Pharmaceutical regulatory law

Regulatory framework and authorities

Which legislation sets out the regulatory framework for the marketing, authorisation and pricing of pharmaceutical products, including generic drugs? Which bodies are entrusted with enforcing these rules?

The French Public Health Code (PHC) regulates the marketing authorisation (MA) of reference medicinal products for human use (articles L5121-8 and R5121-21 and following) and generic products (articles L5121-10 and R5121-5 and following).

Applications for MAs are submitted to the French National Agency for the Safety of Medicines and Health Products (ANSM). A simplified procedure exists for generics that have to prove the bioequivalence of their product with reference to the original medicine.

Any company marketing medicinal products without prior authorisation incurs five years’ imprisonment and a fine of €375,000 (article L5421-2 of the PHC). The ANSM is competent to control the validity of the MAs but not to impose these sanctions, which may solely be decided by the criminal court after instruction by the public prosecutor.

After having obtained an MA for its medicine, a pharmaceutical firm may decide on which market to place its product. A key distinction must be made between the hospital market for inpatients and the pharmacy market for outpatients:

  • for the hospital market, pricing is free and prices are set through bids (except for medicines that can be purchased by outpatients and for most innovative medicines for which prices are set according to a procedure similar to the one applying to pharmacy reimbursable medicines as described below). However, since 1 January 2018, article L162-16-5 of the French Social Security Code (SSC) provides, for example, that the purchase price of the medicinal products paid by the hospital cannot be higher than the selling price to the public minus the margin of the company that was set out by decision of the Minister; and
  • for the pharmacy market, the firm can choose to enter the non-reimbursable market or the reimbursable market:
  • if it chooses the non-reimbursable market, pricing is totally free; or
  • if it chooses the reimbursable market, the price is then regulated and set by an agreement between the Economic Committee for Healthcare Products (CEPS) and the firm (article L162-16-4 of the SSC), or in the absence of an agreement, by the CEPS alone.

The price determination process takes into account various criteria including the improvement of clinical benefit evaluated by the Transparency Commission of the French National Authority for Health, the prices of other medicinal products with a similar therapeutic design, the expected or recorded sales volume and the actual and foreseeable use of the medicinal product.

For generics, the price set by the CEPS (based on ministerial guidelines) is 60 per cent lower than a reference medicinal product. Once the generic is marketed, the price of the reference medicinal product is then reduced by 20 per cent. After certain marketing periods, the CEPS can decide either to base the reimbursement of each medicine on the average price of the generic versions or to apply a further price reduction of 7 per cent for generics and 12.5 per cent for original medicines.

Only administrative courts have jurisdiction to hear on actions against marketing authorisations, decisions fixing the price or decisions regarding the reimbursement of a product.

Pricing

Are drug prices subject to regulatory control?

See question 1.

Also note that a decree of 24 March 2017, pursuant to the Social Security Financing Act (LFSS) for 2017, has defined the list of European countries (ie, comparable market size) that can be used as a comparison for fixing prices of medicinal products reimbursable by French health insurance. The price may be modified in particular in view of the existence of lower prices in Germany, Spain, Italy and the UK.

Furthermore, the LFSS for 2018 also established a flat-rate reimbursement for refundable medicinal products; new articles L162-16-5 and L162-16-6 of the SSC now provide that the reimbursement base of a medicinal product may be subject to a unified price fixed by the CEPS. Such a rate can be widely applied to generics, their original medicinal products, similar biological medicinal products, their reference biological medicinal products as well as any comparable medicine as regards their indications or their therapeutic purpose.

This mirrors the desire of the government to move forward with a full price regulation and appears to be quite inconsistent with the traditional principle of negotiation between the CEPS and the company on an agreement on prices.

Distribution

Is there specific legislation on the distribution of pharmaceutical products?

There is specific legislation on the distribution of pharmaceutical products, which is mainly developed in the PHC. The most important points are as follows.

First, as regards distribution to patients, pharmacists keep the monopoly on the sale of most medicines and in vitro medical devices (article L4211-1 of the PHC) through brick or click (through both physical shops and online). However, on the internet, pharmacies are only authorised to sell non-prescription medicines (article L5121-34 of the PHC). This being said, the pharmacists’ monopoly is nowadays subject to various criticisms, ranging from the European Commission to supermarket chain holders. In order to comply with European case law in this matter, France decided to exclude contact lenses and accessories from the monopoly, as well as pregnancy tests (Law dated 17 March 2014).

Recently, and based on the Competition Authority’s opinion of 10 April 2013, the Versailles Court of Appeal (No. 16/05167 - 12 December 2017) admitted that a platform that provides pharmacists with technical design and maintenance services for their online sales site is deemed lawful as it does not intervene as an intermediary in the sale of medicinal products.

Upstream, the whole supply chain is strongly regulated, thus limiting competition between the various actors.

Prices are only set out freely for the supply to hospitals (see question 1), whereas for the private circuit, the retail price (including taxes) is set out by the CEPS. The maximum margins that can be applied at each step of the supply chain (wholesalers and pharmacists) are set out by law (order dated 4 August 1987, modified since). The theoretical ‘manufacturer price, excluding taxes’ (the price to be applied by the pharmaceutical company) is calculated as a result of the application of these maximum margins to the retail price.

This mechanism results in a significant rigidity and considerably hinders horizontal competition, all the more so as discounts to pharmacists are strictly capped. Therefore, pharmaceutical companies directly selling to pharmacists or wholesalers supplying pharmacists cannot offer discounts exceeding 2.5 per cent of the manufacturer’s price on originator medicines and 40 per cent on generics (see question 4), provided such products are reimbursed by social security funds.

Intersection with competition law

Which aspects of this legislation are most directly relevant to the application of competition law to the pharmaceutical sector?

Several aspects of the above legislation are relevant to the application of competition law to the pharmaceutical sector.

As prices are mainly set out by public bodies, competition between pharmaceutical firms is limited in this field.

On the distribution of pharmaceutical products, article R5124-59 of the PHC, which was modified by Decree No. 2012-1096 of 28 September 2012, imposes public service obligations on wholesalers, the strictness of which may hinder free competition on all levels. For example, wholesalers must store at least 90 per cent of existing medicines. In the former version of the text, this obligation was, in itself, likely to prevent manufacturers from freely organising their own supply chain. This text imposes on the pharmaceutical firms the obligation to supply the French wholesalers so they are in a position to meet their own public service obligations.

Such obligation is now legislative in nature. The Law of 26 January 2016 further introduced article L5121-29 of the PHC, according to which, marketing authorisation holders shall appropriately and continuously supply all authorised pharmaceutical wholesalers in order to enable them to fulfil their public service obligations as well as implement shortage management plans.

Additionally, in the supply chain, wholesale and retail upper margins are set by the government, again eliminating competition.

