings Papers on Economic Activity Microeconomics 1. The number of generic companies that enter during the period of the settlement will influence profit expectations. If the originator’s patent is unenforceable, the generic company would assume that, apart from delays in receiving regulatory approval, the same generic companies would engage in settlement discussions as those that would enter the market if no settlement were reached and trial were concluded. The circumstances under which competing generic companies could be excluded from settlement and forced to wait for patent expiration are limited to situations in which the originator’s patent is valid and only the subset of generic companies settling with the originator are able to circumvent the patent.
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Conversely to the maximum bound on the reverse payment, the minimum 2.55 bound represents the payment at which the generic company is indifferent between settling and continuing with litigation. If the originator ceteris paribus offers a settlement amount below the minimum amount acceptable to the generic company, the generic company will reject the settlement offer. In this scenario, the generic company’s expected profit from entering litigation and possibly entering the market before the expiry of the patent will exceed the payoff from the settlement. Equally, at the minimum feasible payment offer a demand by the originator to further delay generic entry would be rejected in favour of continuing with litigation. Figure 2.4 below provides a stylised graphical representation of the feasible set 2.56 of reverse payment settlement offers.81 This example is simplified in order to highlight how a settlement is affected by the perceived strength of the patent and litigation costs of both parties. Several complicating factors such as attitudes toward risk and changing profits over time are ignored. A complete analysis of a particular settlement must incorporate these factually relevant issues in order to evaluate the competitive effects. Addanki and Daskin (2008) and Kobayashi et al. (2015)82 present models of reverse payment settlements incorporating additional practical considerations. Within the shaded area shown in Figure 2.4, a settlement between an 2.57 originator and generic company is possible.83 Total profits for both firms are maximised when generic entry is delayed until the patent in question expires. However, the incentives of the generic company and originator are opposing. The patent-holder’s profits increase as generic entry is delayed and decrease as the size of the settlement offer to the generic company becomes larger.84 Conversely, the generic company’s profits over the entire time span decrease the longer generic entry is delayed and increase with the size of the value
81 82 83
84
A mathematical explanation of how this figure was formulated can be found in Appendix 2. Bruce H. Kobayashi et al., “Actavis and Multiple ANDA Entrants: Beyond the Temporary Duopoly” (2015) 29(2) Antitrust 89. This model was developed on the basis of a Cournot model of competition. This is consistent with Wiggins and Maness’ (2004) study of pricing competition in pharmaceuticals. See Steven N. Wiggins and Robert Maness, “Price Competition in Pharmaceuticals: The Case of Anti-Infectives” (2004) 42 Economic Inquiry 247. The delay in this context is relative to the expected date of entry. This is different from a delay relative to the expected date on which a trial verdict would be reached.
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Feasible Reverse Payments
Payment to Generic Company
Date of settlement discussions
Expected date of entry
Feasible Set of Reverse Payments
$0 Patent expiry date
Potential Date of Generic Entry Maximum Payment Offered by Patent-Holder
Source:
Minimum Payment Acceptible to Generic Firm
Own analysis.
Figure 2.4
The maximum and minimum acceptable payments
transfer.85 As a result, both the generic company and originator negotiate to agree on a particular payment level and entry date acceptable to both parties.86 2.58 The potential for a period of generic exclusivity is likely to play an important role in forming specific terms of a reverse payment settlement. A lack of generic exclusivity may limit incentives to engage in settlement. The Supreme Court noted in the Actavis opinion that a generic firm that has no claim to generic exclusivity post-trial or post-settlement is unlikely to challenge the patent in the first place.87 A successful challenge to the patent where no generic exclusivity is available would lead to other generic firms free-riding on expensive litigation carried out by the generic and then compete against the generic, resulting in lower prices and profits. Likewise, a large settlement with 85
86 87
It is important to note that in this stylised example, the originator’s offer is made in relation to profits that could be earned after the expected date of entry. In this example a consideration of other factors such as liquidity and profits that can be earned by the originator prior to the expected generic entry date are irrelevant to the negotiation of the settlement. In this sense, and specific to this example, the reverse payment represents a sharing of the portion of the incremental profits earned by the originator beyond the expected generic entry date. A game theoretic analysis would be able to identify potential equilibria given case specific facts. Federal Trade Commission v. Actavis, Inc. et al., 133 S. Ct. 2223, at 2235 (2013).
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a generic firm that could not prevent entry by other generics would not be offered by an originator because: (i)
The patent-holder would know that the generic firm stands to earn substantially less upon entry if other generic companies enter the market; and (ii) It would signal to other generics that the patent is weak, and thus less costly to litigate, therefore provoking additional patent litigation. If the patent litigation proceeds to trial, excluding the potential for counter- 2.59 claims, the optimal outcome for the generic firm would be to obtain immediate entry with a period of generic exclusivity. During this time the generic company and originator may earn duopoly profits. The duration of generic exclusivity and the number of generic companies granted exclusivity depends on case specific factors and the relevant jurisdiction. Thus, the potential for the generic firm to be the only producer of the pharmaceutical product other than the originator after the expiry of the patent is an important bargaining chip for settlement. B. How are the competitive effects of patent settlements without value transfers evaluated? After an originator has settled its infringement suits against generic com- 2.60 panies, regulators and courts must employ an economic framework for evaluating the competitive effects of the agreement. A settlement that results in generic entry after the date on which a trial verdict would be expected but no value is transferred between parties provides a useful context for understanding the basic economic framework for evaluating the competitive effects of a reverse payment settlement. Pharmaceutical patent settlements that affect only the date of entry and 2.61 contain no value transfers are widely considered to be of little concern to competition authorities.88 A generic company would be incentivised to enter the market as soon as possible in the absence of a value transfer. Any settlement that allows for entry before the patent expiry date without a value 88
As noted by the Commission (2010), there are exceptional circumstances where such restrictions can infringe competition law. For example, settlements outside the exclusionary zone of the patents and/or settlement agreements on a parent for which the patent-holder knows that it does not meet the patentability criteria may attract competition law scrutiny. See European Commission, “1st Report on the Monitoring of Patent Settlements’ (DG Competition) COM (2010), para. 13. In the US, generic exclusivity laws such as the 180-day exclusivity period under the US Hatch-Waxman Act would influence settlement discussion and, thus, the conceptual model for evaluating the competitive effects of the settlement.
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transfer reflects the convergence in the beliefs of both parties relating to the outcome of any litigation and its associated costs.89 It is, however, theoretically possible for a settlement without any transfer of value to be problematic from an anti-trust perspective, as shown in Box 2.2. BOX 2.2
EXPECTED ENTRY DATES
Suppose that a ruling against an originator at trial would result in many generic companies entering the market but the originator settles with only one generic company. In this hypothetical scenario, the originator can provide the generic company party to the settlement with a strong incentive to accept the settlement by offering to allow it to enter the market sooner than its expected date of entry, i.e. the probability-weighted date of entry. If no other generic company is able to enter into litigation against the originator or launch its competing product until the originator’s patent expires, purchasers are likely to pay higher prices when only one generic company has entered.90 Accordingly, purchasers may be harmed as a result of this settlement that contains no transfer of value.
2.62 The situation in Box 2.2 is unlikely to arise as it suggests that the settling generic company has some technological ability to circumvent the patent that other potential generic entrants do not possess. This theoretical example is inconsistent with a situation in which the patent is unenforceable (i.e. invalid) because any generic company could challenge an unenforceable patent. After observing settlement of an unenforceable patent, all other generic companies would enter litigation (and possibly seek a settlement as well). 2.63 It is important to note that procompetitive outcomes are possible in this theoretical example. Purchasers may benefit more from duopolistic prices resulting from the accelerated entry of one generic company than they would from oligopolistic prices occurring at the expected entry date.91 That is the procompetitive benefits to purchasers resulting from the settlement outweigh the negative consequences of delayed entry by subsequent generic companies.
89
90 91
For example, a settlement that allows for immediate generic entry (by one or more generic companies) with no value transfer would indicate that both parties agree that the relevant patent is particularly weak. In this example, the alternative to settlement is to enter into litigation. As mentioned above, the length and costs of litigation are uncertain. As outlined above, greater price erosion from the pre-patent price of the pharmaceutical product occurs as more generic companies enter the post-patent market. Schulenburg et al. (2011) found that generic entries gradually decrease price over time rather than having a dramatic immediate effect in Denmark, France, Germany, Netherlands, Sweden and the United Kingdom. Thus, if after the settlement generic companies were able to enter the market immediately, then generic entry of one generic company would be beneficial. See von der Schulenburg et al., supra note 48.
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C. How are the competitive effects of a reverse payment settlement evaluated with value transfers? Discerning the potential benefits from reverse payment settlements implies a 2.64 case specific analysis. As acknowledged by the Commission in the Lundbeck case not all patent settlements that contain payments of some kind are “problematic under [European] Union competition law”.92 In the Servier case, the Commission notes that it “examines value transfers on a case by case basis, to establish whether such transfers amount to a substantial inducement for the generic to withdraw from competition”.93 If practical considerations facing generic and originator companies are ignored 2.65 in the assessment of reverse payment settlements, then virtually all reverse payment settlements are anticompetitive. Shapiro (2003) develops a model that focuses on the welfare effects of a settlement containing an agreed date of entry and an established probability that a patent is considered valid. Owing to the limited scope of the model he finds that “Presumably, the patent holder would not pay more than avoided litigation costs unless it believed that it was buying later entry than it expects to face through the litigation alternative.”94 In relation to Box 2.1 above, if litigation costs are non-negligible, then the 2.66 originator and generic company can only avoid infringing competition law by agreeing to a date of entry within six years of concluding the settlement in exchange for a payment of similar scale to the legal costs of continuing litigation through the verdict. A regulator observing such an agreement may conclude from a “quick look” at the case that the settlement result in a four-year delay to generic entry after the anticipated date of trial verdict and the payment from the originator to the generic company is compensation for the delay. However, an assessment of the facts specific to the hypothetical case in the example would be required to determine that the expected date of entry is in six years from the date of settlement. Proponents of the “quick look” approach suggest that litigation costs are small and that any large payment must therefore be an anticompetitive transfer for delaying entry further. This means that the benefits of certain reverse payment settlements could be overlooked. A beneficial reverse payment settlement for patients and healthcare providers 2.67 would bridge the “gap” (shown in Figure 2.5) between originators and generic 92 93 94
Case COMP/AT.39226 – Lundbeck [2013], para. 639. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1143. Shapiro, supra note 72, 391.
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Gap between parties
Agreement between patent-holder and generic company
Figure 2.5
Last entry date acceptable to generic
First entry date acceptable to patent-holder
Counterfactual entry date
Difference in acceptable entry dates
undertakings. The gap exists because of the difference in entry dates acceptable to generic and originator companies. Without the option of a reverse payment settlement, there could be no mutually agreeable date of entry.95 2.68 Benefits can be conferred to patients and health care systems through reverse payment settlements by allowing generic versions of pharmaceutical products to enter the market at an earlier stage than otherwise possible under litigation (which could last until the expiry of the patent) or the expiry of the patent. The patent-holder and generic company (or generic companies) would be incentivised to enter this procompetitive reverse payment settlement to avoid costly and time consuming litigation.96 A reverse payment settlement in this situation could allow for patented pharmaceutical products to enter the market at an earlier stage than otherwise possible under litigation, as shown in Figure 2.6. A reverse payment settlement is therefore undoubtedly procompetitive if entry under the settlement occurs prior to the expected end of the litigation. 2.69 Under Article 101 and Section 1 of the Sherman Antitrust Act, a settlement that restricts the entry of a potential competitor beyond the counterfactual entry date97 will typically be viewed as anticompetitive. Reverse payment settlements are particularly complex in the pharmaceutical industry as originators’ products are typically protected by more than one patent.98 This issue 95
96
97 98
It should be noted that the patent-holder would not be willing to make a value transfer to generic companies if the settlement resulted in an entry date earlier than the first entry date acceptable to the patent-holder in Figure 2.5. The Commission noted in the Pharmaceutical Sector Inquiry (2009) that infringement proceedings (i.e. litigation against the patent) may take several years to determine whether the generic product infringes the patent. See European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 283. In some instances, the counterfactual entry date may be prior to the expiry date of the patent. As stated by the Commission (2009), originator companies apply for primary patents to protect the active molecules. Originator companies subsequently file secondary patents relating to other aspects of the active molecules, such as dosage forms or particular pharmaceutical formulations. See European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009), para. 138.
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Feasible entry dates of generic with reverse payment settlement
Competitive Agreement between patent-holder and generic company
Anti-Competitive
Counterfactual entry date
Source: Own analysis.
Figure 2.6
The possible procompetitive effects of reverse payment settlements
has also been recognised in recent cases. In the Lundbeck case, Lundbeck obtained process patents to impede generic entry following the expiration of the compound patent.99 A generic company that is unable to invalidate or circumvent the compound patent may attempt to invalidate or circumvent the secondary patents following expiration of the primary patent. If the originator claims infringement by the generic company, then the parties may agree to a reverse payment settlement related to the secondary patent. The agreed upon date of entry would extend beyond the primary patent’s date of expiry but not the secondary patent’s date of expiry. Thus, the relevant date for evaluation of competitive effects is the date of expiry of the specific patent challenged. The additional inducement of a value transfer for generic companies to settle 2.70 is one of the areas of concern for the Commission. The Commission argued in the Servier case that in the absence of the agreed inducement and hence based purely on its assessment of its chances to succeed in the patent dispute, i.e. on the merits of the patent case, the generic company as a reasonable economic operator100 would not accept the commercial limitations which are accepted in the settlement and instead act independently in keeping with its own specific competitive incentives and resort to more procompetitive solutions (for example, continued litigation, acceptance of an early entry settlement).101
In the assessment of reverse payment settlements, the Commission’s current 2.71 approach does not address the situation whereby other practical and theoretical considerations beyond the beliefs about patent strength and litigation costs 99 100
101
Case COMP/AT.39226 – Lundbeck [2013], para. 147. Footnote added. It is unclear with the use of the term “reasonable economic operator” in the case of Servier whether the Commission assumes that generic and originator companies operate using perfect information or imperfect information in settlement negotiations. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1138.
