European Commission fines Servier and generic allies €427.7m

Published: 31-Jul-2014

Over anti-competitive practices related to blood pressure medicine perindopril

French pharmaceutical company Servier and five generics producers have been fined €427.7m by the European Commission over anti-competitive deals.

Brussels said Niche/Unichem, Matrix (now part of Mylan), Teva, Krka and Lupin agreed to protect Servier's blood pressure medicine, perindopril, from price competition by generics in the European Union (EU). This medicine effectively came out of patent protection in 2003, and the Commission found that a series of generic companies who were preparing to launch generic competitors to this drug, were paid for not doing so, or competing in a limited number of markets.

'The generic companies agreed to abstain from competing in exchange for a share of Servier's rent,' said the European Commission. 'This happened at least five times between 2005 and 2007. One generic company acknowledged that it was being 'bought out of perindopril'.

Claiming that payments from Servier to generic manufacturers were worth 'several tens of millions of Euros', the Commission said in one case, Servier offered a generic company a licence for seven national markets, as long as it would 'sacrifice' all other EU markets regarding perindopril sales.

Noting that such deals break EU anti-trust rules, the Commission said that a truly open generics market 'drives prices down significantly' for patients.

Lucy Vincent, Servier’s spokesperson, said: 'Patients have not been deprived of perindopril at any time. Moreover, generic entry has not been delayed. Servier has acted in a transparent and legitimate way to defend its patents, which are essential if we are to continue the development of innovative medicines for the benefit of patients.'

Servier said it had proved to the Commission that the settlement agreements between the company and the generics manufacturers 'have not in any way delayed the entry of generics to the market, which became available as soon as the patent was revoked'.

Patients have not been deprived of perindopril at any time

The company said these agreements were a 'legitimate means to put an end to long, costly, and uncertain disputes' and the patent under investigation had been validated by the European Patent Office.

'The Commission’s decision sets a regrettable precedent for industries that rely on intellectual property. By condemning patent settlement agreements responding to legitimate commercial concerns, the Commission makes patent disputes more risky and more costly,' added Vincent.

Furthermore, Servier said the European Commission’s allegation of its abuse of its dominant position is based on a 'market definition limiting the relevant market to the single molecule of perindopril, whereas treatments for hypertension include at least a dozen competing products within the therapeutic class to which perindopril belongs (ACE Inhibitors)'.

'Medically or economically, limiting the relevant market to a single molecule of such a crowded therapeutic class is absurd,' said Vincent.

The European Federation of Pharmaceutical Industries and Associations (EFPIA) voiced its concerns at the fine, stating that 'judging patent validity is the sole prerogative of specialised patent offices and courts'.

Given the economic and welfare interests at stake, competition authorities should be circumspect in assessing the lawfulness of patent settlements

The EFPIA added that patent settlement agreements in the pharmaceutical sector 'are a symptom of the highly fragmented and inefficient IP enforcement regime in Europe'. Given the economic and welfare interests at stake, competition authorities should be circumspect in assessing the lawfulness of patent settlements and promoting litigation, it said.

'Patent settlement agreements are efficiency enhancing and legitimate where there are bona fide grounds for dispute. They allow companies to avoid the significant costs of protracted patent litigation in multiple jurisdictions and to focus on innovation investments and bringing their products to market,' said the EFPIA.

'There is a lot at stake for both parties in complex patent litigation. Generic companies run a significant financial risk (litigation costs and damages claims) if they launch 'at risk' and are subsequently defeated. Innovator pharmaceutical companies stand to lose much more if injunctive relief is not available since launch 'at risk' will often have an irreversible effect on the medicine’s reimbursement price. This can have a knock-on effect in other jurisdictions given the prevalence of international reference pricing.

'With so much riding on inherently unpredictable litigation outcomes, it is hardly surprising that parties settle on terms that may involve some form of value transfer,' said the EFPIA.

'It is wrong to categorise such agreements as automatically illegal without a full assessment of the facts and effects of the conduct. The fact that settlements may involve a payment says nothing about the validity or strength of the disputed patents.'

It is wrong to categorise such agreements as automatically illegal without a full assessment of the facts

The EFPIA added: 'The pharmaceutical sector recognises that prompt generic market entry on patent expiry is an important part of the effort to control public health expenditure. But prompt generic entry does not conflict with a robust patent system. Today's decision will perversely act to prolong patent litigation and undermine confidence in the patent system to the detriment of innovation and growth in Europe.'

The EFPIA is also concerned that competition regulators tend to 'define the relevant market ever more narrowly in order to find dominance'.

'The Commission appears to have limited the product scope to the molecule level, ignoring the competitive constraints from other alternative treatments in the same therapy class,' the EFPIA said.

'Such an approach bears little relation to the commercial or economic reality shortcutting a proper economic analysis to capture an increasing range of conduct as abusive. If this continues unchecked, it could potentially have a chilling effect on pro-competitive commercial conduct and ultimately on innovation in Europe.'

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