Last week the Commission published its 6th report on the monitoring of patent settlements, exploring the use of such agreements in the pharma sector in the EU during 2014. The report triumphantly declares that the number of agreements which limit access to the market and contain a value transfer, attracting the highest degree of antitrust scrutiny, has “stabilised at a low level”. It also claims that an increase in the total number of settlements (compared with the period before the pharmaceutical sector inquiry) demonstrates that companies have not been deterred from concluding settlements in general.
Unfortunately the Commission’s conclusions are based upon a shaky foundation – the same criticisms made of the 5th report last year can be made again here. This report similarly contains a fairly limited review of the impact of the Commission’s overall policy.
First, the report fails to consider a number of other reasons that may have contributed to or caused the number of patent settlements to increase in recent years compared with the period before 2008 (e.g. number of medicines losing patent protection, general increase in litigation, greater readiness of parties to settle and the introduction of new legislation). The report doesn’t explain how, if at all, it has allowed for these variables in reaching its conclusions. The report also overlooks the reduction in the number of patent settlements concluded each year since 2012. It is therefore difficult to say with any certainty how the Commission’s enforcement activities in this area have affected the willingness of companies to engage in or to settle their patent disputes more generally.
Second, the categorisation of patent settlements is flawed: settlements which involve a genuine compromise (as opposed to one party or the other just giving up) would most likely involve some form of limitation on access to the market and potentially some form of value transfer (as defined by the Commission). It does not therefore follow that a decrease in the number of settlements of this type is necessarily a measure of effective antitrust enforcement or indeed that it enhances consumer welfare. Given the uncertainty that faces parties in the pharma sector who may be contemplating settlement it is no surprise that they may be cautious in concluding agreements of this kind.
Drawing reliable conclusions about the effect of the Commission’s enforcement activities on the settlement proclivities of the pharma sector would require something much less superficial than this annual scanning of the horizon. This applies with even greater force to any attempt to draw conclusions about the overall effect of Commission competition policy on the sector; its impact on the speed and effectiveness of generic entry; and whether the Commission’s focus on that issue has indeed incentivised pharma companies to invest more in developing innovative products or fundamental R&D – an original rationale for the sector enquiry and all that flowed from it.