There have been a number of important developments in the pharmaceutical sector under EU competition law in recent years. Judicial review of the decisions of competition authorities has been thorough and rigorous, while innovation remains at the centre of the interest of the European Commission (the Commission) in merger review. Additionally, on 28 January 2019, the Commission published its report on the enforcement of competition law in the pharmaceutical sector at EU and member state level for the period 2009–2017. The report states that, from 2009 to 2017, the authorities have adopted 29 antitrust decisions against pharmaceutical companies for an array of anticompetitive practices, including abuse of dominance, pay-for-delay agreements, bid rigging and vertical agreements. Additionally, they have investigated more than 100 other cases, and reviewed more than 80 transactions. Pharma sector inquiries are currently ongoing in certain member states.

This chapter outlines these developments from both an EU antitrust and an EU merger control perspective.

Antitrust enforcement in the pharma sector Abuse of dominance cases

Excessive pricing

Competition authorities have been traditionally reluctant to pursue excessive pricing cases since many of them had failed on the facts. However, in recent years, there has been a resurgence of the topic in pharma-related cases.

In particular, the national competition authorities have led the way in 2016, with decisions identifying abusive conduct in Italy (Aspen) and in the United Kingdom (Pfizer/Flynn). The Commission followed shortly after, by initiating its own investigation into Aspen’s practices in 2017. This was the first pure excessive pricing investigation carried out by the Commission; in July 2020, Aspen offered commitments to reduce its prices for the products concerned by 73 per cent on average. After a few adjustments made by Aspen in light of the Commission’s market test, the commitments were accepted by the Commission in February 2020.

At the same time, national courts developed relevant case law, with the UK Court of Appeal upholding the decision of the Competition Appeal Tribunal (CAT), overturning the decision of the UK Competition and Markets Authority (CMA) in Pfizer/Flynn, and the Danish Maritime and Commercial Court (DMCC) upholding the judgment of the Danish Competition Appeals Tribunal (DCAT) confirming the decision of the Danish Competition Council (DCC) finding that CD Pharma had abused its dominant position. The Pfizer/Flynn case is the most recent and most noticeable development in excessive pricing. On 7 December 2016, the CMA imposed a fine of £90 million on Pfizer and Flynn for charging unfair prices, owing to them having increased end prices for phenytoin sodium capsules by 2,600 per cent (Case CE/9742-13). Pfizer and Flynn appealed to the CAT on 7 February 2017 (Pfizer Inc and Pfizer Limited v Competition and Markets Authority, Case No. 1276/1/12/17; and Flynn Pharma Ltd and Flynn Pharma (Holdings) Ltd v Competition and Markets Authority, Case No. 1275/1/12/17), and the CAT quashed the CMA’s decision on 7 June 2018. In December 2018, the CMA was granted leave to appeal the CAT judgment. On 10 March 2020, the UK Court of Appeal confirmed the CAT’s decision finding that the CMA did not correctly apply the relevant legal test for unfair pricing and had failed to consider alternative, countervailing evidence adduced by Pfizer and Flynn (Competition and Markets Authority v Flynn Pfizer and Pfizer Limited, Cases C3/2018/1847 and 1874).

According to the CMA, the prices charged by Pfizer and Flynn were excessive because they significantly exceeded a reasonable rate of return (defined at 6 per cent) and were significantly higher than previous levels. The CMA argued that the extent of the excess was such as to make the prices unfair in themselves. The CAT criticised the CMA for failing to assess correctly the economic value of phenytoin sodium capsules and wrongly relying on only one part of the United Brands test (‘price unfair in itself’), while it should also have considered the prices of meaningful comparators such as phenytoin sodium tablets. The CAT also found that the CMA did not give sufficient consideration to the evidence provided by Pfizer and Flynn regarding the prices of comparator drugs, and it set aside the CMA’s finding of abuse.

As the United Brands test was at the core of the debate before the Court of Appeal, it is worth recalling that, in United Brands, the Court of Justice of the European Union (CJEU) held that a price is excessive where it bears ‘no reasonable relation to the economic value of the product supplied’. That is the case where the difference between the costs incurred and the price charged is excessive (the excessiveness limb) and where the price is unfair either in itself or when compared to the price of competing products (the unfairness limb) (United Brands Company and United Brands Continentaal BV v Commission, Case C-27/76, EU:C:1978:22, paragraphs 250–252).