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can allow for a reverse payment settlement with an entry date prior to the otherwise expected date of generic entry. Such a settlement would ultimately benefit patients and healthcare systems through earlier generic entry than expected under litigation. In evaluating his model of settlement, Shapiro (2003) points out that in more complex settings “if other factors are brought into the analysis, such as risk aversion and asymmetric information about market conditions”, reverse payment settlements may not necessarily be anticompetitive.102 2.72 Addanki and Daskin (2008) demonstrate that the presence of procompetitive outcomes, which were hypothesised in Shapiro (2003), are possible by applying risk-averse preferences to a specific theoretical model of settlement.103 Their model incorporates preferences to account for the parties’ aversion to risky litigation outcomes, a discount rate to account for the time value of money, common beliefs about the probability that the patent-holder prevails at trial, duopolistic profits following generic entry and ongoing costs to the generic company if it cannot enter immediately. Using these reasonable assumptions, they construct numerical examples that show a gap between the parties’ preferred entry dates which can only be bridged by a reverse payment. 2.73 Although the results of Addanki and Daskin (2008)’s numerical simulations depend primarily on the assumptions applied, it is noteworthy that they are able to demonstrate an instance in which generic entry occurs faster through a reverse payment settlement than expected under litigation. This type of settlement would confer substantial benefits to purchasers through earlier entry despite leading to a value transfer that may be considered quite large.104 More specifically, the first example Addanki and Daskin (2008) present shows the generic company entering 25% earlier105 than the expected entry date through a reverse payment that transfers 12% of the monopoly profits earned by the originator to the generic firm. For a blockbuster drug, 12% of profits generated over multiple years of earnings can amount to a very large transfer.106 102 103
104 105 106
Shapiro, supra note 72, 391. Addanki and Daskin, supra note 71, Appendix A. See also Addanki and Butler (2013) for a less mathematically rigorous explanation of the role of risk aversion in procompetitive reverse payment settlements. See Addanki and Butler, supra note 64, 77. Note that their model does not contain litigation costs. For example, if the entry date is one year from today then generic entry would occur in month nine. It is also important to note that the numerical simulations Addanki and Daskin (2008) present do not represent the maximum value transfer or the fastest entry that could be supported by this model. Alternative choices of parameters and more complicated versions of the model (such as allowing for differing discount rates or beliefs relating to the strength of the patent) will have an impact on the feasible set of reverse payment settlements.
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6. THE EUROPEAN APPROACH
Addanki and Daskin (2008) go on to outline several other reasons why a 2.74 reverse payment settlement may lead to a procompetitive outcome: For instance, the patentee might simply be unduly pessimistic about its case; the judge 2.75 or magistrate may have placed particular pressure on the patentee to settle; or litigation costs, including out-of-pocket costs as well as the significant opportunity costs that litigation imposes on senior management time and attention, could be a factor. There are certainly other reasons as well why the [patentee would settle on a generic entry date that is earlier than the expected entry date] … Among other things, there might be antitrust counterclaims that would be disposed of concurrently with the patent litigation, which could bear on the parties’ incentives to settle.107
In summary, investigations that focus only on the negotiated date of entry and 2.76 the size of the value transfer will overlook many of the key factors that are relevant to originators’ and generic companies’ decisions to engage in reverse payment settlements. A careful review of the specific facts of the case can reveal information that is helpful in identifying procompetitive effects of the agreement that may, on balance with any restraints from the settlement, benefit patients and health systems. In the next sections, the approach of the Commission and the US competition authorities in the assessment of reverse payment settlements will be reviewed.
6. THE EUROPEAN APPROACH A. Overview of the regulatory assessment in Europe After numerous landmark decisions regarding reverse payment settlements, 2.77 the Commission has provided some insight as to whether certain reverse payment settlements infringe Article 101. The Commission’s latest approach to assess reverse payment settlements was 2.78 released nearly two years after the Commission first issued its decision in the Lundbeck case in 2013.108 In the Lundbeck and the Servier decisions, the 107 108
Addanki and Daskin, supra note 71. The Commission considered a co-promotion agreement between Janssen-Cilag B.V., a subsidiary of Johnson&Johnson, and the Dutch generic companies Hexal B.V. and Sandoz B.V, subsidiaries of Novartis/Sandoz (“the parties”) in the Netherlands in the Fentanyl case (2013). The Commission’s assessment as to whether the parties were at least potential competitors considered whether: + +
There were any regulator obstacles for Novartis/Sandoz to launch its Fentanyl patch in the Netherlands at the time the agreement was concluded; Novartis/Sandoz were preparing to launch its own Fentanyl patch at the time of the agreement; and
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Commission used a three-pronged approach to assess whether reverse payment settlements had the “potential to restrict competition by [their] nature”.109 In the Lundbeck case, the Commission concluded that agreements with value transfers induced generic undertakings not to pursue their independent efforts to enter the market. Thus, these settlements were found to infringe Article 101.110 In the decisions reviewed, the Commission noted, however, that settlements containing value transfers would be considered on a case by case basis.111 2.79 The three-pronged approach used by the Commission considered whether (along with other important case specific factors):112 The generic undertaking and the originator undertaking were at least potential competitors; The generic undertaking committed itself in the agreement to limit, for the duration of the agreement, its independent efforts to enter one or more EEA markets with the generic product; and The agreement was related to a transfer of value from the originator undertaking which substantially reduced the incentives of the generic undertaking to independently pursue its efforts to enter one or more EEA markets with [its] generic product.113
2.80 The Commission has thus far focused on delays suffered by potential competitors from entering the market due to reverse payment settlements. This view assumes that in the absence of the settlement, entry would have occurred earlier. As discussed above, in the context of patent disputes, earlier entry hinges on a patent being declared invalid such that generic entry could occur prior to the entry date foreseen in the settlement.114 Once a patent is declared invalid, generic companies would be free to enter the market after receiving the appropriate market authorisations. To assess whether such potential competition between originator and generic parties to the settlement exists, the Commission confirmed that the perceptions of market incumbents should “play a role” in its investigations.115 +
109 110 111 112 113 114 115
Johnson & Johnson perceived Novartis/Sandoz to be at least potential competitors. Case COMP/AT.39685 – Fentanyl [2013], para. 227.
Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1154. Case COMP/AT.39226 – Lundbeck [2013], para. 663. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1143. Case COMP/AT.39226 – Lundbeck [2013], para. 662. Case COMP/AT.39226 – Lundbeck [2013], para. 661. Assuming that there are no alternative non-infringement ways in which to enter the market. Case COMP/AT.39226 – Lundbeck [2013], para. 614; and Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1172.
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There are numerous issues with the Commission’s current approach that could 2.81 lead to uncertainty in future, more complex, investigations into reverse payment settlements. The Commission’s current approach relies heavily upon the en ante views of the generic and originator undertakings as to the validity of the patent and the time and cost of litigation before a settlement is agreed. The beliefs of the generic and originator undertakings are based on a subjective assessment of the likelihood that the patent in question will be declared invalid. The likelihood of entry estimated by the originator and generic companies may be incorrect and misguided given that both parties have only incomplete and imperfect information as to how the patent courts will adjudge the strength of the patent. Therefore, the Commission’s reliance upon the views of both generic companies and originator companies may not necessarily lead to an accurate assessment of the strength of the patent in question upon which a settlement was agreed. Additionally, in the Commission’s recent decisions and in the General Court’s 2.82 judgment, the concrete possibility of market entry is almost equated to certainty. The notion of potential competition in the consideration of reverse payment settlements relates to the likelihood of invalidating a patent allowing for the generic company to enter. According to the General Court’s decision, the concrete steps that generic companies made to enter the market, the internal assessment of Lundbeck regarding its patent’s invalidity together with the agreed settlement meant that generic companies were potential competitors. However, it is unclear as to whether a patent settlement restricting the generic undertaking’s entry, where the patent(s) in question had either a 1%, 50% or 80% chance of invalidation, the generic company had a very different risk profile to the originator (i.e. aggressive risk-taking) and that the agreement brought about earlier market entry than would have been the case under litigation, would still be considered anticompetitive.116 The following section will highlight the Commission’s approach in assessing 2.83 reverse payment settlements by firstly reviewing the findings of the Commission’s 2009 Sector Inquiry and the resultant monitoring programme. The approach in its recent enforcement action will then be reviewed. B. The Pharmaceutical Sector Inquiry The issue of reverse payment settlements featured prominently in the Com- 2.84 mission’s Pharmaceutical Sector Inquiry conducted in 2009. The sector 116
Judgment of General Court from 8 September 2016, Case T-472/13 Lundbeck v. European Commission, para 122.
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inquiry coincided with other initiatives to provide European patients with “safe, effective and affordable medicines, while at the same time creating a business environment that stimulates research, boosts valuable innovation and supports the competitiveness of the industry”.117 2.85 As part of the Pharmaceutical Sector Inquiry, the Commission established that between 2000 and June 2008: More than 200 settlement agreements were concluded between originator and generic companies concerning a total of 49 medicines, of which 31 were best-selling medicines whose patents were due to expire; Of the assessed settlements, approximately half restricted the entry of the generic company (“restrictive settlements”); and Of these restrictive settlements, a “significant proportion” of these agreements involved some form of value transfer from the originator to the generic company.118 As part of these restrictive settlements, over EUR 200 million was transferred directly to generic companies. 2.86 The Commission concluded in its sector inquiry that settlements that restrict generic entry using value transfers potentially infringe competition law. As a result, the Commission believed that it was necessary to conduct an annual monitoring programme. Through the monitoring programme, the Commission seeks to improve its understanding of the settlements between pharmaceutical companies and to identify possibly anticompetitive settlements that delay generic market entry to the detriment of the European consumer.119 C. Annual monitoring reports 2.87 Since the European Pharmaceutical Sector Inquiry (2009), the Commission has conducted six annual monitoring reports that reviewed patent settlements in the pharmaceutical industry from mid-2008 to 2014. 2.88 The monitoring exercise allows the Commission to gain greater understanding of the use of settlement agreements between originators and generic companies in the EEA.120 Even with the Commission’s heightened attention 117 118 119 120
European Commission, Pharmaceutical Sector Inquiry Final Report Executive Summary, (DG Competition) (2009), 1. This took the form of either a direct payment, licence agreement, distribution agreement or a “side deal”. European Commission, ‘1st Report on the Monitoring of Patent Settlements’ (DG Competition) COM (2010), para. 1. European Commission, ‘5th Report on the Monitoring of Patent Settlements’ (DG Competition) COM (2014), para. 1.
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on anticompetitive settlements, the Commission, in its monitoring exercise for 2014, regarded 88% of the patent settlements reviewed (where most settlements did not involve a value transfer) as raising no prima facie need for further competition law scrutiny.121 In each monitoring report, the Commission classified settlements using the 2.89 following categories with which the need for further antitrust scrutiny (shown in Figure 2.7) was evaluated: Category A – No limitation of generic entry – “[a] patent settlement agreement enables the generic company to enter the market and compete freely or does not require the generic company to leave the market”. Category B – Limitation on generic company – “[The] Generic company cannot enter freely with its own product. From total ban on generic entry to limited entry controlled (e.g. through license terms) by the originator (the originator).” Category B consists of two subcategories: a) B.I – No value transfer from the originator company – “[a] patent settlement agreement limits generic entry but contains no value transfer from the originator company to the generic company”. b) B.II – Value transfer from the originator company – “[a] patent settlement agreement limits generic entry and contains value transfers from the originator company to the generic company”.
High Degree
• Category B.II • Category B.I Little Scrutiny
• Category A Source: Own analysis.
Figure 2.7
121
Degree of antitrust scrutiny expected for each settlement category
European Commission, ‘6th Report on the Monitoring of Patent Settlements’ (DG Competition) COM (2015), para. 51.
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2.90 Reverse payment settlements that involve a value transfer and limit generic entry are typically allocated to Category B.II. Accordingly, reverse payment settlements would receive a high degree of antitrust scrutiny owing to the value transfer and limitations placed on generic companies to enter the market. The Commission notes that this does, however, not suggest “that agreements falling into this category would always be incompatible with EU competition law. This needs to be assessed on the basis of circumstances of each individual case.”122 2.91 Following the European Pharmaceutical Sector Inquiry, there is no clear trend in settlements categorised as B.II by the Commission, shown in Table 2.3. Table 2.3 Number of settlements in each of the monitoring reports that the Commission reviewed Categories of settlement Category A Category B.I Category B.II Total Number of Settlements Reviewed
2008/2009*
2010
2011
2012
2013
2014
57% 33% 10%
61% 36% 3%
70% 19% 11%
43% 51% 7%
45% 47% 8%
49% 39% 12%
93
89
120
183
146
76
Notes: * Second half of 2008 considered. Percentages may not add-up exactly to 100% owing to rounding. Source:
Own analysis of European Monitoring Reports.
2.92 Within Category B.II, the Commission further assessed the content of each deal involving a payment to a generic company. In 2013, the Commission found that two of the 11 B.II settlements “only enabled entry at the time the patent lapsed and included a payment and a licence to the generic company”.123 In general, the Commission noted that Category B.II settlements have stabilised at a low level.124 2.93 In the sixth monitoring report that reviewed settlement agreements in 2014, the Commission found that the Category B.II settlements reviewed did not involve an explicit value transfer from the originator to the generic company involved.125 Rather, 33% of the Category B.II settlements involved a licence and enabled the early entry of the generic drug. Only one of the settlements reviewed included a licence without any specified provisions for early generic 122 123 124 125
European Commission, ‘5th Report on the Monitoring of Patent Settlements’ (DG Competition) COM (2014), para. 17. Ibid para. 46. Ibid para. 50. European Commission, ‘6th Report on the Monitoring of Patent Settlements’ (DG Competition) COM (2015), para. 46.
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entry.126 In such instances, whilst a value transfer is theoretically present in such settlements, the Commission emphasised once again that any investigations into possibly anticompetitive settlements will consider any potential procompetitive benefits from such licences.127 D. Reverse payment investigations i. The Servier case
In the Servier case, the Commission imposed fines totaling EUR 427.7 million 2.94 on Servier and five generic companies for restricting market entry through numerous reverse payment settlements and the acquisition of non-infringing technologies designed to delay market entry.128 According to the Commission, Servier and generic companies concluded deals that aimed to “[protect] Servier’s bestselling blood pressure medicine, Perindopril”.129 The Commission concluded that these settlements infringed Article 101. The reverse payment settlements were part of Servier’s overall strategy to delay generic entry. In the Servier decision, the Commission assessed whether the reverse payment settlements agreed by Servier constituted a violation of Article 101. Other aspects of Servier’s wider strategy were not investigated by the Commission.130 The Commission also concluded that the reverse payment settlements agreed 2.95 by Servier together with Servier’s acquisition of other, possibly non-infringing, technologies that could be used to produce Perindopril constituted an infringement of Article 102. Servier’s acquisition of these technologies helped to further delay generic entry into the market by removing them as a competitive source in the market.131 For example, Servier acquired a technology in 2004 from Azad to “strengthen the defence mechanism” for Perindopril.132 Through Servier’s acquisitions, Servier eliminated direct competition from the patent-holders of these technologies and from generic companies that could have used these technologies as an essential input in bringing generic versions of Perindopril to the market.133 126 127 128 129
130 131 132 133
Ibid para. 46. Ibid para. 47. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 3145 and para. 3186. European Commission, “Antitrust: Commission Fines Servier and Five Generic Companies for Curbing Entry of Cheaper Versions of Cardiovascular Medicine” (Brussels, 9 July 2014) http://europa.eu/rapid/ press-release_IP-14-799_en.html, accessed 15 July 2015. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 85. Ibid para. 6. Ibid para. 1799. Generic companies noted that “once an API manufacturer has got around the process patents, Servier has bought the company, sourcing API has been very difficult”. See Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 6.
