The pharmaceutical sector has been a key enforcement priority for European competition authorities for over 10 years now. The wave of investigations that followed the European Commission’s sector inquiry that took place between 2008 and 2009 and the Commission’s Report of 28 January 20191 on the enforcement of competition law in the pharmaceutical sector between 2009 and 2017 (the Commission’s Report) illustrate this tendency.
Many of the practices on which the Commission’s Report focused have now been investigated by EU competition authorities and judged (even if not always yet by final courts) like “pay-for-delay” or product denigration. Companies seem to have learned their lesson and new investigations of these are less likely in the future. But authorities have recently shifted their interest to other types of practices which may be anti-competitive like excessive pricing or pharmaceuticals advertising and online sales.
With 20 pending investigations currently on the way in the EU, the pharmaceutical sector is still high on the agenda of EU competition authorities.
Limitation to generics market entry
Several practices aim at delaying the market entry of generics. Pay-for-delay agreements are settlements by which generic companies agree to delay or prevent generic or biosimilar entry in exchange for a financial counterpart. Such practices can be caught by the prohibition of both anti-competitive agreements and abuse of dominant position.
After the UK Competition and Markets Authority (CMA) fined GSK and certain generics businesses for pay-for-delay arrangements in 2016 (being anti-competitive agreements and, for GSK, the abuse of dominant position), the UK Competition Appeal Tribunal (CAT) referred several questions to the Court of Justice of the European Union (CJEU). The CAT thought these questions should be considered by the European courts, as they are linked to the issues also under appeal in the European courts in the Lundbeck and Servier pay-for-delay cases. More precisely, the CAT asked:
- under what circumstances entering into a pay-for-delay agreement may constitute an abuse of dominant position of the patent holder; and
- certain questions regarding market definition in the context of practices that aim at delaying generic entry.
On 30 January 2020, the CJEU handed down its judgement and considered that these pay-for-delay agreements may constitute “by-object” restrictions to competition if it is clear that the net gain from the transfer of value by GSK in favour of the generics businesses can have no other explanation than the commercial interest of the parties not to engage in competition on the merits, unless sufficiently significant pro-competitive effects exist. The CJEU also held that these pay-for-delay agreements may as well be qualified as “by-effect” restrictions and as an abuse of dominant position of the patent holder.
This is the first time the CJEU confirms the competition relationship between companies that own the patent to a drug and generics makers, although the latter are not active yet on the market. This decision gives an insight into what might be the CJEU’s position regarding the appeal pending against the EU General Court’s decisions in similar cases (Lundbeck and Servier).
As a reminder, in 2016, the EU General Court dismissed the Danish drug maker Lundbeck’s appeal against a 2013 Commission’s decision finding that Lundbeck and generics manufacturers were party to an agreement which infringed EU competition rules. The EU General Court found that generics manufacturers should be regarded as potential competitors of Lundbeck, held that the agreement at issue was a restriction by object and upheld the €146m fine imposed on Lundbeck and generics makers. Lundbeck appealed this decision at the CJEU.
Similarly, in December 2018, the EU General Court partially annulled the 2014 Commission’s decision sanctioning the French pharmaceutical company Servier for illegal patent settlements with generic companies. The General Court reduced by €102.67m the initial amount of the fine of €427.7m imposed on Servier and several generics producers by the Commission. An appeal is currently pending before the CJEU and a decision should be expected by the end of 2020 or early 2021.
Product denigration consists in disseminating misleading or incorrect information in order to restrain generics market entry. On 11 July 2019, the Paris Court of Appel upheld the 2017 FCA’s decision sanctioning the Johnson and Johnson’s subsidiary Janssen Cilag for having abused its dominant position by implementing a strategy to delay generics entry on the French market of its pain relief medicine Durogesic. The Court confirmed the FCA’s conclusions in this investigation which started back in 2009 that Janssen Cilag implemented an unjustified product denigration strategy but reduced by €4m the €25m fine imposed by the FCA.
