Big Pharma's Anticompetitive Practices Delaying Generic Entry: Has the Tide Turned?

Abstract

Competition authorities around the world have long tried to curb the anticompetitive practices of originator drug companies, including their anticompetitive agreements with generic drug companies that result in the delay of generic entry. Their work appears to bear fruit as the years 2013 and 2014 seem to mark a new chapter in competition enforcement in the sector. In July 2014 the Commission issued its third prohibition decision in the sector (i) against the French originator company Servier for its exclusionary conduct and for concluding a series of deals with generic companies to protect its best-selling blood-pressure medicine, perindopril, from generic price competition in violation of both Articles 101 and 102 of the TFEU and (ii) against five generic drug manufacturers for violation of Article 101. Through a technology acquisition and a series of reverse payment patent settlements with generic rivals, the Commission found that Servier implemented an unlawful exclusionary strategy to delay the entry of cheaper generic medicine. The Servier decision was preceded by the Commission’s Fentanyl prohibition decision in December 2013 fining Johnson & Johnson and Novartis for their respective Dutch subsidiaries’ anticompetitive agreement to delay the market entry of a cheaper generic version of the painkiller fentanyl in the Netherlands, in breach of Article 101. Earlier in June 2013 the Commission also fined the Danish pharmaceutical company Lundbeck and several generic producers for agreeing to delay the market entry of cheaper generic versions of Lundbeck’s branded citalopram, a blockbuster antidepressant, in breach of Article 101. In the same month the US Supreme Court issued its landmark Actavis opinion holding that patent owners do not enjoy immunity from the ‘rule of reason’ scrutiny of antitrust laws when making reverse payment settlements, even if the settlements are only for the terms of the patents. The Actavis decision ended a ‘dramatic split’ among Appellate Courts of different Circuits in the USA, and today it provides a new impetus to the FTC’s efforts to scrutinise pay-for-delay settlements. In the EEA, we know from public statements that the European Commission also presses forward with additional reverse payment and other new cases in the sector. In the past decades, in anticipation of reaching the ‘patent cliff ’ for their blockbuster medicines, originator drug companies have employed numerous measures that were aimed at ‘evergreening’ or otherwise extending the high rent-earning status of such medicines. These measures included inter alia life cycle strategies for follow-on products, complex patent strategies involving patent litigation/EPO opposition and patent settlements, prolongation of patent protection through SPCs, interventions before marketing or reimbursement authorities raising safety, bioequivalence or patent infringement issues, cooperation with potential generic competitors in the marketing of their products. Given rising healthcare costs and the budgetary constraints that followed the recent economic crisis, it is not surprising that these attempts have attracted, and continue to attract, the attention of the legislators and competition authorities alike in many jurisdictions. A review of the regulatory attempts to curb evergreening is beyond the scope of this note. Competition authorities scrutinise individual practices where appropriate to detect those that are likely anticompetitive and thus harmful to society. However, one should emphasise at the outset that in most cases many of the foregoing practices by the originator companies may well constitute legitimate business practices and should not, on balance, be deemed in violation of competition laws. In some other cases, however, the particular conducts of the originator companies have rightfully attracted competition law scrutiny. One such earlier case is, for example, the AstraZeneca case where the Commission fined AstraZeneca for abusing its dominant position in two infringements of Article 102. The first abuse