Most importantly, within the past 10 years, French law has been designed to support the inclusion of generic products into the market. Initially, generics benefited from article L5125-23 of the PHC allowing pharmacists to replace prescribed brand-name medicines with their generic equivalent. Since 1 January 2009, general practitioners are required to write their prescriptions according to the international non-proprietary names, which assign a common name to each active substance. This mechanism is promoted through financial incentives to pharmacists. Indeed, their margins are set higher by the government when they sell generics to their patients. Furthermore, under the French Social Security Code, generic companies are allowed to grant much higher discounts than originator companies to pharmacists. Thus, where originator companies’ discounts to pharmacists are limited to 2.5 per cent, generic companies were allowed to grant them discounts of up to 17 per cent. However, in practice, generic companies did not respect these thresholds and implemented various mechanisms in order to actually grant financial advantages that could, in fact, go up to almost 50 per cent. Taking account of this situation, parliament amended this cap (Law dated 17 March 2014). Since 1 September 2014, generic companies may grant pharmacies discounts of up to 40 per cent on their reimbursed products. Regarding generic medicines, the Competition Authority announced in November 2017 that it will assess, as part of its new sectorial investigation, the impact of the heavy discounts given by the pharmaceutical companies to dispensing pharmacists on the balance of the medicines distribution chain, and will examine whether these discounts are reflected in the prices paid by patients.

As a counterpart of this change, the Law imposes on generics companies an obligation to notify to the CEPS the annual turnover they achieved for each medicine, together with the global discounts and financial advantages granted to pharmacists for each medicine. In the case of absence of filing or false declaration, the generics company may incur a fine of up to 5 per cent of the concerned annual turnover.

It is likely that the information thus gathered would be used by the Pricing Authority to obtain prices reductions from the generics companies if it shows that discounts granted to pharmacies are of significant importance.

Finally, on 12 December 2017, the Ministry of Solidarity and Health and the Ministry of Public Accounts and Action set a mandatory objective of national market penetration rate of generics at 86 per cent for 2017. With an actual rate of 83.4 per cent on 31 December 2016, this goal was almost achieved. Since then, the rate has been set out at 85 per cent each year. The setting out of such rate also limits competition, even between generic and originator companies, since it restrains, in any case, the originator company’s market share to a maximum of 15 per cent.

Competition legislation and regulation

Legislation

Which legislation sets out competition law?

The competition legal framework is mainly codified in Book IV of the French Commercial Code, entitled ‘Pricing freedom and competition’ (article L410-1 and following), lastly amended by Law No. 2015-990 for growth, activity and equal economic opportunity and passed on 6 August 2015.

Competition authorities

Which authorities investigate and decide on pharmaceutical mergers and the anticompetitive nature of conduct or agreements in the pharmaceutical sector?

There is no specific authority in charge of applying competition law in the pharmaceutical sector. Competition law is applied to this sector by the Competition Authority, which is also competent for all business sectors.

The Authority is now solely responsible for making competition work on the markets by overseeing mergers as well as by enforcing rules prohibiting cartels, anticompetitive agreements and abuses of dominance in any economic sector.

In particular, the Authority is responsible for merger control. Filing is mandatory, when the conditions set out in article L430-2 of the French Commercial Code are met (namely thresholds of total turnover).

Pursuant to article L430-7-1 of the French Commercial Code, the Minister of the Economy nonetheless retains certain powers such as opening an in-depth stage II investigation or reversing the Competition Authority’s decision under certain circumstances.

Since the replacement of the Competition Council by the Competition Authority, competition investigations are mostly conducted by the investigators of the Competition Authority, under the sole supervision of the chief case-handler. However, the Ministry of the Economy holds some powers in this regard through its administration, which still has some investigators.

For instance, in April 2014, the Competition Authority opened an investigation for anticompetitive agreements between Roche and Novartis. On 26 October 2016, the French Supreme Court approved the decision authorising the Directorate-General for Competition, Consumer Affairs and Prevention of Fraud to carry out dawn raids in the premises of Novartis.

 

Remedies

What remedies can competition authorities impose for anticompetitive conduct or agreements by pharmaceutical companies?

There are no particular remedies for the pharmaceutical sector that may be imposed by the Competition Authority.

There are various sanctions for infringements of French competition law: the Competition Authority may order interim measures, order the parties to change their conduct within a specified period or under special conditions, order publicity measures for its decisions or sentence parties to fines of up to 10 per cent of their worldwide turnover.

French competition law also provides alternative means to resolve competition issues to companies suspected of infringement.

Firstly, before notifying an actual statement of objections, the Authority may indicate to a company it has ‘competition concerns’ regarding some of its behaviour. The said company may then propose commitments in order to resolve such concerns and thus avoid being fined.

Furthermore, even having received a statement of objections, companies may initiate a settlement procedure enabling them to obtain a fine reduction of between 10 and 25 per cent if they agree to waive their right to challenge the statement of objections and propose behavioural or structural commitments. A new law, adopted in August 2015, adjusted this settlement procedure to render it closer to the one existing at the European level. This procedure would be rendered more ‘attractive’, since the general case handler will from now on be in a position to propose in the settlement the minimum and maximum fine the firm must pay, should it decide to sign the settlement.

Finally, French law also provides a leniency programme under which companies may report anticompetitive practices to the Authority before or after the opening of a contentious procedure against them. They may thus obtain either full immunity or a reduction of the fine they would otherwise have incurred in consideration for handing over evidence to the Authority and for their cooperation during the investigation phase.

These solutions have been implemented in the pharmaceutical sector. As regards financial sanctions, in Decision No. 07-D-09, the Competition Authority imposed a €10 million fine on GlaxoSmithKline as it ruled that the firm had abusively hindered the entry of generics into hospitals by implementing predatory prices as part of a global intimidation strategy aimed at discouraging generic medicine manufacturers from entering the hospital medicine market. However, the decision was overruled by the Supreme Court in a Decision dated 17 March 2009.

In Decision No. 13-D-11, the Competition Authority imposed a €40.6 million fine on Sanofi-Aventis for having implemented a strategy that denigrated generics of Plavix, one of the top-selling medicinal products in the world. The Paris Court of Appeal followed by the French Supreme Court confirmed the decision and the fine imposed by the Competition Authority, in cases dated 18 December 2014 and 18 October 2016. In three decisions, Nos. 07-D-22 (Boehringer Ingelheim, Lilly France, Merck, Sanofi-Aventis); 07-D-45 (Pfizer); and 07-D-46 (GlaxoSmithKline), the Competition Authority accepted the commitments submitted by pharmaceutical companies that amended their supply chain for medicinal products so as to increase its fluidity, flexibility and transparency for wholesalers. These decisions were ultimately overruled by the Supreme Court on procedural grounds.

In Decision No. 13-D-21, Schering-Plough was fined €15.3 million for hindering the entry of generics of its originator, Subutex. Schering-Plough chose not to contest the objections brought forward by the Competition Authority and submitted several commitments in order to prevent such practices in the future, such as the control of commercial strategy before the entry of generics, and the sales staff training on the prohibition of denigration of generics. In this respect, the amount of the fine was reduced by 20 per cent. In its Decision of 26 March 2015, the Paris Court of Appeal dismissed Reckitt Benckiser (fined €318,000 for its participation in the anticompetitive agreement) for annulment of the above-mentioned decision, a decision that was finally confirmed by the French Supreme Court on 11 January 2017.

More recently, in Decision No. 17-D-25 dated 20 December 2017, the Competition Authority imposed a €25 million fine on Janssen-Cilag for having implemented a strategy that denigrated generics manufactured by Ratiopharm.

Moreover, following the example of the European Commission of 2006, the Competition Authority published a Notice on the Method Relating to the Setting of Financial Penalties (16 May 2011), which provides a thorough analysis of the elements taken into consideration for setting the amount of the fine.

