First published in our Biotech Review of the Year publication (Issue 10).

The investigations – only one of which has yet reached the stage of an infringement decision – test the boundaries of when competition law may intervene in relation to the exercise of patent rights.

While the outcomes of most of the cases remain uncertain, pharma companies – who may find themselves in a dominant position in the period prior to patent expiry – would be well advised to consider patent filing and enforcement strategies through the lens of competition law, to ensure that they do not fall foul of antitrust rules.

European Commission investigations

In October 2022 the European Commission (EC) issued a Statement of Objections against Teva, alleging that the company breached EU competition rules on abuse of dominance by engaging in practices aimed at delaying generic competition to its blockbuster multiple sclerosis treatment, Copaxone. In the EC’s preliminary view, Teva’s approach to filing and in some cases subsequently withdrawing divisional patents on Copaxone “artificially extended” its patent protection after the expiry of the original basic patent, thereby (it is claimed) forcing its generic rivals to file new patent challenges each time, with the result that their access to market was delayed. Although filing and enforcement of divisional patents is commonplace in the pharma sector, and although a divisional patent can never extend the period of patent protection beyond that of the original right, the EC considers that Teva’s strategy “artificially prolongs legal uncertainty to the benefit of the patent holder, and can effectively block or delay entry of generic or generic-like medicines”.[1] The EC has also alleged that Teva implemented a disparagement campaign targeted at healthcare professionals, which it says created doubts about the safety and efficacy of a rival generic medicine and its therapeutic equivalence to Copaxone.

The Teva investigation is the first time the EC has pursued a company for its divisional patent filing and enforcement strategies. The issue is not completely new. In its Pharmaceutical Sector Inquiry Final Report of 2009, the EC commented on the proliferation of divisional patent applications and noted that in some cases “divisionals seemingly serve to prevent or delay generic entry. While this, during the period of exclusivity, is generally in line with the underlying objectives of patent systems, it may in certain cases only be aimed at excluding competition and not at safeguarding a viable commercial development of own innovation”.[2] However, it remains controversial to suggest that the use of divisional patents – which are used across sectors and do not result in any extension of the scope or period of protection compared to the original patent from which the divisional was carved out – can amount to an infringement of competition law. It remains to be seen how the EC seeks to distinguish between legitimate and illegitimate conduct in this area.

In June 2022, the EC announced that it had opened an investigation to assess whether Vifor Pharma had restricted competition by disparaging its closest competitor in the market for intravenous iron deficiency treatments. The EC is concerned that Vifor may have pursued a misleading communication campaign, primarily targeting healthcare professionals, which may have unduly hindered uptake of Monofer, a competing iron deficiency drug produced by the Danish company Pharmacosmos. Announcing the investigation, Executive Vice-President Margrethe Vestager stated: “Competition in the pharmaceutical sector is important. It provides access to affordable and innovative medicines to patients. The dissemination of misleading information regarding the safety of Pharmacosmos’ iron deficiency treatment, Monofer, may have delayed its uptake. This would ultimately harm patients by stifling competition from an innovative medicine.”[3]

This is the first time that the EC has opened an antitrust investigation based solely on a disparagement theory of harm. However, there have been a number of cases before the French Competition Authority in which promotional campaigns by companies including Schering Plough (Subutex), Sanofi-Aventis (Plavix) and Janssen-Cilag (Durogesic) have been found to amount to an abuse of a dominant position due to their effects on the penetration of generic products following patent expiry. The decision in the last of these cases (Durogesic) was upheld by the French Supreme Court in July 2022.

The Vifor case is noteworthy as it concerns rival originator products: previous investigations have tended to focus on competition between originators and generics. The case therefore has the potential to clarify the extent to which the EC’s framework of assessment will differ in situations where generic competition is not at stake. Regardless of the outcome, the case is an important reminder that competition law may apply to promotional statements made by pharmaceutical companies. This is something that companies should consider alongside their compliance with regulatory rules on the promotion of medicines.

Enforcement action in Switzerland and Spain

In September 2022 the Swiss Competition Commission (COMCO) opened an investigation to assess whether Novartis had sought to protect its blockbuster psoriasis drug, Cosentyx, from competition by using patents that it had acquired from Genentech to initiate litigation against its competitors, including Eli Lilly (Lilly).

According to a statement issued by COMCO, the investigation is focusing on “whether the alleged behaviour constitutes the use of a so-called blocking patent, which might amount to an unlawful abuse of an allegedly dominant position”.[4] Writing in his personal capacity, the President of COMCO, Professor Andreas Heinemann, previously criticised so-called ‘blocking patents’ in a 2019 article:

“Blocking strategies do not aim at all at protecting one’s own inventions, but their purpose is to block competing products. It is inherent to blocking patents that they are not exploited for creating something new but to prevent the development of new products and processes by competitors.”[5]

As things stand, however, there is no case law on so-called blocking patents, as defined by Professor Heinemann, in either Switzerland or the EU. There are many legitimate reasons why companies file patents that do not directly protect existing intended innovation, and the patents are not granted or withheld based on the use that the patentee intends to make of them. Novartis has now also in any event discontinued its litigation against Lilly.[6] It remains to be seen whether COMCO and the EC (which has opened a parallel preliminary investigation) will discontinue their investigations in the light of this development.