In Pfizer/Flynn, the Court of Appeal noted that the two-limb test was neither a purely disjunctive (ie, one or the other) nor a combinatorial test and confirmed the CAT’s ruling that the ‘in itself’ and ‘by comparison’ options under the second limb were not strict alternatives. While the Court of Appeal considered that the competition authorities are free to choose the most appropriate means to show that a price is unfair (whether ‘in itself’, by comparison or otherwise), it, however, pointed out that authorities have a duty to take into consideration the alternative, exculpatory evidence adduced by the companies under investigation. Relying on the approach taken by the CJEU in its Intel judgment (Intel Corporation Inc v Commission, Case C-413/14 P, EU:C:2017:632), Lord Justice Green held that ‘if an undertaking adduces evidence of a type unlike that which the competition authority relies upon to establish an abuse then the authority is under a duty to consider that evidence’ (Cases C3/2018/1847 and 1874, op cit Judgment of Green LJ, paragraph 89). The case has been remitted back to the CMA to assess Pfizer and Flynn’s pricing of phenytoin sodium capsules de novo in light of the Court of Appeal’s judgment. On 5 August 2021, the CMA issued a new statement of objections against Pfizer and Flynn, generally echoing the same allegations on which its 2016 decision was based.

In the United Kingdom, the CMA has also opened investigations against Concordia and Actavis. Following the Pfizer/Flynn court decisions, the Concordia case was narrowed, and supplementary statements of objections were sent in January 2019 and July 2020. Concerning Actavis, on 15 July 2021, the CMA imposed fines totalling over £260 million for excessive and unfair pricing and paying potential competitors to stay out of the market. The CMA concluded that Auden Mckenzie and Actavis UK increased the price of hydrocortisone tablets by over 10,000 per cent from 2008 to 2016. Moreover, the CMA concluded that Accord-UK and Allergan paid two potential competitors to refrain from entering the market with their generic versions of hydrocortisone tablets.

In Denmark, the DMCC confirmed the DCC decision in CD Pharma (December 2018) by upholding the judgment of the DCAT in a ruling of March 2020. The DCC had found, on 31 January 2018, that the pharmaceutical distributor CD Pharma had abused its dominant position by charging unfair prices. Therefore, it ordered CD Pharma to stop this conduct in the future and submitted the matter to the State Prosecutor for Serious Economic and International Crime. As in the Pfizer/Flynn and Aspen cases, the DCC based its analysis on the two limbs of the United Brands test: it considered that the difference between the costs and the selling prices was excessive, given CD Pharma’s high profit margins of around 80 per cent, and that the price was unfair both ‘of itself’ and compared to competing products. The DCC also compared the price charged in Denmark with its neighbouring countries.

 

Rebates

On 14 March 2019, the CMA decided to close its investigation into pharmaceutical company MSD’s discount scheme for the medicine Remicade, concluding that it was not likely to limit competition. Previously, the CMA had issued a statement of objections, alleging that MSD abused its dominant position because the disputed rebate scheme impeded the sale of biosimilar versions of Remicade and dissuaded customers from switching to them.

The CMA’s decision confirmed the finding of the CJEU in Intel that rebates by dominant undertakings are not per se illegal, and that a variety of factors must be assessed for determining the existence of an abuse and the likelihood of exclusionary effects. The CMA found that, at the time MSD’s discount scheme was launched, the UK National Health Service (NHS) believed that it could lead to exclusionary effects, while also acknowledging that it was designed with the aim of disincentivising the NHS from switching to biosimilars.

However, the core of the CMA’s analysis on the likelihood of exclusionary effects was the objective assessment of the market conditions at the time of the introduction of the rebates in March and April 2015 (Intel, p 63). After conducting a thorough scrutiny and surveying NHS staff, the CMA concluded that the NHS showed less clinical caution and a much greater willingness to use biosimilars. Therefore, the market reality at that time prevented the rebates from developing any likelihood of exclusionary effects.

