The Court of Justice of the European Union has clarified the criteria for establishing that an agreement to settle a dispute between a pharmaceutical patent holder and a generic company is contrary to EU competition law in a judgment delivered on Thursday 30 January (Case C-3071/8).
Holder of a patent on the active pharmaceutical ingredient of an antidepressant drug and secondary patents protecting certain processes for the manufacture of that ingredient, the GlaxoSmithKline group (GSK) concluded amicable settlement agreements with a number of generic drug manufacturers who were keen to enter the UK market when GSK's main patent expired in 1999.
Under these agreements, generic companies agreed to forgo entry into the UK market for a certain period in exchange for payments from GSK.
The British Competition Appeal Tribunal referred questions to the Court for a preliminary ruling on the legality of the decision of the British Competition and Markets Authority that the contested agreements infringe the prohibition on concluding agreements restricting competition (Article 101 TFEU) and constitute an abuse of a dominant position (Article 102 TFEU).
In its judgment, the Court considers that it is necessary to assess, for each generic manufacturer, the existence of a firm determination and its own capacity to enter the market and the absence of insurmountable barriers to market entry. Possible patents do not, in themselves, establish such barriers since their validity can be challenged, the Court said.
In order to establish the concept of restriction of competition ‘by object’, the Court points out that the degree of harm to agreements on competition must be examined, in regards to their content, their objectives and their economic and legal context. The possible pro-competitive effects of the contested agreements must also be assessed.
In order to establish a restriction of competition by effect, it is necessary to determine how the market will operate and its structure in the absence of the collusive practice without it being necessary to establish that less restrictive agreements could have been concluded.
Finally, on the issue of abuse of a dominant position, the Court held that the product market must be determined taking into account also the generic medicines of the medicine whose manufacturing process remains protected by a patent, provided that it is established that the generic manufacturers are able to compete seriously with GSK.
The Court notes that, having regard to the possible cumulative restrictive effects of competition of the various agreements, the conclusion of those agreements is liable to produce a significant crowding out effect on the market. But such behaviour may be justified if the they can prove that it is outweighed or even surpassed by an efficiency that also benefit consumers.
See the judgment: http://bit.ly/2Gzo5cy (Original version in French by Mathieu Bion)