Pharmaceutical regulatory lawRegulatory framework and authorities
What is the applicable regulatory framework for the authorisation, pricing and marketing of pharmaceutical products, including generic drugs?
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 refundable medicines); and
- for the pharmacy market, on the non-reimbursable market, pricing is totally free.
On the contrary, for the reimbursable market, the price is regulated and set by an agreement between the Economic Committee for Health Care Products (CEPS) and the firm (article L162-16-4 of the French Social Security Code (SSC)), or, in absence of an agreement, by the CEPS alone. Prices for over-the-counter (OTC) products are freely set.Regulatory authorities
Which authorities are entrusted with enforcing these rules?
As regards the authorisation and marketing of a medicinal product, the ANSM is competent at a national level. At the European level, the Committee for Medical Products of Human Use of the European Medicines Agency evaluates the medicines in terms of risk-benefit balance. The European Commission (EC) may subsequently grant the application.
With respect to pricing and reimbursement, the French Health Authority (HAS) assesses the clinical benefit of the medicine while the CEPS is in charge of determining the retail price based on the HAS’s opinions. The National Union of Health Insurance Funds determines the reimbursement rate for medicines. An order of the Ministry of Health shall enforce the inclusion of the product on the list.
Only administrative courts have the jurisdiction to hear on actions against MA, decisions fixing the price or decisions regarding reimbursement for a product.Pricing
Are drug prices subject to regulatory control?
The price determination process, which is a negotiation between the CEPS and the company, takes into account various criteria, including the improvement of clinical benefit evaluated by the Transparency Commission of the HAS, 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. Depending on the medicine’s price in Germany, Spain, Italy and the UK (defined as reference countries because of their comparable market size), the retail price may be consequently adjusted or revised by the CEPS.
For generics, the price set out by the CEPS 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. The reimbursement base of a medicine may also be subject to a unified price fixed by the CEPS and widely applied to generics, similar biological medicines and reference medicines (article L162-16-6 of the SSC).
This mirrors the desire of the government to move forward a full price regulation in contrast with the traditional principle of price negotiation between the CEPS and the company.Distribution
Is the distribution of pharmaceutical products subject to a specific framework or legislation? Do the rules differ depending on the distribution channel?
Specific legislation on the distribution of pharmaceutical products is mainly developed in the PHC.
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 or online). However, on the internet, pharmacies are only authorised to sell non-prescription medicines (article L5121-34 of the PHC). Owing to various criticisms and to comply with European case law, 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. Save from some exceptions, prices are set out freely for the supply to hospitals.
For the private circuit, the retail price (including taxes) is set out by the CEPS (see question 1). The maximum margins that can be applied at each step of the supply chain (wholesalers and pharmacists) are set out by law (amended order dated 4 August 1987). 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, provided such products are reimbursed by social security funds.Intersection with competition law
Which aspects of the regulatory framework 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 and wholesale and retail upper margins are mainly set out by public bodies, competition between pharmaceutical firms is limited in these fields.
On the distribution of pharmaceutical products, wholesalers have public service obligations, which strictness may hinder free competition on all levels (article R5124-59 of the PHC further amended). For example, wholesalers must store at least 90 per cent of existing medicines. As MA holders, the pharmaceutical firms have a legislative obligation to appropriately and continuously supply all authorised pharmaceutical wholesalers to enable them to fulfil their public service obligations as well as implement shortage management plans (article L5121-29 of the PHC). Pharmaceutical firms are also burdened by other obligations, including mandatory declaration to the ANSM in the case of medicine shortage or risk of medicine shortage or the development of a ‘shortage management plan’ for products of major therapeutic interest.
Whereas, since 2017, dozens of wholesalers have been fined for breaching their obligations, the ANSM has recently paid more attention to pharmaceutical firms’ obligations. This resulted in fining a pharmaceutical firm €348,623 for not having developed a management plan for shortage of several anti-Parkinson drugs in a decision dated 28 December 2018, and condemning another firm that failed to inform the ANSM of the end of commercialisation of a medicine, failed to notify of the risk of a medicine shortage and failed to develop a shortage management plan for such medicine (Decision dated 27 February 2019).