Therefore, the Remicade decision confirmed that competition authorities should carry out an economic analysis of the effects of discount schemes to substantiate the existence of an abuse in this type of unilateral conduct.

 

Disparagement cases

On 9 September 2020, the French Competition Authority (FCA) imposed fines totalling €444 million on three laboratories (Novartis, Roche and Genentech) for having abused their collective dominant position in the market for the treatment of age-related macular degeneration (AMD). The facts that led to the FCA’s decision had already been investigated and sanctioned by the Italian Competition Authority (ICA) in 2014 on different grounds.

It is worth briefly recalling the facts. Genentech developed two medicines: Lucentis, which was authorised by the European Commission and the European Medicines Agency for the treatment of AMD, and Avastin, an authorised anticancer drug. Genentech concluded licence agreements with Roche and Novartis, which were respectively in charge of marketing Avastin and Lucentis outside the United States. Before the distribution of Lucentis began, doctors in Europe (including in France and Italy) realised that Avastin had positive effects on patients suffering from AMD and started prescribing Avastin to them. This practice continued after Lucentis entered the market.

As Lucentis is more expensive than Avastin, this situation had negative consequences for the three laboratories: Novartis could not get the expected income from sales of Lucentis; Genentech was deprived of the licensing revenue on sales of Lucentis; and Roche was the main shareholder of Genentech.

In 2014, the ICA found that Novartis and Roche agreed, in violation of the provisions of article 101 of the Treaty on the Functioning of the European Union (TFEU), to create an artificial differentiation between Avastin and Lucentis to engender concerns regarding the safety of Avastin and to increase the sales of Lucentis.

This case gave rise to a preliminary ruling of the CJEU, wherein the Court stressed that medicines manufactured and sold illegally could not be regarded as substitutable with lawfully authorised ones. The CJEU also recalled that off-label drugs could only be used under strict conditions, such as the lack of an equivalent authorised product on the market. However, despite the fact that, since Lucentis had obtained  its marketing authorisation, there had been an equivalent, authorised product on the market, the CJEU did not further discuss the issue and concluded that an arrangement to disseminate, in a context of scientific uncertainty, misleading information about the safety of a medicine being used off-label may constitute a restriction of competition ‘by object’ (F Hoffmann-La Roche, Case C-179/16, ECLI:EU:C:2018:25). The ICA’s decision was finally confirmed in a judgment on 15 July 2019 (Italian Council of State, 15 July 2019, No. 04990/2019).

In its recent decision, the FCA took a completely different approach and concluded on a collective abuse of dominance. It found that the three companies formed a ‘single collective entity’ because of the existence of structural ties and cross-holdings between them, enabling them to implement a common strategy in the market. It concluded that they abused their collective dominance to implement a set of behaviours aimed at preserving the position of Lucentis and its high price, by curbing the off-label use of the anti-cancer drug Avastin. In particular, it first considered that Novartis disparaged Avastin by organising a communications campaign meant to discredit the use of Avastin to treat AMD. The campaign targeted ophthalmologists and doctors who were key opinion leaders, as well as patient associations and the general public. Second, it considered that Novartis and Roche, with the assistance of Genentech, orchestrated a series of blocking tactics and gave alarmist and misleading information to the French public authorities.

Considering the criticisms raised with regard to the substitutability of Avastin and Lucentis and the relatively new approach taken by the FCA, it will be interesting to see whether the FCA’s decision will survive an appeal, as we predict the parties will not stop here.

 

Patent settlement cases

Since the closure of the Commission’s inquiry into the pharmaceutical sector in 2009, the Commission has monitored settlements between pharmaceutical companies, which were intended to resolve disputes on the validity or infringements of patents. The Commission has been concerned that such arrangements are used by originator drug makers to pay generics not to enter the market. Therefore, in reality, they would be ‘pay-for-delay’ agreements, rather than good faith settlements of genuine disputes.

The Commission’s latest report on the monitoring of patent settlements was published on 9 March 2018, covering the period from January to December 2016. Since then, no further monitoring exercise has been conducted by the Commission. While it restated the Commission’s commitment towards patent settlements, it provided limited guidance on what is an acceptable settlement. Such guidance can be better found in the judgments in the Servier, Lundbeck and Paroxetine cases.

