FINANCIAL INSTITUTIONS

ENERGY

INFRASTRUCTURE, MINING AND COMMODITIES

TRANSPORT

TECHNOLOGY AND INNOVATION

PHARMACEUTICALS AND LIFE SCIENCES

Tendencies of pharmaceutical market regulation by

antimonopoly agencies of Europe

Yann Anselin

Associate

Norton Rose

6 April 2012

Presentation overview: outline

Principles applied

Conclusion

General principles guiding

analysis of originators' conducts

I. General framework of analysis

- Reminder of strategies identified by the Commission

- Importance of market context

- Strict approach to originators' responsibility

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(i) Anti-generic strategies identified in the Commission's sector enquiry

Anticompetitive "toolbox" of originators

Patent clusters

Switch to second generation products

Patent litigation

Patent settlements

Misleading representations

Other? (direct sales etc.)

(ii) Importance of specific market/regulatory context

EU General Court: AstraZeneca §183

"In the pharmaceutical sector, competitive relationships respond to mechanisms which

differ from those determining competitive interactions normally present in markets

that are not so heavily regulated".

Tension between need to reward R&D and conflicting objectives

Control of public budgets (sector enquiry)

Strong barriers to generic entry

First mover advantage of originators

Inertia of prescribing doctors

Complex interplay between several regulatory authorities (Patent protection

/ Marketing authorization / Competition)

6 6

Factors working against

substitution

(Fragile substitution

dynamics, complexity of

pharmaceutical products,

drug prescription liability)

Privileged position of

originator drug on the

market

("First mover" advantage)

Existence of

specialized regulatory agencies

(Third-party specifically entrusted

with task of regulating the market)

3 Main factors lead to limited scope for manoeuvre of

originators

(iii) Strict approach to originators' responsibility

ECJ in Michelin: "Special responsibility" of dominant undertakings

+

7

Fragile substitution dynamics

Pharmacies

Prescribing

doctors

Patients

Financial incentives to deliver

generics

Information overflow

Strict civil and criminal

liability regime

Not price sensitive

Generally prescribe the originator’s brand

Can exclude substitution

Not price sensitive

Can be reluctant to switch

treatment Opposite incentives

(iii) Strict approach to originators' responsibility

(iii) Strict approach to originators' responsibility

Factors working against substitution

Complex, high-risk products

Information overflow & lack of transparency

Pharmacists must deal with hundreds of drug references

Information and training notably organized by originators medical representatives

Strict liability regime of doctors and pharmacists

Strong "first mover" advantage of originators

Initial monopoly

Established network of medical visitors (doctors & pharmacists)

Existence of specialized health agencies

Competent regulatory body alone in position to assess potential risks raised by generics

Potential safety risks are not considered objective justification to originator’s warning

II. Principles applied: Differentiated analysis

of originator’s practices

- Misleading representations to patent authorities

- Communication strategies (healthcare professionals, patients health

authorities)

- Lifecycle management (product deregistration)

- Pricing & commercial conditions

II. Principles applied : Overview of main EU & national decisions

General Court's judgment in Astra Zeneca (T-321/05 of 1 July 2010)

Misleading representations to patent authority (first abuse)

Product deregistration (second abuse)

3 decisions by the French Competition Authority (interim measures)

Misleading representations

• Arrow Generics / Schering Plough, 11 December 2007

• Ratiopharm / Janssen Cilag, 31 July 2009

• Teva Santé/ Sanofi Aventis, 17 May 2010

Overstocking of originator's products through pricing conditions

• Arrow Generics / Schering Plough, 11 December 2007

1 OFT decision (Reckitt Benckiser, 12 April 2011)

Anticompetitive "switch" strategy based on withdrawal of prior formulation before

publication of the generic name

II. Principles applied (1) : Misleading representations to patent authorities

AZ adopted its own interpretation of SPC regulation to obtain extra SPC for omeprazole (the active substance in AZ’s product Losec)

Instead of "first marketing authorisation" date (the “technical authorisation”), AZ communicated the date when all the administrative steps required for marketing had been satisfied, including the national authority’s approval of pricing levels

BUT AZ did not disclose to the national authorities the basis for its calculation

Strict assessment performed by EU General Court:

• Special responsibility of dominant originators also covers the use of public procedures and regulations

• Lack of clarity concerning the interpretation of the SPC Regulation cannot constitute an objective justification for the behaviour

• Limited discretion of the administrative authority emphasized:

National authorities could reasonably assume that the date provided related to technical authorisation, which was the prevailing standard among patent offices

Under such circumstances, the cause of the anticompetitive effect resulting from AZ's conduct is not State action, but the misrepresentations

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II. Principles applied (2): Communication strategies of originators

Lobbying actions aimed at

health authorities

High scope for manoeuvre

But many uncertainties remaining

Information targeted at

patients and healthcare professionals

Very low scope for manoeuvre

Strict effect based approach:

almost any conduct can be abusive

FCA makes a recurrent distinction between health care professionals and

health authorities

In principle, FCA declines competence to sanction lobbying actions aimed at health agencies…

Lobbying actions with the Afssaps and the EMEA with the aim to convince these authorities to withdraw generic's MA (Sanofi Aventis & Janssen Cilag)

Deliberate use of regulatory procedures to know in advance the marketing date and the characteristics of the generic (Janssen Cilag: price fixing procedure of the Healthcare product pricing committee, CEPS)

… But precise scope of exception remains unclear:

Still few decisions (+ interim measures cases)

Conducts similar to the ones sanctioned in AstraZeneca (misleading information on own products) likely to be sanctioned by FCA

Other exceptions?

