In a long-awaited judgment dated 6 December 2012, the European Court of Justice (ECJ) has confirmed that certain brand protection strategies may infringe the EU competition rules. The ECJ dismissed an appeal by AstraZeneca against a General Court judgment which itself largely upheld a European Commission (Commission) decision that AstraZeneca had abused a dominant position on the market for proton pump inhibitors (PPIs), which treat ulcers. AstraZeneca’s best-known PPI brand is Losec.
Two practices were found to be abusive in restricting access by generic competition to the PPI market: misleading representations to patent offices when seeking supplementary protection certificates; and the deregistration of existing marketing authorisations. Comparable strategies to protect the sales of innovative drugs were the focus of the Commission’s 2008/2009 Sector Inquiry and subsequent enforcement action, although the AstraZeneca case has no procedural connection to the Sector Inquiry.
In earlier Law-Now articles, we have summarised the General Court judgment and the Advocate-General’s Opinion earlier in 2012, which the ECJ has followed. See also our Law-Now on the Sector Inquiry. Our article today explains the story so far of the AstraZeneca case, assesses the market definition and abuse points and the broad implications for the pharmaceutical sector.
The AstraZeneca case: the full story
The AstraZeneca case is one of the most protracted enforcement proceedings in EU competition law history, a fact which may reflect the novelty and the controversial nature of the type of abuse identified, as well as the complexity of the underlying circumstances.
The case covers a period of twenty years, broken down as follows:
1993-2000: the period of the alleged abusive activity
1999: complaints by generic companies to the Commission
2000: the Commission raids AstraZeneca
2005: the Commission publishes its decision to fine AstraZeneca €60m
2010: decision largely upheld by the General Court (but fine reduced to €52.5m)
May 2012: Advocate-General’s Opinion
December 2012: final judgment from ECJ
Why was AstraZeneca considered dominant?
The Commission’s (and subsequently the courts’) view that AstraZeneca was dominant on a suggested narrow market for PPIs has always been challenged by AstraZeneca, with some sympathy from a number of industry commentators. AstraZeneca’s argument was that a wider anti-ulcerant market was appropriate, including above all H2 blockers, the “older” anti-ulcerant product which PPIs eventually replaced.
The ECJ’s judgment, however, supports the Commission’s and General Court’s argument that, simply because H2 blockers continued to be sold and because medical professionals may have been reluctant to prescribe the newer PPI products e.g. through fear of side-effects, this did not mean the two products were competitive substitutes. Old and new products can co-exist on separate markets and it was reasonable of the General Court to hold that there was no causal link between the slow increase in PPI sales and any purported competitive threat of H2 blockers.
Why were AstraZeneca’s actions considered abusive?
The idea that misuse of an IP or regulatory process can constitute abuse of a dominant position was, at the time of the Commission’s 2005 decision, novel in the EU. The Commission identified two abuses:
- The first related to misleading representations to patent offices in Germany, Belgium, Denmark, Norway, the Netherlands and the UK in order to obtain supplementary protection certificates for Losec that conferred extended patent protection. The Commission found that AstraZeneca had concealed the date on which it had obtained its first marketing authorisation and this enabled AstraZeneca to obtain protection to which it was not entitled (the SPC abuse).
- The second related to the deregistration of the Losec capsule marketing authorisations in Denmark, Norway and Sweden in order to delay the marketing of generic medicinal products and to prevent parallel imports of the capsule form of Losec (the MA abuse).
The fine was reduced from €60m to €52.5m by the General Court because it found that, with regard to the MA abuse, the Commission had not established that the deregistration of the marketing authorisations was capable of preventing parallel imports in Denmark and Norway.
In relation to both abuses, AstraZeneca’s argument was, in essence, that it was playing the system within the legal bounds of that system and that it had a bona fide belief in the acceptability of its actions in those terms. It also argued that neither alleged abuse resulted in ascertainable harm to competition.
Broadly, the ECJ upheld the counter-argument that any action which could potentially damage competition and which did not represent competition on the merits could be an abuse.
- On the SPC abuse, it was enough that AstraZeneca had “recourse to highly misleading representations with the aim of leading public authorities into error” and that its actions “were very likely to result in the issue of unlawful SPCs”.
- On the MA abuse, the ECJ noted AstraZeneca’s view that it was simply exercising a right to withdraw registrations, but held that compliance or non-compliance with other legal rules had no essential relevance to the potential existence of an abuse under the competition rules.
How serious will the impact be for the sector?
In recent years, the pharmaceutical sector has seen many blockbuster innovative drugs come to the end of their lifecycle, losing the protection of patent coverage and of data exclusivity. In this case, the strict stance of the Commission and the courts regarding strategies to protect leading pharmaceutical brands has already made drug companies wary of implementing such strategies. On this, the AstraZeneca case has arguably been more influential than the Sector Inquiry and it is also significant that national competition authorities have issued decisions akin to the AstraZeneca case (see e.g. our earlier Law-Now on the Reckitt Benckiser/Gaviscon case for the UK).
The new judgment is firmly rooted in the facts of this specific case. On the SPC abuse, for instance, it is hard to gauge how firm is the legal principle which this case establishes: it is positive that the ECJ states that a simple mistake in dealing with a regulatory authority will not be abusive, but when does an aggressive, but otherwise legal regulatory strategy become “highly misleading” and therefore abusive?
The possible application of this case is unclear and its impact has already been absorbed by the sector in the many years since the Commission’s 2005 decision. However, this judgment represents final confirmation of a significant concept – that sleight of hand in dealing with regulatory authorities can represent the abuse of a dominant position – and it is widely anticipated that competition law authorities may be somewhat emboldened in their enforcement activity as a result.