Most importantly, within the past 10 years, French law has been designed to support the inclusion of generic products into the market by means of obligations and incentives. While pharmacists are allowed to replace prescribed brand-name medicines with their generic equivalent, general practitioners are required to write their prescriptions according to the international non-proprietary names with a common name for each active substance. In addition, it is now mandatory to justify the mention of ‘non-substitutable’ with medical criteria and, as from 1 January 2020, patients who refuse the generic equivalent without such medical justification will see their reimbursement limited to the price of such generic. Pharmacists’ margins are set higher by the government when they sell generics to their patients, and 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 may grant discounts of up to 40 per cent on their reimbursed products. As a counterpart of this measure, generics companies must declare to the CEPS their annual turnover achieved for each generic medicine, as well as the global discounts and financial advantages granted for each generic medicine.
It is likely that the information thus gathered would be used by the Pricing Authority to obtain price reductions from the generics companies if it shows that discounts granted to pharmacies are of significant importance.
Finally, on 12 November 2018, 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 90 per cent for 2019. The setting out of such rate also aims at limiting competition, even between generic and originator companies.
Competition legislation and regulationLegislation and enforcement authorities
What are the main competition law provisions and which authorities are responsible for enforcing them?
The competition legal framework is mainly codified in Book IV of the French Commercial Code (CC), entitled ‘Pricing freedom and competition’ (article L410-1 and following) and includes provisions related to anticompetitive practices and mergers as well as transparency and restrictive practices such as unfair business practices.
While transparency and restrictive practices are mainly investigated and prosecuted by the Directorate-General for Competition, Consumer Affairs and Prevention of Fraud (DGCCRF), the French Competition Authority (FCA) is 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 at a national level. Competition investigations are mostly conducted by the FCA’s investigators, under the sole supervision of the chief case-handler. Nonetheless, the Ministry of the Economy holds some powers in this regard through its administration, which still has some investigators. Whenever such practices or mergers have a Community dimension, the EC shall be the regulatory body in charge of enforcing competition law provisions.
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.Public enforcement and remedies
What actions can competition authorities take to tackle anticompetitive conduct or agreements in the pharmaceutical sector and what remedies can they impose?
Although there are no particular actions or remedies specifically addressing competition issues within the pharmaceutical sector, the FCA and the EC hold a set of actions and remedies to tackle anticompetitive conduct or agreements.
Depending on the territorial scope of the practices, the FCA or the EC may deal with cases on their own initiatives or through interested private parties in the case of a referral. Proceedings before the FCA start with examining the admissibility of the referral and continue with the analysis of the conditions of competition in the specific market. These proceedings may result in dawn raids at the firms’ offices or requests for information, which are powerful investigative tools compelling firms to provide accurate information under penalty of fine. The FCA may then 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.
The FCA also provides alternative means to resolve competition issues to companies suspected of infringement.
First, before notifying an actual statement of objections, the FCA may indicate to a company that it has ‘competition concerns’ regarding some of its behaviour. The said company may then propose commitments 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. The settlement procedure is now closer to the one existing at the European level and enables the general case handler to propose in the settlement the minimum and maximum fine the firm must pay, should it decide to sign the settlement. The FCA’s procedural notice dated 21 December 2018 further detailed the procedure and its prerequisites with the aim of enhancing readability and predictability for firms.
Finally, French law also provides a leniency programme under which companies may report anticompetitive practices to the FCA before or after the opening of a contentious procedure against them. Firms 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 FCA and for their cooperation during the investigation phase.
These solutions have been implemented in the pharmaceutical sector. As regards financial sanctions, in Decision No. 13-D-11, the FCA 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 FCA, 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 FCA 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 FCA and submitted several commitments 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. The amount of the fine was then reduced by 20 per cent. The decision was confirmed by the Paris Court of Appeal (Decision of 26 March 2015) and the French Supreme Court on 11 January 2017.
More recently, in Decision No. 17-D-25 dated 20 December 2017, the FCA imposed a €25 million fine on Janssen-Cilag for having implemented a strategy denigrating the Durogesic’s generics manufactured by Ratiopharm and for having intervened in the MA process of the generics before the ANSM.
In 2018, wholesale distributors of veterinary medicines and their professional body were fined €16 million for setting up several cartel agreements that froze the competition on the market concerned and aimed at taking advantage of the health emergency situation caused by the rapid spread of bluetongue between 2007 and 2010 (Decision No. 18-D-15 of 26 July 2018).
