Be careful what you use your patents for

Last month we made reference to the investigation started by the Italian Antitrust Authority to verify possible abuse of dominant position by Pfizer using patent system, artificially extendeding the patent protection of an active principle in order to prevent new generic drugs entering the market (here).


Now is the turn of the European Commission to continue investigating violation of EU antitrust rules to delay generics entering the market.

At the beginning of December some websites (i.e. Businessweek, Reuters) made reference to several raids at the premises of AstraZeneca and Nycomed in the course of an investigation regarding suspected anticompetitive practices. The European Commission published a quite short Press Release (here), informing that:

“The European Commission can confirm that on 30 November 2010 Commission officials carried out unannounced inspections at the premises of a limited number of companies active in the pharmaceutical sector in several Member States. The Commission has reason to believe that the companies concerned may have acted individually or jointly, notably to delay generic entry for a particular medicine. If confirmed, this could be a potential violation of EU antitrust rules that prohibit restrictive business practices and/or the abuse of a dominant market position (Articles 101 and 102 of the EU Treaty)”.

There may be a link between this raids and the Executive Summary of the Pharmaceutical Sector Inquiry Report by the EU Commission we have talked about in this Blog (here). As we said, we are living strange times, being patent system used to prevent competition.

This would not be the first time AstraZeneca is investigated by EC for this reason. On 15 June 2005, the EC fined that company €60 million for misusing patent system to delay market entry of competing generic drugs (text of the decision (text of the decision here). A short summary of the decision was provided by the EC (here):

From 1993 to 2000 AstraZeneca infringed EC and EEA competition rules by blocking or delaying market access for generic versions of Losec and preventing parallel imports of Losec. AstraZeneca did this by:
• giving misleading information to several national patent offices in the EEA resulting in AstraZeneca gaining extended patent protection for Losec through so-called supplementary protection certificates (SPCs). In this specific case, the patent offices essentially relied on information supplied by AZ and they were not obliged – as in normal patent assessments – to consider whether the products were innovative. AZ’s misleading conduct amounted to an abuse in Belgium, Denmark, Germany, the Netherlands, Norway and the United Kingdom.
• misusing rules and procedures applied by the national medicines agencies which issue market authorisations for medicines by selectively deregistering the market authorisations for Losec capsules in Denmark, Norway and Sweden with the intent of blocking or delaying entry by generic firms and parallel traders. At the time, generic products could only be marketed and parallel importers only obtain import licenses if there was an existing reference market authorisation for the original corresponding product (Losec). The purpose of a market authorisation is the right to sell a medicine and not to exclude competitors. Unlike patents, SPCs and data exclusivity, market authorisations are not intended to reward innovation and the finding of an abuse cannot therefore affect incentives to innovate. Subsequent changes in the applicable EU legislation have made it impossible to repeat this specific conduct.
Losec pioneered a new generation of medicines to treat stomach ulcers and other acid-related diseases – so-called proton pump inhibitors. Losec initially received patent protection in Europe in 1979. During part of this period, Losec was the world’s best-selling prescription medicine.
The Commission’s decision does not prohibit AstraZeneca’s dominant position on the proton pump inhibitor market but the company’s abuse of that position. The fine takes into account that some features of the abuses can be considered as novel.

On 1 July 2010 The General Court essentially upholded the decision of the Commission, reducing the fine to €52,5 million, since “the Commission failed to prove that the deregistrations of the marketing authorisations were capable of preventing parallel imports of Losec in Denmark and Norway, and, a fortiori, that the cessation or the sharp decline of parallel imports of Losec in those two countries was caused by AstraZeneca’s conduct” (Press release of the GC here and the Ruling here). This Ruling has been recently appealed by AstraZeneca (here).

The reverse of a reverse payment?

From Reuters comes a summary of the settlement of the US patent infringement brought by Johnson & Johnson against Teva Pharmaceutical Industries Ltd in respect of Teva's US generic version of J&J's Ortho Tri-Cyclen Lo birth control pill. In short Teva, which briefly sold a generic version of the product earlier this month before ceasing shipments, has secured a licence to re-enter the market on 31 December 2015, or even earlier in certain circumstances (the patent is expected to expire in 2019). In return, Teva will pay J&J a royalty based on sales of its generic that it shipped.

Both companies put a positive spin on the settlement, the full details of which have not been made public. Said a spokesman for J&J:

"This settlement compensates us for loss caused by their at-risk launch and recognizes the patent is valid and enforceable".

Investors must have liked the result too, since both companies' shares rose on news of the deal, which looks a clever one. As the Reuters report notes:

"The settlement comes as US antitrust regulators and Congress are taking a closer look at patent settlements between brand and generic drugmakers amid allegations they shortchange consumers by delaying the arrival of low-cost generic drugs while the companies profit.

Many settlements that have drawn objections involved a payment from brand companies to generic firms -- what critics call "pay-for-delay" deals. But Natixis Bleichroeder analyst Corey Davis noted the Teva-J&J settlement involved the opposite -- a payment from Teva back to J&J".

"By not having any payments from the innovator, the (Federal Trade Commission) can have little basis to complain," Davis said in a research note".

The deal is said by Teva to remain contingent on the US District Court for the District of New Jersey, which is seised of the patent litigation suit, upholding the validity and enforceability of J&J's patent.