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A Worrying Trend: The Italian Competition Authority finds a Regulatory Abuse in the Pharma Sector

22/03/2012

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On 11 January, the Italian Competition Authority (“ICA”) fined Pfizer €10.7 million for an abuse of a dominant position contrary to Article 102.  Pfizer had undertaken a “centralised” strategy to protect exclusivity for Xalatan, a treatment for glaucoma.

The ICA’s decision

At the heart of Pfizer’s “complex strategy” were applications for a divisional patent and, in Italy only, a related SPC.  When validating the divisional in Italy, Pfizer failed to mention its relationship to the parent patent, nor did it mention the parent patent when seeking the SPC.  In 2010, the divisional patent was revoked by the EPO.

The ICA found that the timing of the divisional patent, its validation only in countries where patent protection was about to lapse, the absence of a new product, the request only for an Italian SPC and subsequent patent litigation all demonstrated that Pfizer’s conduct sought to delay competitors’ entry.  It deemed that Pfizer had created a thick “web of patents” and suggested that Pfizer had exploited a lack of transparency. 

Further elements of Pfizer’s strategy which were condemned included: (i) pressuring the Italian Health Authority to hinder the publication of generic marketing authorisations and avoid their inclusion in the transparency list; (ii) sending cease and desist letters to generics before patent expiry; (iii) starting legal proceedings to discourage competitors; and (iv) applying for a paediatric extension to prolong exclusivity by a further six months.

Points to ponder…

Worryingly, it is not clear from the decision exactly what constituted the abuse.  The ICA was clearly unimpressed with and focussed on Pfizer’s application for the divisional patent, suggesting that it was ‘vexatious’.  However, the ICA did not find explicitly that Pfizer had exploited a lack of transparency to obtain an SPC on a divisional patent to which it should not have been entitled.  Rather than focus on a single aspect of Pfizer’s behaviour, the ICA was clearly concerned about its overall strategy.  Although the ICA describes a number of aspects of Pfizer’s conduct, on a practical note it is not clear which of these in isolation, or in combination, would constitute an abuse.
The ICA’s emphasis on Pfizer’s centralised strategy is also of concern for those for whom it makes sense to have a managed approach to protecting innovation.  This appears to go further than the General Court in AstraZeneca, which, despite largely approving the Commission’s analysis, did recognise that the purpose of an IP right is to exclude and that a dominant company has the prima facie right to seek extensions to its protection. 

Practically, the emphasis on Pfizer’s “subjective bad faith” is notable.  The ICA repeatedly refers to evidence (which appears to have been considerable) setting out Pfizer’s intention to prolong exclusivity after the expiry of the relevant patent protection.  This focus reinforces that while not sufficient in themselves to establish abuse, documents and correspondence are crucial in an authority’s investigation into abuses.

The ICA relies heavily on the Commission’s decision in AstraZeneca, largely upheld by the General Court in 2010.  Should the Court of Justice take a different approach in the appeal, it is difficult to see how the ICA’s analysis could stand independently.  It remains to be seen whether the ICA’s decision is appealed and, if so, whether its approach is upheld.

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