Following the example of the EC of 2006, the FCA 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 enforcement and remedies
Can remedies be sought through private enforcement by a party that claims to have suffered harm from anticompetitive conduct or agreements implemented by pharmaceutical companies? What form would such remedies typically take and how can they be obtained?
Private parties can initiate proceedings before the FCA by filing a complaint.
They usually request the FCA to take interim measures to order the end of the practices they deem to be anticompetitive (see, eg, Decision Nos. 07-D-22 Phoenix Pharma, 09-D-28 Ratiopharm, 07-MC-06 Arrow Génériques). In the latter, based on a few pharmacist testimonies, the FCA considered that Schering-Plough may have denigrated Arrow’s generic. It thus adopted interim measures to restore the HCPs’ confidence towards Arrow’s generic and ordered Schering-Plough to publish a statement in this regard.
Executive order No. 2017-303 of 9 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 the 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
Can 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 EC. Since the reform of competition investigations, the FCA has its own investigators to conduct ordinary investigations (article L450-3 of the CC) or investigations under judicial control (article L450-4 of the CC).
Following a first inquiry in the distribution of medicinal products for human use in private practices, which led to the publication of an opinion on 19 December 2013 (Opinion 13-A-24), the FCA decided on 21 November 2017 to launch a new broad sector inquiry to investigate the functioning of competition with regards to medicines for human use and medical biology.
On 4 March 2019, the final report of the FCA was published and included various comments particularly on the distribution of medicines (Opinion 19-A-08).
As regards the market trend, while the opinion confirmed an increase of direct sales for non-reimbursable medicines over the period 2008-2017, it underlines the rise of the direct sales channel for refundable reference medicines, especially new ‘niche’ originator products entering the market at a high price (eg, oncology products). The FCA notes that such rise may result in a refusal to sell products to wholesalers, which can be questionable as regards public service obligations. Be that as it may, the FCA indicates that the direct channel can still be motivated by a set of circumstances. For instance, a newly developed drug that would target a very limited population may not require the supply of all pharmaceutical wholesalers and would then legitimise a nationally centralised management of the distribution channel by the manufacturer. Similarly, the same applies to new products entailing heavy treatments and requiring additional training of HCPs or owing to commercial considerations. Such position seems to be in line with the previous solutions of the FCA and the European Court of Justice (ECJ) on the allocations policy imposed on wholesalers, which accepted the company’s commercial interests as a legitimate defence (eg, Decision dated 16 September 2008, GSK, C-468/06).
As for the wholesalers, the FCA notes a significant deterioration of their economic and financial situation (ie, three major wholesalers, together representing 60 per cent of the cumulative turnover on the market, are reportedly in a deficit position in 2018). The FCA identifies several causes of this situation such as the heavy dependence between the wholesalers’ remuneration and the drug price or the non-inclusion in the wholesalers’ remuneration of the costs incurred by wholesalers, in particular with regard to their public service obligations. Owing to the public expenditure policies, the drugs’ prices and volumes on the market for reimbursable medicines are slowly reduced, which, according to the FCA, greatly affects the business model of wholesalers. Lastly, they suffer from the competition with both pharmacists and custodians. As a counter-attack, some wholesalers start to provide logistic services to OTC and generics firms in exchange for contractual remuneration while others choose to diversify their activities into OTC products or export.
Despite these new strategies, the FCA indicates that long-term profitability and activity of wholesalers are threatened owing to their insufficient weight during discussion with suppliers. Hence, the FCA recommends revising the remuneration of wholesalers, including the criteria used to set up their margin, with the aim of distinguishing the margin from the drug price and by taking into account the logistical costs incurred by wholesalers. To avoid any increase in direct sales in response to the revision of the wholesalers’ margin, such measures should be implemented gradually. Though these recommendations are in line with the FCA’s conclusions dated 2013, it will be necessary to be aware of potential future regulatory changes to ensure that the burden of these measures will not be borne by the pharmaceutical industry.Health authority involvement
To what extent do health authorities or regulatory bodies play a role in the application of competition law to the pharmaceutical sector? How do these authorities interact with the relevant competition authority?