II. Principles applied (2): Communication strategies of originators

Lobbying actions targeted at health agencies

Any communication can be abusive if capable of creating even a slight doubt as to the efficacy and/or safety of a generic

FCA in Sanofi Aventis, (§105) :

"By suggesting, in an implicit but necessary manner, that these differences have an impact on the product's safety and efficiency, and therefore on the patient's health […] the Sanofi-Aventis

laboratory is encouraging not to prescribe or replace the original with anything other than the laboratory's own generic".

Focus on actual or potential effects of information delivered

Even seemingly objective and neutral information can be abusive

Even information focusing on originator's product (and hence only implicitly relating to generics) can be abusive

Even information directly referring to an official warning made by the health agency can be abusive (Janssen Cilag)

II. Principles applied (2): Communication strategies of originators

Communications directed at patients & healthcare professionals

II. Principles applied (2): Communication strategies of originators

Aggravating circumstance when communication made before generic launch

(FCA in Arrow Generics and Janssen Cilag)

Generic manufacturers can not respond to criticism as they do not yet have a sales network in place

Rumours spread about the generic can by definition not be based on effects actually observed on patients

Questionable as (i) some risks are not taken into account by agency granting MA (example risks linked to different excipients) and (ii) warnings can only be made

effectively before generic launch

Communications directed at patients & healthcare professionals (cont)

II. Principles applied (3): Product deregistration & switching strategies

Reckitt Benckizer Case, OFT, 12 April 2011

• RB knew that the NHS uses a computer system which allows general practitioners to search for a well-known branded product, and then verify whether any cheaper generic version if any are available

• RB withdrew and de-listed NHS packs of its Gaviscon Original Liquid (GL) medicine after the product's patent had expired but before the publication of the generic name for it

When doctors searched under the brand name, the prescription system failed to throw up the cheaper generic version, and patients were instead transferred to another Reckitt product, Gaviscon

Advance (GA)

OFT performed thorough assessment of RB's conduct, noting following factors:

• Internal documents revealing the anticompetitive strategy pursued by RB

• At the time of withdrawal, significant demand for GL remained + GA was less popular with Global Practitioners than GL although already available for seven years

• While carrying out the withdrawal of GL, prescriptions of GA were encouraged

II. Principles applied (3): Product deregistration

AstraZeneca (T-321/05), second abuse

• AZ deregistered its marketing authorisations in some countries for its capsule-based version of Losec® and switched to tablets

• Generic drug companies could not rely on the documentation on AZ's marketing authorisation dossier to obtain generic marketing authorisations through the abridged procedure, as well as the ability of parallel importers to obtain import licenses

EU General Court : Several indicia show that deregistrations were not a form of "competition on the merits"

AZ's justification, that maintaining the marketing authorisation imposed the unnecessary cost of requiring it to continue to report adverse reactions to the drug, “scarcely credible.”

AZ did not deregister the drug in several other countries where it switched to tablets

No commercial justification for the conduct, i.e : “no evidence” that the deregistrations were “necessary, or even useful” to AZ's legitimate strategy of converting capsule sales to tablets

Sales conditions allegedly aimed at favouring pharmacists overstocking of SP's product:

Rebates to pharmacists

Terms of payment

Paid surveys

Direct sales

Factors underlined by FCA in its analysis:

Timing of conduct (measures implemented during period immediately preceding generic launch)

Exceptional character of measure (never before implemented by originator)

Lack of alternative explanation for the conduct (than to exclude generics)

Analysis of intent

Ex post verification of negative effects on Arrow's sales performance

Criteria suggest full fledged in concreto analysis… but too early to draw definitive conclusions (interim measures case)

FCA, Arrow Generics, 11 December 2007

II. Principles applied (4): Pricing related conducts

III. Conclusion

- Differentiated approach to originators conducts

- Clear trends but much uncertainty remaining

III. Conclusion & Outlook

Communications towards patients

& physicians (FCA)

Lobbying and information

given to health agencies

(FCA)

Misleading information to

patent authorities

(Astra Zeneca)

Product deregistration

(lifecycle management)

(Astra Zeneca &

OFT)

Pricing and other

commercial conditions

(FCA)

Before generic launch

Near "per se" abuse?

Exemption from competition rules? Exception: misleading information?

Near "per se" abuse?

Full fledged "in concreto" assessment Timing of conduct = aggravating circumstance?

Full fledged "in concreto" assessment Timing of conduct = aggravating circumstance?

After generic launch

Near "per se" abuse? Increased scope for manoeuvre?

Exemption from competition rules? Exception: misleading information?

Near "per se" abuse?

Full fledged "in concreto" assessment

Full fledged "in concreto" assessment

Differentiated approach to originators' conducts

III. Conclusion & Outlook

Originator companies face significant legal uncertainty

Lack of clear borderline test(s)

separating legitimate from

abusive conduct

Overall tendency to adopt strict

approach

to originator's responsibility

First trends in the case law but legal uncertainty

remaining

Conducts

implemented by

Originators

Differentiated approach to

types of abuses