European Commission acts against patent and disparagement practices

In last week's landmark decision in the Healthcare and Life Sciences sector (HLS), the European Commission imposed a hefty fine of € 462.6 million on pharmaceutical company Teva for alleged abuse of a dominant position relating to its multiple sclerosis treatment, Copaxone. According to the Commission, Teva manoeuvred to delay competition for Copaxone, by extending patent protection by means of filing and withdrawing divisional patents, and disseminating misleading information about a competitor's product, in violation of EU antitrust rules that prohibit abuses of dominance. This case not only highlights the fine line between competitive strategies and antitrust law compliance, but also sets a precedent that could reshape the future of patent practices and market competition in the HLS sector.

Infringements and shift in regulatory focus

The HLS sector has long been under the scrutiny of the European Commission and various national competition authorities within the EU. While the focus of competition law enforcement was traditionally on anti-competitive agreements, including pay-for-delay agreements, there has been a shift towards investigating abuses of dominant positions. For example, a notable area of concern has been the issue of excessive pricing, with several authorities imposing fines for such practices.

More recently, competition authorities have been increasingly examining practices of disparagement and potential misuse of patent procedures by dominant pharmaceutical companies.  For example, in Italy, the AGCM investigated and fined pharmaceutical companies for entering into an agreement which, among others, led to the disparagement of competing products.  On appeal, a question was referred for a preliminary ruling from the Court of Justice of the EU, which in 2018 confirmed that a disparagement agreement was anticompetitive.

The key question being addressed in the Teva case is when legitimate commercial strategies cross the line into unlawful conduct that constitutes an abuse of a dominant position. The Commission's observations can be summarized as follows:

• Patent Procedures

The use by dominant companies of patent procedures to artificially extend market exclusivity can raise significant competition law concerns. When such company near the expiration of a patent for crucial medicine, it may attempt to maintain its position by exploiting divisional patent rules. These rules allow for the filing of new patents derived from an original patent application, focusing on different aspects of the same invention. By strategically filing a series of these divisional patents, a company can create a complex legal barrier that complicates and delays competitors' market entry, in the view of the Commission. If these patents face revocation threats, withdrawing them to avoid setting a legal precedent can further prolong the period of uncertainty for competitors, as competitors are forced to repeatedly start new lengthy legal challenges. The Commission regards this a practice of manipulating patent procedures to hinder competition and delay the introduction of alternative products.

• Information Campaign

Engaging in a systematic campaign to undermine a competitor's product, despite it being approved by health authorities for safety, efficacy, and equivalence, is deemed in violation of antitrust laws by the Commission. Such a disparagement campaign involves disseminating misleading information about the competitor's version of a medicine used to treat a specific condition, aiming to question its reliability and effectiveness. Such a campaign may target crucial stakeholders, such as healthcare professionals and decision-makers involved in the pricing and reimbursement of medicines. According to the Commission, the objective is to delay or prevent the competitor's product from entering the market.

The recent fine imposed by the Commission on Teva represents a pivotal decision, marking the first occasion on which the Commission has penalized a company for engaging in this type of strategy, consisting of both patent misuse and disparagement practices.

Although the Commission had previously adopted a commitments decision in 2024, accepting assurances from Vifor in response to preliminary concerns over a potentially anti-competitive disparagement campaign against competitors, this latest decision signals a more direct and punitive approach to enforcing competition law regarding these practices. By addressing both patent misuse and disparagement, the Commission aims to set a precedent for future enforcement actions in the sector.

In its report titled "Update on Competition Enforcement in the Pharmaceutical Sector (2018-2022) - Collaborative Efforts by European Competition Authorities for Accessible and Innovative Medicines," of January 2024, the Commission put its focus on unlawful actions of pharmaceutical companies that violate antitrust laws. These actions included disparagement, putting particular emphasis on the role of the French Competition Authority in handling such cases. The Commission highlighted that the FCA has been at the forefront of tackling disparagement, citing a series of decisions against companies involved in such practices, three of which were upheld by France's highest courts. Additionally, the report points out the misuse of patent procedures as another form of illegal activity, referencing a case handled by the Spanish competition authority where a pharmaceutical company was fined for deceitfully manipulating a patent case to hinder competition, rather than to protect its patents.

Balancing of strategies

The practices investigated in the Teva caseare not an isolated instance of competition law enforcement within the HLS sector. Over the years, there has been a clear trend of national competition authorities, notably the French competition authority, taking a proactive stance on this matters. Precedents have been established by imposing fines on multiple HLS companies for engaging in disparagement tactics.

This latest Commission decision serves as a critical reminder for companies in the HLS sector to meticulously review their commercial and business strategies, patent management practices and communication strategies/disparagement. Companies should be particularly vigilant about their communication strategies, ensuring that any claims made about competitors' products are accurate and supported by evidence. This development also highlights the critical balance between protecting intellectual property rights and avoiding practices that could be deemed anti-competitive and potentially restrict market access.