With respect to restrictive practices and transparency provisions, the ANSM and the DGCCRF have been coordinating their actions related to the market surveillance of some products (ie, medicinal plants, medical devices and in vitro diagnostic medical devices, contact lenses, cosmetics and tattoo products). An ordinance dated 19 December 2013 gave powers to the DGCCRF officers to investigate and record infringements to the provisions related to health products. In this respect, a cooperation agreement dated 7 January 2015 between both entities made it possible for the ANSM and the DGCCRF to spontaneously share their information and to set up the rules of their cooperation related to the market surveillance.
Regarding competition law provisions, the DGCCRF or the FCA may consult the ANSM as part of an investigation or in the course of a sector inquiry. The 2013 sector inquiry, which led to the publication of Opinion No. 13-SOA-01, led the FCA to discuss and exchange information with the ANSM.NGO involvement
To what extent do non-government groups play a role in the application of competition law to the pharmaceutical sector?
Article L462-1, paragraph 2 of the CC enables professional associations, labour unions or recognised consumer groups to petition the FCA with regard to the interests for which they are responsible to obtain its opinion on ‘any issue regarding competition’.
Although this option has been mainly used by healthcare professional associations (eg, Opinion No. 96-A-17 dated 5 November 1996), manufacturers’ associations have recently started to exercise it (Opinion No. 12-A-06 dated 29 February 2012, Opinion No. 12-A-14 dated 19 June 2012).
Review of mergersThresholds and triggers
What are the relevant thresholds for the review of mergers in the pharmaceutical sector?
Regardless of the sector, a concentration shall be notified to the FCA under three cumulative conditions:
- the combined aggregate worldwide turnover of all undertakings concerned in the concentration is more than €150 million;
- the aggregate turnover in France of at least two of all undertakings concerned exceeds €50 million; and
- the concentration shall not have a Community dimension, under Council Regulation 139/2004.
Is the acquisition of one or more patents or licences subject to merger notification? 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 CC (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 FCA 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. The FCA currently works on new guidelines, which should be adopted in the course of 2019. These will also take into account the recent order dated 18 April 2019 simplifying the notification process.Market definition
How are the 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.
Although the third level (ATC3), which groups products according to their therapeutic indications (ie, their intended use), is generally used as an operational market definition, 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 EC case law regarding the pharmaceutical sector. Nevertheless, in antitrust cases, the FCA 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 (Decisions Nos. 03-D-35, Sandoz, 07-D-09, GlaxoSmithKline, 09-D-28 Ratiopharm, 07-MC-06 Arrow Génériques, 13-D-11 Janssen-Cilag). This trend is also visible in merger controls (eg, assessment of the effects of a merger on the market of regulators of bone calcium: FCA, Decisions Nos. 13-DCC-106 dated 6 August 2013, EC, COMP/M.5295, Teva/Barr, 19 December 2008, EC, COMP/M.5253, Sanofi-Aventis/Zentiva, 4 February 2009 and EC, COMP/M.5555, Novartis/EBEWE, 22 September 2009, COMP/M.5865 Teva/Ratiopharm, 3 August 2010). In each case, the EC 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 FCA checked the market shares of the parties to the concentration on each of the three levels.
The FCA conforms to the EC’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 and contract manufacturing. In the Boiron/Dolisos case, the FCA made its own distinction between generic homeopathic medicines (MNC) and branded homeopathic medicines (MNM).Geographic market
The geographic market for pharmaceutical products is generally defined on a national scope (Decisions Nos. 07-MC-06,07-D-09, 13-D-11 and 13-D21) but may sometimes be said to be local (eg, on the market related to the supply of medicinal products by wholesalers to pharmacists, contrary to the market supply of medicines by pharmaceutical firms to wholesalers, which is on a national scope, see Opinion No. 02-A-15 on a merger between two pharmaceutical wholesalers).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 EC, as European thresholds are often exceeded. On this point, the EC is currently considering complementing the existing thresholds (turnover-based system) with the notion of ‘market potential’ 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 FCA authorised a merger between Boiron and Dolisos, two French companies manufacturing homeopathic products (Opinion No. 05-A-01).
In this case, the FCA distinguished within the homeopathic medicines, MNC from 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.Addressing competition concerns
Can merging parties put forward arguments based on the strengthening of the local or regional research and development activities or efficiency-based arguments to address antitrust concerns?
Article L420-4 of the CC 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.
In Decision No. 07-D-05, the FCA 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 CC, 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 FCA on the grounds of general interest other than the maintenance of competition (eg, 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 markets be considered problematic?
