The Pharmaceutical Sector Inquiry: much ado about nothing The facts outlined in the report are deep - PowerPoint PPT Presentation

Loading...

PPT – The Pharmaceutical Sector Inquiry: much ado about nothing The facts outlined in the report are deep PowerPoint presentation | free to view - id: 2510b0-ZDc1Z



Loading


The Adobe Flash plugin is needed to view this content

Get the plugin now

View by Category
About This Presentation
Title:

The Pharmaceutical Sector Inquiry: much ado about nothing The facts outlined in the report are deep

Description:

'The facts outlined in the report are deep basic truths about this industry... litigation initiated mainly by originators but generics won 62% of the time; ... – PowerPoint PPT presentation

Number of Views:107
Avg rating:3.0/5.0
Slides: 20
Provided by: sjb8
Category:

less

Write a Comment
User Comments (0)
Transcript and Presenter's Notes

Title: The Pharmaceutical Sector Inquiry: much ado about nothing The facts outlined in the report are deep


1
The Pharmaceutical Sector Inquiry much ado about
nothing? The facts outlined in the report are
deep basic truths about this industry… there is
nothing new on what they are reporting. Jacob LJ
during his speech on the presentation of the
Preliminary Report, Nov 2008
Competition Law Association meeting London 27
July 2009 Stephen Kon
1164540
2
Overview
  • The rationale for the pharma sector inquiry
  • Background to the pharma sector inquiry
  • What insights did the pharma sector inquiry
    provide to the Commission in terms of enforcement
    and regulation in the sector?

3
EC sector inquiries
  • Rationale for sector enquiries more than mere
    fact-finding. General objectives are to
  • identify infringements of competition law for
    follow-up enforcement action and
  • make informed policy decisions in developing the
    regulatory framework.
  • Sector inquiries help direct the Commission's
    attention to where enforcement cases should be
    opened by uncovering evidence and they shine a
    spotlight on anti-competitive business practices
    which sometimes is enough to get the companies
    themselves to solve the problems. There is a
    further advantage. The improved understanding
    these inquiries give us also informs the
    Commission's policy decisions about the framework
    for the market concerned, helping us to regulate
    better." (Commissioner Kroes, SPEECH/07/186)
  • Sector inquiries are used to look
    into...possible restrictions or distortions of
    competition and their possible causes, and, where
    appropriate, to suggest ways forward" (CPN (1)
    2008) and
  • "Sector inquiries are used...where the trend of
    trade between Member States, the rigidity of
    prices or other circumstances suggest a
    restriction or distortion of competition" (Art 17
    Reg 1/2003)

4
Rationale for the pharma sector inquiry
  • Specific concerns identified by the Commission in
    the Frequently Asked Questions document
    accompanying the press release that announced the
    inquiry (MEMO/08/20, 16 January 2008)
  • Decline in innovation fewer newer products - 40
    per year 1995-1999 vs 28 per year 2000-2004 and
  • Delayed entry of generic medicines.
  • Commission Decision launching dawn raids on 15
    January 2008 describes purposes of inquiry as
    being more than fact-finding
  • There are indications of commercial practices
    by pharmaceutical suppliers including notably
    patenting or the exercise of patents which may
    not serve to protect innovation but to block
    innovative and/or generic competition,
    litigation, which may be vexatious, and
    agreements, which may be collusive.
  • These practices may cause market distortion when
    they unduly fence off incumbent suppliers of
    drugs from innovative or generic competition, for
    example, due to de facto extended patent
    protection through unilateral conduct or
    agreements. Such practices may limit consumer
    choice, reduce economic incentives to invest in
    research and development of new products and
    damage public and private health budgets.
  • In order to establish the extent of the
    above-mentioned practices and to assess them
    fully in their proper factual and economic
    context, the use of formal investigative powers
    such as those granted to the Commission for
    sector inquiries is required. (Inspection
    Decision initiating an inquiry into the
    pharmaceutical sector COMP/D2/39.514, 15 January
    2008)

5
Significant Commission resources dedicated to the
inquiry
  • Commission has dedicated team of 25-40 staff
  • Extensive questionnaires sent to over 100
    originators and generics separate questionnaires
    then issued to associations of doctors,
    pharmacists and price regulators
  • First use of Commission powers to conduct dawn
    raids to launch sector inquiry. Justification was
    that "highly confidential information may be
    easily withheld, concealed or destroyed"
    (IP/08/49). Criticised by industry as
    disproportionate. Note that in conducting dawn
    raids as part of sector inquiries, there is no
    requirement to have a suspicion for wrongdoing
    (as is the case with cartel investigations for
    example).
  • Proactive / oppressive approach to enforcement?