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ii. Events leading up to the settlement
2.96 Perindopril is primarily used to treat cardiovascular disease such as hypertension and heart failure.134 The original patent for the molecule was filed in 1981 along with process patents in the 1980s.135 The molecule patent was granted an extension in several Member States through an SPC in which patent protection for the molecule would last until 2009 in certain Member States.136 2.97 Since its successful commercialisation, Perindopril became one of Servier’s best-selling products. In the financial year 2000/2001, Perindopril accounted for between 20% to 30% of Servier’s revenue.137 Thus, the product became increasingly important to the short-, medium- and long-term financial performance of Servier.138 Given the dramatic decreases in prices and in volumes of the originator’s product upon patent expiry associated with generic entry, Servier began to devise strategies intended to prevent or delay generic entry after the patent for Perindopril’s molecule expired.139 2.98 As part of this strategy, Servier sought to increase the patent protection around Perindopril as early as 1999 by filing new process patents.140 These patents were intended to “neutralise the arrival of generics”.141 This led to a flurry of patent filings between 2001 and 2005; where 21 of the 33 process patents filed were described by Servier internally as either “blocking patents” or “paper patents”.142 Despite Servier’s own misgivings relating to the “inventive step” of some of these patents, the respective patent applications were granted by the European Patent Office (“EPO”).143 2.99 One of the patents filed during this period, EP 1 296 947 (the “947 patent”), served as one of the substantial barriers to entry from the perspective of potential generic entrants and was central to the Commission’s investigation. Most of the ongoing patent litigations prior to the conclusion of reverse payment settlements concerned this patent.144
134 135 136 137 138 139 140 141 142 143 144
Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 86. Ibid para. 93. Ibid para. 96. Ibid para. 103. Ibid para. 105. Ibid para. 107. Ibid para. 115. Ibid para. 117. Ibid para. 122. Ibid para. 122. Ibid para. 126.
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Both generic companies as well as Servier doubted the validity of the 947 2.100 patent. Although Servier received a favourable decision from the EPO Opposition in 2006 to maintain the 947 patent in its amended form,145 Servier reserved doubts relating to the patent’s validity in Servier’s proceedings against Apotex before the High Court.146 The High Court declared the 947 patent invalid in England in 2007.147 This allowed generic companies to enter the English market. In contrast, the European patent was still in force. The generic companies with whom Servier entered into settlement agreements were part of the original ten generic companies that entered into opposition proceedings against the 947 patent in 2004.148 iii. Commission’s assessment of reverse payment settlements
The Commission considered whether each settlement constituted an infringe- 2.101 ment in itself based on the criteria, as described in the section above. Additionally, as part of its investigation, the Commission further considered whether:149 The settlements lasted the entire period of the patent or whether they restricted entry after the expiry of the agreement; The value transferred from the originator accounted for the expected profits of the generic company post-entry; and The restrictions contained in the settlement went beyond what Servier could have achieved through successful enforcement of its patent. a.
Potential competition
In its assessment of potential competition, the Commission sought to assess 2.102 the likelihood of generic entry absent the settlement. The factors evaluated by the Commission in its investigation include: The expectations of the generic company and originator firm as to the outcome of litigation relating to the patent concerned. Many of the settlements in the case of Servier related to the highly disputed 947 patent. The internal documents of the generic companies involved raised doubts over the validity of the 947 patent and the likelihood of defeating the patent in question. For example, prior to Niche’s agreement with Servier, Niche opposed the 947 patent before the EPO. Niche’s lawyers stated that “there are too many problems with the patent for Servier to risk asserting it against 145 146 147 148 149
Ibid para. 128. Ibid para. 127. Ibid para. 180. Ibid para. 129. Ibid para. 1155.
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Niche”.150 Internal documents also showed that Servier was reluctant to “risk suit on the 947 patent”.151 2.103 The Commission observed that generic companies felt they could overturn the process patents in force and ultimately enter the market. On the other hand, Servier was allegedly reluctant to enforce 947. The Commission also noted the substantial progress and investment made by generic companies in bringing their generic versions of Perindopril to the brink of market entry. For example, prior to Servier’s settlement with Niche/Matrix, Niche/Matrix had made substantial progress in bringing a generic alternative to the market in terms of investment and applying for market authorisations. Niche was the first generic company to apply for a marketing authorisation in the UK.152 It had also concluded 14 agreements with commercial partners in Europe. These partners had also applied for market authorisations in a number of Member States.153 In other Member States, especially in countries where Servier’s patents were declared invalid or expired, some generic companies were already active in the supply of a generic alternative to Perindopril. For example, Krka had already launched its generic version of Perindopril in a number of Central and Eastern European markets by 2006. Prior to the settlements, the Commission noted that Krka was in discussions with a number of potential generic companies as partners with the intention of entering Western European markets.154 b.
Restriction of competition
2.104 The Commission’s assessment also focused on how the settlements under investigation prevented generic competitors entering the market. In the case of Niche/Matrix, the settlement led to the parties withdrawing their opposition to the patent in question.155 The non-challenge aspect of the settlement prevented Niche/Matrix from entering the market even after the expiry of the process patent in question.156 2.105 Additionally, the Commission also considered some of the other aspects of the settlements between Servier and the generic companies to be particularly 150 151 152 153 154 155 156
Ibid para. 1290. Ibid para. 1290. Ibid para. 1283. Ibid para. 1284. Ibid para. 1674. Ibid para. 1305. Ibid para. 1317.
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restrictive. In the agreement between Teva and Servier, Teva agreed not to continue with its challenge to Servier’s patents, including the 947 patent. As part of the settlement, Teva was allowed to enter the UK market with a Perindopril manufactured using a different process to Servier’s alpha crystalline form for Perindopril.157 Thereby, Teva’s development of its own version of Perindopril had to be put on hold owing to its obligation to destroy all stock within 30 days of the agreement. Teva was also required to purchase all of its requirements of Perindopril erbumine exclusively from Servier.158 The Commission concluded that Teva could neither sell its own product nor engage in the development of an alternative to Servier’s version of Perindopril.159 If Servier refused to supply, Teva would be unable to terminate the agreement, sell its own or a third party range of Perindopril and instead would be paid damages by Servier.160 Teva’s ability to compete and to choose its source of supply independently in the UK market was thereby affected by the settlement.161 c.
Assessment of value transfer
In the final part of the Commission’s consideration of each settlement, the 2.106 quantum of the value transferred was analysed. The Commission considered how the value transfer ultimately influenced generic companies to abandon their independent efforts to enter the market. In its assessment of the value transfer, the Commission found it “instructive” 2.107 to compare the value transferred as part of the settlements with the planned sales that each generic company expected upon entry.162 As part of the agreement between Servier and Matrix, a net value transfer of GBP 11.8 million was transferred to Matrix from Servier without any value transferred in the other direction. The Commission concluded that the nature of the settlement induced Servier and Matrix into agreement rather than Matrix pursuing generic entry.163 Likewise, Teva, whilst in the process of deciding whether to complete a deal with either Servier or to conclude an agreement with Krka which would allow Teva to enter in the UK, also recognised the benefits from settling with Servier rather than entering into competition with one another as part of their settlement.164 157 158 159 160 161 162 163 164
Ibid para. 1549. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1552. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1552. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1559 and para. 1574. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1574. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1465. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1466. Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1585.
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2.108 The Commission gave due consideration to the possibility that the magnitude of the value transfer was agreed to cover the costs incurred by the generic parties in developing the generic version of the products. iv. Effects of generic entry
2.109 As discussed above, the Commission was also able to highlight the ability of generic companies to enter the market. In the Servier case, potential competition became actual competition in the UK after Servier’s patent was declared invalid. The entry of Apotex as well as other generic companies had a dramatic effect in the UK market. Average prices for Perindopril dropped almost ten-fold from between GBP 0.20–0.50 in the first half of 2007 to GBP 0.02–0.10 by the first half of 2008 as competition re-focused on price upon generic entry.165 This further strengthened the Commission’s argument that generic companies were in a position to enter the market and compete with Servier’s version of Perindopril. This is shown in Figure 2.8 below.
Source: Own analysis of the calculations of average prices in Servier (2014). See Case COMP/AT.39612 – Perindopril (Servier) [2014].
Figure 2.8 165 166
UK weighted average prices for Perindopril 166
Ibid para. 2290. 2006h1 denotes the period from January 2006 to June 2006, 2006h2 denotes the period from July 2006 to December 2006.
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v. The Lundbeck case
In 2013, the Commission fined Lundbeck EUR 93.8 million and several 2.110 generic manufacturers a total of EUR 52.2 million in relation to reverse payment settlements that were alleged to infringe Article 101.167 The Commission investigated six settlements that were concluded and implemented between January 2002 and December 2003.168 As part of the settlements, Lundbeck transferred a total of EUR 66.8 million to generic undertakings.169 These payments were transferred to prevent generic versions of Citalopram, an anti-depressant, from entering various European markets. Lundbeck filed the earliest patent associated with Citalopram in 1977. 2.111 Between 1977 and 1985, patents for the compound as well as processes used to manufacture the products were granted in many Western European countries. Citalopram eventually entered the market in the EEA in the early to mid-nineties and became a notable success for Lundbeck. Sales of Citalopram accounted for between 50–60% of Lundbeck’s total EEA sales in 1996 and 80–90% of its total EEA sales by 2002.170 As early as 1997, Lundbeck began planning for the inevitable expiration of the 2.112 patents associated with Citalopram that were due to expire in 2002.171 Lundbeck’s strategy sought to delay generic entry to allow a “window of opportunity” to transfer patients treated with Citalopram to Citalopram’s successor, Escitalopram, to ensure that its most important product continued to generate high revenue and profitability for the company in the years to come. The strategy to defend against generic entry consisted of five elements:172 Creating a window of opportunity for Escitalopram; Patenting process to manufacture Citalopram; Intervening in marketing authorisation procedures for generic Citalopram; Eliminating the competitive threat of upcoming Citalopram API producers; and Persuading generic suppliers to stop their efforts to enter the Citalopram market. 167 168 169 170 171 172
The generic companies with which Lundbeck made an agreement include Merck (GUK), Arrow, Alpharma, and Ranbaxy. COMP/AT.39226 – Lundbeck [2013], para. 192. Ibid para. 193. Ibid para. 118. The patents in question expired prior to 2002 in some European countries. Case COMP/AT.39226 – Lundbeck [2013], para. 134.
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2.113 Notably, Lundbeck started to create a body of process patents to protect Citalopram to gain this “window of opportunity”. This included a crystallisation patent that covered the process for the preparation of purified salts of Citalopram through the crystallisation of the base.173 Whilst derided by Lundbeck’s competitors as “high school chemistry”, the crystallisation process patent became Lundbeck’s main weapon to fight generic market entry in the EEA with infringement litigation.174 2.114 Despite the efforts of Lundbeck to eliminate the early attempts of generic undertakings to enter the market for Citalopram in 1999 and 2000,175 other generic suppliers continued with their plans to enter the market for Citalopram. Lundbeck adopted a two-pronged strategy: Threatening or commencing infringement litigation using the process patents filed since 1997; and For generic companies that remained undeterred by the threat of litigation, Lundbeck offered generic companies settlements that contained a transfer of value in return for the generic company to give up their independent efforts to enter the market for Citalopram.176 vi. Commission’s assessment of the settlements
2.115 In its assessment of the settlements between Lundbeck and generic companies, the Commission used the three-pronged approach detailed above. The assessment focused in particular on assessing the likelihood of competition that would have occurred without the agreement and the subsequent effect on trade. The Commission’s approach to assessing the reverse payment settlements agreed by Lundbeck was upheld by the European Union General Court. 2.116 The Commission cited in their decision comments by generic companies who believed they had a realistic chance to successfully defend themselves against a claim of patent infringement.177 Even Lundbeck was uncertain of whether they could successfully defend their process patent.178
173 174 175 176 177 178
Ibid para. 113. Ibid para. 149. Lundbeck acquired potential generic producers (e.g. VIS in 1999 para. 176) and patents relating to the manufacturing process used to produce Citalopram (e.g. Norpharma in 1999 para. 174). Case COMP/AT.39226 – Lundbeck [2013], paras. 185–86. Ibid para. 761 and para. 1031. Ibid para. 1039.
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The willingness of generic companies to enter the market was further 2.117 supported through the existence of supply agreements and marketing authorisations filed with the relevant national authorities. For example, NM Pharma, Merck (GUK)’s Swedish supplier, received marketing authorisation in Sweden and started selling the generic version of Citalopram. It planned to use the Swedish marketing authorisation to obtain market authorisation in other European countries.179 Value transfers in these settlements took the form of inventory purchases, with 2.118 the purpose of destroying generic stock, profit guarantees and lump sum payments. In some of the settlements, the value transferred was directly related to the profit that the generic company would have made if they entered the market. The Commission found that, in the case of the agreement between Merck (GUK) and Lundbeck, the value transferred from Lundbeck to Merck (GUK) approximately corresponded to the profits that Merck (GUK) expected to generate if they successfully entered the market with a generic version of Citalopram.180 In return, the generic companies agreed to remain out of the market throughout the duration of the agreements. It was unclear if generic companies were free to enter the market after the agreements expired. Similar to the Servier case, potential competition between Lundbeck and the 2.119 generic companies became actual competition. The Commission noted that, in the context of the settlement between Lundbeck and Merck (GUK), Merck (GUK) successfully entered the market in the period between the end of the first settlement and the agreement of an extension. The Commission concluded from Merck (GUK)’s successful launch, which was not hindered by any legal action started by Lundbeck, that entry in the market was not just a theoretical possibility.181 The General Court agreed with the Commission’s approach in assessing 2.120 potential competition in Lundbeck. The Commission proved that there was a “real concrete possibility” of generic products entering the market.182 One of the possible entry points for generic products was for the crystallisation patent to be found invalid. Lundbeck estimated that the patent had a 50–60% probability to be found invalid.183 179 180 181 182 183
Ibid para. 829. Ibid para. 824. Ibid para. 762. Judgment of General Court from 8 September 2016, Case T-472/13 Lundbeck v. European Commission; para. 159. Ibid para. 122.
