A 2009 inquiry into the European pharmaceutical sector identified competition between ‘originator’ and ‘generic’ companies as an area where pharmaceutical markets “are not working as well as they should”.  The inquiry was particularly concerned about originator pharmaceutical companies launching pre-emptive litigation against potential generic competitors, and subsequent settlement agreements in which would-be generic competitors would be paid to delay entry to the market. 

Article 101 of the Treaty on the Functioning of the European Union (TFEU) precludes transactions or contractual arrangements which have the “object or effect of the prevention, restriction or distortion of competition”.  As part of its continued focus on competition in the pharmaceutical sector, the European Commission has launched investigatory proceedings into contracts between Johnson & Johnson and Sandoz in relation to the sale of generic versions of fentanyl in the Netherlands, which, it is thought, may breach Article 101.  The initiation of the proceedings by the Commission removes jurisdiction from member states to consider whether the arrangements breach Article 101.

Competition regulatory authorities, both in Europe and the US, are increasingly scrutinising agreements between originator and generic companies in the pharmaceutical sector, and we expect this to remain an area of focus.