6
What has inquiry added to existing enforcement
action in the sector?
  • Some time prior to the inquiry, there had been a
    significant shift in the Commissions enforcement
    priorities in this sector
  • Nadia de Souza "the adoption of the AstraZeneca
    case has heralded a new era in the Commission's
    enforcement activities in pharmaceuticals aimed
    at promoting inter-brand competition by spurring
    on innovation between pharmaceutical producers
    and by increasing price competition stemming from
    generic entry after patent expiry." (CPN (1)
    Spring 2007)
  • Commissioner Kroes to European Parliament Summer
    2006 "generic competition is an area which has
    suffered from under enforcement in the past ...
    the Commission will give greater priority to
    competition in the Generic sector in the
    immediate future.
  • Commission already moving away from focus on
    parallel trade in pharma sector which culminated
    in Bayer/Adalat (Case T-41/96, 2000 and C-2/01P
    and C-3/01P 2004) and the Greek GSK case dealing
    with supply quota systems (Syfait II, 2007) and
    the Spanish GSK case (Case T-68/0 GSK v
    Commission, 2006) dealing with dual pricing
    systems.
  • Commission and NCAs practice already addressing
    matters under investigation in inquiry.

7
Enforcement practice the AstraZeneca case
  • Case history
  • Commission Decision June 2005 (Case COMP/37507
    AstraZeneca)
  • AstraZeneca appeal to Court of First Instance
    (CFI) in August 2005 (Case T-321/05 AstraZeneca)
  • Oral hearing held in late November 2008
  • AstraZeneca announces in SEC filing that CFI
    judgment expected in Spring 2009
  • First Commission Art 82 infringement decision in
    the pharma sector - Commission levied a fine of
    60 million
  • Facts misleading information was submitted to
    obtain an SPC in order to exclude generic firms
    from competing against AstraZeneca's anti-ulcer
    product Losec, accompanied by deregistration of
    Losec capsules in certain Member States and
    registration of new MUPS formulation

8
Enforcement practice the AstraZeneca case (2)
  • The AstraZeneca case addresses many of the
    fundamental issues under investigation in the
    pharma inquiry
  • Market definition and dominance in the
    application of Art 82
  • Commission moves away from relying solely on ATC3
    classification in relevant pharma market
    definition.
  • Looks at structure of market (market shares)
    patent position gatekeeper status
    incumbency/first mover and pricing independence.
  • Commission also confirmed that the special
    responsibility of dominant companies under Art 82
    must be considered in light of the specific
    circumstances of each case which show that
    competition has been weakened (Case C-33/94
    Tetra Pak v Commission), cf Final Report
    concludes that in relation to competition between
    originator companies anti-competitive effects
    can only be assessed on a case-by-case basis,
    which goes beyond what a sector inquiry can do.

9
Enforcement practice the AstraZeneca case (3)
  • Abuse through Government process
  • The enforcement, or threatened enforcement, of a
    fraudulently obtained patent or a patent obtained
    by deliberate misrepresentation or misstatements
    can be a breach of Art 81 (cf application of s2
    Sherman Act, see Walker Process Equipment, 382
    U.S. 172, 1965).
  • Commission concluded that abuse consists of
    misleading representations to patent agents,
    patent offices and national courts, knowingly
    engaged in by AstraZeneca as part of its overall
    strategy and that this was with a view to
    preventing, or least delaying generic entry.
  • Clear that the Commission is not challenging the
    grant of the SPC per se but no reason of
    principle why fact a product is covered by a
    patent should immunise it from Art 82.
  • Commission's approach in AstraZeneca case not
    fundamentally different from approach in FTCs
    s2 Sherman Act cases i.e. in Biovail (Orange
    Book listing for new 365 patent even though it
    only claimed a method for using a metabolite not
    for product itself) or BMS case (Taxol - listing
    patent in Orange Book without a reasonable good
    faith belief that the relevant patent claims were
    valid).
  • Clear statement of principle in DG Competitions
    Discussion paper on the application of Art 82 to
    exclusionary abuses at para 60, citing
    AstraZeneca as authority where a certain
    exclusionary conduct is clearly not competition
    on the merits, in particular conduct which
    clearly creates no efficiencies and which only
    raises obstacles to residual competition, such
    conduct is presumed to be an abuse.