Concerning Servier and Lundbeck, the relevant Commission decisions had held that the disputed patent settlements restricted competition (Commission decision of 19 June 2013 in Lundbeck, Case AT39226; and Commission decision of 9 July 2014 in Perindopril (Servier), Case AT39612). In both cases, the addressees challenged the decisions before the EU courts. In Servier, following a number of hearings in June and July 2017, the General Court (GC) judgment was published in December 2018, reducing the fines from €331 million to €228 million (Servier and Others v Commission, Case T-691/14, EU:T:2018:922). Both Servier (Servier and Others v Commission, Case C-201/19 P) and the Commission (Commission v Servier and Others, Case C-176/19 P) appealed against the GC judgment in February 2019.  These appeals are still pending as of July 2021.

The Servier judgment addressed issues of both pharmaceutical market definition and patent settlements as a restriction of competition. The main takeaway is that the GC thoroughly reviewed the Commission decision and partially annulled it, overturning the latter’s definition of the relevant market for perindopril, as well as its assessment of one patent settlement agreement. Perindopril is a molecule used to treat hypertension and heart failure. The GC relied on expert evidence and medical studies and concluded that the Commission made various mistakes in its analysis of therapeutic substitution of perindopril with other ACE inhibitors, as it underestimated the competitive pressure exerted by other medicines with the same therapeutic use that could be prescribed by doctors. In addition, it stressed that prices should not be the only or preponderant factor for the determination of the relevant product market in the pharma sector. Rather, it followed the CJEU in the AstraZeneca case (Astrazeneca v Commission, Case C-457/10 P, EU:C:2012:770) and noted that drugs could be subject to competitive pressure on the basis of qualitative non-price factors (promotional efforts of drug makers, the patient’s profile, the doctor’s experience and drugs’ therapeutic differences). In light of these, the GC annulled the Commission’s finding that the relevant market was limited to perindopril, and as a consequence, annulled the finding of an abuse of dominance therein.

With regard to the disputed patent settlements, the GC held that four out of five, and in particular those concluded with Niche, Matrix, Teva and Lupin, constituted restrictions by object. For the GC, the relevant generics were potential competitors, and the settlements limited the generic drug makers’ ability to challenge the validity of Servier’s patents and to commercialise their own products. In particular, the GC held that:

  • generic drug makers are potential competitors to the patent owner, unless the latter rebuts the Commission’s findings by producing evidence of insurmountable technical, regulatory or financial barriers to entry for the generics;
  • the presumption of validity of a patent does not lead to a presumption of infringement by the generic product, something that should be decided by the competent patent court; and
  • a settlement that includes non-challenge and non-commercialisation clauses, obtained in exchange for a reverse payment higher than costs inherent to litigation, constitutes a restriction of competition by object.

 

The GC found that certain reverse payments would not lead to this conclusion (eg, payments covering costs inherent to litigation or payments of an amount insufficient to induce the generic to stay off the market).

Importantly, the GC also found that settlement agreements based on the strength of the litigious patent, and providing for a licence on the patent on market terms, cannot be qualified as a restriction by object. The fifth patent settlement, between Servier and Krka, was held lawful as the Commission failed to prove that the disputed licence was not concluded at market conditions, and that the settlement had anticompetitive effects.

In the UK damages litigation brought by the Secretary of State for Health and the NHS Business Services Authority, the respondent (Servier) sought to rely on the judgment from the GC to argue that, as the relevant market should include other ACE inhibitors, the failure by the claimants to switch to these products amounted to contributory negligence and failure to mitigate damages in relation to their claims under article 101. In November 2020, the UK Supreme Court upheld the findings of the High Court and the Court of Appeal that the GC judgment does not constitute res judicata, as it has not become definitive, considering the pending appeal to the Court of Justice (ECJ). Moreover, the Supreme Court held that even if the GC decision was definitive, its binding effect would be limited to the specific context in which it was made (ie, in relation to the article 102 analysis) and would not apply in relation to the mitigation of damages in the context of the article 101 claims (Secretary of State for Health and others v Servier Laboratories Ltd and others [2021] UKSC 24).

