Competition bodies intensify their campaign to promote generic drugs

Late last month, the European Union’s antitrust regulator challenged suspected collusion in the pharmaceutical sector involving allegedly anticompetitive efforts to block the sale of cheaper generics medicines. Johnson & Johnson and Novartis were charged with colluding to delay the sale of a generic version of a drug called fentanyl, a strong pain killer, on to the Dutch market.

This probe is the latest move by the European Commission, as competition regulator in Europe and the US regulator, the Federal Trade Commission  (FTC) to scrutinize barriers to competition in the pharmaceutical industry.  The FTC has long waged a wide ranging, albeit to date relatively unsuccessful, campaign to discipline what it believes are serious threats to generic competition from the pharmaceutical sector.

In 2009, the European Commission produced a report on the pharmaceuticals sector, confirming its provisional findings that the market entry of generic drugs was being unnecessarily delayed and that the number of novel medicines reaching the market was in decline.  The inquiry showed that "originator companies used a variety of instruments to extend the commercial life of their products without generic entry for as long as possible."  Such Commission efforts echo the intense efforts in the courts, in the US Congress and in administrative proceedings, to end what are perceived as wide ranging efforts to thwart generic market entry.

Pending competition law enquiries

Sector inquiries such as this are a tool under EU competition law designed to improve the Commission’s knowledge of a sector and which are ‘upstream’ of any antitrust proceedings in specific cases, which may or may not follow.

There are a large number of competition law investigations that remain pending in Brussels and Washington.

Focusing on Europe, on the same day as it published the pharmaceutical sector inquiry final report in 2009, the Commission opened an investigation into Les Laboratoires Servier and a number of generic pharmaceutical companies for suspected breaches of Article 101 (restrictive business practices) and 102 (abuse of a dominant position) of the Treaty on the Functioning of the European Union (TFEU). The proceedings concern both unilateral behavior by Servier, and agreements between Servier and a number of generic companies, which may have the object or effect of hindering the entry of generic versions of the cardio-vascular medicine perindopril into markets in Europe.

Similarly, in early 2010, a formal investigation was opened against the pharmaceutical company Lundbeck suspected of hindering the entry of generic versions of the anti-depressant drug citalopram into European markets.

And more recently, in late 2010, the Commission organized unannounced inspections at the premises of a limited number of pharmaceutical companies in several member states with respect to a heartburn drug called Nexium7.

Industry-wide review

In addition to investigating particular settlement agreements in the Servier and Lundbeck cases, the Commission decided to conduct an industry-wide review of the issue. In January 2010, it sent its first requests for information to a number of pharmaceutical companies asking them for copies of their patent settlement agreements concluded between originator and generic pharmaceutical companies. The Commission was particularly interested in patent settlements in which an originator company had paid off a generic competitor in return for delayed market entry of a generic drug. It renewed its monitoring exercise in January 2011 considering that the monitoring itself has a deterrent effect.

And in April 2011, the Commission opened a formal antitrust investigation to assess whether a patent settlement agreement between US-based pharmaceutical company Cephalon and Israeli generic drugs firm Teva may have had the object or effect of hindering the entry of generic modafinil (brand name Provigil), used for the treatment of certain types of sleeping disorder. 

In July 2011, the Commission increased efforts to monitor patent settlements, which the regulator believes may restrain competition.

Conclusion

Two years after the adoption of its pharmaceutical sector inquiry report, this sector is still regarded by the Commission as a "priority in terms of enforcement of competition rules". "Pharmaceutical companies are already rewarded for their innovation efforts by the patents they are granted. Paying a competitor to stay out of the market is a restriction of competition that the Commission will not tolerate," said Joaquín Almunia, the European commissioner in charge of competition

US antitrust regulators have also been looking critically at so-called "pay-for-delay" settlement deals and other tactics used to delay generics.

Joining their colleagues in America, while in the past the Commission concentrated its attention on the issue of parallel trade agreements, the Commission is today focusing more on companies’ behavior to delay or hamper the market entry - of both generic and new innovative drugs - which will compete with their products already on the market.

Howard Fogt and Sophie Lignier

Foley & Lardner LLP, Washington and Brussels