The FCA must 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 FCA first must 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 CC):
- 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 further detailed in the guidelines issued by the FCA on 10 July 2013, which shall be amended in 2019.
When assessing the Boiron/Dolisos merger, the FCA considered that the operation would not only affect the market but would create a near-monopoly in the market for MNC.
In addition, the FCA assesses whether the contribution to economic progress is such to offset the distortions of competition that may arise from the operation (article L430-6 of the CC).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 FCA 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 EC (eg, see 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 FCA 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, the Authority is now entitled to impose penalties on companies for not implementing remedies or commitments conditioning the implementation of the merger.
Anticompetitive agreementsAssessment framework
What is the general framework for assessing whether an agreement or concerted practice can be considered anticompetitive?
According to article L420-1 of the CC, which is similar to article 101 of the Treaty on the Functioning of the European Union (TFEU), prohibited anticompetitive agreements are the ones aiming at or likely to have the effect of preventing, restricting or distorting competition in a market, regardless of any intermediation of a company in the group established outside France. For instance, they would:
- 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.
To what extent are technology licensing agreements considered anticompetitive?
Such agreements are assessed in accordance with the rules laid down in EC Regulation No. 316/2014 on technology transfer as well as in Guidelines on the application of article 101 of the Treaty on the Functioning of the European Union to technology transfer agreements 2014/C 89/03.
Licensing agreements would consequently not be deemed anticompetitive, subject to the conditions that the parties’ market shares meet the thresholds and that they do not contain hard-core restrictions as per 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 FCA’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 the following:
- 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.
In practice, the 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 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? How can these issues be resolved?
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 and often contain a transfer of technology.
Other agreements (such as consignment stock agreements, agreements focusing on the transfering of an MA or the underlying documentation) could also contain direct or indirect restrictions such as price-fixing or territorial restrictions.
In spite of confidentiality provisions protecting information exchanged between parties, such agreements should not contain provisions obstructing the application of competition rules so that they may not be upheld in the case of antitrust infringements.Issues with vertical agreements
Which aspects of vertical agreements are most likely to raise antitrust concerns?
The FCA uses the principles set out in 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. The negative effects on the market of vertical agreements may entail the following:
- 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.
By applying such principles in the pharmaceutical sector, the FCA recognises under certain circumstances, in particular when having small market shares, that approval of its wholesalers by a pharmaceutical firm shall not be prohibited (Decision No. 03-D-53, Biotherm).
With respect to online sales, the ECJ stated in the Pierre Fabre case (Case C-439/09, Pierre Fabre Dermo-Cosmétique SAS), that prohibition to sell on the internet constitutes a per se restriction to competition when the clause is not legitimated by the product properties.
However, it is recognised that a manufacturer, such as Caudalie, which justifies of a lawful distribution network, is entitled to prohibit the sale of its products on non-authorised, non-licensed websites (Caudalie case: see French Supreme Court, Decision No. 16-15067, 13 September 2017 and Paris Court of Appeal Decision No. 17/20787, 13 July 2018; see also ECJ 6 December 2017, C-230/16, Coty).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 EC’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 EC sent several statements of objection to pharmaceutical firms and fined Lundbeck (€93.8 million), Johnson & Johnson (€10.8 million) and Novartis (€5.5 million) as well as Servier (€331 million).
The General Court confirmed the fine in the Lundbeck case but reduced by 30 per cent the fine first imposed by the EC to Servier.
For the first time, on 8 September 2016, the General Court ruled on the pay-for-delay practice in the Lundbeck case. In this 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. Hence, Lundbeck kept the generic producers out of the market for the duration of the agreements without promising any guarantee of market entry thereafter.
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.
For the second time, the General Court ruled on pay-for-delay settlements in the Servier case, where the pharmaceutical firm implemented a strategy to exclude competitors and delay generic entry through a technology acquisition and a series of patent settlements.
On 12 December 2018, the General Court declared that the EC’s analysis was invalid particularly as regards the abuse of dominant position as the relevant market should not have been restricted to the sole Perindopril molecule, taking into account the sector specificities. In addition, the Court acknowledged a restriction by object for most of the agreements concluded between Servier and several generic companies.
That being said, it appears that potential antitrust violation by such settlements may only be discussed if the settlements would contain provisions preventing the generic company to enter the market and providing for a kind of value transfer.Joint communications and lobbying
To what extent can joint communications or lobbying actions be anticompetitive?