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2.121 The Commission cited the following points in their arguments that the generic producers were potential competitors:184 +
+
+
+ +
The significant investments made by generic companies to enter the market; The steps taken by generic undertakings to enter the market (e.g. market authorisations); The fact that there were process patents available without infringing the contested process patents; No courts found a generic product to be infringing; and A non-negligible possibility for Lundbeck’s patents to be found invalid.185
2.122 The Commission also cited in several instances the opportunities for potential generic entrants to enter the market with other, allegedly, non-infringing processes that were developed during the period of the settlement. For example, the Commission noted that if Lundbeck successfully defended its process patent in the context of the Cipla API, then Arrow would have been free to import Citalopram into the UK if Cipla had switched to the allegedly non-infringing Cipla II process.186 vii. The Fentanyl case
2.123 The Commission also considered the legality of a type of reverse payment settlement in the Fentanyl case in 2013. The investigation centered on a co-promotion agreement that saw Janssen-Cilag B.V.187 (“Johnson& Johnson”), the originator, pay Hexal B.V. and Sandoz B.V.188 (“Novartis/ Sandoz”), the generic entrant, to jointly promote (but not sell) Johnson& Johnson’s (“J&J”) product to pharmacies in the Netherlands.189 The objective of the agreement was to ensure that Novartis/Sandoz would not enter with a generic version of Fentanyl patches in the Netherlands.190 2.124 Fentanyl is the generic International Nonproprietary Name (INN) of a synthetic opioid used to treat chronic pain.191 The original compound patent 184 185 186 187 188 189 190 191
It is difficult to assess the weighting of each of the above factors to determine how the Commission would assess an agreement where one or more of the above factors in the Lundbeck decision did not exist. Judgment of General Court from 8 September 2016, Case T-472/13 Lundbeck v. European Commission; para. 157. Case COMP/AT.39226 – Lundbeck [2013], para. 913. A subsidiary of Johnson&Johnson. A subsidiary of Novartis and Sandoz. Case COMP/AT.39685 – Fentanyl [2013], para. 2. Ibid para. 4. Ibid para. 69.
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for Fentanyl expired in 1982.192 The pharmaceutical product at the centre of the Commission’s investigation concerns two different types of transdermal patches containing Fentanyl: Depot patch – contains an inert alcohol gel infused with a dose of Fentanyl which is fixed to the skin providing constant administration of the opioid over a period of 48 to 72 hours;193 and Matrix patch – the follow-on product to the depot patch allowing for better adhesion and discretion for the patient.194 J&J and Novartis/Sandoz entered into the co-promotion agreement in July 2.125 2005. By this time, the period of data exclusivity of the patent covering the depot patch had already expired in the Netherlands (March 2004).195 The patents relating to the matrix patch were pending for J&J.196 Thus, prior to and during the co-promotion agreement, there were no patents protecting either the Fentanyl depot patch or the Fentanyl matrix patch. Although generic entry was theoretically possible in the Netherlands, no 2.126 generic company had ever entered the market with the depot patch.197 However, J&J was aware that Novartis/Sandoz were in a strong position to release a generic version of Fentanyl prior to the co-promotion agreement.198 If Novartis/Sandoz entered the market with a generic version of Fentanyl, then there would be a substantial reduction in the price offered by J&J. J&J expected that with generic entry, the price of Fentanyl would be reduced to 67% of its Pharmacy Purchase Price as of August 2005 (i.e. pre-generic entry).199 As noted by J&J, the co-promotion agreement would lead to no price reduction instead of competition.200 The Commission found in its investigation, using the criteria to assess 2.127 whether J&J and Novartis/Sandoz were at least potential competitors as described above, that the generic version of Fentanyl produced by Novartis/ Sandoz:
192 193 194 195 196 197 198 199 200
Ibid para. 70. Ibid para. 77. Ibid para. 78. Ibid para. 83. Ibid para. 24. Ibid para. 39. Ibid para. 110. Ibid para. 49. Ibid para. 119.
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Fulfilled regulatory requirements – marketing authorisation of the generic version of Fentanyl was attained in March 2005, four months before the co-promotion agreement was concluded.201 Accordingly, all key regulatory requirements were fulfilled for the launch of a generic version of Fentanyl;202 Was ready to be launched – on the basis of contemporaneous documents, the Commission found that Novartis/Sandoz were on the verge of launching its generic version of the drug. This included the production of product packaging material. The Commission noted that Novartis/Sandoz did not proceed with the launch as they opted for the “more profitable solution [the co-promotion agreement]”.203 A potential competitor to J&J – the Commission found that J&J perceived Novartis/Sandoz to be the most advanced potential competitors in the Netherlands at the time the co-promotion agreement was agreed.204 2.128 The Fentanyl case differs from the above cases given that the pharmaceutical product in question was not patent protected. The Commission’s assessment of whether the co-promotion agreement infringed Article 101, however, relied heavily on establishing whether J&J and Novartis/Sandoz were potential competitors. The co-promotion agreement was found to exclude a potential generic competitor in the market at a time when generic entry was imminent.205 The payment transferred to Novartis/Sandoz for limited copromotion activities considerably exceeded the expected profit that Novartis/ Sandoz would have made if they had entered the Dutch market for Fentanyl depot patches.206 Through this payment, Novartis/Sandoz was able to benefit from the supracompetitive profits made by J&J.207 E. Summary of precedent cases 2.129 The above cases provide an important initial view as to how the Commission assesses reverse payment settlements. In each case, the Commission’s assessment sought to establish whether generic companies would have entered the market if a value transfer were not present to incentivise generic companies to remain out of the market. 201 202 203 204 205 206 207
Ibid para. 229. Ibid para. 230. Ibid para. 238. Ibid para. 251 and para. 253. Ibid para. 363. Ibid para. 364. Ibid para. 365.
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In future cases, reverse payment settlements will need to demonstrate a clear 2.130 link to procompetitive benefits accruing to customers to withstand challenges from the Commission. In the three cases considered, given the relative ease to innovate around a process patent, it was difficult to establish how the settlements could benefit patients and health care systems by extending the market exclusivity of the originator’s pharmaceutical product beyond the life of the compound patent. Thus, as the Commission noted in commenting on the economic analysis prepared for Matrix in the Servier case, consumer benefits arising from settlements need to be sufficiently proven.208 The Commission has thus far categorised reverse payment settlement as a “by 2.131 object” restriction of competition. This is in stark contrast to the US treatment of reverse payment settlements. The General Court has tried to address this issue and provide some guidance as to why the reverse payments in this case were “by object” restrictions of competition in the Lundbeck case. The General Court notes that the size of reverse payments may constitute a workable surrogate for the weakness of the patent (similar to the US).209 In the Lundbeck case, however, the payment was linked to the expected market profits. This, together with the absence of provisions allowing for generic companies to enter the market once the agreements expired, the agreements going beyond the scope of the patents, and the fact that Lundbeck and the generic companies were potential competitors, led the Commission and the General Court to conclude that the agreements were “by object” restrictions of competition.210
7. THE US APPROACH POST-ACTAVIS A. The Actavis ruling The Actavis case relates to a suit brought by the FTC in 2009 against an 2.132 agreement between Solvay, which held the patent for AndroGel, a testosterone replacement drug, and two generic drug manufacturers that had sought approval from the Food & Drug Administration (“FDA”) to market generic versions of AndroGel: Actavis and Paddock.211 The generic manufacturers challenged the validity of Solvay’s patent for the formulation of AndroGel by filing a Paragraph IV Certification under the Hatch-Waxman Act. Their 208 209 210 211
Case COMP/AT.39612 – Perindopril (Servier) [2014], para. 1209. Judgment of General Court from 8 September 2016, Case T-472/13 Lundbeck v. European Commission; para. 353. Ibid para. 354. Federal Trade Commission v. Actavis, Inc. et al., 133 S. Ct. 2223 (2013), at 2229.
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filing resulted in a patent infringement claim by Solvay, which they subsequently settled in 2006 following FDA approval of Actavis’s generic. Among the terms of the settlement was the commitment by Actavis, Paddock and Par not to launch a generic version of AndroGel until 2015 and payments to Actavis of USD 19–30 million annually, to Paddock of USD 12 million in total, and to Par Pharmaceutical, a generic manufacturer joining Paddock’s patent challenge, of USD 60 million in total.212 2.133 After rulings in favour of the manufacturers in the District and Circuit Courts, the FTC appealed the decision to the Supreme Court. In a 5–3 ruling, the Court determined that reverse payment settlements must be evaluated using a rule of reason.213 In addition to its general guidance, the Court explained several considerations that led to its conclusion.214 In particular, the size of the payment was identified as a “strong indicator” of a patent-holder’s power to bring about anticompetitive harm and a “workable surrogate” for evaluating the weakness of a patent. B. Different legal assessments prior to the Supreme Court judgment 2.134 The US Supreme Court’s ruling on Actavis in 2013 addressed the disagreement amongst circuit courts over the appropriate legal framework to assess the potential anticompetitive effects of reverse payment settlements.215 Under prior reasoning, some circuit courts ruled that an originator’s ability to legally exercise its monopoly power over its technology until the expiration of its patent extended to the use of payments to prevent generic companies from challenging the originator’s patents in court. As a result, reverse payment settlements considered in these circuit courts had only been found to violate competition laws if generic entry was delayed or hindered after the expiration of the originator’s original patent.216 This reasoning is termed the “scope of 212 213 214
215 216
Ibid 2229. Ibid 2237. [A] reverse payment, where large and unjustified, can bring with it the risk of significant anticompetitive effects; one who makes such a payment may be unable to explain and to justify it; such a firm or individual may well possess market power derived from the patent; a court, by examining the size of the payment, may well be able to assess its likely anticompetitive effects along with its potential justifications without litigating the validity of the patent; and parties may well find ways to settle patent disputes without the use of reverse payments. See Federal Trade Commission v. Actavis, Inc. et al., 133 S. Ct. 2223 (2013), at 2237. Ibid 2230. In the US, reverse payment settlements are often referred to as “pay-for-delay” settlements. Our discussion so far has been limited to the exclusionary effects of the instant Agreements to delay entrance into the market, the subsequent invalidation of the patent, and the mere fact of exit payments. To the extent that these or other effects of the Agreements are within the scope of the exclusionary potential of the patent, such effects are not subject to per se antitrust condemnation … Application of rule
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patent” argument. The scope of patent argument does not account for how the probability of success at trial affects the expected entry date under litigation. Rather, a potentially valid patent is regarded as having the right to exclude competitors during patent exclusivity. The FTC’s arguments in the case against Actavis favoured the approaches 2.135 described by other circuit courts, such as In re K-Dur Antitrust Litigation. In this case, the Third Circuit opined that “the finder of fact must treat any payment from a patent-holder to a generic patent challenger who agrees to delay entry into the market as prima facie evidence of an unreasonable restraint of trade, which could be rebutted by showing that the payment (1) was for a purpose other than delayed entry or (2) offers some procompetitive benefit”.217 The reasoning in the K-Dur decision is consistent with the simplified model of reverse payment settlements envisioned by Shapiro, as described above.218 In Shapiro’s model of reverse payment settlements, the expected date of entry is the relevant benchmark for examining the competitive effects of a reverse payment settlement. However, Shapiro’s simplified theory further suggests that rational firms negotiating within the confines of competition law would settle on a reverse payment that reflects only the costs of continuing with litigation and the expected date of entry (which, as discussed above, is affected by the strength of the patent and probability of success at trial). Thus, according to the FTC’s reasoning in Actavis, termed the “quick look” approach, reverse payment settlements that delay generic entry and include value transfers greater than expected legal fees arising from litigation would be deemed anticompetitive by nature. The Supreme Court’s opinion offers a middle ground between the scope of the 2.136 patent argument, advocated by Actavis, and the FTC’s quick look argument. The Supreme Court held that courts should analyse reverse payment settlements using the rule of reason; it left the task of weighing the procompetitive and anticompetitive aspects of reverse payment settlements to the lower courts.219 This ruling opened the door for a detailed, case-by-case evaluation of the competitive effects from reverse payment settlements. As a result, the courts are called upon to develop a framework for examining a variety of issues that influence the terms of the settlement. This includes assessing: of reason analysis is similarly inappropriate, as the anticompetitive effects of exclusion cannot be seriously debated. 217 218 219
See Valley Drug Co. v. Geneva Pharm., Inc. 344 F.3d 1295, at 1311 and note 27 (2003). In re K-Dur Antitrust Litigation, 686 F.3d 197 (C.A.3 2012) at 218. See also In re Cardizem CD Antitrust Litigation, 332 F. 3d 896 (C.A 6 2003), at 900. Shapiro, supra note 72, 391. Federal Trade Commission v. Actavis, Inc. et al., 133 S. Ct. 2223 (2013), at 2238.
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a) b) c) d) e)
The probability of the generic company prevailing at trial; The expected costs of litigation; Whether there was in fact a transfer of value from the originator to the generic company; The size and nature of the value transfer; and The characteristics of the originator and generic company.
C. The Supreme Court Actavis ruling compared with the EU approach 2.137 Although the opinion expressed in Actavis and the three-pronged approach adopted by the Commission share at least the intent to apply a reasoned and detailed approach to the evaluation of reverse payment settlements, in practice there are several differences. The first prong of the EU approach, related to the assessment of whether the originator and generic companies are potential competitors, is implicit in the US review of reverse payment settlements because Hatch-Waxman certifications require that the generic product is bio-equivalent to the originator’s drug. This indicates that the generic and originator companies are likely to be perceived as potential competitors. The possibility also exists that, in a crowded therapeutic space, originators may challenge each other’s patents and be incentivised to settle any litigation through a transfer of value. In this instance, the discussion in Actavis of market power would play a similar role to the first prong of the EU evaluation of reverse payment settlements. 2.138 The second prong of the Commission’s review generally is also addressed in US cases. Both the US and EU reviews consider whether the settlement places restrictions on entry by the generic company. The US approach requires that lower courts evaluate the difficult question of whether the terms of a settlement allow for generic entry prior to the expected date of entry. In comparison, the EU approach uses the subjective assessments of each party to the settlement to arrive at an understanding of the strength of the patent which in turn could be compared with the entry date agreed to. Actavis, however, expressly favours using the size of the payment as a “workable surrogate” for the strength of the patent.220 As discussed above, the size of the payment may
220
“In a word, the size of the unexplained reverse payment can provide a workable surrogate for a patent’s weakness, all without forcing a court to conduct a detailed exploration of the validity of the patent itself.” See Federal Trade Commission v. Actavis, Inc. et al., 133 S. Ct. 2223 (2013), at 2236. The Actavis decision does not specify a benchmark for determining whether a payment is “large” or “small”. It is not yet clear if courts will measure size relative to litigation costs, the profits that a generic company might expect to earn from entry, or the profits that the originator might expect to earn from delay of the generic company.
