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Lundbeck 'pay for delay' case: Advocate General Opinion

Posted on 03 August 2020

In her recent opinion in Case C-591/16 P, Lundbeck v Commission, Advocate General (AG) Kokott has recommended that the Court of Justice of the European Union uphold the judgment of the General Court that patent settlement agreements reached between Lundbeck and several generics manufacturers in the pharmaceutical sector constituted a restriction of competition "by object".  This is the first time that the CJEU's guidance in Generics (UK) & others (C-307/18) has been applied to a different, albeit similar, set of "pay for delay" arrangements in the pharmaceutical sector.  We discussed the Generics decision here.

AG Kokott's findings in this Opinion are in line with her previous opinion in Generics (UK), and it seems likely therefore the CJEU will accept her Opinion, and reach the same conclusions.

Background

Lundbeck held patents in relation to an active pharmaceutical ingredient used in the manufacture of citalopram, an anti-depressant treatment.  Lundbeck also held patents in relation to manufacturing processes for the production of citalopram.  Further, Lundbeck developed other, more effective, processes for the production of citalopram, in respect of which it applied for and often obtained patents in several EEA countries.  In particular, between 2001 and 2003, Lundbeck obtained patents for the production of citalopram by certain manufacturing processes.  Lastly, Lundbeck also planned to launch a new antidepressant medicinal product, Cipralex, based on the active pharmaceutical ingredient (API) known as escitalopram (or S-citalopram), by the end of 2002 or the beginning of 2003. That new medicinal product was designed for the same patients as those who could be treated by Lundbeck’s patented medicinal product Cipramil, based on citalopram. The escitalopram API was protected by patents valid until at least 2012.

At a time when patent protection on citalopram was about to expire, Lundbeck entered into patent settlement agreements with four generics manufacturers, paying them to agree to refrain from entering the market with generic citalopram products.

European Commission decision

The European Commission investigated and in 2013 found that the purpose of the Settlement Agreements was to exclude the generic manufacturers from the market for the agreed period of time in exchange for payments from Lundbeck. As such, it classified those agreements as restrictions of competition by object, and imposed fines on Lundbeck and the other parties to the agreements.  

Lundbeck, alongside the other parties, appealed to the General Court for an annulment of the Commission's decision. The appeals were rejected in September 2016 (discussed here).

Lundbeck and the generics manufacturers then took their case to the CJEU. Arguments put forward included that the patent settlement agreements were not obvious breaches of antitrust law and the companies disputed whether they really had the effect of keeping generic versions of citalopram off the market.

The Opinion

This article focuses on three key points dealt with in the Opinion.

1. Were the patent settlement agreements ‘by object’ restrictions of competition?

AG Kokott's answer to this first point is "yes".  In her Opinion, AG Kokott recommends that the CJEU upholds the finding that the settlement agreements breached competition laws as restrictions of competition by object.

The AG agrees with the General Court that the settlement agreements went beyond the specific subject matter of Lundbeck’s intellectual property rights, which included the right to oppose infringements, but not the right to enter into agreements by which actual or potential competitors were paid not to compete by entering the market.  

AG Kokott flags an important issue in her Opinion, which is that the Commission acknowledged (in the context of the Lundbeck proceedings) that patent dispute settlements are not unlawful per se and "may even be in the public interest as a means of conserving resources and encouraging economic development." However, patent dispute settlements become problematic when they clash with the rules of competition law because their purpose is not to resolve a patent dispute, but to prevent or delay the market entry of potential competitors.

2. Were Lundbeck and the generic manufacturers ‘potential competitors’?

Again, AG Kokott's answer here is "yes".  The AG agrees with the General that the Commission had been correct in finding that the patents, still held by Lundbeck at the time that they entered into the settlement agreements, were not insurmountable barriers to the entry of the generics manufacturers to the market.  The A G cites the CJEU's judgment in Generics (UK) in addressing this.

The AG also states that the Commission was not required to demonstrate that the generic manufacturers were in fact able to enter the market without infringing Lundbeck’s patents (again in line with the Generics (UK) decision).

3. The correct test when imposing fines

AG Kokott rejects Lundbeck’s arguments that the General Court erred in law when it upheld the Commission's fines both as a matter of principle and in its method of calculation. Her view is that the Commission is not required to show "with certainty that that undertaking was aware of that anticompetitive nature. In other words, it is not necessary to prove that the undertaking in question knew that its conduct was anticompetitive."

What next?

As noted above, it appears likely that the CJEU will reach the same conclusion as AG Kokott, continuing the line of authority it began with the Generics (UK) decision.

Aside from the CJEU's decision in this case, next up in the pay for delay run of cases will be the hearing before the CJEU in the Servier case concerning perindopril, which is expected later this year.  In the meantime, the Generics case has returned to the Competition Appeals Tribunal and further developments are awaited.

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