Merck "Weighed In" -- On The '08-'09 European Pharma Competition Inquiry

Early in 2009, through Cleary Gottlieb's offices in Brussels, Merck offered the following observations and critiques, among others, on the ECC initiative on enhancing pharma competitiveness, particularly on the topic of generic market access, begun in late-2008:

. . . .The Preliminary Report focuses on a number of practices of research-based companies in the area of patents and judicial remedies. These practices include patent applications, patent litigation, patent settlements, regulatory interventions, and the launch of follow-on products. The Preliminary Report describes these practices as a "tool-box" that research-based companies may use to delay generic entry . . . . The Report also suggests that some of these practices may serve to delay or impede entry of innovative medicines. . . .

The practices discussed in the Preliminary Report represent the exercise of the essential function and specific subject matter of national patent systems and judicial remedies. As far as Merck is aware, none of the practices discussed in the Preliminary Report has been the subject of a finding of infringement under EC competition law. Nor are these practices identified as potentially problematic in the Commission’s recently published Guidance Paper on Article 82 EC. This distinguishes the Pharmaceutical Sector Inquiry from previous sector inquires where the focus typically was on conduct that had been the object of past case law and guidance notices. . . .

The absence of infringement findings in the area covered by the Preliminary Report suggests that particular caution should be exercised in formulating conclusions that could be understood as questioning the freedom of research-based companies to seek and enforce patent protection for their products. To the extent that elements of the patent system are considered to be subject to improvement, such improvements should be made through the legislative process, rather than competition proceedings. . . .

Although the Preliminary Report generally recognizes that the practices at issue represent a legitimate exercise of patent rights, it includes at the same time qualifying statements that could be understood as suggesting that these practices may raise concerns in certain circumstances. The Preliminary Report, however, does not explain what these circumstances are, nor does it identify legal principles that could support such concerns. As a result, the positions expressed in the Preliminary Report risk contradicting the principles of the patent system and existing case law on the relationship between intellectual property rights and EC competition law. . . .

Given the above views, it must have been difficult for Merck, and Cleary Gottlieb's Brussels office to swallow the ECC's findings, just-released in July 2009, then (among others):

. . . .Competition Commissioner Neelie Kroes said: "We must have more competition and less red tape in pharmaceuticals. . . ."

Reacting to the findings, the Commission will apply increased scrutiny under EC Treaty antitrust law to the sector and bring specific cases where appropriate. The use of specific instruments by originator companies in order to delay generic entry will be subject to competition scrutiny if used in an anti-competitive way, which may constitute an infringement under Article 81 or 82 of the EC Treaty. Defensive patenting strategies that mainly focus on excluding competitors without pursuing innovative efforts will remain under scrutiny. To reduce the risk that settlements between originator and generic companies are concluded at the expense of consumers, the Commission undertakes to carry out further focused monitoring of settlements that limit or delay the market entry of generic drugs. In the case of clear indications that a submission by a stakeholder intervening before a marketing authorisation body was primarily made to delay the market entry of a competitor, injured parties and stakeholders are invited to bring relevant evidence of practices to the attention of the relevant competition authorities.

On regulatory issues the inquiry finds that:

Δ There is an urgent need for the establishment of a Community patent and a unified specialised patent litigation system in Europe to reduce administrative burdens and uncertainty for companies. A full 30% of patent court cases are conducted in parallel in several Member States, and in 11% of cases national courts reach conflicting judgements.

Δ Recent initiatives of the European Patent Office (EPO) to ensure a high quality standard of patents granted and to accelerate procedures are welcome. This includes measures taken in March 2009 to limit the possibilities and time periods during which voluntary divisional patent applications can be filed (so called "raising the bar exercise")

The Commission is also urging Member States to:

Δ ensure that third party submissions do not occur and in any event do not lead to delays for generic approvals

Δ significantly accelerate approval procedures for generic medicines - for example, the Commission believes that generic products should automatically/immediately receive pricing and reimbursement status where the originator drug already benefits from such status, which would allow for a faster product launch in certain cases

Δ take action if misleading information campaigns questioning the quality of generic medicines are detected in their territory

Δ streamline trials that test the added value of novel medicines.

To assist Member States in delivering speedy generic uptake and improved price competition, the report contains an overview of national measures and their effects on generic uptake (volume, prices, number of entrants) and encourages Member States that want to benefit from generic savings to consider such measures. In this light the Commission will also examine existing EU rules in the area of pricing and reimbursement (Transparency Directive 89/105/EEC). . . .

[I still have seen no confirmation from the ECC web-based reporting mechanism (usually very prompt), that the Merial-to-Sanofi (easy) portion of the deal has cleared ECC review. In fact, when the Sanofi-Aventis CEO was presenting at a B of A conference yesterday, his slide deck still listed the Merial deal as "pending EU review". The audio stream made no mention of any clearance, despite the one or two press stories to the contrary. I'll keep an eye on the official ECC Journal, tomorrow. . . .]