Concerning the Lundbeck case, in March 2021 the ECJ dismissed the appeals brought by Lundbeck and five generic manufacturers against the judgment of the GC in favour of the Commission (Lundbeck A/S and Lundbeck Ltd v European Commission, Case C-591/16 P). As background, in 2013 the Commission fined Lundbeck and five generic manufacturers for entering into patent settlement agreements pursuant to which Lundbeck provided financial compensation to the generic manufacturers in exchange for the delay of their entry in the market. The parties appealed the Commission’s decision to the GC, which upheld the decision in 2016. The 2021 decision by the ECJ dismissed all appeals against the GC judgment and, therefore, upheld the Commission’s decision from 2013. The ECJ judgment essentially follows the Court’s ruling in Paroxetine (Generics (UK) Ltd and Others v CMA (Paroxetine), Case C-307/18, EU:C:2020:52), especially in relation to the criteria to assess potential competition and a restriction of competition by object.

The CJEU’s ruling in Paroxetine followed the examination by the UK CAT of the appeal by GlaxoSmithKline (GSK) and several generic companies against a decision of the CMA finding that GSK abused its dominant position and entered into anticompetitive agreements with generics manufacturers to delay their entry into the market. The CAT decided to refer several questions to the CJEU for clarification on the points listed below.

  • Potential competition: the CAT asked several questions to determine under which conditions an originator and a generic may be considered potential competitors; in particular, in light of the existence of a dispute or injunction proceedings, or both.
  • Restriction by object: the CAT asked several questions to determine whether a patent settlement agreement may be considered restriction by object; in particular, in light of the existence of value transfers of different sizes and forms, including supply agreements between the originators and the generic company.
  • Restriction by effect: the CAT asked whether the finding of a restriction by effect depends on the likelihood of the generic having won the litigation or, alternatively, on the likelihood that a less restrictive agreement would have been entered into.
  • Market definition: the CAT asked whether competition from generic drugs prior to their effective entry is to be taken into account when defining the market.
  • Abuse of dominance: the CAT asked several questions on the conditions under which one or several patent settlement agreements can constitute abuses of a dominant position.

 

Concerning the assessment of potential competition, the court confirmed the ruling in Delimitis (Delimitis v Henninger Bräu, Case C-234/89, EU:C:1991:91) and noted that the structure of the market, including the specificities of the pharmaceutical sector, the economic and legal context, and the facts of the particular case, should be taken into account. It considered that, while potential competition could not arise from the purely hypothetical possibility of such an entry, or from the mere wish or desire of the generic manufacturer to enter the market, nor should it be required to demonstrate with certainty that the generic manufacturers would, in fact, enter. For the court, the question to be considered is whether the generic manufacturer, notwithstanding the existence of the patent, had real and concrete possibilities of entering the market at the relevant time had the settlement agreement not been concluded. The court listed multiple factors that shall be taken into account in this assessment and specified that the existence of a transfer of value from the originator manufacturer to the generic manufacturer can indicate that there is a competitive relationship between these undertakings – ‘the larger the transfer of value, the stronger the indication’.

With regard to the qualification of settlement agreements as restrictions by object, the court recalled its Cartes Bancaires and Maxima Latvija’s judgments (Groupement des Cartes Bancaires v Commission, Case C-67/13 P, EU:C:2014:2204 and Maxima Latvija, Case C-345/14, EU:C:2015;784) by reaffirming broad principles about the differences between restriction by object and by effect. It also noted that the existence of pro-competitive effects could prevent an agreement from being a restriction by object where those effects gave rise to reasonable doubt on whether the agreement resulted in a sufficient degree of harm to competition. The court also specified that a patent settlement agreement should not automatically be characterised as a restriction by object simply because it involves a value transfer from the originator to the generic. Indeed, where such a transfer is appropriate and strictly necessary, having regard to the legitimate objectives of the parties to the agreement, it can be justified. This would be the case where the value transfer corresponded to costs incurred because of the litigation. However, the court pointed out that if the analysis of the agreement makes it clear that the transfers of value only reflect the parties’ commercial motivation not to compete on the merits, the agreement will be qualified as a restriction by object.