Private actions and remedies

Can private parties obtain competition-related remedies if they suffer harm from anticompetitive conduct or agreements by pharmaceutical companies? What form would such remedies typically take and how can they be obtained?

Private parties can initiate proceedings before the Competition Authority by filing a complaint.

They usually request the Competition Authority to take interim measures to order the end of the practices they deem to be anticompetitive (see, for example, Decisions Nos. 07-D-22 Phoenix Pharma; 09-D-28 Ratiopharm; and 07-MC-06 Arrow Génériques). In the latter, based on a few pharmacist testimonies, the Competition Authority considered that Schering-Plough may have denigrated Arrow’s generic. It thus adopted interim measures in order to restore the HCPs’ confidence towards Arrow’s generic and ordered Schering-Plough to publish a statement in this regard.

The executive order No. 2017-303 of 9 March 2017 (OJ of 10 March 2017) finally transposed into French law Directive 2014/104/EU of 26 November 2014, on certain rules governing actions for damages under national law for infringements of the competition law provisions of the member states and of the European Union. This text aims at promoting private enforcement (eg, recognising irrebuttable presumption of misbehaviour in case of an infringement of competition law found by a final decision of a national competition authority or a review court, shifting the burden of proof onto the defendant as regards the overcharge passed on, and the right to full compensation of the claimant.)

Sector inquiries

May the antitrust authority conduct sector-wide inquiries? If so, have such inquiries ever been conducted into the pharmaceutical sector and, if so, what was the main outcome?

Regarding competition inquiries, the powers of the Competition Authorities are very similar to those of the European Commission. Since the reform of competition investigations, the Competition Authority has its own investigators (see question 6) in order to conduct ordinary investigations (article L450-3 of the French Commercial Code) or investigations under judicial control (article L450-4 of the French Commercial Code).

On 25 February 2013, the Competition Authority launched a broad sector inquiry to investigate the distribution of medicinal products for human use in private practices.

The final report was published on 19 December 2013 (Opinion 13-A-24) and included various comments and proposals as regards each link of the supply chain, with the aim of ‘enhancing competition within this highly regulated industry’.

As regards the originator companies, the main findings can be summarised as follows.

In 2013 the Competition Authority specifically punished the behaviour of originator companies denigrating generic medicinal products in the pharmaceutical sector (see question 7). In this regard, the final report insists that pharmaceutical companies adopt, beyond and within a compliance programme, a specific training programme for the whole staff of the company on the ‘denigration issues and risks’, in order to avoid ‘denigration barriers’ whenever generic products are about to enter the market. In this respect, every originator company active on the French market should investigate and assess the possible necessity of finally adopting a competition compliance programme or amending its existing programme in this regard, if necessary.

The final report indirectly alludes to supply chain management schemes through the issue of supply shortages, which arose in France in 2012 and 2013. The Authority implied that such shortages might have several different causes, but observed that these shortages might be the consequence of supply chain management schemes implemented by pharmaceutical companies, as well as the activity of the wholesalers exporting these products.

Finally, the Competition Authority commented on the relationships between originator companies and wholesalers only in relation to non-reimbursable medicinal products (OTC medicinal products). The report noticed that, for these medicinal products (for which rebates are not limited by legal provisions, see question 4), in some cases, rebates granted to pharmacists through the direct-to-pharmacy (DtP) channel seemed to be superior to the ones granted to the wholesalers. Such difference would ‘illustrate the power struggle created by the pharmaceutical firms with the wholesalers’. The Authority suggested that the situation could result from the companies’ willingness to maintain their margins in relation to the smaller pharmacies, since they would nevertheless keep an interest in buying from the pharmaceutical company rather than through wholesalers.

Even if, in practice, such behaviour is not limited to non-reimbursable medicinal products, it is to be kept in mind that, in itself, such behaviour would not constitute an anticompetitive practice. The situation depends on the context as well as differentiated and specific conditions applied to both channels.

Finally, with respect to retail sales, the report notes that despite the strong growth of the self-medication practice, competition between pharmacies in this sector is very weak. Thus, the Authority recommended that the government should adopt measures to implement a limited and regulated opening to competition for self-medication medicines and that certain products, such as pregnancy tests and contact lens care solutions, should be taken out of the scope of the pharmacists’ monopoly in order to also be distributed in drugstores or supermarkets. For the last two categories, the laws have been changed accordingly, whereas the distribution of self-medication products outside the pharmacies is still the subject of strong dispute.

According to the Authority, some recommendations were not followed, or only followed in part, by the government. On 21 November 2017, the Competition Authority therefore decided to launch a new broad sector inquiry to investigate the functioning of competition with regard to medicines for human use and medical biology. It will notably focus on the pricing of medicines, the distribution of medicines as well as the potential development of pharmacist’s activity. This inquiry aims to promote fair competition between the different stakeholders (Decision No. 17-SOA-01).

NGO involvement

To what extent do non-government groups play a role in the application of competition rules to the pharmaceutical sector?

Article L462-1, paragraph 2 of the French Commercial Code enables professional associations, labour unions or recognised consumer groups to petition the Competition Authority with regard to the interests for which they are responsible to obtain its opinion on ‘any issue regarding competition’.

This option has been used mainly by HCP associations. For example, the national association of emergency practitioners requested the Competition Council’s opinion on rules set out by the Council of the national medical association to organise emergency care in France (Opinion No. 96-A-17, dated 5 November 1996).

This opportunity has recently been used by manufacturers’ associations. Thus, the French National Association of Dental Prostheses Manufacturers consulted the Competition Authority regarding the effects on competition of the exclusive sale of dental prostheses by dental surgeons (Opinion No. 12-A-06, dated 29 February 2012).

The Association of Veterinary Medicinal Products Manufacturers also used this faculty to obtain the Competition Authority’s opinion regarding the possible competition issues that would result in the creation of an association of veterinary surgeons whose goal was to negotiate prices with the manufacturers on behalf of their members. The Authority concluded that the appearance of this newcomer would not by itself raise issues from a competition law standpoint (Opinion No. 12-A-14, dated 19 June 2012).

Review of mergers

Sector-specific considerations

Are the sector-specific features of the pharmaceutical industry taken into account when mergers between two pharmaceutical companies are being reviewed?

Owing to the size of most pharmaceutical firms, the majority of mergers in this sector are referred to the Commission, as European thresholds are often exceeded. On this point, the Commission is currently considering complementing the existing thresholds (turnover-based system) with the notion of ‘market potential’ in order to capture some transactions, particularly in the pharmaceutical sector.

This being said, French practice in this sector is thus limited. However, specific sector features are taken into account in the definition of the relevant markets.

For example, the Competition Authority authorised a merger between Boiron and Dolisos, two French companies manufacturing homeopathic products (Opinion No. 05-A-01).

In this case, the definition of the relevant markets was influenced by the regulations applicable to certain products. The Competition Authority distinguished within the homeopathic medicines, generic homeopathic medicines (MNC) from branded homeopathic medicines (MNM), based, in particular, on the facts that the MNM include, contrary to the MNC, a therapeutic indication and are not reimbursable by social security insurance. Their marketing is thus subject to a marketing authorisation, and their prices and margins are not controlled.

Market definition

How are product and geographic markets typically defined in the pharmaceutical sector?