The assessment of lobbying actions or joint communications shall follow the European legislation and practice.
As article 101 of the TFEU prohibits concerted practices, the exchange of information may be the basis of an anticompetitive agreement whether by object or effect.
Although some behaviours are commonly identified as having an anticompetitive object (eg, exchange of information between competitors on future intentions), the assessment of the anticompetitive object of the agreement may, in most cases, depend on the nature, the economic and legal context and require a case-by-case analysis.
In the absence of such an object, it is necessary to analyse the actual or the potential effects. Relying on an analysis grid inspired by the EC, the FCA will assess the structure of the market on which the exchange takes place (ie, the degree of concentration of the market, the number of participants, their combined market share or the existence of barriers to market entry). The FCA specifies that other characteristics of the market may be used for the analysis (ie, the existence of structural links between companies and the supervision of companies in applying the policy). The FCA will also assess the characteristics of the exchange of information (ie, the nature of the data and the modalities of the exchange). Several criteria are to be combined: 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 FCA sanctioned two agreements between manufacturers aiming at coordinating their commercial policy with retailers (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 CC and article 102 of the TFEU.
In a decision of 14 May 2013, the FCA sanctioned Sanofi-Aventis up to €40.6 million for abuse of dominant position characterised by systematic communication aiming at denigrating its competitors towards HCPs via public speech and commercial arguments addressed to pharmacists and doctors questioning the substitutability of its medicinal product.
Practices of denigration made by Schering-Plow were also found as constituting 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 FCA imposed a fine of €25 million on Janssen-Cilag and its mother company Johnson & Johnson for developing similar denigrating strategies. Aside from its interventions during the generics’ MA process before the ANSM, 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 marketed 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. Transparency and disclosure of contractual relationships, including 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, are mandatory for pharmaceutical firms (article L1453-1 of the PHC). Deliberate failure to comply with this publication is punishable by a fine of up to €75,000.
In addition, 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.
From a competition point of view, such transparency reduces the uncertainty and renders the competitors’ behaviours easier to predict.
However, 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 conductAbuse 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 CC).
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 FCA 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 FCA considered that such a scheme resulted in increasing customer loyalty towards Sandoz.
The FCA 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 FCA 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 FCA.
On 8 July 2014, the FCA 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 healthcare professionals 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 of the TFEU (anticompetitive agreements). Although not legally binding, the EC’s Notice on agreements of minor importance (de minimis) defines thresholds below which the competition infringement is deemed insignificant.
This ‘soft law’ text may serve as a helpful analytical guide for national competition authorities, each of which may have its own prosecution policy.
In French law, article L464-6-1 of the CC gives the FCA the power to dismiss the case when a threshold of 10 per cent (for agreement between competing companies) or 15 per cent (for agreement between non-competing companies) is not exceeded, except for gross restrictions (article L464-6-2 of the CC).
Should the thresholds not be met, the practice may still be considered anticompetitive because of its sensitive nature (eg, Decision No. 13-D-14 sanctioning two professional organisations of veterinarians for having set up a charter defining the prices that the signatory veterinarians had to charge).Market definition
Do antitrust authorities approach market definition in the context of unilateral conduct in the same way as in mergers? If not, what are the main differences and what justifies them?
The authorities may use similar criteria to define the targeted market, such as the ownership of property rights, the ATC classification, the patients’ propensity to switch treatments or the drug price factor as regards merger control and dominant position. Apart from these criteria, which are sector-specific, both approaches are very different in essence. While merger control focuses upstream on a prospective analysis of whether the transaction would significantly impede effective competition in particular by creating or strengthening a dominant position in France or within the EU, the authorities’ approach on anticompetitive unilateral conduct is based, downstream, on a concrete and actual analysis where the enterprise under scrutiny should be in a dominant position.Establishing dominance
When is a party likely to be considered dominant or jointly dominant? Can a patent owner be dominant simply on account of the patent that it owns?
A dominant position can be defined as the situation where an undertaking has the faculty to behave independently of its competitors, customers, and ultimately from consumers (ECJ, United Brands, C-27/76). In practice, a large market scale often entails a dominant position though other indicators can be used (eg, weakness of competition, absence of competition, control of resources and technology).