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be large even in procompetitive settlements. To resolve this tension, US courts may choose to investigate the strength of the patent when the size of the value transfer proves unhelpful. Finally, both EU and US jurisdictions place an emphasis on the value 2.139 transfer in understanding the competitive effects of the agreement. Non-cash value transfers can feature prominently in reverse payment settlements. The Commission and US courts take these types of transfers into consideration in the assessment of competitive effects of reverse payment settlements. However, given the variety of non-cash transfers and major differences in regulatory environments it is not yet clear if there will be agreement on which types of value transfers constitute an infringement of competition law and how these transfers will be valued. For example, the commitment not to launch an authorised generic poses a unique challenge in the estimation of the settlement’s value. The current approach in the US is to treat an agreement that limits authorised generics as a competition-reducing transfer that is weighed against procompetitive terms in the settlement. Similarly, plaintiffs to lawsuits in the US have alleged that side agreements occurring contemporaneously with settlements on the entry date of a generic should be included in the estimated value of the settlement. In In re Nexium, as discussed below, plaintiffs alleged that generic companies received compensation for the delay of generic versions of Nexium in the form of a settlement whereby Nexium abstained from claiming potential damages from patent infringements relating to other pharmaceutical products. Experts in this case were tasked with evaluating whether the settlement amounts in the other matters were consistent with the damage that would have been expected but for the reverse payment settlement that the originator and generics entered into for Nexium.221 D. The FTC’s monitoring of reverse payment settlements Similar to the monitoring reports carried out by the Commission, firms in the 2.140 US are required to submit patent settlements to the FTC for review. The FTC received authority to review patent settlements in the pharmaceutical industry as part of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. The FTC reviews settlement agreements between originators and generic companies that have applied for regulatory approval of a generic
221
In re: Nexium (Esomeprazole) Antitrust Litigation, 42 F. Supp. 3d 231 (D. Mass. 2014), at 283.
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version of the originators’ pharmaceutical product. This concerns agreements that relate to: The manufacture, marketing or sale of originator or generic pharmaceutical products; or The 180-day Hatch-Waxman exclusivity period of any generic related to the originator’s pharmaceutical product must be filed with the FTC within ten days of execution.222 2.141 Settlements between generic companies related to the 180-day HatchWaxman exclusivity period are also required to be filed with the FTC within ten days of their execution. Table 2.4 shows the number of final settlements reviewed by the FTC considered to be potentially reverse payment settlements. Table 2.5 shows the number of settlements involving first filers.223 2.142 Although the intent of this review is to challenge anticompetitive reverse settlements as they occur, there has been at least one instance in which the FTC did not raise concerns regarding a settlement but the settlement in question was later challenged in private civil litigation. Challenging the dismissal of a case brought by direct purchasers of Effexor XR, an antidepressant, the FTC indicated that their inaction on a reverse settlement between Teva and Wyeth should not be interpreted as providing any form of protection from further antitrust scrutiny.224 The FTC clarified that it “reviews almost 200 pharmaceutical agreement filings annually and [it] cannot possibly identify and investigate all settlements that merit further inquiry on the timeline of private-party litigation”.225
222
223
224 225
Federal Trade Commission, “Pay-for-Delay: How Drug Company Pay-Offs Cost Consumers Billions” (January 2010) www.ftc.gov/sites/default/files/documents/reports/pay-delay-how-drug-company-pay-offscost-consumers-billions-federal-trade-commission-staff-study/100112payfordelayrpt.pdf, accessed 12 January 2016. See also Federal Trade Commission, “Medicare Prescription Drug and Improvement Act Requires Drug Companies to File Certain Agreements with the Federal Trade Commission and U.S. Department of Justice” (7 January 2004) www.ftc.gov/sites/default/files/documents/one-stops/pay-delay/040106pharm rules.pdf, accessed 23 February 2016. Generic companies who were the first to file abbreviated new drug applications on the litigated product and, at the time of settlement, were potentially eligible for 180 days of generic exclusivity under the HatchWaxman Act. Brief for Amicus Curiae Federal Trade Commission Supporting Plaintiffs-Appellants, In re: Effexor XR Antitrust Litigation, No. 3:11-cv-05479-PGS-LHG (17 Nov. 2015). Ibid.
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/ (-) 27%
3
11
FY 2005
(-) 50%
14
28
FY 2006
(-) 42%
14
33
FY 2007
24%
$10 billion
16
66
FY 2008
28%
$9.5 billion
19
68
FY 2009
27%
$9.3 billion
31
113
FY 2010
18%
$9 billion
28
156
FY 2011
29%
$8.3 billion
40
140
FY 2012
20%
$4.3 billion
29
145
FY 2013
Job: Figueroa-EU_law_of_competition_and_trade
/ 0%
0
8
40%
2
5
FY 2005
82%
9
11
FY 2006
69%
11
16
FY 2007
45%
13
29
FY 2008
47%
15
32
FY 2009
53%
26
49
FY 2010
33%
18
54
FY 2011
53%
23
43
FY 2012
32%
13
41
FY 2013
Source: Adapted table from Federal Trade Commission “Agreements Filed with the Federal Trade Commission under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Overview of Agreements Filed in FY 2013 A Report by the Bureau of Competition” (Washington, 2014).
Note: * First filer generics refer to those generic producers who were the first to file abbreviated new drug applications on the litigated product and thus were eligible for 180 days of generic exclusivity under the Hatch-Waxman Act. The financial year runs from October to September (e.g. FY 2013: 1 October 2012 to 30 September 2013).
Percentage of pay-for-delay settlements involving first filers*
P otential pay-for-d elay involving first filers *
Final settlements involving first filers*
FY 2004
Table 2.5 Settlements involving first filers considered to be potential reverse payment settlements
Source: Adapted table from Federal Trade Commission “Agreements Filed with the Federal Trade Commission under the Medicare Prescription Drug, Improvement and Modernization Act of 2003. Overview of Agreements Filed in FY 2013 A Report by the Bureau of Competition” (Washington, 2014).
Note: The financial year runs from October to September (e.g. FY 2013: 1 October 2012 to 30 September 2013).
Percentage of final settlements noted as "potential pay-for-delay" 0%
0
Potential pay-for-delay Sales of the branded pharmaceutical products potentially involved in pay-for-delay
14
Final settlements
(-)
FY 2004
Table 2.4 Monitored final settlements that the FTC considered to be potential reverse payment settlements
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E. The effects of the Actavis ruling on reverse payment settlement lawsuits 2.143 Although lower courts are now in the process of re-evaluating the Actavis case, many other lawsuits against reverse payment settlements have already begun to apply the Supreme Court’s opinions on reverse payment settlements. The question of the relative size of the value transfer has become a focus for several other cases. These cases have demonstrated the challenges in adopting the rule of reason approach. 2.144 US antitrust enforcers have taken the position that the reverse payment referenced in the Supreme Court’s Actavis decision relates to any transfer of value from the originator to the potential entrant. Thus, stock purchases, inventory acquisition or even a promise by the originator not to launch a competing authorised generic are relevant to the calculation of the payment. The FTC views clauses in settlements that restrict the launch of an authorised generic (“AG”) by the originator company as a valuable form of compensation that a brand can transfer to a generic in the course of patent settlement agreements. In its 2011 study, the FTC found that “competition from AGs during the 180-day exclusivity period has the potential to reduce both generic drug prices and generic firm revenues”.226 The Third Circuit ruled in In re Lamictal that the Actavis settlement included provisions to limit the launch of authorised generics that could be considered a form of “payment to eliminate the risk of competition”.227 Although limitations on authorised generics may 226
The FTC study elaborates on the following results: [D]epending on model specifications, competition from an authorized generic during the 180-day exclusivity period is associated with retail generic prices that are 4-8 percent lower and wholesale generic prices that are 7-14 percent lower than prices without authorized generic competition. On average, the retail price of a typical generic drug during the 180-day exclusivity period is 86 percent of the pre-entry brand price without AG competition and 82 percent of the pre-entry brand price when an AG competes. Similarly, the average wholesale price of a typical generic drug during exclusivity, which is 80 percent of the pre-entry brand wholesale price without an AG, falls to 70 percent of the brand price with AG competition. An analysis of authorized generic pricing over the long term provides no evidence that AG prices are higher than prices of other generics, allaying concerns that AGs might be less aggressive competitors. The new analysis also confirms the Interim Report’s finding that authorized generics have a substantial effect on the revenues of competing, generic firms during the 180-day exclusivity period; depending on how the models are specified, they estimate that the presence of authorized generic competition reduces the first-filer generic’s revenues by 40 to 52 percent, on average. Moreover, the impact of AG competition on first-filer revenues persists outside of exclusivity. Revenues of the first-filer generic manufacturer in the 30 months following exclusivity are between 53 percent and 62 percent lower when facing an AG.
227
Federal Trade Commission, “Authorized Generic Drugs: Short-Term Effects and Long-Term Impact” (August 2011) www.ftc.gov/sites/default/files/documents/reports/authorized-generic-drugs-short-termeffects-and-long-term-impact-report-federal-trade-commission/authorized-generic-drugs-short-term-effectsand-long-term-impact-report-federal-trade-commission.pdf, accessed 23 December 2015. In re Lamictal, No. 14-1243 (3d. Cir. June 26, 2015).
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be viewed as a form of value transfer to generic companies, such commitments by originators can also have a direct impact on prices paid by purchasers of medicines by limiting the number of competitors. Thus, in addition to factoring into the analysis whether a reverse payment is justified, commitments not to launch an authorised generic may also be considered in weighing the competitive effects of the settlement. For example, in In re Wellbutrin XL Antitrust Litigation, the district court dismissed a case against a settlement between GlaxoSmithKline PLC, Biovail Laboratories Inc., and potential generic entrants of Wellbutrin XL, a drug to treat depression. Plaintiffs in the case alleged that GlaxoSmithKline’s agreement not to launch an authorised generic in competition against other generic producers was a form of payment for delay of generic entry. The district court found that the anticompetitive features of the settlement were not outweighed by the procompetitive benefits.228 More recently, the Third Circuit of Appeals affirmed the District Court’s dismissal of the case.229 The nature of value transfers considered by courts has extended beyond the 2.145 transfer of lump-sum cash payments. In FTC v. AbbVie, the FTC has argued that AbbVie compensated Teva Pharmaceutical Industries, Ltd. to delay the launch of its generic version of the testosterone drug AndroGel, by providing a side agreement to license an unrelated cholesterol drug, TriCor.230 The District Court of New Jersey has found that plaintiffs in In re Lipitor Antitrust Litigation had not demonstrated a “reliable foundation” for estimating the value of a reverse payment to settle patent litigation on Lipitor, a drug to treat high cholesterol, which included non-cash considerations such as licences to market the drug Lipitor in non-US markets and settlement of a lawsuit on a separate drug Accupril, which treats high blood pressure.231 In an appeal consolidated with Effexor XR, a treatment for depression and other psychological disorders, the Third Circuit reversed the District Court’s dismissal, finding that plaintiffs’ allegation of the Accupril settlement in exchange for generic delay was plausible.232 Defendants subsequently appealed to the Supreme Court. Both pre- and post-Actavis, defendants have settled with purchasers for large 2.146 sums of money over alleged reverse payment settlements. Litigation in California relating to a reverse payment from Bayer to generic producers of Cipro, an orally administered antibiotic, was ongoing as the Supreme Court 228 229 230 231 232
In re Wellbutrin XL Antitrust Litigation, 133 F. Supp. 3d 734 (E.D. Pa Sep. 23, 2015), at 738. In re Wellbutrin XL Antitrust Litigation, 868 F. 3d 132 (3d. Cir. Aug. 9, 2017). Federal Trade Commission v. AbbVie Inc., Civil Action No. 14-5151 (E.D. Pa. Aug. 25, 2015). In re Lipitor Antitrust Litigation, 46 F. Supp. 3d 523 (D.N.J. 2014), at 544. In re Lipitor Antitrust Litigation, 868 F. 3d 231 (3d. Cir. Aug, 21 2017).
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reviewed Actavis. Bayer paid Barr Laboratories, Inc. USD 398.1 million to withdraw its challenge to Bayer’s patent on the API in Cipro and delay its launch until six months prior to patent expiration, at which point Barr would receive a license to sell Bayer-supplied Cipro.233 Bayer settled the case for USD 74 million shortly before the Actavis ruling, leaving Barr to proceed with the litigation alone.234 In May 2015, Teva Pharmaceutical Industries, Ltd settled with the FTC for USD 1.2 billion to end litigation over its alleged reverse payment settlement to delay the launch of a generic version of Provigil, a drug to treat sleep disorder.235 Cephalon (which was acquired by Teva in 2012) paid four generic producers over USD 300 million in total to delay launch of a generic for six years, until 2012.236 The damages will compensate direct purchasers including drug wholesalers, pharmacies and insurers. Large settlements continue today. For example, direct purchasers settled with defendants in In re: Lidoderm Antitrust Litigation for USD 166 million soon before trial was to begin.237 2.147 Despite the number of cases in the US challenging reverse payment settlements in the pharmaceutical industry, it remains rare for a case to go to trial and reach a verdict.238 In re Nexium, filed in 2012, is one such case. Plaintiffs argued that AstraZeneca entered into a settlement to delay the launch of generic versions of Nexium, a treatment for acid reflux, by three generic producers: Dr. Reddy’s; Ranbaxy; and Teva Pharmaceutical Industries, Ltd. 2.148 The settlement involved provisions to limit the launch of an authorised generic and a host of other terms that greatly complicated the court and jury’s assessment of the case. 233 234
235
236 237 238
In re Cipro Cases I & II, 348 P.3d 845, 61 Cal. 4th 116, 187 Cal. Rptr. 3d 632 (2015). In re: Cipro Cases I & II, No. 4154 and 4220 (Superior Court for the County of San Diego 18 Nov. 2013). The California Supreme Court subsequently ruled that the Actavis rule of reason framework applied to state cases, allowing the case to proceed with the generic companies. See In re Cipro Cases I & II, 348 P.3d 845, 61 Cal. 4th 116, 187 Cal. Rptr. 3d 632 (2015). Federal Trade Commission, “FTC Settlement of Cephalon Pay for Delay Case Ensures $1.2 Billion in Ill-Gotten Gains Relinquished; Refunds Will Go To Purchasers Affected By Anticompetitive Tactics” (28 May 2015) www.ftc.gov/news-events/press-releases/2015/05/ftc-settlement-cephalon-pay-delay-caseensures-12-billion-ill, accessed 2 January 2016. Ibid; Federal Trade Commission v. Cephalon, Inc., Civil Action No. 2: 08-cv-2141 (E.D. Pa. Apr. 15, 2015). In re: Lidoderm Antitrust Litigation, 14-md-02521-WHO (N.D. Ca. May 3, 2018). Indeed, parties to the direct purchaser lawsuit, In re Solodyn (Minocycline Hydrochloride) Antitrust Litigation, settled midtrial. In re Solodyn (Minocycline Hydrochloride) Antitrust Litigation, l:14-md-2503-DJC (D. Mass. Apr. 5, 2018).
