Almost ten years on from the European Commission's Final Report into the pharmaceutical sector, it has issued a report focussing on enforcement activity in the subsequent period (up to 2017). The report highlights that competition enforcement and market monitoring remains a high priority, in particular in the light of concerns raised by both the European Council and Parliament that anticompetitive practices may be blocking patients' access to affordable and innovative essential medicines.
The statistics over the period under review demonstrate the levels of enforcement activity, by the Commission, and also by national competition authorities:
- 29 antitrust decisions against pharmaceutical companies, imposing sanctions (including fines of over more than EUR 1 billion) and obtaining binding commitments
- More than 100 other cases investigated, with more than 20 cases of possible antitrust infringement currently under investigation
- Review of more than 80 merger transactions, with competition concerns being detected in 19 (all of which were resolved so that the transaction could proceed)
The report focuses on three key areas:
Access to cheaper medicines
Here, the report highlights that effective competition by generics and biosimilars is a vital source of price competition, and therefore European competition authorities have "vigorously investigated and sanctioned" practices that lead to higher prices. The report refers specifically to the 'landmark' decisions taken by the Commission (Lundbeck, Fentanyl and Servier cases), and the UK Competition & Markets Authority (Paroxetine) in relation to 'pay for delay' agreements with generics.
In relation to such agreements, there have also been recent developments in the EU courts. In December 2018, the General Court decided that a number of patent settlement agreements entered into by Servier and various generic companies were anticompetitive, as they were restrictive of competition by object. However, the General Court also made two important findings.
First, it found that a settlement agreement between Servier and Krka, involving a licence and royalty payment by Krka, was not anticompetitive. Secondly, the Court annulled the fine on Servier in relation to the separate finding that it had abused a dominant position in relation to perindopril (thereby reducing the total fine on Servier by €102.67 million to €228.32 million). This was due to a "series of errors" by the Commission in defining the market as limited to a single molecule within the ACE inhibitor class (perindopril) in its originator and generic versions. Namely the Commission had:
- wrongly considered that perindopril differed, in terms of therapeutic use, from other ACE inhibitors;
- underestimated the propensity of patients treated with perindopril to change medicines;
- and also placed excessive importance on price in analysing competitive constraints.
Significantly, the Court also made the important statement that: "the adoption of settlement agreements in the field of patents is not necessarily contrary to competition law".
The Servier decision has been appealed to the Court of Justice (CJEU) so further developments should be monitored. In the meantime, on 24 January 2019, the CJEU heard argument on Lundbeck's appeal against fines of €93.8 million relating to agreements with four generic companies concerning citalopram and, in 2018, the UK Competition Appeal Tribunal referred a series of questions to the CJEU concerning paroxetine (the date for the hearing does not yet appear in the CJEU diary).
In addition to 'pay for delay' agreements, another main focus of investigation is the pricing of off-patent medicines, with a number of cases before national competition authorities, as well as more recognised forms of misconduct, such as bid rigging cartels.
Finally under this heading, the report also notes the Commission's intervention into a number of mergers that could have led to price rises for medicines, in particular for generic products or biosimilars (all of these transactions were subsequently cleared).
Access to innovative medicines
Another key focus of the enforcement and market monitoring activity has been on conduct affecting incentives to innovate. In the merger control space, in particular, the Commission notes that it has intervened to ensure a number of transactions did not compromise R&D efforts to launch new medicines.
Scope for further enforcement action
The report concludes that, whilst the actions taken and discussed in the report demonstrate the effectiveness of competition law enforcement, it must remain a high priority in the sector, given the pressing need to ensure effective access for patients to innovative and affordable medicines. The sector will therefore continue to be the focus of pro-active investigation, but competition enforcement is not the complete answer to meet this increasing societal challenge.