Regarding the question related to the notion of restriction by effect, the court recalled the MasterCard judgment (MasterCard and Others v Commission, Case C-382/12 P, EU:C:2014:2201) and stated that to determine the existence of restrictive effects, a counterfactual analysis is necessary. The court excluded the need to determine precisely the chances of success of the generic manufacturer or originator manufacturer in the patent proceedings, or the probability of concluding a less restrictive agreement to conduct the counterfactual analysis, but considered that these factors could be taken into consideration, among other things, to determine how the market would have operated and been structured in the absence of the agreement at stake.

The part of the judgment concerning the market definition is relatively short as the CAT’s question was very narrow. However, the question allowed the CJEU to underline the specificities of the pharmaceutical sector and the importance of the opinion of professional circles, notably when considering interchangeability. The court also noted that generic manufacturers would have to be able to present themselves ‘within a short period on the market concerned with sufficient strength to constitute a serious counterbalance to the manufacturer of the originator medicine’; this is the case when they have applied for market authorisation or have signed supply contracts with distributors. The court pointed out that, as a process patent (unlike a molecule patent) cannot provide absolute certainty that a generic version of the originator’s product could not enter the market, its existence is not sufficient to prevent generic products from being considered as part of the relevant market.

Finally, on the issue related to the abuse of dominance, the CJEU found that where the overall strategy of a dominant undertaking is capable of restricting competition and having exclusionary effects that go beyond the specific anticompetitive effects of each of the settlement agreements, it could result in an abuse of dominant position. The conclusions of the court relied on the CAT’s finding of the existence of a strategy that ‘had, if not as its object, at least as its effect of delaying the market entry of generic medicines’. Therefore, the court recalled that the concept of an abuse of dominance includes agreements that, although they did not individually breach article 101 of the TFEU, did contribute to the cumulative anticompetitive effects of the other agreements.

As the CJEU’s ruling in Paroxetine only offers limited insights on market definition and restrictions by effect, we expect the court to give more guidance on these questions in its forthcoming Servier judgment.

Finally, in November 2020, the Commission fined Teva and Cepalon about €60 million for entering into a patent settlement agreement, whereby Cephalon offered a package of commercial-side deals beneficial to Teva in exchange for Teva not entering the market with a cheaper version of Cephalon’s medicine for sleep disorders. Teva was ready to enter the market in 2005, when the parties concluded the patent settlement agreement. In fact, Teva entered the UK market for a short period in 2005 and offered a price around 50 per cent lower than Cephalon’s product. The infringement lasted from December 2005 to October 2011, when Teva acquired Cephalon and the parties became part of the same economic group.

 

Pharma sector inquiries across Europe

There have also been developments in the pharmaceutical sector inquiries in France, Spain and Austria in recent years.

In particular, in April 2019, the FCA handed down its opinion concerning the pharmaceutical distribution of drugs in urban areas and chemical pathology (Opinion 19-A-08). The report proposed measures to encourage the evolution of the regulatory framework concerning online selling, advertising and the possibility to open the capital of pharmacies. The FCA also made a suggestion to reduce the scope of the French monopoly on dispensing medicinal products, in favour of alternative distribution methods.

In May 2018 and October 2019, the Austrian Federal Competition Authority (AFCA) published two interim reports for the sector inquiries in the healthcare market. The first report analysed competition restrictions in the pharmacy market and focused on market entry and ownership structures, as well as on the general regulatory framework for pharmacies. The AFCA also provided a list of recommendations from a competition law perspective. The second report analysed the market for healthcare in rural areas and addresses the following matters:

  • the inventory of regional supply with pharmacies and general practitioners;
  • medical shortages and health policy measures;
  • medical pharmacies;
  • primary care units, employment of doctors and teaching practice; and
  • proposals from the Austrian Chamber of Pharmacists for the modernisation of the Pharmacies Act.