In October 2022, the Spanish competition authority (CNMC) fined Merck Sharp and Dohme (MSD) just under €39 million for abusing its dominant position in the market for contraceptive rings.[7] MSD owns patents protecting its Nuvaring product and in 2017 it sought an ex parte interim injunction from the Spanish courts to prevent the manufacture and sale of a competing contraceptive ring developed by Insud Pharma. The CNMC found that in applying for the interim injunction, MSD had “deployed a strategy of deception by withholding relevant factual and technical information from the court”, and that this lack of transparency was a “determining factor” in obtaining the injunction. According to the CNMC, “the purpose of MSD’s legal actions was not to enforce its patent rights”, but rather “to suppress competition from the new market entrant for as long as possible”.

There are parallels between the MSD case and the landmark case on misuse of the patent system, AstraZeneca. In 2005 the EC found that AstraZeneca had abused its dominant position by persuading various patent authorities to grant it supplementary protection certificates, extending the period of patent protection, on the basis of misleading information. In upholding the EC’s decision, the Court of Justice (CJEU) stated:

“AZ’s consistent and linear conduct […], which was characterised by the notification to the patent offices of highly misleading representations and by a manifest lack of transparency, […] and by which AZ deliberately attempted to mislead the patent offices and judicial authorities in order to keep for as long as possible its monopoly on the PPI market, fell outside the scope of competition on the merits.”[8]

Where should the line be drawn?

As alluded to in the above extract from the CJEU’s AstraZeneca judgment, dominant firms are entitled to compete with their rivals ‘on the merits’ – and they may maintain or even increase their market share by doing so. The CJEU observed in Intel that “not every exclusionary effect is necessarily detrimental to competition. Competition on the merits may, by definition, lead to the departure from the market or the marginalisation of competitors that are less efficient and so less attractive to consumers from the point of view of, among other things, price, choice, quality or innovation”.[9]

At the same time, however, dominant firms have a ‘special responsibility’ not to allow their conduct to impair ‘genuine, undistorted competition’. This special responsibility may deprive a dominant firm of the right to engage in conduct that would be unobjectionable if adopted by a non-dominant company. In the recent case of Servizio Elettrico Nazionale, the CJEU held that in order to establish an exclusionary practice as abusive, a competition authority must show two things: first, that the practice is capable of producing exclusionary effects (i.e. that it is capable of making it more difficult for competitors to enter or remain on the market); and second, that the practice relies on “the use of means other than those which come within the scope of competition on the merits”.[10]

In practice, the concept of competition on the merits can be hard to pin down – particularly in an IP context. In his Opinion in Servizio Elettrico Nazionale, Advocate General Rantos observed that when applying Article 102 TFEU to exclusionary practices, competition on the merits generally refers to “a competitive situation in which consumers benefit from lower prices, better quality and a wider choice of new or improved goods and services”.[11] Whilst this formulation is attractively simple, it is questionable whether it adequately caters for scenarios in which dominant firms enforce their IP rights – which inherently serve to block competition – against parties which may be infringing those rights. How does one distinguish between abusive and non-abusive enforcement in such situations? Cases such as ITT Promedia and Protégé International suggest that actions based on the assertion of valid rights or claims will only be found to be vexatious and thus abusive in exceptional circumstances. These cases suggest that other factors – such as evidence of bad faith or the existence of a strategy aimed solely at harassing competitors – are relevant to the analysis.

The way in which the pending cases discussed above develop has the potential to shed further light on the dividing line between competition on the merits and its converse in an IP context. If the competition authorities pursue the cases to final decisions, that is likely to result in appeals which will need to consider the distinction between legitimate IP strategies (which are necessarily exclusionary in nature) and an abusive restriction of competition. The role that courts play in assertions of IP and the seeking of injunctions will also be a relevant point of distinction from the AstraZeneca line of case law, in which applications for SPCs were made to patent offices which have limited discretion or budget to conduct factual investigations.

In the meantime, the ongoing investigations illustrate the breadth of pharma sector practices that competition authorities are willing to investigate and their appetite (and public budget) for doing so. They also provide an important reminder that whilst the competition rules do not call into question the existence of IP rights, the exercise of such rights is not immune from antitrust scrutiny.

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[1] Antitrust: Commission sends Statement of Objections to Teva over misuse of the patent system and disparagement of rival multiple sclerosis medicine

[2] See para 523 of the report: Pharmaceutical Sector Inquiry

[3] Antitrust: Commission opens investigation into possible anticompetitive disparagement by Vifor Pharma of iron medicine

[4] COMCO : Investigation on use of patents

[5] Andreas Heinemann, ‘Blocking Patents and the Process of Innovation’ (March 2019)

[6] According to Lilly’s quarterly financial report for Q3 2022, Novartis and Lilly reached a settlement in October 2022 to resolve their patent-related disputes

[7] https://www.cnmc.es/sites/default/files/editor_contenidos/Notas%20de%20prensa/2022/20221025_NP_Sancionador_Merck_eng.pdf

[8] Case C-457/10 P, AstraZeneca v Commission, ECLI:EU:C:2012:770, para 93

[9] Case C 413/14 P, Intel v Commission, ECLI:EU:C:2017:632, para 134. See also Case T-321/05, AstraZeneca v Commission, EU:T:2010:266, para 804: “[…] the preparation by an undertaking, even in a dominant position, of a strategy whose object it is to minimise the erosion of its sales and to enable it to deal with competition from generic products is legitimate and is part of the normal competitive process, provided that the conduct envisaged does not depart from practices coming within the scope of competition on the merits […].”

[10] Case C-377/20 Servizio Elettrico Nazionale SpA v Autorità Garante della Concorrenza e del Mercato, ECLI:EU:C:2022:379, para 61

[11] Case C-377/20 Servizio Elettrico Nazionale SpA v Autorità Garante della Concorrenza e del Mercato, Opinion of Advocate General Rantos dated 9 December 2021, ECLI:EU:C:2021:998, para 63