Monday, 13 February 2012

Italy: Pfizer fined 10.6 M (abuse of dominant position)

We finally have a decision in the Xalatan case, started in October 2010 (reported here and here).

In a 33 page decision (here), the Italian Competition Authority concludes that Pfizer artificially extended patent protection of the active ingredient latanoprost (used to treat eye glaucoma) to prevent or delay generics entering the market.

I find of particular interest the following paragraphs of the decision (fast translation):

"74. The documentation inspection revealed the existence of a complex strategy - developed by a working group of Pfizer (the so-called "LOE group") - for the defense of the drugs after the expiry of patent protection, primarily designed to protect their share market entrance of equivalent drugs. The latter, in fact, are retained by Pfizer a particularly serious threat.

75. Among the strategies designed, beside those purely commercial or promotional, special emphasis is given to the use of "legal strategies" to change the date of expiration of patent protection.

76. … Pfizer appears to have full knowledge of the peculiarities of the Italian situation and the risk of a possible entry in the market of equivalents to Xalatan in advance of the rest of Europe.

84. Additional documentation shows Pfizer’s knowledge about the violation of antitrust law in the case concerning the release of the new SPC in Italy and the extension of patent protection in September 2009 to July 2011, in view of the doubts of the company regarding the validity of the SPC obtained.

89. Fears about possible actions by Pfizer to prevent access to the market for generic drugs were confirmed in the letter, sent in July 2009 by an attorney of Pfizer to Ratiopharm, requesting not to introduce its drug in commerce…

90. The documents included in the file show that similar communications were sent to other producers of Xalatan equivalents. The purpose of these letters was to prevent latanoprost generics entering the market before the patent expiration in July 2011.

91. However, comments from employees of the company suggest that sending warning letters to generic companies before placing their drugs in the market has been practiced successfully by Pfizer in other circumstances… (should we expect new investigations?)

The effectiveness of this strategy appears to support Pfizer’s choice to use the same even with regard to drugs whose patents where to expire. In particular, with reference to four blockbuster products, the company aimed to further prolong the patent rights from two to three years.

113. … Following the listing of Ratiopharm and Sifi (May 2010) the sales of Xalatan have suffered a drastic reduction in volume of approximately 70%. This share has been gradually acquired a 50% to Sifi and the remaining 20% from Ratiopharm.

138. The evidence acquired during the procedure, described in detail above, fully confirm Pfizer's abusive behaviour.

139. This documentation proves the existence of Pfizer's strategy to artificially extend the patent protection of Xalatan in Italy from September 2009 to July 2011, in order to align it with other European countries, by requests - solely to this end - both the EP168 divisional patent in 2002 and the following SPC, requested in Italy in 2009.

144. Pfizer's exclusionary conduct aimed not only to defend the sales of Xalatan in the Italian market, but also to those made in the entire European market as a price reduction to the public in Italy (to effectively combat the entrance of genericis) would inevitably risk a drastic decrease in revenues from sales of Xalatan in other Member States due to import from Italy, via parallel trade.

198. Again demonstrating the exclusionary nature of Pfizer's request (reference is made to the SPC), is relevant to make reference to the absence of a new drug, which normally follows the divisional application. This shows that the company had no intention to launch a new drug, but only to exclude prostaglandin generics from the Italian market - regardless of the absence of a statutory obligation in this regard, a fact underlined by Pfizer –.

212. The exclusionary nature of Pfizer’s overall strategy can be also seen in the request made in January 2011, to obtain a further term of protection extension based on pediatric trials of Xalatan (up to January 2012).

With the release of the extension of patent protection, Pfizer appears to have obtained a new extension of patent rights on their drug, this time not only in Italy but in all EU countries (should the European Commission start an investigation?)

214. … testing for pediatric use of a drug, like Xalatan, used to treat a disease that typically affects old people, appears only as seeking further extension of patent coverage of the drug.

As evidence, the documents in the case shows that the pediatric trial is held by Pfizer a tool to use for all drugs for which patent is near expiration, not just those intended primarily for the treatment of diseases that may also cover the children.

217 It should be emphasized that the request to extend patent protection for pediatric use has been made by Pfizer in January 2011, after the revocation of the divisional application by the EPO in October 2010 - which led to the annulment of the SPC - and, then, after disappearing in Italy the legal basis on which that request was based.

225. … Finally it appears Pfizer’s intention to use the same strategy to defend next drugs to “expire” … (will the Italian Authority start new investigations regarding those drugs?)

231. Finally, it should be noted that despite the huge estimated losses from the decrease in sales of Xalatan on the Italian market, Pfizer believes that it can not lower the price in Italy. Such a choice, in fact, is considered extremely dangerous because, as a result of parallel trade, a price cut in Italy would inevitably be forced to adjust the price of Pfizer's Xalatan on other European markets with "high price", where the patent protection was guaranteed by the SPC until July 2011 (and subsequently extended to January 2012).

233 Pfizer's strategy has produced significant effects on the market.
First to mention is the delay with which generics have entered the market ... (will now companies affected file damages actions? And the Italian Government, taking in to account the excess paid through the national health system?)

245 Direct result of the Pfizer’s strategy is the damage suffered by the NHS in terms of lost savings on drug reimbursement prices as a result of delaying the entry of generics in the market. The data reported by Pfizer itself confirms that the amount of Xalatan sold in the period following the expiration of the patent in September 2009, was approximately 1.4 million units.
In view of the price difference of the reimbursement price by the NHS of drugs based on latanoprost before and after the entry of generics in the market, the lack of savings for the NHS can be estimated around Euro 14 million.

251. According to the Commission Communication 2004 / C 101/07 - Guidelines on the effect on trade between Member States concept contained in Articles 81 and 82 of the Treaty on OJ C 101/81 of 27 April 2004, the concept of effect on trade between Member States must be interpreted taking into account the influence, direct or indirect, actual or potential, on the pattern of trade between Member States.

252. In light of that legal framework the case falls under Article 102 TFEU - and integrates many cases of violation - given the fact that the conduct engaged in by Pfizer were eligible to restrict trade between Member States. In particular, the conduct in question has produced its effects on the entire Italian territory, which is significant part of the Community market and on which there are many multinational companies and international operators.

255… the conduct in question - delaying, for about seven months, the entry of generics on the market - has enabled Pfizer to continue enjoying a monopoly rent quantifiable up to about Euro 17 million - in view of the market share gained by generics in the first seven months of their entry on the market -".

1 comment:

Anonymous said...

Dominant position has always been used to increase prices or deliver a less than optimal product. One of the most wide-spread, but probably least known cases was the incandescent lamp cartel that worldwide regulated the lifetime of a bulb to ca. 1000 hours at rated voltage. The technology permitted this - I shall not bore you with details. That it was not the optimum could be discerned by the fact that for the Norwegian market, the light bulb manufacturers were able to provide a 2500 hours lifetime. This was caused by the fact that households paid for each installed kilowatt, not consumption in kilowatthours (hydroelectric power is always on). So, the habit was to leave lights on all night, in turn creating a larger consumption of light bulbs.

Our politicians have our mandate to protect us against cartels, and their latest feats have been to generate a whole new market for light bulbs, purportedly more environmental, and to press for Digital Audio Broadcast and Digital terrestrial television, everything requiring new equipment and discarding the old.

Consumers will vote with their feet if they are allowed to.

Kind regards

George Brock-Nannestad