Currently, both the Spanish and Belgian competition authorities are investigating practices aiming at delaying generics market entry. In April and May 2019, the Spanish Competition Authority carried out inspections:
- at a firm which manufactures a combined hormonal contraceptive drug and may have tried to prevent generic market entry2; and
- at the premises of a pharmaceutical company which may have prevented its competitors from supplying inhalers to health services and hospitals.
In October 2019, the Belgian Competition Authority also conducted dawn raids at hospitals and at several pharmaceutical companies in order to investigate practices aiming at limiting the entry on the market or the expansion of biosimilar medicines competing with princeps (the Swiss company Roche confirmed that it is concerned by these inspections).
Excessive pricing
Excessive prices refer to prices set significantly above competitive levels, which reflects the strong market power of a company. Both the European Commission and national competition authorities have shown a renewed interest in addressing excessive pricing issue in the last few years.
The Italian Competition Authority fined Aspen €5.2m for excessive prices in 2016 and an appeal against this judgment is pending before the Italian State Council. The Commission also opened an investigation in 2017 regarding Aspen’s potential abuse of dominant position in the EU. Aspen is suspected of having imposed significant and unjustified price increases for some of its cancer drugs and the case is still pending.
At the end of 2016, the CMA found that Pfizer and Flynn had abused their dominant positions by excessively increasing their prices for the anti-epilepsy drug, phenytoin, and imposed a £90m fine. However, this decision was quashed by the CAT, on the grounds that the CMA’s assessment of Pfizer’s and Flynn’s respective pricing practices failed to analyse sufficiently the prices of comparator drugs. The CMA has, in turn, appealed that decision to the UK Court of Appeal, seeking to reinstate the decision. That appeal was heard at the end of 2019 and we await the Court of Appeal’s judgment.
The CMA has other investigations into pharma pricing in progress; including assessing whether Actavis charged excessive and unfair prices for the supply of hydrocortisone tablets in the UK (which witnessed increase between 9.500% and 12.000% depending on the type of tablets)3.
Advertising and online sales
Without targeting any potential anti-competitive behaviour, the French Competition Authority’s (FCA) Opinion on the distribution of medicines and medical biology sectors (Opinion) dated 4 April 20194 highlights the consequences, from a competition standpoint, of the strict regulatory framework that applies to the distribution of pharmaceuticals in France (restriction of online sales, pharmacist’s monopoly, limitation of advertising on medicines …).
In October 2019, the Belgian Order of Pharmacists received a €225,000 fine for enacting and enforcing certain rules aimed at restricting the pharmacists’ ability as regards parapharmaceuticals to advertise online and to use Google Adwords6.
Conclusion
Case-law regarding “pay-for-delay” and product denigration practices is now rather uniform and pharmaceutical companies seem well aware of the risks incurred by these practices which limits the likelihood of future cases.
But the above shows that pharmaceutical stakeholders must remain vigilant as other topics are now in the sight of competition authorities, in particular still on practices to limit generic entry but also on the level of prices. On excessive or unfair prices, which is, in all sectors a difficult competition area, there is still no settled case-law. In France in 2018, the FCA fined Sanicorse for excessive prices in the field of medical waste management but this decision was quashed by the Paris Court of Appeal at the end of last year, which considered that there was no evidence that prices increase led to excessive prices7. Some EU courts’ decisions provide clarifications regarding the methods that can be used to determine whether a price is excessive (for instance the 2017 decision “AKKA/LAA” of the CJEU). In the field of pharmaceuticals, it remains to be seen how pending investigations will evolve.
1 EU Commission, Report on Competition enforcement in the pharmaceutical sector (2009-2017), 28 January 2019, available here
2 Press releases of the Spanish Competition Authority (Comision Nacional de los mercados y la competencia) available here and here
3 Press release of the CMA, available here
4 French Competition Authority, Opinion on the distribution of medicines and medical biology sectors, 4 April 2019, available in French here
5 Pres release of the Belgian Competition Authority, available here
6 Press release of the Belgian Competition Authority, available here
7 FCA’s decision 18-D-17 of 20 September 2018 and Paris Court of Appeal decision of 14 November 2019, n°18/23992