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First, Ranbaxy’s settlement with AstraZeneca included a commitment not to 2.149 launch an authorised generic during Ranbaxy’s Hatch-Waxman 180-dayexclusivity period and side deals to allow Ranbaxy to distribute authorised generic versions of Plendil and Prilosec, to store AstraZeneca product, to supply the active ingredient for Nexium to AstraZeneca and to supply branded Nexium capsules to AstraZeneca in the US. Plaintiffs alleged that the terms of the settlement were a form of compensation in exchange for Ranbaxy’s commitment to withdraw its challenge to the Nexium patents and to delay launch of its generic until 27 May 2015.239 After Ranbaxy’s settlement, Teva settled with AstraZeneca, committing to 2.150 withdraw its challenges to AstraZeneca’s patents. Concurrently, AstraZeneca forgave a substantial portion of potential damages owed to AstraZeneca for potential infringement on generic sales of a different drug, Prilosec.240 Plaintiffs alleged that the forgiveness of these liabilities acted as compensation for Teva’s delayed launch. Likewise, the plaintiffs alleged that AstraZeneca agreed to forgive Dr. Reddy’s liabilities related to infringing sales of the drug Accolate as compensation for withdrawing its challenges to the Nexium patents.241 Following a review of the difficulties that generic companies faced in launching generic versions of Nexium, the court, however, concluded that the plaintiffs had offered no direct evidence that generic entry would have occurred prior to May 2014.242 The jury verdict was ultimately a loss for the plaintiffs. Despite finding that 1) AstraZeneca exercised market power in the market, 2) the settlement between AstraZeneca and Ranbaxy included a large and unjustified payment to Ranbaxy, and 3) the settlement was “unreasonably anticompetitive”, the jury did not find that Ranbaxy would have otherwise entered before the agreed-upon settlement date of 27 May 2014.243 Finally, it should be noted that the US Congress has introduced legislation (in 2.151 2015 and again in 2017) to alter the legal assessment of reverse payment settlements. Under the proposed rules, reverse settlements for pharmaceuticals would be presumptively illegal, establishing the standard for which the FTC argued, and was denied, in the Supreme Court ruling on Actavis. The bill, sponsored by Senator Amy Klobucher and entitled the “Preserve Access to Affordable Generics Act”, would create a standard by which any agreement that resolved patent infringement of a drug is presumptively anticompetitive if 239 240 241 242 243
In re: Nexium (Esomeprazole) Antitrust Litigation, 42 F. Supp. 3d 231 (D. Mass. 2014), at 262. Ibid 247. Ibid 247. Ibid 275. In re: Nexium (Esomeprazole) Antitrust Litigation, Civil Action No. 12-md-02409-WGY (D. Mass. 7 Aug. 2015), at 36.
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the generic company “receives anything of value, including an exclusive license and … agrees to limit or forego research, development, manufacturing, marketing, or sales of the [generic] product for any period of time”.244 Exceptions are provided for agreements in which the only consideration granted to the generic company is the right to market its drug before expiration of the originator’s patent, payment for reasonable litigation expenses (a maximum of USD 7,500,000), and/or a covenant not to sue the generic company on any claim that the generic drug infringes the originator’s patent. Progress on this legislation is likely to extend beyond the publication of this book. 2.152 Although the proposed legislation attempts to place limits on reverse payment settlements by broadly defining illegal settlements to include transfers of “anything of value”, it does not address all strategies that originators may employ to stave off generic entry. A reverse payment settlement is a method by which an originator and a generic company can agree on the specific terms of entry and a transfer of value in view of the probability that each party prevails at trial over the validity of a patent, among other things discussed above. Originators have, however, developed alternative strategies to prevent generic entry without agreement from generic companies. Feldman and Frondorf (2016) survey a variety of strategies they term “Generation 3.0” of generic pharmaceutical delay.245 These strategies include product hopping, evergreening, use of regulatory barriers to prevent testing of generic samples for regulatory approval and use of obscure regulatory nuances such as citizen petitions to prevent the approval of generic versions of pharmaceutical products. Owing to the complexity of the pharmaceutical approval process and the large profits at stake to originators from generic entry prior to patent expiration, legislators would likely find it difficult to prevent every form of generic delay that can be implemented by originators.
8. CONCLUSION 2.153 Reverse payment settlements are a by-product of an imperfect patent system where the breadth and validity of patents are at stake in patent litigation. In light of the imperfections in the patent systems, certain types of reverse payment settlements can provide benefits to patients and health care systems. In this instance, reverse payment settlements allow for generic entry to take 244 245
115th Congress, “S.124 – Preserve Access to Affordable Generics Act” (12 January 2017) www. congress.gov/bill/115th-congress/senate-bill/124/text, accessed 25 May 2018. Feldman and Frondorf, supra note 6.
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8. CONCLUSION
place earlier than would have been otherwise possible through either the continuation of time- and cost-consuming litigation between the originator and generic company or the eventual expiration of the patent. These benefits would need to be proved in the context of an antitrust investigation. Both originators and generic companies may face economic incentives to enter 2.154 procompetitive reverse payment settlements. Generic companies derive benefits from avoiding costly legal expenses whilst being able to enter the market earlier than would be expected under litigation. Originators benefit from secure revenue streams over the course of the settlement period. Three recent cases in Europe have revealed the Commission’s approach in 2.155 investigating reverse payment settlements. These cases shared many common characteristics such as the nature of the patent expiry (the molecule patent was due to expire in the near future/expired) and a protective body of process patents used to defend against possible generic entry but used as a basis to create settlements to avoid litigation from generic companies. It remains, however, to be seen how the Commission would approach a settlement that restricted a generic company’s challenge to molecule patents.246 There still exists uncertainty as to the way in which the Commission defines potential competition. This is particularly relevant for originators and/or generic competitors who may not be aware of the ability of each party to respectively defend their patent and enter the market. Reverse payment settlements in the US, on the other hand, have been more 2.156 likely to relate to molecule or formulation patents. This difference is largely due to the incentives created by the Hatch-Waxman Act that provides for a period of generic exclusivity to the first generic company to challenge the validity of an originator’s patent and FDA rules prohibit producers from listing process or manufacturing patents in the FDA Orange Book (which determines the relevant patents that generic companies can challenge).247 Furthermore, the US approach to evaluating competitive effects from reverse payment settlements was clarified with the Supreme Court’s 2013 Actavis ruling that instructed courts to use a “rule of reason” framework. Although reverse payment settlements are pending in various courts throughout the country, the case specific inquiry demanded by a rule of reason approach is likely to be more conducive to a finding of no anticompetitive effects than the EU’s current three-pronged approach. 246 247
This could be the case if a generic company developed a pharmaceutical product that was biologically similar to the product of the originator company. Applications for FDA Approval to Market a New Drug, 68 Fed. Reg. 36,678 (June 18, 2003).
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2.157 Further consideration also needs to be given to the way in which damage will be calculated if reverse payment settlements are found to be anticompetitive. The main customers of patented drugs are national health care systems.248 The relevant counterfactual scenario for damage is the expected entry date of the generic producer if litigation were pursued. Accordingly, the predicted date on which generic companies could have feasibly entered the market will determine the effect on prices for the pharmaceutical product in question. Excess profits earned by the originator in a period in which generic entry would have occurred could act as a first indication, especially when generic producers have entered into other international markets.
248
In the US, Medicare and Medicaid are large buyers of pharmaceuticals.
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APPENDICES Appendix 1 – the process of generic entry Europe
Under European patent law, generic entry can occur prior to the expiration of 2.158 the patent or at the point of expiration of the patent. In Europe, patents can last up to 25 years from the point of a patent application.249 A patent is enforceable across the community by either filing the patent at each respective national patent authority or at the European Patent Office. In the pharmaceutical sector, patented drugs may be placed on the market only 2.159 once they have received market authorisation, either on a national or community basis. In some cases, pharmaceutical companies may only have a limited period of exclusivity. This can result from the length of time between patent application and market authorisation. Thus, in certain cases, an extension of exclusivity of up to five years can be awarded through a Supplementary Protection Certificate (“SPC”) increasing the protection from 20 to 25 years.250 Generic producers have the ability to challenge the validity of patents 2.160 throughout a reference medicinal product’s period of exclusivity. Originators can seek an injunction in individual national courts to prevent a generic company from marketing their version of the reference pharmaceutical product. The Commission notes that it can take several years to establish whether a generic product infringes the originator’s patent.251 Litigation contesting a patent’s validity may also be settled. In such a 2.161 settlement the party that began litigation will withdraw its challenge to the patent. In return, a benefit of some kind will be transferred to the party for ending the litigation. Reverse payment settlements are one type of settlement allowing to end litigation. US
The current process for launching a generic drug was substantially altered by 2.162 the Drug Price Competition and Patent Restoration Act of 1984, more 249 250 251
Article 63 of the European Patent Convention (EPC) provides patent protection for up to 20 years. Patents can expire before if yearly renewal fees are not paid by the originator. Council Regulation (EEC) No 1768/92 of 18 June 1992 concerning the creation of a supplementary protection certificate for medicinal products [1992] OJ L182/1. European Commission, Pharmaceutical Sector Inquiry, Final Report, (DG Competition) (2009) para. 283.
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commonly known as the Hatch-Waxman Act. The Hatch-Waxman Act served the dual purpose of reducing entry costs for generics that wished to compete with originators while also providing for extensions to originators’ patents to account for delays in launching caused by regulatory review. The process for entry of biosimilar versions of original biological products was established with the passage of the Patient Protection and American Affordable Care Act in 2010 in the part of the law known as the Biologics Price Competition and Innovation Act (“BPCI Act”). The BPCI Act addresses the more complicated nature of patents and regulatory approval of generic, or biosimilar, biological products. 2.163 As the formal name of the Hatch-Waxman Act suggests, originators have benefited from extensions to the terms of their patents and thus potential delays to entry of generics. Prior to the passage of the Act, originators had seen the length of the exclusivity period wear away as regulatory review time increased. Because patents are filed prior to the testing phase of a drug, delays in FDA review were encroaching on the profitable life of the drug. For example, a drug that takes ten years to obtain final approval following patent filing will have lost half of its total patent life to regulatory review.252 Attempting to address concerns that these circumstances diminished incentives to innovate drugs requiring complicated review processes, the HatchWaxman Act allowed originators to recover part of the time during which they have a patented drug but are not yet permitted to market the drug. Since the passage of the Act, originators can extend the life of their patents for an amount of time related to the regulatory review process. Subject to limitations, the originator can file to extend the patent by one half of the time of the testing phase prior to submission of an application for approval and the entire time of the approval review period.253 The extensions are only permitted to increase the total term of the patent following approval to 14 years, and extensions are capped at five years.254 2.164 Other provisions of the law prevent competition by means other than patent exclusivity. For example, the Hatch-Waxman Act prevents submission of applications for competing new drugs or generics within five years of approval of a new chemical entity.255 The term of exclusivity can be reduced if the applicant for the competing new drug claims the drug patent is invalid or not 252
253 254 255
DiMasi et al. (2003) found that the time from the start of clinical trials to marketing approval was 90.3 months, which had fallen relative to previous studies. See Joseph A. DiMasi et al., “The Price of Innovation: New Estimates of Drug Development Costs” (2003) 22 Journal of Health Economics 151. Section 35 U.S.C. § 156(c)(1) (2012) and 35 U.S.C. § 156(c)(2) (2011). Section 35 U.S.C. § 156(c)(3) (2012) and 35 U.S.C. § 156(g)(4)(A) (2011). Section 21 U.S.C. § 355(c)(3)(E)(ii) (2011).
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APPENDICES
infringed. New applications of existing drugs can also apply for an exclusivity period of three years.256 More generally, if the generic company certifies that the originator’s patent is invalid or not infringed and the originator files suit against the generic company, then the FDA is not permitted to approve the generic company’s Abbreviated New Drug Application (“ANDA”) for 30 months unless the generic company prevails in court before the end of the period.257 Should the generic firm commercialise its drug following ANDA approval but prior to ruling on the infringement case, the brand may be able to collect damages in the event that it prevails at trial. Whereas the extensions to originator patents and non-patent periods of 2.165 exclusivity have provided increased value for originators, generic companies also have received several new rights under Hatch-Waxman. The first of these rights is the ability to file an ANDA rather than the more challenging NDA, which the originator must submit. Subject to certain limitations, the requirements for an ANDA include a demonstration that the generic company’s drug contains the same active ingredient(s); that the route of administration, dosage form, strength and labeling are the same; and that the drug is bioequivalent to the originator’s drug.258 This ANDA process was intended to speed the approval process for generic drugs. The Hatch-Waxman Act also provides protection to generic companies from patent infringement lawsuits related to testing of the drug.259 The Hatch-Waxman Act provisions that relate directly to timing of entry 2.166 concern certifications that the generic must make when filing its ANDA. The generic company must make a certification according to one of four paragraphs about the originator’s patent on the drug: “(I) that such patent information has not been filed, (II) that such patent has expired, (III) of the date on which such patent will expire, or (IV) that such patent is invalid or will not be infringed by the manufacture, use, or sale of the new drug for which the application is submitted”.260 The paragraph (IV) certification is most relevant to the issue of patent settlements as it permits the originator to bring an infringement suit against the generic company (within a 45 day window of notice). As mentioned above, the originator’s suit against the generic company starts a 30-month waiting period for approval of the ANDA. The HatchWaxman Act further provides an incentive for a firm to be the first filer of a 256 257 258 259 260
Section 21 U.S.C. § 355(c)(3)(E)(iii) (2011). Section 21 U.S.C. § 355(j)(5)(B)(iii) (2011). Section 21 U.S.C. § 355(j)(2) (2011). Section 35 U.S.C. § 271(e)(2) (2011). Section 21 U.S.C. § 355(j)(2)(A)(vii)(I)–(IV) (2011).