The FCA follows the EU case law in its assessment of these situations. However, although it left the question open, the FCA surprisingly seemed to consider that, despite important market shares of 55-60 per cent in 2000 and 70-75 per cent in 2004, Sanofi-Aventis may not have held a dominant position in the hospital medicines market (see Decision No. 10-D-02 dated 14 January 2010).
Regarding joint domination, the FCA assesses factors connecting the undertakings that give them the power to adopt a common market policy, applying the EU case law as such (Judgment of 7 October 1999, T-228/97, Irish Sugar). To date, the FCA has never found a joint domination in the pharmaceutical sector (ie, Decision No. 07-D-42, Nestlé, Danone-Blédina, Milupa-Nutricia, Sodilac, Decision No. 09-D-38).IP rights
To what extent can an application for the grant or enforcement of a patent or any other IP right (SPC, etc) expose the patent owner to liability for an antitrust violation?
In 2001, the FCA 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, in the AstraZeneca case, the General Court, followed by the ECJ, upheld the Commission’s decision that ruled that the mere application for a supplementary protection certificate could amount to an abuse (ie, Judgment dated 1 July 2010, Case T-321/05, Decision dated 6 December 2012, Case C-457/10P). In its 2009 report on the pharmaceutical sector, the EC also criticised the ‘patent filing strategies’ and the use of ‘patent clusters’ to delay or block the market entry of generic medicines as well as some defence strategies used by originator companies in courts.
This being said, abuse of court proceedings remains exceptional in the EU (see Case T-111/96 ITT Promedia NV ) and in France (see Decision No. 01-D-57).
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. AstraZeneca was fined €60 million for having implemented such practices with its medicine Losec (see question 33).
Although the manufacturer has the right to withdraw its MA ‘at any point in time without being obliged to give any reasons’ (C-94/98, Rhone Poulenc Rorer), a company in a dominant position holds a ‘particular’ responsibility and is also expected to exercise its right in a reasonable way in respect of third parties’ access to the market (see CFI T-24/93, Compagnie maritime Belge Transport SA).
To date, the FCA has not had the occasion to rule on the conformity of such practices with competition law.Communications
Can communications or recommendations aimed at the public, HCPs or health authorities trigger antitrust liability?
Yes, see question 27.Authorised generics
Can a patent owner 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?
Launching its own generic or granting a licence to do so shortly before the expiry of the patent protection with the intention to allow an ‘early entry’ has been a common practice of originator companies for many years.
In principle, such practices are not seen 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. To date, there has been no case law in France regarding this practice of authorised generics. In this regard, in its report on authorised generics, the FCA 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 owner 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 ECJ 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 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 FCA 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, such as the pharmaceutical sector). The usual approach is based on costs, value of service and comparison with other prices (see, for example, ECJ, 14 February 1978, United Brands, C-27/76).
However, the ECJ 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).
For the very first time, the EC opened an investigation on excessive pricing against Aspen in May 2017 (see question 40).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 FCA 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 sector specificities have not been deemed sufficient to be considered as an objective justification. The FCA considered that these restrictions 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, French decision practice could evolve based on more recent European case law. Thus, in the Spanish GSK case (ECJ, 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 ECJ confirmed that the specific legal and economic context of the pharmaceutical sector could be relevant in the application of article 101(3) of the TFEU.
Update and trendsCurrent trends and developments
40Are there in your jurisdiction any emerging trends or hot topics regarding antitrust regulation and enforcement in the pharmaceutical sector?Emerging trends and hot topics40 Are there in your jurisdiction any emerging trends or hot topics regarding antitrust regulation and enforcement in the pharmaceutical sector?
Denigrating strategies have been discussed following FCA decisions that sanctioned several pharmaceutical firms that had implemented practices aimed at delaying generics entry on the market and hindering their further development (see questions 7 and 27).
In light of the FCA’s recent opinion (4 April 2019), the relationships between pharmaceutical firms and wholesalers is particularly scrutinised, especially in the context of direct sales channel (see questions 5 and 9).
In addition, although to date there is no case law addressing this particular issue in France, excessive pricing in the pharmaceutical sector has raised various concerns. Even if these practices remain exceptional, they have appeared to be on the rise since 2015 at a global scale and have raised numerous issues (ie, the definition and the legal test to apply), which affects predictability for companies.