The EC’s latest report on pharmaceutical patent settlement agreements in the EEA (the EU plus three other countries), covering 2013, was published on 5 December 2014. The EC started these reports after its 2009 competition inquiry into the pharmaceutical sector, which identified settlements that limit generic entry and provide at the same time for a value transfer from the originator to the generic company as potentially raising competition concerns.

The headline finding in the report is that, as with previous years, the vast majority of pharmaceutical settlement agreements (some 92 percent) are prima facie unproblematic in competition law terms. The EC says this shows the industry’s increased awareness of potentially problematic practices. This may or may not be the case, but in any event this area of law remains unclear despite these reports and two recent EC decisions concerning this issue.

In its June 2013 Lundbeck decision, the EC imposed a fine of EUR93.8 million on Danish pharmaceutical company Lundbeck and fines totalling EUR52.2 million on several producers of generic medicines for agreeing to delay the market entry of cheaper generic versions of citalopram, a blockbuster antidepressant. In July 2014 the EC imposed fines totalling EUR427.7 million on Servier and five producers of generic medicines for concluding a series of deals all aimed at protecting Servier’s perindopril product from price competition by generics in the EU. This followed the expiry of Servier’s principal patent for the perindopril molecule in 2003. Certain secondary patents had remained in force.

Both of those cases have been appealed to the GC, and the correct legal position will not be known until the court opines. Meanwhile, legal uncertainty limits the appetite of originators and generics to negotiate patent settlement agreements and indeed probably reduces the likelihood that generic suppliers will challenge patents in the first place (which could in turn skew the findings of the EC’s monitoring reports going forward).

Although these cases and studies come from the pharmaceutical sector, similar issues would apply in any other sector. Companies are of course able to apply for patents, to enforce them, to transfer technologies and to settle litigation. However, competition law concerns may arise where such tools are misused. The EC stated in relation to the Servier case that “engaging in an exclusionary strategy to foreclose important competing technologies and buying [a] close competitor … is blatantly abusive.”