Product market

In general, medicinal products may be subdivided into therapeutic classes by reference to the ‘anatomical therapeutic chemical’ classification (ATC), which classifies medicinal products into five different groups according to the organ or system on which they act and their therapeutic, pharmacological and chemical properties.

The third level (ATC3) allows products to be grouped in terms of their therapeutic indications (ie, their intended use) and is therefore generally used as an operational market definition. However, market definition may also be based on other levels of the ATC classification.

As regards merger control, the French authorities’ practice regarding the market definition is mainly guided by the European Commission case law regarding the pharmaceutical sector. Nevertheless, it should be noted that in antitrust cases, the Competition Authority considers level 3 of the ATC merely as a starting point and tends to narrow the market definition to level 5 of the ATC, namely, the molecule (see Decisions Nos. 03-D-35, Sandoz; 07-D-09, GlaxoSmithKline; 09-D-28 Ratiopharm; 07-MC-06 Arrow Génériques; and 13-D-11 Janssen-Cilag). This trend is also visible in merger controls. In a decision of 6 August 2013, the Competition Authority had to assess possible effects of a merger on the market of regulators of bone calcium (acquisition of sole control of Warner Chilcott Company by Actavis Inc, Decision No. 13-DCC-106), a market that has been examined four times by the Commission between 2008 and 2010 (No. COMP/M.5295, Teva/Barr, 19 December 2008; No. COMP/M.5253, Sanofi-Aventis/Zentiva, 4 February 2009; No. COMP/M.5555, Novartis/EBEWE, 22 September 2009; and No. COMP/M.5865 Teva/Ratiopharm, 3 August 2010). In each case, the European authority left open the issue of whether the market should be defined at level 3 (regulators of bone calcium) or level 4 (bisphosphonates), but clearly ruled out the idea of narrowing the market at level 5, deeming that there was a high degree of substitutability between the molecule (risedronic acid) and the other bisphosphonates. Nevertheless, the Competition Authority checked the market shares of the parties to the concentration on each of the three levels.

On the other hand, the Competition Authority conforms to the Commission’s practice as regards the definition of the different market products and distinguishes between prescribed medicines and non-prescribed medicines, reimbursable and non-reimbursable medicines, products already on the market and pipeline products, active pharmaceutical ingredients, contract manufacturing. In the Boiron/Dolisos case, the Competition Authority made its own distinction between MNC and MNM (see question 11).

Geographic market

The geographic market for pharmaceutical products is generally defined on a national scope (see Decisions Nos. 07-MC-06; 07-D-09; 13-D-11; and 13-D21) but may sometimes be said to be local. It could be the case for the market related to the supply of medicinal products by wholesalers to pharmacists (owing to public services obligations; see question 4), contrary to the market supply of medicinal products by pharmaceutical firms to wholesalers, which is on a national scope (Opinion No. 02-A-15 on a merger between two pharmaceutical wholesalers).

Addressing competition concerns

Is it possible to invoke before the authorities the strengthening of the local or regional research and development activities or efficiency-based arguments to address antitrust concerns?

Article L420-4 of the French Commercial Code lays down a system of exemptions that states that provisions related to cartels and abuse of dominant position do not apply to practices that have the effect of promoting economic progress and reserve for consumers a fair share in the resulting profit, without giving the undertakings involved the opportunity to eliminate competition for a substantial part of the products in question.

For example, in Decision No. 07-D-05, the Competition Authority admitted that the price method set out by a trade association to determine the price of non-reimbursable prostheses did not infringe the provisions of article L420-1 of the French Commercial Code, as the conditions of exemptions were fulfilled. The method allowed patients to benefit from rare devices under better conditions.

As regards mergers, the Ministry of the Economy may reverse the decision taken by the Competition Authority on the grounds of general interest other than the maintenance of competition, notably industrial development, the competitiveness of companies with regard to international competition or the preservation of employment.

In the pharmaceutical sector as in other sectors, arguments such as strengthening the local or regional research and development activities are almost never admitted by the competition authorities.

Horizontal mergers

Under which circumstances will a horizontal merger of companies currently active in the same product and geographical market be considered problematic?

The French Competition Authority has to ensure the operation would not harm competition, especially by the creation or the reinforcement of a dominant position or the creation or reinforcement of a purchasing power that would place the supplier in a position of dependency. In this regard, the Authority first has to determine the relevant markets and the conditions under which those are affected.

Thus, under French law, overlaps may be considered problematic when a market is deemed to be ‘affected’, that is, if one of the following three conditions is met (annex 4-3 of article R430-2 of the French Commercial Code):

  • two or more concerned undertakings operate on this market and their cumulative shares amount to 25 per cent or more;
  • at least one of the concerned undertakings operates on this market and another of these undertakings operates on an upstream, downstream or related market, as soon as, in one or the other of these markets, the market shares of all the parties amount to 25 per cent or more; or
  • the transaction leads to the elimination of a potential competitor on one of the markets on which the parties operate.

These criteria are detailed in the guidelines related to merger control issued by the French Competition Authority on 10 July 2013.

When assessing the Boiron/Dolisos merger, the Competition Authority considered that the operation would not only affect the market but would create a near-monopoly in the market for MNC. Regarding potential competition, the Authority ruled that new entries would be unlikely, owing to several barriers such as the regulatory framework, impossibility of competing on prices, range effect, low level of prices and substantial registration fees for new products.

According to article L430-6 of the Commercial Code, the Competition Authority also assesses whether the contribution to economic progress is such to offset the distortions of competition that may arise from the operation.

Product overlap

When is an overlap with respect to products that are being developed likely to be problematic? How is potential competition assessed?

The few mergers in the pharmaceutical sector controlled by the French authorities did not imply pipeline products. However, it is likely that in such cases they would apply general rules. Overlaps between pipeline products would be assessed regarding the competition situation on the relevant markets and possible effects of the merger on these markets. It cannot be excluded that in case of serious doubts, the Competition Authority could authorise the merger, provided that rights on one product would be licensed if finally launched.

Remedies

Which remedies will typically be required to resolve any issues that have been identified?

Like the European Commission (eg, Case M. 7337 of December 2014 in the IMS Health/Cegedim deal and Case M. 8060 of October 2016 in the Abbott Laboratories/St Jude Medical deal), the French Competition Authority is likely to require commitments from the parties, such as licensing or divestments (even if such remedies have not been required yet in the pharmaceutical sector).

In the Boiron/Dolisos case, the merger was authorised after the parties guaranteed that the new entity would continue to offer every homeopathic strain both parties offered before the merger, and that they would not grant financial incentives to pharmacists in exchange for exclusive purchasing commitments of MNC, or grant financial incentives to pharmacists buying MNC in exchange for a commitment to also buy their branded homeopathic medicines.

Notably, a new law adopted in August 2015 gave more power to the French Competition Authority in this regard. The Authority is now entitled to impose penalties on companies for not implementing remedies or commitments conditioning the implementation of the merger.

Patents and licences

Would the acquisition of one or more patents or licences be subject to merger reporting requirements? If so, when would that be the case?

In this regard, French law and practice by the authorities are quite similar to EU law and practice. Acquisition of assets falls within the meaning of ‘control’. As with EC Merger Regulation No. 139/2004, the French Commercial Code (articles L430-1, I, 2 and L430-1, III) provides that the object of control can be one or more, or also parts of, undertakings that constitute legal entities, the assets of such entities, or only some of these assets.

