Distribution or marketing of the same drug by more than one company is commonplace in the pharmaceutical industry given the huge costs of bringing products to market. Nonetheless, co-marketing / co-promotion agreements have in recent years come under increased antitrust scrutiny. For example the European Commission investigated such an agreement culminating in an infringement decision in 20131. More recently an Italian Competition Authority (“AGCM”) commitments decision in relation to a co-distribution arrangement2 raised concerns about market partitioning as well as exchanges of commercially sensitive information, the manufacturer’s control of promotional strategies and the effect of non-compete clauses.
First, the AGCM was concerned with the exchange of information such as marketing plans, quantities sold, promotional spend, as well as scientific information about the underlying active ingredient of the product. It did accept that some exchange of information on marketing plans and future orders was a legitimate means for a manufacturer to monitor how well its product was being commercialised. However, concerns about the requirement to exchange scientific information and research relating to the active ingredient remained. Respondents to a consultation argued that the requirement was necessary to ensure that an accurate message was delivered to doctors in the licensee’s promotions, thus guaranteeing patient safety. However the AGCM was not convinced and ultimately the parties committed to remove the requirement. The AGCM also identified concerns relating to the manufacturer’s control of the scientific elements of the promotional material, relating to the active ingredient, coupled with an obligation on the licensee to follow its promotional strategy.
Separately, the parties also agreed to reduce the reporting time period and remove clauses requiring a minimum threshold of resources and market share to be achieved. Similarly, the duration of the agreement was reduced to a maximum of three years.
Finally, the decision considered the effects of a non-compete clause prohibiting one of the parties from marketing a competing drug. The parties successfully persuaded the AGCM that non-competes are commonplace in co-marketing agreements and necessary to ensure that the parties do not focus on marketing competing products. In this case, the clause did not prevent the licensee from developing a competing product to be distributed by a third party.
Co-marketing agreements can be a pro-competitive means of bringing pharmaceuticals to market, as well as stimulating intra-brand competition, particularly where a company has a monopoly over a molecule during the term of the patent.
Nonetheless, agreements of this kind are not immune from competition authority scrutiny. While relevant markets are often assessed rather narrowly in the pharmaceutical sector, there is also a trend towards a more inclusive approach to potential competition, following the ‘pay-for-delay’ cases. Agreements between (potential) competitors are considered more strictly under the competition rules, including in relation to what information can be safely exchanged between the parties without risking a competition law infringement.
The AGCM’s conclusions in relation to the exchange of scientific information about the co-marketed product in this case are perhaps surprising: it would usually be useful and pro-competitive for a co-marketer to have information of this kind to promote the product. However, even if this case does represent something of a ‘high water-mark’ for what should be considered to be commercially sensitive information, it is a useful reminder that any sharing of confidential information should be kept to the minimum necessary for the effective operation of the agreement.