 

Mergers in the pharmaceutical sector

From July 2019 to July 2021, the Commission reviewed 29 transactions in the pharmaceutical sector. Most of them did not raise serious doubts on their compatibility with the common market and led to simplified clearance proceedings. Six clearances were subject to conditions. One was the merger between Japanese Takeda and Shire, which was approved in November 2018 subject to the divestment of a Shire pipeline drug that would compete with a Takeda product (Takeda/Shire, COMP/M8955). This reaffirmed the Commission’s position in considering ‘innovation’ as an important parameter of competition. However, taking into account some exceptional circumstances, the Commission waived the commitments made by Takeda on 28 May 2020.

The second was the acquisition of GE’s BioPharma business by Danaher (Danaher/GE Healthcare Life Sciences Biopharma, COMP/M9331). The Commission approved the operation in December 2019 subject to the sale of five Danaher businesses to a purchaser with experience in the supply of biotech equipment or consumables in Europe, the Middle East and Africa, the Americas and Asia.

A third merger related to the acquisition of Pfizer’s Consumer Health Business by GSK and was conditional upon the global divestment of Pfizer’s topical pain management business carried out under the ThermaCare brand (Glaxosmithkline/Pfizer Consumer Healthcare Business, COMP/M9274). The Commission found that products in the market for topical pain management are broadly substitutable irrespective of their differing format or composition, for example, patches and gels, irrespective of whether medicated. The transaction was cleared with conditions in July 2019 and Angelini SpA was approved as purchaser in March 2020.

The fourth case related to the acquisition of Allergan by AbbVie and was approved by the Commission in January 2020 subject to the divestment of a product Allergan was developing to treat inflammatory bowel diseases (AbbVie/Allergan, COMP/M9461).

The fifth operation related to the merger of Mylan and Upjohn, a business division of Pfizer. The Commission found that the transaction would raise competition concerns in some countries because of the strong position of the two companies and the limited number of significant competitors on the market. Thus, the parties offered to divest Mylan’s business in the relevant markets to a suitable purchaser (AbbVie/Allergan, COMP/M9517). The conditional clearance decision was adopted in April 2020.

The sixth concentration concerned the acquisition of Bayer’s animal health division by Elanco (Elanco Animal Health/Bayer Animal Health Division, COMP/M9554). In June 2020, the Commission cleared the operation subject to the divestment of otitis products and several types of parasiticides in the European Economic Area, the United Kingdom and globally.

Furthermore, on 26 March 2021, the EC published new guidance on the application of the referral mechanism set out in article 22 of the EUMR. The EC no longer discourages referrals falling below national merger thresholds but may encourage them in appropriate cases. Examples of good candidates include (1) a start-up or recent entrant with significant competitive potential, but with low turnover; (2) an important innovator or a company who is conducting potentially important research; (3) a target holding competitively significant assets, such as IP; and (4) a target supplying key input for the downstream market. The new guidance aims at addressing the perceived enforcement gap in relation to ‘killer acquisitions’ falling below merger thresholds in the EU.

The new guidance explicitly refers to the pharmaceutical and biotech sectors, together with the digital sector. However, the Commission's renewed practice is not limited to those sectors and leaves the door open for any transaction that falls below the national merger control thresholds and threatens to affect competition in the EU.

In March 2021, the FCA referred to the EC Illumina’s acquisition of Grail, which is developing multi-cancer early detection tests that screen for cancer in asymptomatic patients using DNA sequencing. This was the first time the FCA referred a below-threshold transaction to the EC.

The referral was followed by the competition authorities from Belgium, Greece, the Netherlands, Iceland and Norway. The Spanish, Austrian and Slovenian competition authorities decided they did not have the power to refer the transaction to the EC, as it would not be notifiable in their respective jurisdictions. On 19 April 2021, the EC accepted the referral and asserted jurisdiction over the US$7.1 billion acquisition, even though it did not meet the notification thresholds in any member state. On 22 July 2021, the EC opened an in-depth (Phase II) investigation into the transaction and has until 29 November 2021 to make a decision.

Illumina unsuccessfully challenged the referral before French and Dutch courts. Moreover, on 29 April 2021, Illumina filed an appeal before the European General Court seeking the annulment of the EC’s decision to accept the referral under article 22. The appeal is pending as of July 2021. The General Court’s decision will probably provide clarity on the scope of the revised article 22 guidance.