Product life-cycle management and pharmaceutical “patent-ability”

FEDERAL ANTIMONOPOLY COMMISSION – FAS RUSSIA 7th Session of the Working Group for Research of Competition Issues in the Pharmaceutical Market Moscow, 21 September 2015 Product life-cycle management and pharmaceutical “patent-ability” Some remarks from the antitrust field Luca Arnaudo, Ph.D. Italian Competition Authority – Investigative Directorate The views expressed in this presentation are the personal opinion of the author and do not necessarily represent the position of the Italian Competition Authority 11 1. Sector inquiry (1/2 ) Pharmaceutical life-cycle management: an introduction • Product life-cycle refers to the evolution of a product’s commercial performance as measured by its sales over time, with market life (namely the length of time between market introduction and removal of the product from the market) usually split into the following four main stages: (1) introduction, (2) growth, (3) maturity, (4) decline. • Pharmaceutical industry has been traditionally considered the perfect candidate for Life-Cycle Management (LCM) strategies (see Cox, 1967), due to its temporary monopoly-oriented typical scenarios. However, explicit reference to using Intellectual Property (IP) rights as part of such strategies has been rare (cf. Kvesic, 2008). 1. Sector inquiry (1/2 ) Pharmaceutical life-cycle management: an introduction • For sure, the aggressive use of LCM strategies is widespread within the pharmaceutical industry: • “The findings indicated that originator companies use a variety of instruments to extend the commercial life of their medicines. The result of the sector inquiry suggest that the behavior of companies contributes to the generic delay” (EU Commission, EC, 2009) • At the same time, it is no business secret that LCMs frequently relies upon IP rights as a legal tool both for “playing around” with existing regulations (e.g. artificial extensions of the patent protection through secondary patenting, changes in indications of registered products, delisting of a patented original drug: see Rab & Leibenluft, 2010), as well as for directly raising barriers to entry against competitors (sham litigation, sophisticated/temerarious patent interference). 1. Sector inquiry (1/2 Pharmaceutical life-cycle management and antitrust ) • From an antitrust viewpoint, in order to properly address the public concerns related to IP driven-LCM strategies a clear theory of harm is needed. • In fact, many recurring practices are prima facie lawful as they refer to legitimately established IP rights, but they may become anti-competitive when combined within a general exclusionary strategy (so-called IP/antitrust interface issue). • “IP laws generally offer a right of exclusive use and exploitation to provide a reward to the innovator, to provide an incentive to other innovators and to bring into the public domain innovative information […]. Competition authorities regulate near monopolies, mergers and commercial agreements with the aim of maintaining effective competition in markets. This regulation occasionally results in limits being placed on the free exercise of the exclusive rights granted by IP laws.” (Anderman, 2007) 1. Sector inquiry (1/2 Pharmaceutical life-cycle management and antitrust ) • As regards EU, remember (at least) art. 102 TFUE: • “Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States”. • For its proper enforcement we need to correctly consider and assess: (1) dominance within a proper relevant market; (2) abuse of such dominance. • Due to the rather unique features of pharmaceutical sector (i.e. effective consumer role of patients vis-à-vis doctors as product selectors), however, market definition may prove to be a very delicate issue. In fact, taking for granted as a common starting point the WHO Anatomical Therapeutic Chemical (ATC) classification system of medicines, a case-by-case approach is generally followed by the competition authorities. 1. Sector inquiry (1/2 Pharmaceutical life-cycle management and antitrust ) • Some useful advice for assessing both dominance/market analysis and the recurrence of an abuse (eventually developing a more detailed “black list” of illicit conducts) may now be found by following the growing case-law related to the pharmaceutical industry, both at supra-national and national level. • When we restrict our view to already assessed abusive LCMs perpetrated by leveraging IP rights, at least the following two cases should be carefully considered: • AstraZeneca-Losec (EC, 2005; upheld by the EU Court of Justice, ECJ, 2012) • Pfizer-Xalatan (Italian Competition Authority, ICA, 2012; upheld by the Italian State Council, ISC, 2014) 1. Sector inquiry (1/2) The AstraZeneca-Losec case in a nutshell • The EC verified two distinct abusive conducts made by the company AstraZeneca, namely: • misleading IPR regulatory authorities; • deregistering a patented/approved product to delay entry of generics competitors. • AstraZeneca acted an array of misrepresentations in front of national patent offices and national courts which led to the grant of Supplementary Patent Certifications (SPC) for its blockbuster product, Losec. This allowed the company to be granted with an exclusive right to which its was not entitled, or to which it was entitled for a shorter period. 