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November 2017

On 21 September 2017, Advocate General Saugmandsgaard Øe delivered his Opinion in Case C-179/16 F. Hoffman-La Roche Ltd and Others v Autorità Garante della Concorrenza e del Mercato ("AGCM"), which examined the interplay between pharmaceutical regulatory law and EU competition law, particularly Article 101 of the Treaty on the Functioning of the European Union ("TFEU").

Article 101(1) TFEU prohibits agreements between undertakings which have as their object or effect the prevention, restriction or distortion of competition within the EU. A key consideration in determining whether an agreement may infringe Article 101(1) TFEU is determining the relevant product market.

Article 101(3) TFEU provides for certain exemptions to this restriction. In general terms, the exemption applies to agreements which contribute to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, provided they do not: (a) impose on the undertakings concerned restrictions that are not indispensable to the attainment of the aforementioned objectives; or (b) afford on such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question.

We discuss the Advocate General's Opinion in this article. Regardless of whether the Court of Justice of the European Union ("CJEU") agrees with the findings of the Advocate General, the Court's judgment is likely to have significant impact on the pharmaceutical industry and competition law in general.

Facts

The active ingredients of Avastin (bevacizumab) and Lucentis (ranibizumab) were developed by Genentech Inc. (a subsidiary of the Roche Group) during the course of the same research programme. Bevacizumab was developed for the treatment of certain cancers whereas ranibizumab was developed for the ophthalmology field to treat, for example, age-related macular degeneration ("AMD"). Genentech subsequently granted a licence to Roche (its parent company) to exploit Avastin and a separate licence to the Novartis Group to exploit Lucentis. The licence relating to Lucentis was concluded in June 2003.

In September 2005, the Italian Medicines Agency (Agenzia Italiana del Farmaco; "AIFA") transposed the marketing authorisation for Avastin granted by the European Medicines Agency ("EMA") for the treatment of certain cancers, agreeing that the cost of would be reimbursed by the Italian National Health Service. The marketing authorisation for Lucentis for the treatment of AMD was obtained from AFIA in May 2007 and was approved for reimbursement in December 2008.

Prior to the launch of Lucentis, some medical practitioners discovered that treating cancer patients who also suffered from AMD with Avastin resulted in an improvement of the latter condition. This led to some medical practitioners administering the medicine by injection into the eye (intravitreal administration) in patients suffering with AMD. This 'off-label' use of Avastin in Italy was approved for reimbursement in May 2007 and, due to the lower cost of treatment, continued after the launch of Lucentis.

AIFA eventually removed Avastin from the list of reimbursed 'off label' medicines in October 2012, referring to certain amendments made by the EMA to the summary of product characteristics i.e. the addition of certain special warnings and precautions relating to intravitreal use of Avastin.

By its decision of 27 February 2014, AGCM (the Italian Competition Authority) found that F. Hoffmann-La Roche and Novartis AG, (through their subsidiaries) had put in place an agreement that restricted competition in breach of Article 101 TFEU. According to the AGCM, the companies had in place "a single and complex horizontal agreement implemented through a multitude of concerted practices" and the purpose of that agreement was to achieve an "artificial differentiation" between Avastin and Lucentis.

The companies were fined a total of €180 million, but appealed the decision. The appeal was dismissed by the Regional Administrative Court of Lazio in December 2014 and the companies appealed to the Council of State (Consiglio di Stato) for the judgment to be set aside. The Council of State stayed the proceedings pending a reference to the CJEU. In particular, the CJEU was asked to clarify to what extent and on what basis the lawfulness of prescribing medicinal products 'off-label' and scientific uncertainty around the risks associated with such use come into play when applying Article 101 TFEU.

The Advocate General's Opinion

The Advocate General distilled Council of State's reference questions into three points:

1. The extent to which off-label use of medicines can form part of the 'relevant product market' when assessing the application of Article 101 TFEU;

2. The nature of the relationship between the parties to a licence agreement and the consequences for the application of Article 101 TFEU to collusion postdating that agreement; and

3. The extent to which communications to third parties may give rise to 'restriction of competition by object'.

The Advocate General's views are summarised below.