10
Enforcement practice the AstraZeneca case (4)
  • Abuse through regulatory process/deregistration
    abuse
  • Well established in EC Case law that the
    existence of a regulatory framework does not
    exclude the application of competition law.
  • Selective requests for de-registration of Losec
    capsules for MUPS tablets. According to
    Commission, exclusionary intent demonstrated by
  • documentary evidence (internal AstraZeneca
    documents)
  • selectively planned for countries where
    AstraZeneca believes there is a good chance of
    achieving aim
  • local marketing companies would have preferred to
    keep Losec capsules on market in certain
    circumstances.
  • Single acts of withdrawing or requesting
    de-registration of a marketing authorisation will
    not normally be abusive focus here is on
    selectivity and overall intention to exclude.

11
Enforcement practice the AstraZeneca case (5)
  • More generally AstraZeneca leaves open many
    questions, including
  • Can Art 82 apply to circumstances giving rise to
    ownership of an IPR?
  • Can Art 82 impose an obligation on a company to
    maintain an MA for a product it no longer
    requires?
  • To what extent can Art 82 interfere with a
    company's rights in protecting its confidential
    information lodged with regulatory authorities?
  • In what circumstances should the use or misuse of
    public procedures and regulations, including
    administrative and judicial processes, constitute
    an 'abuse'?
  • Does the Sector Inquiry Report shed any light on
    these questions?

12
Enforcement Practice - further Commission and NCA
investigations (1)
  • Investigations by both DG Competition and NCAs
    since AstraZeneca address many of the fundamental
    issues raised during the pharma inquiry
  • Vexatious litigation and misuse of regulatory
    procedure
  • GlaxoSmithKline re Seroxat (2005) Commission
    investigation following dawn raid concerning
    complaint that GSK abused dominant position in
    market place for Seroxat through enforcement of
    its IPRs, litigation surrounding regulatory
    approvals and marketing of Seroxat (decision on
    whether to proceed pending).
  • Cf judgment of the CFI in ITT Promedia (Case
    T-111/96, 1996) - bringing legal proceedings for
    enforcement of a right may infringe Art 82 if
  • the legal proceedings cannot be regarded as an
    attempt to enforce legitimate rights and in fact
    only serves to harass the opposing party and
  • proceedings must be conceived in the framework of
    a plan the goal of which is to eliminate the
    competition.

13
Enforcement Practice - further Commission and NCA
investigations (2)
  • Misuse of patent system
  • Boehringer Ingelheim (2007) - Commission opened
    investigation into whether BI misused the patent
    system in order to exclude potential competition
    in drugs to treat chronic obstructive pulmonary
    disease (COPD). We understand the case relates to
    whether patent should have been granted (decision
    pending).
  • Settlement and licensing agreements
  • between innovator companies PPls AstraZeneca
    Takeda litigation settlement investigated but
    Commission decided not to pursue.
  • US debate dealing with reverse payment
    agreements between innovators and generics. Most
    recent action by FTC demonstrating that reverse
    payment agreements are an enforcement priority
    (suit against several reverse payment settlements
    in 2nd Circuit Court of Appeals in New York, 6
    July 2009) cf Commission Servier investigation
    (informal investigation launched toward end of
    2008, prior to publication of Final Report
    formal proceedings opened on the day the Report
    was published, 8 July 2009).
  • Unnecessary and undue interference in regulatory
    processes
  • OFT investigation that Reckitts Benckiser re
    Gaviscon (2008) lobbying medicines agencies not
    to grant an MA to a generic, lobbying doctors not
    to prescribe a generic, delaying introduction of
    a generic name for a product.

14
Enforcement Practice - further Commission and NCA
investigations (3)
  • Improper conduct to delay entry of generic
    competitor
  • Novartis (2006) OFT investigation into alleged
    financial inducements and other improper conduct
    to delay customers from switching to the generic
    form of the schizophrenia drug clozapine.
    Investigation closed due to lack of evidence.
  • Arrow Generiques (2007) Schering-Plough found to
    have engaged in practices aimed at denigrating
    Arrow's generic version of SP's product. The
    French Competition Council ordered SP to issue
    press releases in medical reviews specifying that
    generics are subject to MA approval which
    guarantees their safety. Court of Cassation
    confirmed decision.
  • Predatory pricing
  • OFT/CAT NAPP Decision (CA98/2/2001)
    (unfair/predatory pricing) and, more recently GSK
    re Cerufoxime (2007) - fined 10 million by the
    French Competition Council for infringing EC and
    French competition law by predatory pricing on
    the Cerufoxime market in an attempt to delay the
    arrival of generic products on adjacent markets
    where GSK patents were about to expire.
  • Does the Final Report offer more or better
    insights into possible enforcement action?

