On 18 December 2013, the French Competition Authority (FCA) issued Decision n°13-D-21 relating to anticompetitive practices implemented by Schering-Plough (SP) in the course of the introduction onto the market of Subutex® generics, an opioid substitute used to treat drug addiction. At the conclusion of the proceeding initiated in 2006 which resulted in SP entering into a (French) settlement proceeding, the FCA levied a fine amounting in total to 16 million Euros. In addition to the high level of fines, this decision also provided the FCA with the opportunity to consolidate its legal position in its campaign against « anti-generics strategies », in a manner similar to its Opinion n°13-A-24 issued the same day (see our separate Alert) and its decision issued a few months earlier against Sanofi (Plavax® Case – see our Alert of 16 May 2013). In doing so, the FCA also confirmed its intention to continue responding severely to any practices which it deems anticompetitive in the pharmaceutical sector.
Sanctioning of a global strategy based on acts of disparagement
The acts sanctioned by the FCA concerned principally an alleged abuse of dominant position by SP consisting of (i) disparagement of Subutex® generics and (ii) gaining the loyalty of pharmacists via discounts and extended payment terms without genuine economically justified counterpart. To a lesser extent, the FCA also sanctioned a single concerted practice which it deemed to be complex and continued organized between SP and Reckitt-Benckiser (RB), the holder of the Subutex® marketing authorization.
The FCA based its decision on a particularly narrow market definition, limiting the relevant product market to the Subutex® molecule and its generics, i.e., buprenorphine, considering moreover that on the basis of its market shares, SP had maintained its dominant position even after the entry into the market of the generics.
The facts in connection with which SP was fined were based on a complaint by Arrow, a generics manufacturer, and date back to an old concern of the two pharmaceutical companies to be able to anticipate the consequences on their sales of the loss of their exclusive rights on Subutex® in 2006. In order to limit loss of profits notwithstanding the expiration of patent protection, the two pharmaceutical companies envisaged the implementation of a plan aimed at maximizing performances, through a communication strategy, an adaptation of the commercial conditions and the launch of second generation medication.
It is therefore actually the analysis, from a competition law point of view, of the product’s life cycle management and its adaptation to a new competitive situation which were at stake.
- With respect to the characterisation of the practices in question, the decision gave the FCA the opportunity to consolidate its definition of disparagement practice as an abuse of dominant position, without however resolving all the existing ambiguities.
While the FCA affirmed that not all disparaging messages necessarily constitute an abuse of dominant position absent a link between the company’s domination and the disparagement practice, the application of the principle to pharmaceutical companies is extremely severe. The FCA thus applied in this decision the same analysis it had made in the Plavix® Case, under which messages can become disparaging when are they are not limited to stating the objectives qualities of a medication. In fact, a simple message describing differences must be appreciated « within the context of the message given and the conditions under which it is heard » and can be therefore analysed as putting forward « substantial differences which may create an objective doubt as to the qualities of competing generics », likely to constitute an abuse of dominant position. The FCA therefore intends to parse any message broadcasted in order to check for implicit or indirect disparagement in a context which it intends to appreciate on the basis of its own criteria.
Similarly to its Plavix® decision, the FCA also considered that disparagement can produce effects which persist beyond the period of disparagement and used a one year turnover basis to calculate the fine. As support for this, the FCA referred to the persistently low level of original/generic substitution regarding Subutex®, even though this could have proven, quite to the contrary, the difficulty of substituting generics for Subutex®, independently of any practice of denigration. In this respect, objective obstacles appear genuinely to exist, as attested by the Health authorities themselves, who have continued, even up to the present time, to exclude Subutex® from the list of medicines for which substitution objectives are set.
- With respect to the sanctioning of business practices, which in the case of SP consisted in paying a number of pharmacists, just prior to the launching of the generics, remunerations « for services rendered» in proportion to the volume of products ordered, and in offering them longer payment terms, the FCA reproached SP for making such payments in the absence of any economically justifiable counterpart.
In this case as well, the FCA took into account the specific context applicable to the marketing of pharmaceutical products, which prevents pharmacists from simultaneously maintaining significant inventory of brand-name originals and generics, and sanctioned the foreclosure effect to which the generic was subjected.