Thus, in its new guidelines related to merger control dated 10 July 2013, the Competition Authority states that the acquisition of control over assets (such as brands or patents) can only be considered a merger if those assets constitute the whole or a part of an undertaking, namely a business with a market presence, to which a market turnover can be clearly attributed (see paragraph 22 of the guidelines).

Anticompetitive agreements

Assessment framework

What is the general framework for assessing whether an agreement or practice can be considered anticompetitive?

Agreements or concerted practices fall under the scope of article L420-1 of the French Commercial Code, which is similar to article 101 of the Treaty on the Functioning of the European Union (TFEU) (formerly article 81 of the EC Treaty). It specifies that practices that have the aim or that are likely to have the effect of preventing, restricting or distorting competition in a market shall be prohibited, even through the direct or indirect intermediation of a company in the group established outside France, and in particular those that:

  • limit access to the market or the free exercise of competition by other undertakings;
  • prevent price fixing;
  • limit or control production, opportunities, investments or technical progress; or
  • share out the markets or sources of supply.

Technology licensing agreements

To what extent are technology licensing agreements considered anticompetitive?

The French Commercial Code does not contain provisions applicable to technology licensing agreements. Thus, such agreements are assessed in accordance with the rules laid down in EC Regulation No. 772/2004 on technology transfer (see the Competition Council’s Annual Report, 2004, page 125).

Licensing agreements would consequently not be deemed as anticompetitive, subject to the conditions that the parties’ market shares meet the thresholds set out by the Regulation and that they do not contain hard-core restrictions as listed by the Regulation.

Co-promotion and co-marketing agreements

To what extent are co-promotion and co-marketing agreements considered anticompetitive?

French legislation does not contain specific provisions applicable to co-promotion and co-marketing agreements. Thus, the Competition Authority’s review of such agreements follows European legislation and practice.

The European Commission defined co-promotion and co-marketing agreements in its Final Report on the pharmaceutical sector inquiry (8 July 2009) as being:

  • co-promotion agreements: (joint) commercialisation of a specific medicinal product by both parties under one single trademark; and
  • co-marketing agreements: commercialisation of a specific medicinal product by both parties under different trademarks.

Such definitions may appear to be clear in first instance. However, assessment of such contracts under competition law is often problematic as the relationships they create between the parties may fall under the scope of various regulations and guidelines (vertical and horizontal agreements, R&D, transfer of technology agreements).

The content and nature of the relationships created between the parties have to be carefully scrutinised in order to determine under which set of competition rules a particular agreement may fall into and, consequently, assess its validity under competition law, in particular if they imply exchanges of information between the parties.

Other agreements

What other forms of agreement with a competitor are likely to be an issue? Can these issues be resolved by appropriate confidentiality provisions?

Agreements focusing on R&D create a collaborative relationship between two companies in which they contribute to the overall discovery process by using the parties’ combined expertise to deliver outcomes. R&D agreements often contain a transfer of technology (see question 19).

Other agreements (as listed in the final report of the European Commission, such as consignment stock agreements, agreements focusing on the transfer of a market authorisation or the underlying documentation) could contain direct or indirect restrictions such as price fixing or territorial restrictions.

All these agreements often contain confidentiality provisions related to information exchanged between parties. However, these provisions should not and cannot obstruct the application of competition rules so that they may not be upheld in case of antitrust infringements.

Issues with vertical agreements

Which aspects of vertical agreements are most likely to raise antitrust concerns?

The Competition Authority uses the principles set out in EC Regulation No. 2790/1999 (now EC Regulation No. 330/2010 of 20 April 2010) to apply French competition law to vertical agreements, if the relevant market share does not exceed the 30 per cent threshold. In this regard, the negative effects on the market that may result from vertical agreements are as follows:

  • foreclosure of other suppliers or other buyers by raising barriers to entry;
  • price fixing (see Decision No. 07-D-35, Sirona Dental Systems);
  • reduction of interbrand competition; and
  • limitations to the freedom of consumers to purchase goods or services in a member state.

In this respect, the Authority had the opportunity to assess vertical agreements in many decisions. It deemed that, under certain circumstances, in particular when having small market shares, approval of its wholesalers by a pharmaceutical firm shall not be prohibited (see Decision No. 03-D-53, Biotherm).

Furthermore, the Authority ruled that the prohibition of mail-order selling imposed by a prosthesis manufacturer to its wholesalers did not restrict competition law (see Decision No. 03-D-69, Ivoclar). However, this case law seemed no longer to apply since, according to the Court of Justice’s decision in the Pierre Fabre case (case C-439/09, Pierre Fabre Dermo-Cosmétique SAS), the Paris Court of Appeal ruled, on 31 January 2013, that prohibition to sell on the internet constitutes a per se restriction to competition when the clause contains no objective justification with respect to product properties.

However, the French Supreme Court, in the Caudalie case (Decision No. 16-15067, 13 September 2017), overruled the decision from the Paris Court of Appeal stating that, in case of a lawful distribution network (which was the case for Caudalie - refer to the Competition Authority’s Decision No. 07-D-07), the prohibition of selling the products on non-authorised, non-licensed websites cannot be challenged.

Patent dispute settlements

To what extent can the settlement of a patent dispute expose the parties concerned to liability for an antitrust violation?

There is no French case law concerning the settlement of a patent dispute in the pharmaceutical sector in relation to an antitrust violation.

The European Commission’s Final Report on the sector inquiry suggested that, under certain circumstances, settlement agreements between originator and generic companies could be deemed to be anticompetitive. Following this statement, the Commission sent several statements of objection to pharmaceutical firms and fined Lundbeck (€93.8 million), Johnson & Johnson (€10.8 million), Novartis (€5.5 million) and Servier (€331 million).

Owing to the conclusion of a co-promotion agreement, Johnson & Johnson provided Novartis with monthly payments exceeding the profit that the company would have expected to obtain from selling its generic on the market.

Servier implemented a strategy to exclude competitors and delay generic entry through a technology acquisition and a series of patent settlements.

In the Lundbeck case, the agreements went further than other settlements of patent disputes as the originator company not only paid significant lump sums to generic companies, but also purchased their stocks for the sole purpose of destroying them, and guaranteed them profits through a distribution agreement. Therefore, Lundbeck kept the generic producers out of the market for the duration of the agreements without promising the generic companies any guarantee of market entry thereafter.

For the first time, on 8 September 2016, the General Court ruled on the pay for delay practice in the Lundbeck case. In line with the Commission, the General Court acknowledged the restriction by object and confirmed the existence of potential competition between generic and originator companies, although the intellectual property rights on the patent had not expired.

However, it appears that potential antitrust violation by such settlements may only be discussed in cases where the settlements would contain provisions preventing the generic company to enter the market and providing for a kind of value transfer.

The seventh report on the Monitoring of Patent Settlements published on 13 December 2016 showed a total of 125 patent settlements for the year 2015, where B.II agreements (settlements limiting generic entry with value transfer from originator to generic company) from originator to generic company accounted for 10 per cent.

In the US, some circuit courts first ruled that patent settlements that would not go further than the potential exclusionary effect that is the essence of the rights conferred to the holder by the patent itself (the patent test) did not infringe competition law, even when providing for a transfer of value from the originator company to the generic firm in compensation for the latter not entering or delaying its entry into the market.