1. Sector inquiry (1/2) The AstraZeneca-Losec case in a nutshell • Furthermore, AstraZeneca deregistered marketing authorizations for the Losec capsules in various Member States in combination with the withdrawal from the market of the Losec capsules and the introduction of reformulated Losec tablets (so-called MUPS). • Please note: pursuant to EU law in force at the time of the decision, a market authorization for a generic product could be granted pursuant to a simplified procedure only if the original reference product was still registered. AstraZeneca practices made more difficult the marketing of generic products competing with Losec, eventually obtaining a delay of their market entry. 1. Sector inquiry (1/2) The Pfizer-Xalatan case in a nutshell • ICA verified several distinct abusive conducts made by the company Pfizer, namely: • artificially extending the duration of the Italian patent protection through divisional applications and an SPC; • starting an aggressive “legal campaign” to enforce its exclusive rights against companies preparing the launch of generics products. 1. Sector inquiry (1/2) The Pfizer-Xalatan case in a nutshell • In Italy the Xalatan patent was lacking the extension obtained within most of the other EU Member States by means of further SPCs. The ICA established that Pfizer obtained a divisional patent for the same product and relied on it as a basic patent to obtain also in Italy a SPC: this in order to realign the patent expiration time at a EU-wide level and fill the possible national gap of its blockbuster’s LCM. • After having enhanced its protection strategy, Pfizer did not industrially develop any of its new patent rights. Rather, the company engaged itself in “vigorously” deterring the entry on the relevant market of targeted competitors (e.g. by issuing warnings to generics producers and threatening them with civil and administrative actions). 1. Sector inquiry (1/2) On uses and abuses of (IP) rights • Note: both the EC and ICA cases confronted the issue of whether and when the mere acquisition - not the exercise - of an IPR can amount to an abuse according to Art. 102 TFEU. • “[…] while the mere possession and enforcement of a patent or any other intellectual property right against a competitor does not, in principle, violate Article [102], the contention that [it] cannot constitute an infringement of Article [102] of the Treaty, because it relates to the existence of an intellectual property right (as opposed to the exercise of that right) must be rejected” (EC 2005, §741) • “[…] misuse of the patent system potentially reduces the incentive to engage in innovation, since it enables the company in a dominant position to maintain its exclusivity beyond the period envisaged by the legislator” (ECJ 2012, §367) 1. Sector inquiry (1/2) On uses and abuses of (IP) rights • An interesting fallout of the ICA’s case has been the establishment of an “abuse of rights” doctrine as a broader legal framework to be used when dealing with the antitrust relevance of IP driven-LCM strategies. • The highest national administrative court upheld the ICA’s decision (also) by considering that the concrete exercise of a right, even if formally respectful of the legal framework related to its entitlement, may be done in a manner objectionable with respect to a criterion of evaluation “of legal or extra-legal nature” (ISC, 2014). 1. Sector inquiry (1/2) On uses and abuses of (IP) rights • The ISC stated that “the legal field of patent protection of inventions is different from the one of competition law”. • Having established that, it went further on by considering that “what is debated here is not a conduct forbidden by patent law, but the anticompetitive effect of a sequence of acts, even when they were individually considered legal. After all, the abuse of dominant position, of which Pfizer is accused, is nothing but a specification of the wider category of ‘abuse of right’, whose condition is the existence of a right, used by its owner in a specious way, not coherent with the purpose for which it is granted: in this case, the exclusion of competitors” (ISC, 2014) 1. Sector inquiry (1/2) On uses and abuses of (IP) rights • As a result of the abuse of rights, far from presupposing a breach in the formal sense, it is required, then, the use of the altered pattern of formal law, aimed at the achievement of goals proved to be different from the ones by the legislator. • As a preliminary conclusion, it can be said that a properly carved “abuse of rights doctrine” may allow antitrust enforcement authorities to more effectively pursue the illegal conducts that are typical of sophisticated companies operating within complex sectors, such as the pharmaceutical one. In fact, administrative burdens and industrial technicalities make the pharma sector especially apt to conducts aimed at distorting lawful faculties (such as the one stemming from IP rights) for reaching anti-competitive results. 1. Sector inquiry (1/2) Further reading (texts quoted in the slides) • William Cox, Product Life Cycles as Marketing Models, The Journal of Business, vol. 40, n. 4, 1967, pp. 375-384 • Dennis Kvesic, Product lifecycle management: marketing strategies for the pharmaceutical industry, Journal of Medical Marketing, vol. 8, n. 4, 2008, p. 298 • EU Commission, Pharmaceutical Sector Inquiry Final Report. Executive Summary, 8 July 2009 (http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/communication_en.pdf) • Suzanne Rab, Robert Leibenluft, All in a Life Cycle, European Pharmaceutical Contractor, Summer 2010 (http://www.samedanltd.com/magazine/11/issue/131/article/2679) • Steve Anderman (ed.), The interface between intellectual property rights and competition policy, Cambridge, Cambridge University Press, 2007 2. Enforcement of competition law THANK YOU LUCA ARNAUDO, Ph.D. ITALIAN COMPETITION AUTHORITY Piazza Verdi 6/A. 00198 Rome, Italy [email protected] ph. ++390685821259