The particular appreciation of competition in the pharmaceutical sector
The actions which were sanctioned occurred in a very particular context which cannot be ignored, relating to medication prescribed to drug addicts as a substitute for heroin injections, therefore presenting significant peculiarities from the point of view of the risks of trafficking and misuse, as well as the possibility of marginalisation and psychological difficulties of certain patients. These points were confirmed by the health authorities themselves, who, it is interesting to note, provided testimony to the FCA in the framework of the enquiry.
Nonetheless, the FCA deemed SP’s messages to constitute disparagement without taking into account the fact that the health authorities had themselves questioned the differences between the original and the generic excipients likely to create a risk of misuse by injection of the generic, even prior to the alleged infringements of which SP was accused.
The FCA also indirectly criticised SP for not having alerted the health authorities to the risk concerning the excipients used by Arrow, thus considering that the messages expressed by SP on this point to healthcare professionals were similar to disparagement. The FCA also pointed out that the messages in question were not justified by any objective of public health protection. However, it is still unsure whether this means that the FCA recognises pharmaceutical companies as having a role to play in the protection of public health, separate from the authorities’ duty in such respect, as long as they convey messages backed by scientific studies. From this angle, the currently awaited decision which the FCA is to render regarding the use by Janssen-Cilag of a message from the health authorities will be decisive for pharmaceutical companies to be able to adapt their communication properly.
Above all, the FCA confirmed by this new decision, that the practices sanctioned were particularly serious in that they took place in what the FCA described as a context of risk aversion and ignorance by doctors and pharmacists. The FCA even stated that it considered that it was henceforth difficult for healthcare professionals to decide in an independent manner whether differences in the excipients used in generics of Subutex® do or do not have an impact on patients’ health in case of misuse. This recurrent message, coming from a competition authority, certainly raises some interesting questions concerning the judgment being made on the quality of the national health system, with regard to professional rules and independent practice which are supposed to govern the art of exercising medicine in France.
In this context, it is easy to imagine that, on the basis of its own criteria, the FCA will have no difficulty in enforcing such « contextualised » definition of disparagement.
In the end, the FCA considered the abuse particularly serious in that it combined two practices, in part simultaneously. This resulted in the fine being calculated using a percentage factor of seriousness slightly greater than the one applied in the Plavix® Case, i.e., 14 %. It is therefore only on the basis of the FCA’s 2011 Communication on the calculation of fines that the final amount of the fine here can be considered as being moderate, given that the turnover of the concerned product alone was taken into account, not the company’s total turnover. SP thus benefited from the small number of prescriptions for Subutex®, as compared to more broadly prescribed drugs, given the nature of the illness at stake, although the relative level of the fine remains heavy for the company.
Lastly, the severity with which the FCA seems to consider pharmaceutical companies can also be illustrated in its determination of the damage to the economy caused by the complained of acts. For example, the FCA did not hesitate to use against SP the commercial prospective strategic studies which the company itself had ordered from external consultants in view of the entry of generics into the market. These studies were based on several scenarios, including a high risk of strong substitution to Subutex®, and the FCA consequently considered as unfounded the arguments used afterwards by SP to explain the objective reasons for a low substitution for this particular product, even though other hypotheses, including a scenario of much lower substitution level had also been envisaged. Similarly, the FCA did not in fine give any estimation on the basis of the specific example of Subutex®, limiting itself to comparisons - by nature insufficient - with other products or dosages, so that at no time were the peculiarities of this particular product and its users suffering from addiction really taken into account when analysing the level of potential substitution. However, to our knowledge it is precisely the peculiarities of this product which led the health authorities themselves to exclude Subutex® from the substitution objectives assigned to French doctors.
The decision made by the FCA provides originators with noteworthy feedback concerning the preparation and assessment of strategies they may be contemplating in view of the competition faced from generic products. Indeed, the FCA confirmed the application of the principle stated by the Court of Justice of the EU in the AstraZeneca Case, according to which strategies of pharmaceutical companies aiming at adapting to a new situation of competition created by the entry into the market of a generic are not illegal per se and that the anticompetitive nature of each element of such strategies must first be demonstrated in order to run the risk of sanctions.