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paragraph IV ANDA by providing a 180-day period of exclusivity should the generic company prevail in the infringement suit.261 2.167 In the absence of the exclusivity period, if the generic company were to prevail at trial in its claims that the originator’s patent is invalid or unenforceable, it could open the door for all other generic firms to enter immediately. As additional generic entry results in reduced prices and lower profits, the generic company that devotes the time and resources to challenging the patent may be worse off than generic companies that abstain from litigation, effectively financing the cost of accelerating entry for all generic companies. Thus, no company may step forward to challenge the patent in the absence of the generic exclusivity period. The statutory right to an exclusivity period allows the generic company to recoup the cost and possibly, in some circumstances, serves as an incentive to accelerate generic companies’ pursuits of noninfringing versions of the originator’s drug. In Actavis, the Supreme Court noted “that right has proved valuable – indeed, it can be worth several hundred million dollars”.262 2.168 The entry process for generic biological products differs from that of the “small molecule” pharmaceutical products covered by the Hatch-Waxman Act. As mentioned above, the BPCI Act laid out the process for obtaining approval to market a biosimilar version of an approved biological product. The law defines biosimilarity according to two criteria: “(A) that the biological product is highly similar to the reference product notwithstanding minor differences in clinically inactive components; and (B) there are no clinically meaningful differences between the biological product and the reference product in terms of the safety, purity, and potency of the product”.263 Furthermore, a biological product may be approved as “interchangeable” with a previously approved biological product if it “may be substituted for the reference product without the intervention of the health care provider who prescribed the reference product”.264 2.169 Compared with the Hatch-Waxman Act, the rules for entry of a biosimilar product are rather simple. A producer may not apply for abbreviated approval of its biosimilar product within four years of the reference product’s approval and may not be approved for commercialisation until 12 years from the date of the reference product’s licensure, subject to limitations related to approvals for 261 262 263 264
Section 21 U.S.C. § 355(j)(5)(B)(iv) (2011). Federal Trade Commission v. Actavis, Inc. et al., 133 S. Ct. 2223 (2013), at 2229 citing Hemphill, supra note 10, 1579. Section 42 U.S.C. § 262(i)(2) (2011). Section 42 U.S.C. § 262(i)(3) (2011).
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APPENDICES
changes or modifications to the reference product.265 The intervening eightyear gap between possible applications and approval allows time for the originator and generic company to resolve patent infringement challenges in court, should the product have any patent life remaining after the 12-year exclusivity period. It should be noted that the strong incentives to bring patent challenges (and be the first in doing so) against originator products found in the Hatch-Waxman Act are not found in the BPCI Act. The BPCI Act leaves open the possibility that a biological product may be 2.170 deemed as biosimilar to a reference product while not necessarily infringing upon the reference product’s patents. Such a situation is less likely for a generic version of a small molecule pharmaceutical product because generic companies must demonstrate that their active ingredients are identical to those of the originators. Biological products, on the other hand, face greater risk to their Intellectual Property rights. Patents for biological products are more likely to be narrow in scope and less likely to be effective in preventing competitors from devising methods to work around the patents.266 Whereas the HatchWaxman Act accounts for the smaller risk of weak patent protection in the form of statutory exclusivity periods, for example, in the case of new chemical entities and a 30-month stay of approval against potentially infringing generic products, the BPCI Act provides even greater protection through its 12-year exclusivity period. Despite passage of the BPCI Act in 2010, applications for and approval of 2.171 biosimilar products have only recently occurred. The US FDA received its first biosimilar application in July 2014, for Zarxio, which referenced the biological Neupogen, used in a variety treatments related to neutropenia. In March 2015, Zarxio also became the first biosimilar biological product approved in the US.267 As of the date of this publication, no known instances of reverse payment settlements have occurred in the process of resolving claims of patent infringement in applications for biosimilar products. Patent settlement discussions are fundamentally influenced by the combin- 2.172 ation of rules laid out in the Hatch-Waxman Act and the BPCI Act. The originator and generic company must consider not only the strength of the patent in a traditional patent litigation context, but also the interpretation that a judge may take with respect to the complicated set of rules governing patent 265 266 267
Section 42 U.S.C. § 262(k)(7) (2011). See, e.g., Bruce S. Manheim Jr et al., “‘Follow-On Biologics’: Ensuring Continued Innovation In The Biotechnology Industry” (2006) 25 Health Affairs 394, at 397–98. U.S. Food and Drug Administration, “FDA Approves First Biosimilar Product Zarxio” (6 March 2015) www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm436648.htm, accessed 3 January 2016.
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extensions and exclusivity periods. In analysing a reverse payment settlement, one must evaluate how implementation of the Hatch-Waxman Act or BPCI Act would have impacted the calculus of an expected date of entry. Appendix 2 – mathematical explanation of the lower and upper bounds for the settlement offer 2.173 The patent-holder evaluates expected profits from continued litigation relative to profits from settlement. The maximisation decision for both the generic and originator companies considers the following parameters: ρ – represents the probability that the patent-holder succeeds at trial; M – represents the monopoly profits in the period of patent protection that are in excess of competitive profits earned from the pharmaceutical until the expiration of the patent. L – represents the costs of litigation. σ – (a number between zero and one) represents the profit from settlement as a percentage of the profits made during patent exclusivity without a settlement if the patent-holder were to prevail at trial; and P – represents the reverse payment made from the patent-holder to the generic firm (which may be one lump-sum amount, a series of payments, or the monetary value of some other form of transfer to the generic firm). Equation 1: Originator’s maximisation function. max {ρM – L, σM – P} P
2.174 By rearranging Equation 1, it can be observed that the originator will choose to settle if the reverse payment is less than or equal to the difference between the profits it expects if the originator succeeds or fails at trial.268 The right-hand side of Equation 2 of the inequality below is profits from settlement minus expected profits from continuing litigation. Equation 2: When the originator settles. P ≤ (σ – ρ)M + L
268
Note that there is no amount specified for profits in the event that the patent-holder loses at trial. This is because M is defined as profits in excess of competitive profits (i.e. in excess of profits if the patent is invalid). Thus, the profits for losing at trial have been normalised to zero.
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APPENDICES
As σ is simply a measure of the flow of monopoly profits before generic entry in the settlement, this inequality also identifies the earliest entry date that could be negotiated in the absence of a reverse payment, as shown in Equation 3. Equation 3: Earliest possible entry date without reverse payment settlement. σ(P = 0)M ≥ ρM – L In the absence of a reverse payment, the settlement profits until the date of 2.176 generic entry must be greater than or equal to the profits expected from continuing litigation. The generic firm does not directly select the level of the payment. Thus, the 2.177 generic company will compare the risk-adjusted oligopoly profits from continuing litigation with the payment offered plus the potentially delayed oligopoly profits. In Equation 4, ρ represents the probability that the patent-holder prevails at 2.178 trial, Lg is the cost of litigation for the generic firm, and P represents the payment from the patent-holder to the generic. Let D represent oligopoly profits and let ø (a number between zero and one) represent the profits from delayed entry as a percentage of oligopoly profits from immediate entry. Equation 4: Generic maximisation decision. max{(1 – ρ)D – Lg, P + øD} The generic firm would be better off accepting the settlement offer if the 2.179 following inequality holds. As the generic firm may have a right to generic exclusivity that could extend beyond patent expiry, ø does not identify a specific date of entry. However, in the extreme case that generic exclusivity is forfeited upon settlement and the date of entry is set to the date of patent expiry, ø would be equal to zero. Ignoring the issue of timing of generic exclusivity and assuming profits remain constant over the course of the settlement, it is possible to express this variable in terms of the originator’s profits from settling, as shown in Equation 5. Equation 5: Originator’s profits from settling.
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2.180 This assumption results in a boundary condition for the generic firm that looks very similar to the originator’s incentives, as shown in Equation 6. Equation 6: Incentives for the generic company. P ≥ (σ – ρ)D – Lg 2.181 In this context, σ should be interpreted as the percentage time delay to generic entry relative to patent expiry. If σ = 1 , then the generic delays entry until the patent expires and if σ = 0 the generic enters immediately. 2.182 If M is normalised to 1, then P, D and L can be expressed as a percentage of the monopoly profits that the originator would receive if its patent were upheld at trial. Assuming, for example, that when normalised, D = 0.3 (the generic firm’s profits are 30% of the monopolists’ if entering immediately) L = 0.05 (litigation costs are 5% of monopoly profits for both firms), and ρ = 0.2 (the patent-holder faces a 20% probability of prevailing at trial), then Figure 2.4 above would describe the feasible reverse payments (relative to M) for all values of σ . This stylised representation of incentives shows that, for the given parameters, the difference between the upper and lower bound of feasible payments grows as the generic entry date moves toward the date of patent expiry. This result would not necessarily hold for all potential parameters.
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3 ARTICLE 101 TFEU: HORIZONTAL COOPERATION AGREEMENTS IN THE PHARMACEUTICAL SECTOR Soledad Blanco Thomas, Lilia Luchianov and Thomas Weck*
1. INTRODUCTION
3.1
2. THE APPLICABLE EU COMPETITION RULES A. Article 101 TFEU B. Applicable EU regulations, guidelines and notices relevant for the assessment of horizontal cooperation C. Safe harbours, de minimis notice and block exemptions D. Ancillary restraints E. Individual assessment 3.
3.6 3.10
3.26 3.28 3.44 3.46
THE RELEVANCE OF SECTOR INQUIRIES AND OTHER STUDIES ON COMPETITION IN THE PHARMACEUTICAL SECTOR 3.51 A. EU Commission’s sector inquiries 3.52 B. National sector inquiries and studies 3.60
4. SPECIFIC ISSUES OF HORIZONTAL AGREEMENTS IN THE PHARMACEUTICAL SECTOR A. Preliminary concepts B. Patent settlement agreements C. Co-promotion agreements D. Market sharing agreements E. Co-marketing agreements F. Agreements concerning the use of the patent system G. Other horizontal agreements
3.227 3.236
5. COMPETITION IN NEW PHARMACEUTICAL AREAS: BIOLOGICAL AND BIOSIMILAR MEDICINES
3.262
3.69 3.73 3.95 3.180 3.205 3.217
1. INTRODUCTION This chapter provides an overview of the European Union (“EU”) competition 3.1 rules and principles regarding horizontal cooperation that takes place in the pharmaceutical sector, in particular, medicines for human use. The goal is to enable practitioners to assess horizontal cooperation in the pharmaceutical industry under Article 101 of the Treaty on the Functioning of the European Union (“TFEU”) and likely avoid fines for their clients. *
This contribution reflects the personal views of the authors and not necessarily the official position of the European Commission or the Monopolkommission.
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3.2 Horizontal cooperation, as the term is used in this chapter, includes agreements and all other forms of coordination (e.g. decisions by associations of undertakings and concerted practices) between actual or potential competitors. Horizontal cooperation can lead to substantial economic benefits. For example, it can be a way for the parties to share risks, save costs, increase investment or launch innovation faster. However, horizontal cooperation may also be found to infringe the provisions of Article 101 TFEU, even if the parties to that cooperation pursue a legitimate objective.1 3.3 The enforcement of competition rules is particularly strict for horizontal cooperation and can lead to the imposition of significant fines. Moreover, since the pharmaceutical industry is essential for the health of Europe’s citizens2 and plays an important role in the economic growth, employment and public health in the EU, infringements of competition law in this sector have been and are likely to continue being the object of scrutiny by competition authorities at the EU and national levels. 3.4 It is therefore necessary for practitioners to be familiar with the rules and to keep abreast of the ongoing developments and recent case law. Readers should also note that the assessment of horizontal cooperation should be conducted on a case-by-case basis taking into account the specific facts and circumstances of each case. 3.5 This chapter is structured as follows: in section 2 we will briefly review the content of Article 101 TFEU and other EU regulations, notices and guidelines that constitute the legal framework for the assessment of horizontal cooperation, in particular in the pharmaceutical industry. In section 3, we will provide a brief overview of the sector inquiries and studies in the pharmaceutical sector at the EU and national levels. In section 4, we will first discuss several concepts relevant for the assessment of horizontal cooperation in the pharmaceutical industry, and then we will discuss the details of agreements that have been or could be the object of competition scrutiny in this sector. In the final section, 5, we will discuss the relation between biological and biosimilar medicines and its potential relevance from a competition perspective.
1 2
Judgment of 11 September 2014, Groupement des cartes bancaires, C-67/13 P, EU:C:2014:2204 (“GCB” or “GCB judgment”), para. 70. EU Commission, Final report on EC Sector Inquiry into the pharmaceutical sector, 8 July 2009 (“Sector Inquiry (Final report)”), para. 1.
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2. THE APPLICABLE EU COMPETITION RULES
2. THE APPLICABLE EU COMPETITION RULES This section provides an overview of the EU competition rules to the extent 3.6 that they are relevant for assessing horizontal cooperation in the pharmaceutical sector. The objective of EU competition rules is “to prevent competition from being distorted to the detriment of the public interest, individual undertakings and consumers, thereby ensuring the well-being of the European Union”.3 During the last decade, the European Commission (“EU Commission”) and 3.7 the national competition authorities (“NCAs”) of the Member States have shown their commitment to pursue antitrust infringements in the pharmaceutical sector by making full use of their powers under competition law. Under the current system, market participants and practitioners are expected 3.8 to self-assess their agreements with competitors or potential competitors to ensure they comply with EU competition rules. Regulation No 1/20034 eliminated the possibility of notifying agreements to the EU Commission for approval and set out the rules for the enforcement of Article 101 TFEU. This regulation also decentralised the application of Article 101 TFEU allowing not only the EU Commission but also national courts and national competition authorities to apply this article in full.5 Therefore, market participants and practitioners need to understand competition rules, how they have been applied in the past to the pharmaceutical sector as well as the recent developments in this area, in order to conduct their assessment of horizontal cooperation. Practitioners would be advised to conduct a step-by-step assessment. The first 3.9 step is to verify whether horizontal cooperation falls within the prohibition of Article 101(1) TFEU and whether it leads to, or includes, any hardcore restrictions (section 2.A). In a subsequent step, practitioners need to verify whether any non-hardcore restrictions are covered by a safe harbour, de minimis rules or block exemptions (sections 2.B and 2.C). If they are not, practitioners will need to verify whether the non-hardcore restrictions 3 4
5
Judgment of 17 February 2011, TeliaSonera Sverige, C-52/09, EU:C:2011:83, para. 22; judgment of 22 October 2002, Roquette Frères, C-94/00, EU:C:2002:603, para. 42. Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty (OJ L 1, 4.1.2003, pp. 1–25) (“Regulation No 1/2003”). National competition law is not the focus of this chapter; however, it should be kept in mind that the NCAs may also apply Article 101 TFEU when the infringements have an effect on intra-community trade. Moreover, each Member State has competition rules which include national provisions equivalent to Article 101 TFEU.