Relevant product market

The Advocate General considered that the relevant product market comprises all those products that are regarded by customers as interchangeable or substitutable, by reason of their characteristics, prices and intended use. The material factor was interchangeability not whether the product benefitted from a marketing authorisation covering the specific therapeutic indication. This premise applied even where the lawfulness of 'off-label' use was uncertain.

The following points were material to the Advocate General's conclusion:

• The demand of prescription medicines was determined by the decisions of medical practitioners, not patients. Although marketing authorisations guide medical practitioners in their treatment choice for patients, prescribing practices coupled with the reimbursement of medicines prescribed off-label may give rise to actual interchangeabilty of two medicinal products independently of the content of their marketing authorisations.
• If the definition of relevant product market was limited to the content of marketing authorisations, pharmaceutical companies would be free to enter agreements (prior to the launch of their products) to share markets by ensuring that there were no overlaps between the indications covered by the respective marketing authorisations.
• Uncertainty regarding the lawfulness of prescribing or marketing medicinal products with a view to their off-label use did not mean that such medicines do not form part of the same market as medicines authorised for those indications. It was for competition authorities and national courts to take into account any uncertainty where it was capable of excluding interchangeability. However, where a medicinal product was widely used off-label, notwithstanding the lawfulness of doing so, competition authorities and courts could validly find that such a medicine is interchangeable with medicines used on label for the same indications and thus belongs to the same product market as them.

The Advocate General stressed that EU competition law concerns independent objectives distinct from those that pharmaceutical legislation sought to achieve.

The nature of the relationship between the parties to a licencing agreement and the consequences of the application of Article 101 TFEU to collusion post-dating that agreement

The Advocate General concluded that certain restrictions, even where they take place in the context of a licensing agreement between non-competing undertakings, do not escape the prohibition rule laid down in Article 101(1) TFEU. In this case the restrictions on competition were not considered ancillary to the implementation of the licensing agreement; nor do they necessarily benefit from exemption under Article 101(3) TFEU. In other words, just because potential competition may only exist on a market as a result of a licence does not automatically permit the parties to the licence to adopt restrictions that could inhibit competition between them. Any potential restriction needs to be carefully justified and must, in effect, be critical to the existence of the original licence.

Restriction of competition by object

The Advocate General considered that any collusion between two undertakings where they agree to communicate to third parties misleading allegations or information in order to reduce competition within a market would constitute a restriction of competition by object, within the meaning of Article 101(1) TFEU. However, whether the communications in this case were in fact misleading was a matter for the national courts to decide.

Applying the above principles, the Advocate General considered that collusive conduct concerning the dissemination of allegations of the lesser safety of one medicinal product by comparison with another does reveal a sufficient degree of harm to competition where those allegations are misleading. This is because the aim of such conduct is to distort competition by exploiting a scientific uncertainty for the purpose of excluding the first medicinal product from the market or, at least, redirecting demand toward the second medicinal product. The same could not be said where communications are not misleading. The aim of the conduct in this situation would be to ensure transparency of information regarding the safety of the relevant medicinal products to allow the recipients of such communications to take decisions that protect public health.

Comment

This Opinion will be of particular interest to trading or standards associations and to participants on the pharmaceutical sector where comments may be made about product safety or best practice. Potentially misleading statements about a competing product by a dominant entity may already constitute an abuse under Article 102 TFEU and this Opinion makes it clear they will also be regarded as an object infringement under Article 101 TFEU. The conclusion that an "off-label" product should be included in the same market as an "on label" product for a specific indication is not particularly surprising if they are found to compete in practice. The same is true in terms of the great care that should be taken when agreeing to collateral restrictions surrounding a licensing arrangement unless they have previously been approved by the ECJ or fall within a relevant block exemption.

The Advocate General's Opinion is not binding on the CJEU and the Court may arrive at a different decision. If the CJEU agrees with the Advocate General, the judgment will have a significant impact on the pharmaceutical industry and competition law in general. Most notably, off-label use of medicinal products may form part of the relevant product market irrespective of whether such use is lawful. In addition, licence agreements between non-competing entities may still be found to be anti-competitive.

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