However, in a decision dated 17 June 2013 (Federal Trade Commission v Actavis Inc), the Supreme Court dismissed the patent test and ruled that the probability for a reverse payment to be deemed anticompetitive depends on the size of the reverse payment, its relationship to projected litigation costs, the existence of convincing justification and the predicted magnitude of the harm.

Joint communications and lobbying

To what extent can joint communications or lobbying actions be anticompetitive?

French legislation does not contain any specific provisions applicable to lobbying actions or joint communication. Hence, the Competition Authority’s assessment of such communications follows the European legislation and practice (‘Thematic study on the exchange of information’, 2009 annual report of the French Competition Authority).

Article 101 TFEU prohibits concerted practices; any economic operator shall autonomously determine the policy it intends to follow in the common market.

Therefore, the exchange of information may be the basis of an anticompetitive agreement. The exchange of information may also constitute a concerted practice with an anticompetitive object or effect.

The fact that it may be anticompetitive by object depends on the nature as well as the economic and legal context. The assessment is done on a case-by-case basis. For example, exchange of information between competitors on future intentions, which are particularly likely to induce coordination of companies’ behaviour, have been repeatedly identified in European case law as infringements by object.

In the absence of such an object, it is necessary to analyse the actual or the potential effects. The Competition Authority follows an analysis grid inspired by the European Commission, that is to say:

  • the structure of the market on which the exchange takes place: the Competition Authority then takes into account the degree of concentration of the market, the number of those who participate in the exchange, their combined market share or the existence of barriers to market entry. The Competition Authority specifies that other characteristics of the market may be used for the analysis: the existence of structural links between companies and the supervision of companies in applying the policy; and
  • the characteristics of the exchange of information: the Competition Authority here takes into account the content of the exchanges, namely, the nature of the data and the modalities of the exchange. In order to achieve this, it is necessary to combine several criteria: data of the same nature may be sensitive or not sensitive depending on the degree of their maturity, aggregation, accuracy and on the basis of the information available on this market.

In the area of cleaning and hygiene products marketed in supermarkets, the Competition Authority sanctioned two agreements between manufacturers that consisted of coordinating their commercial policy with retailers and in particular to consulting each other on price increases (Decision No. 14-D-19, 18 December 2014).

Public communications

To what extent may public communications constitute an infringement?

Certain public communications constituting acts of denigration may constitute an abuse of a dominant position contrary to articles L420-2 of the Commercial Code and article 102 TFEU.

Indeed, in a decision of 14 May 2013, the Competition Authority sanctioned Sanofi-Aventis up to €40.6 million for abuse of dominant position characterised by systematic behaviour aiming at denigrating its competitors towards HCPs. At the launch of the generic version of its medicine, Sanofi had developed a strategy of denigration via public speech and commercial arguments addressed to pharmacists and doctors questioning the substitutability of its medicinal product. The Competition Authority concluded that the communication submitted by Sanofi was misleading (see question 7).

In the same vein, the Competition Council has considered that practices of denigration made by Schering-Plow were likely to constitute an abuse of dominant position, the object or effect being to foreclose a competitor from the market (Decision No. 07-MC-06).

More recently, in a decision of 20 December 2017, the Competition Authority imposed a fine of €25 million on Janssen-Cilag and its mother company Johnson & Johnson for having first prevented then restricted the development of generic versions of Durogesic, its original medicinal product. Beyond its practice of convincing the health authority to refuse the grant, at a national level, of such generic status, Janssen-Cilag launched a major campaign falsely disparaging the generic versions of Durogesic among office- and hospital-based HCPs using misleading language to create doubt in their minds concerning the effectiveness and safety of these generic medicinal products.

Exchange of information

Are anticompetitive exchanges of information more likely to occur in the pharmaceutical sector given the increased transparency imposed by measures such as disclosure of relationships with HCPs, clinical trials, etc?

The pharmaceutical sector in France is already very transparent. Most pharmaceutical firms are members of the Group for the Development and Study of Statistics (GERS), an independent body to which they supply their sales data for every medicine, in each galenic form, that they market in France. Firms may buy the compiled sales data, including information from all the other firms, from the GERS. As a result, any given firm can be in a position to have a clear picture of the sales of all its competitors on the French market.

It is also true that in France, as in other EU member states, additional measures intended to impose transparency at all levels of the pharmaceutical sector have been adopted in the past few years.

As in several other countries, and especially in the aftermath of the Mediator scandal, the PHC has been amended to provide for more transparency in the relationships between the industry and the HCPs. In this regard, article L1453-1 of the PHC as modified by the Law of 26 January 2016 provides for mandatory transparency and disclosure of contractual relationships (the date of signature, the precise subject matter, the amount of the agreement, the direct and final beneficiaries) on a ‘single site’ published by the French government. Deliberate failure to comply with this publication is punishable by a fine of up to €75,000.

The Law of 26 January 2016 has significantly changed the way companies publish their business links. Decree No. 2016-1939 of 28 December 2016 implementing such new provisions came into force on 27 March 2017.

It is to be noted that other instruments aim or result in increasing transparency as regards other areas in the pharmaceutical sector. Thus, pursuant to article L162-17-4 of the Social Security Code, the new agreement (the Framework Agreement) signed between the CEPS and the French Pharmaceutical Companies Association on 31 December 2015, includes an article 2 entitled ‘Exchanges of Information’. This contains a lot of information and includes, notably, the pharmaceutical firms’ sales data (through the GERS), the actual use of medicines by public hospitals, monitoring of the reimbursement expenses and the cost of legal obligations weighing on the pharmaceutical firms (eg, management of waste, packaging and out-of-date medicines, post marketing studies and shortfall management plans).

The Framework Agreement now also provides that pharmaceutical firms shall supply an ad hoc committee with ‘prospective’ data related to the arrival of breakthrough therapies for as long as they may impact reimbursement or the organisation of healthcare services. The said data are, of course, deemed to be confidential.

Furthermore, the renewed Agreement on sales representation provides that each pharmaceutical firm shall conduct an inquiry on the quality of its promotional activity for its most promoted medicine every year. The data will be anonymised before being published, and such publication will provide important qualitative information to all pharmaceutical firms as regards their competitors’ promotional practices.

Last but not least, the ‘Sapin II Law’ (of 9 December 2016) introduced a new system for the prevention and repression of corruption involving heavy management constraints for companies, subject to new criminal sanctions. The central provisions mainly consist of the creation of a new Corruption Prevention Agency with expanded and innovative missions and powers, a new whistle-blower system with the obligation for companies of at least 50 employees to implement appropriate procedures for the collection of alerts, an obligation for certain companies to implement procedures for the prevention of corruption no later than 1 June 2017 and the creation of a Register for Interest Representatives that will have a major impact on businesses. These examples show that the pharmaceutical sector is becoming more transparent than it ever has been. From a competition point of view, such transparency reduces the uncertainty and renders the competitors’ behaviours easier to predict. However, because it results from government-imposed measures, it is not, in itself, anticompetitive.

It cannot be overlooked that, at some point, certain firms would nevertheless be tempted to go further in terms of exchange of information.

Anticompetitive unilateral conduct

Abuse of dominance

In what circumstances is conduct considered to be anticompetitive if carried out by a firm with monopoly or market power?