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Chapter 3 ARTICLE 101 TFEU
included in or derived from horizontal cooperation could be exempted under the provisions of Article 101(3) TFEU or they could be considered ancillary restraints (sections 2.D and 2.E). A. Article 101 TFEU 3.10 Article 101 TFEU (ex-Article 81 of the EC Treaty) provides the applicable rules to assess agreements between actual or potential competitors. 3.11 Article 101(1) TFEU. This article prohibits as incompatible with the internal market: 3.12
[a]ll agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market.
3.13 Whether a horizontal agreement has a restrictive nature within the meaning of Article 101(1) TFEU depends on the content of its clauses, on the “genesis” of the agreement, on the conduct of the parties and on the circumstances in which the agreement is implemented.6 The fact that an agreement does not have restriction of competition as its sole aim and also pursues legitimate objectives does not preclude from finding a violation of competition rules.7 Moreover, the name or form of a horizontal cooperation agreement has no bearing on whether it falls or does not fall within the prohibition of Article 101(1) TFEU. The EU Commission will “pierce the commercial veil” to determine which agreements prevent, restrict or distort competition within the internal market. 3.14 Hardcore restrictions. Article 101 TFEU provides a non-exhaustive list of restrictions that are likely to fall under the prohibition of Article 101(1) TFEU 6
7
Judgment of 8 November 1983, IAZ, joined cases C-96-102, 104, 105, 108 and 110/82, EU:C:1983:310, paras. 23 to 25. See also judgment of 30 June 1966, Société Technique Minière, Case 56/65, EU:C:1966:38; judgment of 28 March 1984, Compagnie Royale Asturienne des Mines (CRAM), joined cases C-29 and 30/83, EU:C:1984:130, para. 26; and Opinion of Advocate General Tizzano of 25 October 2005 in judgment of 6 April 2006, General Motors, C-551/03 P, EU:C:2006:639, paras. 77–78. For example, in the pharmaceutical sector, practitioners should pay particular attention when an agreement with a competitor or a potential competitor enters into force close to the expiration of patents protecting one or several products that are the object (or part of the object) of the agreement. The EU Commission may also take into account the parties’ intentions although they are not a necessary factor to determine whether an agreement restricts competition by object GCB judgment (C-67/13 P), para. 54. Judgment of 20 November 2008, Beef Industry Development and Barry Brothers, C-209/07, EU:C:2008:643, para. 21. See also judgment of 8 November 1983, IAZ, joined cases C-96-102, 104, 105, 108 and 110/82, EU:C:1983:310, para. 25.
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and that are considered “hardcore” restrictions.8 This is the case where agreements: (a) (b) (c) (d)
directly or indirectly fix purchase or selling prices or any other trading conditions; limit or control production, markets, technical development, or investment; share markets or sources of supply; apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.
Restrictions by object or by effect. Under Article 101(1) TFEU, agreements may 3.15 have as their object or effect the prevention, restriction or distortion of competition. Restriction by object. The concept of restriction by object should be inter- 3.16 preted narrowly. It is reserved for cases where the harm to competition made by the restriction is sufficiently clear for the examination of its effects to be considered unnecessary.9 Hardcore restrictions falling into one of the categories expressly listed in Article 101(1) TFEU (price fixing, market sharing, etc.) are the most prominent examples of restrictions by object. However, the competition authorities have considered other conducts to amount to restrictions by object as well.10 Restriction by effect. The prohibition of Article 101(1) TFEU may apply 3.17 when the effect of an agreement is the loss of actual or potential competition, for example, between the parties to the agreement. However, according to the case law,11 there is no need to take account of the concrete effects of an agreement when it is established that it has as its object the restriction of competition.
8
9 10
11
See, for example, Commission decision of 21 November 2001, Vitamins (AT.37512). The non-exhaustive list of hardcore restrictions provided in Article 101(1) TFEU is expanded and developed in the Block Exemption Regulations. GCB judgment (C-67/13 P), supra note 1, para. 58. A restriction by object does not preclude the parties from proving that the conditions of Article 101(3) TFEU are met. Also, a finding of an infringement of Article 101 TFEU does not preclude a finding of abuse of dominance; see for example the Servier decision. Judgment of 4 June 2009, T-Mobile Netherlands and Others, C-8/08, EU:C:2009:343, para. 31; judgment of 14 March 2013, Allianz Hungarian Biztosító and Others, C-32/11, EU:C:2013:160, paras. 28–30; and Judgment of 6 October 2009, GlaxoSmithKline Services, joined cases C-501, 513, 515 and 519/06 P, EU:C:2009:610 (“GSK judgment”), para. 55.
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Chapter 3 ARTICLE 101 TFEU
3.18 When assessing restrictions of competition by effect, the EU Commission must demonstrate, with a reasonable degree of probability, that the relevant agreement has an appreciable effect on competition in the EU. The assessment of competition must be made within the actual context in which competition would occur in the absence of the agreement (the “counterfactual”).12 The General Court (“GC”) considers that the effect of the agreement and the counterfactual are “intrinsically linked”.13 3.19 The assessment of the EU Commission will have to take into account: (i) the legal and economic context in which the competitive forces operate on the relevant markets, and (ii) both the actual and potential effects of the restriction. The EU Commission will normally need to (iii) define the relevant market in which the effects of the restriction will be assessed.14 Moreover, the existence of similar agreements may reinforce their individual adverse effects.15 3.20 Market power is also relevant. Negative effects on competition are likely to occur when the parties individually or jointly have or obtain some degree of market power and the agreement contributes to the creation, maintenance or strengthening of such market power.16 Nevertheless, the existence of a certain degree of competition in the market does not mean that the exclusion of a competitor would preclude from finding an appreciable restriction of competition. 3.21 However, horizontal cooperation may fall outside the scope of Article 101(1) TFEU if it is incapable of having an appreciable effect (de minimis) on competition or on trade between Member States.17 Trade between Member States may be affected whenever it is:
12 13 14 15 16 17
EU Commission Notice, Guidelines on the application of Article 81(3) of the Treaty (OJ C 101, 27.4.2004, pp. 97–118) (“General Exemption Guidelines”), point 17. Judgment of 2 May 2006, O2 (Germany) v. Commission, T-328/03, EU:T:2006:116, para. 71. EU Commission Notice on the definition of the relevant market for the purposes of Community competition law (OJ C 372, 9.12.1997, pp. 5–13) (“Notice on Relevant Market”). Judgment of 28 February 1991, Delimitis, C-234/89, EU:C:1991:91, para. 14. General Exemption Guidelines, point 25. Judgment of 25 November 1971, Béguelin Import, Case 22/71, EU:C:1971:113, para. 16. With regard to de minimis effects, see judgment of 9 July 1969, Völk, Case 5/69, EU:C:1969:35, paras. 5–7; Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 81(1) of the Treaty establishing the European Community (OJ C 368, 22.12.2001, pp. 13–15) (“de minimis notice”), EU Commission Staff Working Document of 25 June 2014, Guidance on restrictions of competition “by object” for the purpose of defining which agreements may benefit from the de minimis notice, C(2014) 4136 final (Revised version of 3.6.2015) (“De minimis notice guidance”), points 5ff.; see also section 2.C.i.
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possible to foresee with a sufficient degree of probability on the basis of a set of 3.22 objective factors of law or fact that the agreement or practice may have an influence, direct or indirect, actual or potential, on the pattern of trade between Member States.18
Article 101(2) TFEU. The agreements or decisions that fall under the 3.23 prohibition of Article 101(1) TFEU are automatically void. Article 101(3) TFEU – Exemptions. Agreements not including hardcore 3.24 restrictions may be exempted from the prohibition of Article 101(1) TFEU if they have pro-competitive elements that outweigh the anticompetitive harm. To that end, the parties to the agreement, decision or concerted practice must be able to show that they meet the four cumulative conditions of Article 101(3) TFEU, two positive and two negative:19 1. The agreement, decision or concerted practice must contribute to improving the production or distribution of goods or contribute to promoting technical or economic progress, 2. Consumers must receive a fair share of the resulting benefits, 3. The restrictions must be indispensable to the attainment of these objectives, and finally 4. The agreement must not afford the parties the possibility of eliminating competition in respect of a substantial part of the products in question.20
Several regulations and guidelines assist practitioners with the interpretation 3.25 and implementation of these conditions. They will be discussed in section 2.B below. B. Applicable EU regulations, guidelines and notices relevant for the assessment of horizontal cooperation Besides the provisions of Article 101 TFEU, practitioners entrusted with the 3.26 assessment of horizontal cooperation should also take into account the regulations, guidelines and notices issued by the EU Commission to facilitate the market participants’ self-assessment of their agreements.
18
19 20
Trade between Member States may be affected in cases where the relevant market is national or sub-national. EU Commission Notice, Guidelines on the effect on trade concept contained in Articles 81 and 82 of the Treaty (OJ C 101, 27.4.2004), paras. 22–23. General Exemption Guidelines, point 34. Judgment of 23 January 2018, F. Hoffmann-La Roche and Others, C-179/16, EU:C:2018:25 (“Avastin/ Lucentis” or “Avastin/Lucentis preliminary ruling”), paras. 96ff.
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Chapter 3 ARTICLE 101 TFEU
3.27 The EU regulations, notices and guidelines listed below are likely to be the most relevant for the assessment of horizontal cooperation in the pharmaceutical sector. (i)
The following regulations and guidelines are relevant for the implementation and interpretation of the provisions of Article 101(1) and (3) TFEU: a. Regulation No 1/2003, which implements the provisions of Article 101 TFEU and allows for these provisions to be applied by NCAs so the EU Commission focuses its resources on pursuing the most serious infringements with a cross-border dimension;21 b. Council Regulation No 2821/71 on application of Article 85(3) of the Treaty to categories of agreements, decisions and concerted practices;22 c. Guidelines on the applicability of Article 101 TFEU to horizontal cooperation agreements (“Horizontal Guidelines”), which provide a framework to companies to assess their agreements under Article 101(1) and (3) TFEU;23 d. Guidelines on the application of Article 101(3) TFEU to individual and categories of agreements, which assist on the interpretation of the conditions contained in Article 101(3) TFEU and the application of Article 101 in individual cases.24 (ii) For the assessment of de minimis restrictions of competition that fall outside the scope of Article 101 TFEU: a. Commission Notice on agreements of minor importance which do not appreciably restrict competition under Article 101(1) TFEU;25 b. Guidance on restrictions of competition “by object” for the purpose of defining which agreements may benefit from the de minimis notice.26 (iii) Block Exemptions Regulations (“BERs”), which provide guidance on the application of the exemption of Article 101(3) TFEU to particular types of agreements to ensure an effective protection of competition and adequate legal security for parties to the agreement: 21 22 23
24 25 26
Regulation No 1/2003 (OJ L 1, 4.1.2003, pp. 1–25). Regulation (EEC) No 2821/71 of the Council of 20 December 1971 on application of Article 85(3) of the Treaty to categories of agreements, decisions and concerted practices (OJ L 285, 29.12.1971, pp. 46–48). EU Commission Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements (OJ C 11, 14.1.2011, p. 1) (hereinafter Horizontal Guidelines). EU Commission Notice, Guidelines on the application of Article 81(3) of the Treaty (OJ C 101, 27.4.2004, pp. 97–118). De minimis notice (OJ C 291, 30.8.2014, p. 1). De minimis notice guidance, C(2014) 4136 final (Revised version of 3.6.2015).
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a. Commission Regulation on the application of Article 101(3) TFEU to certain categories of research and development (“R&D”) agreements (“R&D BER”);27 b. Commission Regulation on the application of Article 101(3) TFEU to certain categories of specialisation agreements (“Specialisation BER”);28 c. Commission Regulation on the application of Article 101(3) TFEU to categories of technology transfer agreements (“TTBER”);29 d. Guidelines on the application of Article 101 TFEU to technology transfer agreements (“TTBER Guidelines”).30 C. Safe harbours, de minimis notice and block exemptions The Block Exemption Regulations declare Article 101(1) TFEU inapplicable 3.28 if an agreement, decision or concerted practice falls within certain categories and meets the conditions set up in these regulations. The BERs provide safe harbours under which typically horizontal cooperation should not raise competition concerns. However, individual clauses with specific restrictions may still be impermissible.31 Moreover, an agreement including a hardcore restriction32 cannot be covered 3.29 by an exemption of Article 101(3) TFEU or a block exemption and, depending on national law, could be void and unenforceable in its entirety because hardcore restrictions are always considered to have an appreciable effect on competition and trade. This rule applies irrespective of whether the subject matter of the agreement is within the scope of an EU block exemption.
27
28
29
30
31 32
Commission Regulation (EU) No 1217/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to certain categories of research and development agreements (OJ L 335/36, 18.12.2010, p. 36); see also the Horizontal Guidelines, points 111–49. Commission Regulation (EU) No 1218/2010 of 14 December 2010 on the application of Article 101(3) of the Treaty to categories of specialization agreements (OJ L 335, 18.12.2010, p. 43); see also the Horizontal Guidelines, points 150–93 (production agreements). Commission Regulation (EU) No 316/2014 of 21 March 2014 on the application of Article 101(3) of the Treaty on the Functioning of the European Union to categories of technology transfer agreements (OJ L 93, 28.3.2014, pp. 17–23). Technology transfer agreements will be discussed in a separate chapter. EU Commission Guidelines on the application of Article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements (OJ C 89, 28.3.2014, pp. 3–50). As indicated above, technology transfer agreements will be discussed in a separate chapter. R&D BER, Article 6; TTBER, Article 5. The specialisation BER does not contain any excluded restrictions. The non-exhaustive list of hardcore restrictions provided in Article 101(1) TFEU is expanded and developed in the Block Exemption Regulations.
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i. Safe harbours and de minimis notice
3.30 In the absence of hardcore restrictions practitioners should determine whether the agreement falls within the “safe harbours” of the block exemption regulations or the de minimis notice and whether they meet the necessary conditions to avoid falling under the prohibition of Article 101 TFEU. 3.31 Safe harbours. Table 3.1 includes the most relevant safe harbour thresholds for horizontal agreements. These safe harbours apply when the combined market shares of the parties to the horizontal agreement are below the threshold in the relevant markets. 3.32 Table 3.1
Safe harbour thresholds for horizontal agreements
EU Regulation
Combined market share threshold
R&D BER33 Specialisation BER34 TTBER35 Horizontal Guidelines (joint commercialisation)36 De minimis notice38