15
Does the Final Report help the Commission to
regulate better?
  • Final Report offers little new over the
    Preliminary Report (Nov 2008)
  • Language is toned down somewhat
  • Preliminary Report found that "competition in
    this industry does not work as well it should"
    and identified the reason for this as a series of
    practices used by originators in their "toolbox",
    often cumulatively, with "the objective of
    delaying or blocking market entry of competing
    medicines". In the Final Report, the reference to
    toolbox is changed to "variety of instruments"
    used by originator companies to extend the
    commercial life of their medicines which are
    "amongst the causes" of the delay.
  • The Commission clarified that enforcement action
    would "take into account the legitimate
    objectives to protect innovation and the
    regulatory framework".
  • Final Report concluded that "use of several
    instruments that are in themselves legitimate
    does not necessarily render their combination
    contrary to competition rules", cf Preliminary
    Report reference that cumulative practices may be
    subject to antitrust scrutiny even if
    individually such practices would have been
    lawful. (NB Final Report mentions that a
    case-by-case analysis is required - this is no
    different to the back to basics approach
    outlined in Tetra Pak v Commission Case C-33/94)
  • Many well-established legal principles are
    reiterated
  • If the existence and exercise of an industrial
    property right are not in themselves incompatible
    with competition law, they are not immune from
    competition law intervention. However, certain
    practices can only be an infringement in
    exceptional circumstances.

16
Does the Final Report help the Commission to
regulate better? (2)
  • Final Report does not include any specific
    finding of wrongdoing/infringement, identify
    types of practices that could be prohibited or
    identify any particular default in the regulatory
    framework which causes competition "not to be
    working as well as it should".
  • Final Report provides many factual details about
    the industry practices. But how new, significant
    or helpful are they? eg
  • Companies reported 698 cases of patent litigation
    initiated mainly by originators but generics won
    62 of the time
  • In the period 2000 to 2007, the report estimates
    that savings due to generic entry could have been
    20 higher that they actually were, if entry had
    taken place immediately following loss of
    exclusivity. According to the in-depth analysis
    of this sample … additional savings of some 3
    billion could have been attained, had entry taken
    place immediately and
  • Between 2000 and 2008, more than 200 settlement
    agreements were concluded between originator and
    generic companies. They covered some 49
    medicines, of which 31 medicines (ie 63) were
    best-selling medicines that lost exclusivity
    between 2000 and 2007.
  • "One cannot exclude that early entry agreements
    between originators and generics could be used
    to anticipate generic competition or to react to
    the presence of a generic company.

17
Does the Final Report help the Commission to
regulate better? (3)
  • Patents At EU level, the Final Report recommends
    the rapid establishment of the Community Patent
    which was under way in any event (as acknowledged
    in the Report). It notes that the internal
    documents seized in the dawn raids "confirm that
    some originator companies aimed at developing
    strategies to extend the breadth and duration of
    their patent protection and that they use a
    variety of instruments to extend the commercial
    life of their medicines".
  • Marketing authorisations The Commission calls
    on Member States and national authorities to make
    better use of the possibility of mutual
    recognition of marketing authorisations by
    enhancing procedures and reducing administrative
    burdens on companies, enabling full mutual
    recognition without additional requirements
    imposed on companies.
  • Information campaigns The Final Report states
    that Member States should take action (under Art
    97 of Directive 2001/83) against campaigns by
    originators (or generic) companies that seek to
    denigrate competing generic products. However,
    that Article simply provides that Member States
    should use existing legal and administrative
    structures to ensure the cessation of misleading
    advertising or, in the event that the publication
    of such advertising is imminent, to prohibit such
    publication.

18
Conclusions
  • The Final Report acknowledges that it "summarises
    the facts surrounding the respondents
    comments, but it also asserts that it proposes
    possible policy options as to how the regulatory
    framework should evolve. However, apart from the
    Community Patent, it provides no specific
    guidance on measures at EU level (legislative,
    structural) that may be adopted to address
    matters under investigation and nor does it
    identify specific regulatory structures that
    could be modified to promote competition.
  • On pricing and reimbursement, the Final Report
    reaches the unsurprising conclusion that
  • The frequent adjustment, physicians encourage,
    compulsory substitution, lowest reimbursement
    price and, in a somewhat less pronounced way, the
    differentiated co-payment policies tend to have a
    positive effect on the extent of price
    competition.
  • The detailed and complex regression analysis of
    the relationship between price drops and generic
    price concludes, unsurprisingly, that a host of
    factors such as compulsory substitution and
    lowest price policy tend to have an effect on
    generic substitution. While the detail is
    considerable, it is difficult to see what this
    proves or what the relationships are between the
    general conclusions and the specific conduct,
    other than the more encouragement there is for
    generic prescribing the more positive the impact
    will be on price.
  • Will this general factual analysis assist in
    specific enforcement actions?

19
Was this a valuable use of Commission resources?
About PowerShow.com