Any conduct aimed at limiting access to the market or competition is likely to be considered abusive if it is carried out by an undertaking holding a dominant position (article L420-2 of the French Commercial Code).

Abusive behaviour by a dominant firm may consist of a refusal to sell, tying, discriminatory conditions of selling and breach of commercial relationships, or denigration of generic medicinal products.

For example, in Decision No. 03-D-35, the Competition Authority imposed a €7.8 million fine on Sandoz for abuse of dominant position by offering tied discounts. The firm proposed the hospitals discounts on its global sales to hospitals (especially sales of medicines that were deemed to be in a dominant position) on the condition that the hospitals undertook to buy other products for which the firm was competing with other pharmaceutical firms. The Authority considered that such a scheme resulted in increasing customer loyalty towards Sandoz.

The Competition Authority fined both Sanofi-Aventis (in Decision No. 13-D-11) and Schering-Plough (in Decision No. 13-D-21), for abusing their dominant position, notably by denigrating generic medicinal products. The Competition Authority ruled that such practices had the object and effect of restricting the generic companies’ access to market. The Supreme Court confirmed the two decisions from the Competition Authority.

On 8 July 2014, the Competition Authority fined Cegedim, one of the medical database firms’ leaders, €5.7 million for having refused to sell its database to pharmaceutical companies that were using another firm’s software while such database was regarded by HCPs as being the ultimate system. This analysis was confirmed by the Supreme Court on 21 June 2017.

De minimis thresholds

Is there any de minimis threshold for a conduct to be found abusive?

In accordance with the provisions of the TFEU and the case law of the EU, restrictions that affect the market only insignificantly, given the low position of the undertakings, do not fall within the prohibition laid down in paragraph 1 of article 101 TFEU (anticompetitive agreements).

The European Commission’s Notice on agreements of minor importance (de minimis) defines thresholds below which infringements of competition are considered insignificant and that the EC undertakes not to pursue.

This ‘soft law’ text may serve as a helpful analytical guide for national competition authorities (although it does not bind them), each of which may have its own prosecution policy.

In French law, article L464-6-1 of the French Commercial Code gives the Competition Authority the power to dismiss the case when a threshold of 10 per cent is not exceeded, with regards ‘an agreement between competing companies in the same market’; or when a threshold of 15 per cent is not exceeded, in the case of an agreement between undertakings that are not competitors on the same market, except where there are gross restrictions as listed in article L464-6-2 of the French Commercial Code (identical to the flagrant restrictions within the EU).

However, the non-exceeding of these thresholds does not exclude the possibility for the Authority to establish the existence of an infringement with regard to both French and EU laws, if other elements of a particularly qualitative nature attest the sensitive nature of such practices. For example, in Decision No. 13-D-14, the Authority sanctioned two professional organisations of veterinarians for having set up a charter defining the prices that the signatory veterinarians had to charge to the Society for the Protection of Animals in Strasbourg and organising a sharing of their interventions with it. The Authority recalled that the applicants were not in a position to rely on the de minimis rule, in so far as this rule does not apply, pursuant to article L464-6-2, to restrictions on the fixing of sales prices or the distribution of markets.

Establishing dominance

When is a party likely to be considered dominant or jointly dominant?

The French Commercial Code does not define dominant position. Under such circumstances, the Competition Authority applies the definition set out by the Court of Justice of the European Union (CJEU) in the United Brands case (C-27/76), that is, where an undertaking has the faculty to behave independently of its competitors, customers, and ultimately from consumers. The main indicator of dominance is, of course, a large market share; other factors include the economic weakness of competitors, the absence of latent competition and control of resources and technology.

The Competition Authority follows European case law in its assessment of these situations. However, in a decision dated 14 January 2010, although it left the question open, the Competition Authority surprisingly seemed to consider that, despite important market shares of 55 to 60 per cent in 2000 and 70 to 75 per cent in 2004, Sanofi-Aventis may not have held a dominant position in the hospital medicines market (see Decision No. 10-D-02).

Regarding joint domination, the Competition Authority applies the conditions set out by the Court of First Instance (now the General Court) in the Irish Sugar case (T-228/97), that is, factors connecting the undertakings that give them the power to adopt a common market policy.

The Competition Authority has never found a joint domination in the pharmaceutical sector (see Decision No. 07-D-42, Nestlé, Danone-Blédina, Milupa-Nutricia, Sodilac). The issue was addressed again by the Ministry of the Economy when referring to the Competition Authority a case of alleged concerted practices and abuse of a joint-dominant position by Ethicon and Tyco Healthcare. However, the Competition Authority did not rule on the issue of joint domination as it deemed that the practices of the undertakings concerned were not anticompetitive (see Decision No. 09-D-38).

Can a patent holder be dominant simply on account of the patent that it holds?

Under French competition law, in theory, ownership of a patent does not systematically confer a dominant position to the holder, but under certain circumstances, the Authority deems that it may create or reinforce the dominant position of a company, in particular because this intellectual property right has ‘itself an economic force’. Such position was reasserted by the Competition Authority in its Annual Report for 2004.

As mentioned in question 12, it is worth noting that, in antitrust cases, the French Competition Authority tends to narrow the market definition to level 5 of the ATC medicinal product classification, namely, the molecule.

In its Decision No. 96-D-12, confirmed by the Supreme Court, the Competition Authority deemed that from 1987 to 1991, Lilly France held a dominant position on the Dobutrex market. The firm had an exclusive right of distribution of Dobutrex as it held a patent on the medicine.

Since then, French competition authorities have almost always defined the relevant market as being the one of the molecule without real verification of the therapeutic use of the medicines on the market, thus establishing an almost automatic link between patent and dominant position.

Patent grant and enforcement

When would life-cycle management strategies expose a patent owner to antitrust liability?

Life-cycle management strategies may expose a patent owner to antitrust liability. This is true in the case of strategies by originator companies that consist of the launch of second-generation products or the follow-on of medicinal products shortly before the loss of exclusivity of the first-generation product, sometimes combined with the withdrawal of the initial product from the market and withdrawal of the MA. The European Commission considered that AstraZeneca abused its dominant position for having implemented such practices with its medicine Losec (see question 31). This decision was upheld by the General Court (judgment dated 1 July 2010, case T-321/05) and then confirmed by the CJEU (judgment dated 6 December 2012, case C-457/10 P). In its final report, the Commission stated that as a result of such strategies, generic companies may encounter some difficulties to sell their generic products.

The CJEU has already ruled on such practices from a regulatory and parallel import point of view (C-94/98, Rhone Poulenc Rorer). It acknowledged the possibility for a pharmaceutical company to withdraw its MA ‘at any point in time without being obliged to give any reasons’, setting out the principle that ‘the concept of compulsory licensing is unknown in any Community pharmaceutical legislation’.

Further, the General Court has set out the limits within which ‘an undertaking in a dominant position enjoys an exclusive right with an entitlement to agree to waive that right’, considering that such undertaking ‘is under a duty to make reasonable use of the right of veto conferred on it by agreement in respect of third parties’ access to the market’ (CFI T-24/93, Compagnie maritime Belge Transport SA v Commission).

