The pharmaceutical market naturally evolves in a way that more and more generic medicinal products are introduced. Generic drugs enable wider access to therapies and, as a rule, reduce prices. According to the Copenhagen Economics study, the prices of innovator medicinal products drop by 40% on average after the generic products enter the market. The same study also indicated that when generic medicinal products are marketed, their price is on average 50% lower than the initial price of the corresponding originator product.
Due to these economic circumstances, originator companies often develop various schemes to mitigate the consequences of a corresponding generic product being marketed. These practices include patent filing strategies, disputes and settlement agreements. As a rule, these schemes are not illegal as such, however they are often assessed and questioned by the competition authorities.
Pay-for-delay agreements are concluded between originators and companies intending to introduce a generic medicinal product. Under these agreements, a generic manufacturer agrees to postpone its entry to the market in exchange for compensation. The parties can mutually benefit: for the originator, the profit comes from the delay in a generic medicinal product being marketed, while generic companies share the originator’s profit from their ongoing exclusivity. Regardless of benefits to pharmaceutical companies, such arrangements can adversely affect competition on the market and, as a result, patient access to affordable therapies. Concluding a pay-for-delay agreement can potentially infringe Art. 101 of the Treaty on the Functioning of the European Union (“TFEU”). This is because pay-for-delay agreements can be considered as prohibited market sharing between at least two competing companies. Under such contract, the originator and generic manufacturer can agree to temporarily limit or even exclude any competition on a particular market. In some cases, originators can even buy out their competitors and dissolve their companies. As a side note, from the perspective of competition law, it does not matter what type of agreement the originator and generic manufacturer conclude. In some cases, agreements that the authorities ultimately questioned were referred to as, e.g. co-promotion agreements or distribution agreements. Pay-for-delay agreements can also be considered an infringement under Art. 102 TFEU (i.e. as a form of prohibited market behaviour by a dominant company). That determination can potentially be made if the originator holds a dominant position on a relevant market, which is not unheard-of in the pharmaceutical sector.
Misuse of the regulatory framework
Apart from pay-for-delay agreements, the Commission identified other anti-competitive practices generally geared towards postponing the entry of generic medicinal products. One such practice involves the misuse of the regulatory framework. The Commission established the abuse of a dominant position where an originator made misleading representations to the patent office to extend the patent protection period for the original medicinal product. In addition, the originator would have marketing authorisations (“MA”) withdrawn in various countries. That way generic manufacturers could not market their products in selected Member States as, technically, the MA of the original medicinal product was not in force. In another case, the originator withdrew its product following the lapse of the patent protection but before the generic entered the market and its name was revealed. Due to this scheme, pharmacies and doctors were unable to provide their patients with a generic substitute and could only recommend another, similar product of the originator, a product that was still patent protected. Such marketing strategy was considered an abuse of a dominant position.
Disparagement and other practices curbing demand for generics
As determined by the European Court of Justice and NCAs, it would also be considered anti-competitive to defame either generic competitors or their products with the intent to decrease competition. Such defamatory practices include spreading misleading or false information regarding: (I) adverse effects; (ii) off-label use; or (iii) any scientific uncertainty as to the product’s reliability or effectiveness. Such information could potentially be passed on to the authorities, patients, and healthcare professionals. It could also be anti-competitive to compare products of the originator and the generic manufacturer falsely or unfoundedly. Based on such comparison, it could be construed that the original product was in fact better or safer than the generic medicinal product. This would, in turn, also hinder competition.