Introduction
Public financing system of medicines
Facts
Decision
Similar cases
Comment


Introduction

On January 22 2013 the 15th Division of the Barcelona Court of Appeal (which specialises in unfair competition and IP matters) handed down an important judgment regarding unfair competition and the risk of imminent patent infringement relating to the inclusion of a generic drug in the National Health System's reference pricing system.

This judgment is the first of its kind handed down by an appeal court in main proceedings dealing with this subject matter. In addition, the reasoning behind the judgment is important not only regarding the substantive grounds, but also concerning procedural issues (eg, the joinder of the unfair competition and patent infringement actions and the standing in the unfair competition action).

Public financing system of medicines

Generally speaking, once a marketing authorisation for a medicine has been granted, the Ministry of Health initiates ex officio the reference pricing procedure in order to fix a price for the medicine and include it in the reference pricing system (Article 89.1 of the Medicines Act). In the framework of this procedure, the holder of the authorisaton must submit financial information pertaining to the drug in order to enable the authorities to calculate its price. Once initiated, the holder of the authorisation can stop the procedure only by filing a request or by failing to submit the required financial information.

In the case at hand, the generic was granted marketing authorisation and included in the reference pricing system in 2009. Following the inclusion of the first generic of an active ingredient (or a combination thereof) in the reference pricing system, a pricing reference group can be established for all drugs with the same active ingredient and the same method of administration, unless the marketing authorisation is suspended. Each group contains fixed reference prices which apply to all the drugs included in that group.

In such circumstances, two rules apply:

  • the reference price is always considerably lower than the price of the innovator reference drug (ie, the original); and
  • only drugs at or below the reference price threshold are eligible to be financed by the National Health System.

However, if preliminary injunctions are granted against the generic company for imminent or current patent infringement, the effects of the pricing reference group are suspended until the expiration of the patent rights (or a court decision).

In recent years, several amendments to the Medicines Act have been approved. Subsequently, the inclusion of the first generic of an active ingredient (or a combination thereof) in the reference pricing system has two consequences, except when the marketing authorisation is suspended:

  • The imminent creation of a homogeneous cluster – each cluster includes all financed drugs with the same active ingredient(s) with regard to dosage, content, pharmaceutical form and administration method to the point that they can be interchanged in their dispensation (Provision 14 of the Medicines Act). The retail price of each medicine is shown in the homogeneous cluster list. In order to prepare this list, laboratories notify the price that they will fix for each financed medicine to the corresponding authority. In general, pharmacies dispense the lowest-priced medicinal product from each homogeneous cluster to customers (Articles 85.4 and 86.5 of the Medicines Act). When a homogenous cluster includes only the innovator and its licences, this is highlighted in the homogeneous cluster list. If the innovator fails to reduce its price to the lowest price in the cluster, problems will arise at the dispensing stage (within the framework of the reference price system), even in the absence of a generic on the market.
  • The possible creation of a pricing reference group – according to the wording of Article 93.2 of the Medicines Act, the inclusion of a generic of an active ingredient in the reference pricing system leads to the creation of a pricing reference group. However, a draft order relating to pricing reference groups in cases in which the Ministry of Health interprets that the inclusion of the generic in the reference pricing system is insufficient, and that effective marketing of the drug is also required, is in the pipeline.

    Due to a sunset clause, if a drug is not launched onto the market within three years of procurement of a marketing authorisation, the authorisation lapses (Article 21 of the Medicines Act). ?In light of this it can be concluded that:
    • when a generic obtains a marketing authorisation and is included in the reference pricing system, there are several consequences for the price and the dispensation of innovator drugs, even if the generic is not released onto the market; and
    • it is relatively simple for a generic to avoid the consequences of acts of unfair competition.

Inclusion of a generic of an innovator which is covered by a valid patent or supplementary protection certificate (SPC) in the reference price system could be seen an act of unfair competition. In this context, 'unfair competition' is defined as illicit interference in the normal marketing process of an innovator which is covered by a valid patent.

Furthermore, imminent patent infringement could be said to exist in such circumstances. Unless the generic company can provide a strong reason for the procurement of a marketing authorisation and the inclusion of its generic in the reference price system before the expiration of the patent or SPC, it does not make sense to obtain a marketing authorisation. Further, it makes no sense to include a generic in the reference price system if the generic company does not intend to market the drug in the near future. Suspicions of imminent patent infringement are heightened when a marketing authorisation is obtained more than three years before the patent or SPC expires.

