The Court of Justice of the European Union is expected to validate the European Commission’s fine of nearly €94 million imposed on the Danish pharmaceutical group Lundbeck for a cartel aimed at delaying the marketing of generics of its anti-depressant drug citalopram, Advocate General Juliane Kokott said in her Opinion delivered on Thursday 4 June (Case C-66/20).
Lundbeck appealed to the Court against the judgment of the General Court of the EU of September 2016 (T-472/13) which had validated the Commission’s decision of June 2013 (see EUROPE 10870/12). In 2002, it had paid four generic companies (Generics UK 2, Alpharma, Arrow and Ranbaxy) to stay off the market when its patents on certain processes for the manufacture of citalopram expired.
This was the first application of the cartel prohibition to out-of-court dispute settlement agreements between a patent-holding pharmaceutical company and generic manufacturers. In the Commission’s view, such agreements are not illegitimate per se, but become illegitimate when they are aimed solely at preventing potential competitors from entering the market.
In her conclusions, Ms Kokott proposes that the Court should uphold the judgment of the General Court and the Commission’s decision.
In her view, the General Court did not err in upholding the Commission’s assessment that, at the time the agreements were concluded, Lundbeck and the generic companies were in a relationship of “potential competition”. The Commission had rightly considered that the patents held by Lundbeck at the time the agreements were concluded did not constitute insurmountable barriers to generic entry into the citalopram market.
Relying on the case-law (Case C-307/18) (see EUROPE 12415/22), the Advocate General points out that the existence of a process patent does not preclude a generic manufacturer who is willing and able to enter a market and who is prepared to challenge the validity of the patent held by the original manufacturer of the original medicinal product by assuming the risk of being faced with an infringement action from being classified as a “potential competitor”.
The so-called “at-risk” launch of a generic drug and the resulting litigation is common in the phase immediately before or after a generic drug enters the market.
It is not for the Commission to make predictions about the outcome of disputes between patent holders and generic companies in order to assess the competitive relationship between these operators. For the purposes of competition law enforcement, the Commission must above all consider whether generic companies are actually in a position to enter a market at the relevant point in time despite the existence of patents.
According to the Advocate-General, the General Court also correctly recognised that the fact that a generic company does not yet have a marketing authorisation for its product in a given state does not preclude the existence of “potential competition”. To reject out of hand the existence of such a relationship of “potential competition” between the patent holder and the generic manufacturer would undermine the effectiveness of the cartel prohibition, since it would allow exclusionary agreements.
Second, according to Ms Kokott, the General Court rightly concluded that the agreements at issue constitute restrictions of competition by object. These agreements went beyond the specific subject matter of Lundbeck’s intellectual property rights, which could certainly oppose counterfeiting, but not conclude agreements with actual or potential competitors.
The Advocate-General observes in this regard that an agreement to settle a patent dispute amicably must be characterised as restricting competition on the basis of subject-matter if the transfer of value made by the patent holder to the generic company is explained solely by the common commercial interest of the parties not to compete on the merits. And Lundbeck has not provided any evidence that the value transfers made would have had any consideration other than their forbearance from entering the market.
Thirdly, Advocate-General Kokott rejects Lundbeck’s arguments that the General Court erred in law when it upheld the principle and method of calculating the fines imposed by the Commission.
On reading Article 101 of the TFEU, Lundbeck could have foreseen that the disputed agreements would fall under the European cartel ban. Furthermore, it is not required that the same type of agreement has been condemned in the past.
See the conclusions: https://bit.ly/2XU8yfS (Original version in French by Mathieu Bion)