Thus, life-cycle management strategies may be deemed anticompetitive only if they result in hindering other undertakings, in particular generic companies. For example, such a decision was rendered on 3 September 2012 by the Regional Administrative Tribunal for Latium that reversed the Italian Competition Authority’s decision to fine Pfizer Group €10.6 million for having implemented a multifaceted strategy to prevent the entry of generic producers.

However, the French Competition Authority has not had the occasion to rule on the conformity of such practices with competition law, whereas the English Office of Fair Trading issued a statement of objections against Reckitt Benckiser for having withdrawn Gaviscon from the market before generic entry and having promoted the second-generation medicine. Reckitt Benckiser agreed to pay a £10.2 million penalty for abuse of dominance in October 2010.

To what extent can an application for the grant or enforcement of a patent expose the patent owner to liability for an antitrust violation?

In 2001, the Competition Authority ruled that the mere application for the grant of a patent was not abusive, since such conduct would not be capable of harming competition (see Decision No. 01-D-57).

However, it is to be kept in mind that in the AstraZeneca appeal case (judgment dated 1 July 2010, case T-321/05), the General Court upheld the Commission’s decision that ruled that the mere application for a supplementary protection certificate could amount to an abuse (see Decision dated 15 June 2005). On 6 December 2012, the CJEU confirmed the General Court’s decision (case C-457/10 P). Further, in its Final Report on the pharmaceutical sector inquiry, the European Commission identified practices, called ‘patent filing strategies’, suggesting that filing numerous patent applications for the same medicine (forming the ‘patent clusters’) could, in itself, delay or block the market entry of generic medicines.

Under such circumstances, it is unclear whether the Competition Authority would hold to its former ruling regarding patent application, or evolve in the direction set out by the European authorities.

Prima facie, enforcing one’s patents against parties infringing them is a legitimate procedural dimension of the material right granted to the patent holder.

In its final report, the European Commission alleged that in certain instances, originator companies may consider litigation not so much on its merits, but rather as a signal to deter generic entrants.

However, for the time being, European case law considers that court proceedings may constitute an abuse only in exceptional circumstances (see criteria set out by the Court of First Instance (now the General Court) in its ITT Promedia NV case). This case law is also applied in France. The Competition Council ruled that the mere fact of a dominant undertaking to defend its intellectual property rights before the competent courts may not be seen as an abuse per se (see Decision No. 01-D-57).

Communications

Can communications or recommendations aimed at the public or HCPs trigger antitrust liability?

Yes, see question 25.

Authorised generics

May a patent holder market or license its drug as an authorised generic, or allow a third party to do so, before the expiry of the patent protection on the drug concerned, to gain a head start on the competition?

The launch by an originator company of a generic of its own medicine or to grant a licence shortly before the expiry of the protection of a patent with the intention to allow an ‘early entry’ has been a common practice in the pharmaceutical market for many years. In its final report, the European Commission states that early entry agreements are used to control the market launch of a generic product.

In France, there is as yet no case law regarding the practice of authorised generics.

In principle, it is not possible to consider such practices as anticompetitive per se. Such a statement would only be justified after an in-depth analysis of each contractual provision and of the possible effects on competition and consumers. In this regard, it is worth noticing that, in its report on authorised generics, the FTC noticed that such early entry could have a positive impact on consumers and the healthcare system.

In this sort of context, the originator firm should be able to demonstrate that the practice does not have any anticompetitive effects by preparing and implementing a competitive balance providing empirical evidence that the ‘effect’ and ‘competitive balance’ arrangement would be positive, the latter improving distribution of medicines within the relevant territory, while allowing consumers a fair part of the resulting benefit, without evicting competition for a substantial part of the medicines concerned.

Restrictions on off-label use

Can actions taken by a patent holder to limit off-label use trigger antitrust liability?

In a recent decision (23 January 2018, F Hoffmann-La Roche and Others, C-179/16), the CJEU ruled that the agreement between Roche and Novartis, who marketed similar medicines, is anticompetitive by object. Both pharmaceutical companies had put in place an arrangement intended to disseminate information that questioned the safety of one of these products in order to prevent the off-label use of such product and therefore reduce competition.

Pricing

When does pricing conduct raise antitrust risks? Can high prices be abusive?

The Competition Authority plays a great role in the field of exclusionary abuses (ie, presence of barriers to the market that exclude competitors) where the market structure pulls prices up and the aim is to remove barriers to entry.

However, pricing abuse refers more to an abuse of dominant position (ie, absence of sufficient competition within sectors particularly at risk, ie, the pharmaceutical sector).

Yet, it is necessary to have a reference system in order to be able to qualify a price as ‘abusive’ or ‘excessive’. Therefore, the question lies in the definition of a normal price.

The usual approach is based on costs, value of service and comparison with other prices (see, for example CJEU, 14 February 1978, United Brands, C-27/76).

However, the CJEU recently confirmed that there is no single method to achieve such qualification and that the national competition authorities have ‘a certain margin of manoeuvre with respect to the methodology that may be followed to determine an excessive price’ (Opinion of the Advocate General Wahl, 6 April 2017, AKKA/LAA, C-177/16).

In any case, the French Competition Authority recalls that it is necessary to establish that the conduct has an anticompetitive object or effect that is actual or potential (France Telecom, 28 July 2009, Decision No. 09-D-24).

For the very first time, the European Commission opened an investigation on excessive pricing practices of the pharmaceutical industry. This was launched against Aspen in May 2017.

In July 2017, the president of the French Competition Authority, Isabelle Da Silva, announced the opening of a broad investigation including the health sector. Such enquiry is likely to encompass abusive prices.

Sector-specific issues

To what extent can the specific features of the pharmaceutical sector provide an objective justification for conduct that would otherwise infringe antitrust rules?

Public health issues may be taken into account. In Decision No. 07-D-22, the Competition Authority admitted that quota systems adopted by some originator companies had the legitimate aim of rationalising production and optimising medicine distribution with regard to the country’s needs, even if specificity of the sector has not been deemed sufficient to be considered as an objective justification that would allow, in itself, some practices to benefit from exemptions provided for by articles L420-1 and L420-2 of the French Commercial Code. While analysing the quota systems, the Competition Authority noticed that the restrictions imposed by the pharmaceutical firms on the wholesalers were limited to what was strictly necessary for a reliable and optimal supply of the French market, while maintaining real competition possibilities between wholesale distributors.

However, it should be noted that French decision practice could evolve based on more recent European case law. Thus, in the Spanish GSK case (CJEU, October 2009, GlaxoSmithKline Services Unlimited, C-501/06, C-213/06, C-515/06 and C-519/06), when examining the dual pricing schemes, the CJEU confirmed that the specific legal and economic context of the pharmaceutical sector could be relevant in the application of article 101(3) TFEU.

Has national enforcement activity in relation to life-cycle management and settlement agreements with generics increased following the EU Sector Inquiry?

An increase in national enforcement is not noticeable. To date, no decision has been rendered on such subject matter by the French Authority. In any case, since the EU Sector Inquiry and the systematic monitoring of patent settlements that has been carried out by the European Commission since 2010, pharmaceutical firms have become aware of potential competition issues and are more cautious when they contemplate entering into agreements with third parties in the context of upcoming generic entry.

Update and trends

Current trends and developments

Are there in your jurisdiction any emerging trends or hot topics regarding antitrust regulation and enforcement in the pharmaceutical sector?

No updates at this time.