Facts

The case at hand refers to a generic of donepezil for which a marketing authorisation had been obtained and which was included in the reference pricing system more than three years before the SPC expired. During proceedings on the inclusion of the generic in the pricing reference system, the generic company stated - both before the authorities and the rights holders' lawyers - that it did not intend to market the product before the SPC expired. However, the generic company neither curtailed the continuation of the reference price procedure nor suspended the marketing authorisation after the generic was included in the reference price system.

The patentee and the co-marketers of the patent in Spain (which did not hold a recorded patent licence) filed a claim against the generic company on the basis of unfair competition and patent infringement. In conjunction with the claim, they also sought injunctive relief.

Decision

Injunctive relief was granted ex parte, and it was confirmed by both the first instance court and the appeal court following opposition and a corresponding hearing. The first instance court acknowledged both infringements; however, the appeal court acknowledged only the unfair competition claim. The appeal court did not recognise imminent patent infringement owing to statements made by the generic company before the request for injunctive relief regarding its intention not to launch the generic onto the market. The court stated that if the generic company violated these statements, ex parte injunctive relief would be granted as a matter of urgency with a declaration of bad faith, and the generic company would be ordered to pay court costs. As the appeal court had acknowledged the unfair competition claim, it upheld the injunctive relief which was granted in the proceedings before the lower courts. Such preliminary injunction included a prohibition to market donepezil generics before the SPC expired.

In its judgment based on the merits of the case, the first instance court had held that there existed not only anti-competitive behaviour, but also patent infringement. However, the appeal court held that it could confirm only the unfair competition claim. It considered that no clear imminent patent infringement existed in light of the generic company's declaration that it would not launch or market the drug while the SPC was in force; however, the court expressly asserted that it had several doubts in this regard.

There are two important procedural issues in this judgment:

  • Joinder - the imminent patent infringement and unfair competition actions were joined in these proceedings because the unfair competition action comprised aspects that extended beyond mere patent infringement and impacted the fair position of third parties in the market.
  • Standing - as a consequence of the previous distinction, even if co-marketers do not hold a recorded licence for the invoked patent rights, they have standing to bring an unfair competition action in this type of case.

Similar cases

Two recent similar cases applied the existing medicines legislation:

  • Montelukast – on July 30 2012 Barcelona Commercial Court No 5 granted injunctive relief against a generic company because its montelukast generic had been included in the reference pricing system approximately eight months before the expiration of the SPC. The court acknowledged an unfair competition action. However, it did not acknowledge imminent patent infringement because the generic company had expressly declared that it did not intend to market the generic before the patent expired, and the expiration date was looming. A preliminary injunction suspended the marketing authorisation of the generic until one month and 25 days before the expiration of the SPC.
  • Atomoxetine – the patent owner brought suit for imminent patent infringement and unfair competition and also sought injunctive relief. These actions were brought after a marketing authorisation for the generic had been procured, but before the inclusion of the generic in the reference pricing system. The marketing authorisation for the atomoxetine generic had been obtained approximately seven years before the SPC expired. Injunctive relief was granted ex parte by Barcelona Commercial Court No 1 on August 1 2012. The court acknowledged not only the unfair competition action, but also imminent patent infringement. The grounds of this decision were:
    • the lengthy period remaining until the expiration of the SPC and the ensuing expiration of the marketing authorisation if the generic company failed to market the generic before the expiration of the SPC (and thus with patent infringement); and
    • the generic company's failure to respond to two cease-and-desist letters sent by the patentees before filing the claim and request for injunctive relief.

In light of these circumstances, the court concluded that the generic company had failed to provide any reason to obtain marketing authorisation for the generic drug so long before the patent rights expired. The injunctive relief included adoption of the necessary steps to avoid the creation of a homogeneous cluster. Consequently, the generic company requested the exclusion of the generic from the reference pricing system. Simultaneously, the generic company appealed the injunction ruling and expressly stated at the injunction hearing that it did not intend to market the generic in the future. This commitment before the court led to the injunction being lifted on December 13 2012.

Comment

Some Spanish courts have recently acknowledged that, due to the public financing system for medicines, the procurement of a marketing authorisation for a generic covered by patent rights in full force and effect implies an act of unfair competition if the generic company fails to prevent the consequences of the inclusion of the generic in the reference pricing system. Furthermore, some Spanish courts have recently acknowledged that procurement of a marketing authorisation for a generic may also imply imminent patent infringement.

For further information on this topic please contact Teresa Mercadal Menchaca at Bird & Bird by telephone (+34 91 790 6000), fax (+34 91 790 6011) or email (teresa.mercadal@twobirds.com).

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.