On 6 February 2013, following two complaints respectively lodged by an association of private health care facilities and the Italian Ophtalmological Society, the Italian Competition Authority (ICA) started an investigation pursuant to Article 101 TFEU [set out full title of legislation?] against Hoffman-La Roche Ltd, Novartis AG, Genentech Inc., Roche S.p.A. and Novartis Farma S.p.A. The opening of the proceeding is only a preliminary step and does not imply any objections or findings of anticompetitive conduct.
According to the ICA, the companies may have caused losses to the Italian Healthcare System in terms of greater costs faced by the same for the provision of a specific ophthalmic therapy. The ICA argues at this stage that, as Novartis was granted an exclusive license by Genentech/Roche to market Lucentis (i.e. an ophthalmic medicine registered in U.S.) outside the U.S. territory, there might have been an interest of the parties in preventing the use of another medicine, namely Avastin, which is allegedly recognized as a substitute of Lucentis in relation to the same ophthalmic therapy and is marketed in Italy at significantly lower price compared to Lucentis.
Legal and factual background
In Italy the right of marketing pharmaceutical products is subject to authorisation granted by regulatory authorities. In particular, products authorised at European level by the European Commission can be placed in the Italian market, after obtaining the authorisation by the Italian National Medicine Authority (AIFA). In this respect, the European Commission decision only takes into account the so-called on-label use of the product, i.e. what is considered the proper way of using the products in medical treatments. However, under Italian law the so-called off-label use of medicines by the Italian Healthcare System is also allowed under certain conditions: firstly, there shall be no valid alternatives for the treatment of a disease, a regulatory decision to register the medicine in a “List” for off-label use being required; secondly, in case of products authorised for a selected treatment being placed in the market, carrying out the same treatment through off-label use of another product is only authorised for clinical trials; thirdly, there shall be substantial scientific evidence that off-label use of the product, which has not been authorised for that treatment, is feasible, safe and effective.
Since 2007 Novartis has been marketing Lucentis in Italy for a therapy against an ophthalmic disease, namely dms, whilst Roche is authorised to market Avastin within the European Union for certain cancer therapies. However, since early applications of Avastin it has been noted that it was capable of producing positive effects on patients affected by dms. Scientific evidence has been found of the actual substitutability of the two products when carrying out dms therapy. As a consequence, after its insertion in the off-label list, Avastin was widely used for dms therapy, this allowing the Italian Healthcare System to avoid buying the much more expensive Lucentis.
On 30 August 2012 AIFA decided to delist Avastin as an off-label medicine for dms therapy, due to negative effects of Avastin use for such therapy. Therefore, dms therapy is now provided exclusively with Lucentis, at the expense of the Italian Healthcare System. As Lucentis and Avastin are placed in the market at very different prices, the Italian Ophthalmological Society claimed that the prohibition on using Avastin for dms off-label therapy might trigger major costs for the Italian Healthcare System amounting to 400 Euro million per year.
The ICA’s move is a preliminary step
The initiative taken by the ICA is merely a first step in a process possibly resulting in objections raised at later stage, provided that appropriate evidence of anticompetitive conduct is found. In case of such findings, the IAA shall address a Statement of Objections to the parties approximately two months before the deadline fixed for the end of the investigation, which is 20 December 2013.
According to the ICA’s preliminary view, the companies’ conduct might have been aimed at maximizing combined profits. On the one hand, Novartis has benefited from the actual absence of competition in the market of ophthalmic for dms therapy; on the other hand, considering the exclusive license granted by Genentech to Novartis to market Lucentis, Roche’s profits have substantially derived from the royalties that Novartis is obliged to pay. According to the ICA, despite the large amount of scientific publications supporting the Avastin ophthalmic use, the parties might have shared an interest in not supporting the same with a view to protecting Lucentis sales in the Italian market.
Potential risks for pharmaceutical companies
It is worth noting that on 31 January 2013 the Commission sent a Statement of Objections to Novartis and Johnson & Johnson expressing its concerns regarding an agreement concluded between their respective Dutch subsidiaries on fenatyl, a strong pain-killer. The European Commission takes a preliminary view that the “co-promotion” agreement concluded between the subsidiaries may constitute a “pay for delay” agreement, with the companies aiming at delaying the entry of generic medicines in markets where no regulatory barriers are in place. In particular, this was achieved through the granting of monthly payments from Johnson’s subsidiary to Novartis’ one for as long as no generic product was marketed within the Dutch territory.
In substance, it seems clear that national and supranational Competition Authorities are making a strong move to address horizontal agreements in the pharmaceutical sector with a view to avoid free riding on national healthcare systems. In addition, with regard to the investigation just opened by the ICA, the alleged restriction of competition may have been facilitated by the close corporate links between the two companies acting as competitors in the pharmaceutical market.