This presentation by Duncan Matthews was made during the Workshop on Recent Challenges in Competition and IP in Pharmaceutical Markets on 26 February 2019. More material on the workshop can be found at www.oecd.org/daf/competition/workshop-on-recent-challenges-in-competition-and-ip-in-pharmaceutical-markets.htm
1. Workshop on Recent Challenges in
Competition and IP in Pharmaceutical Markets
OECD, 26 February 2019
Professor Duncan Matthews
Director, Queen Mary Intellectual Property Research Institute
Queen Mary University of London
2. European Commission
Statement to the WTO TRIPS Council
13 February 2019
Competition law and intellectual property systems are
not contradictory, but complementary systems of law,
which both strive to further welfare and growth.
Source: European Commission response to South Africa submission to the WTO TRIPS Council on Intellectual Property and the
Public Interest, 1 February 2019, IP/C/W/651.
3. European Commission Final Report
Pharmaceutical Sector Inquiry
8 July 2009
The results of the sector inquiry suggest that the
behaviour of originator companies contribute to the
obstacles for generic and originator entry.
Source: European Commission, Pharmaceutical Sector Inquiry. Final Report, 8 July 2009, page 10.
4. European Commission Report on Competition
Enforcement in the Pharmaceutical Sector
28 January 2019
To mitigate the impact of generic entry, originator companies
often devise and implement a variety of strategies to extend the
commercial life of their innovative medicines … While these
practices are not as such illegitimate, in specific cases they
attract the scrutiny of competition authorities.
Source: Report from the Commission to the Council and the European Parliament. Competition Enforcement in the
Pharmaceutical Sector (2009-2017). European Competition authorities working together for affordable and innovative
medicines. COM (2019) 17 final, 28 January 2019.
5. OECD Meeting of the Competition Committee
18-19 June 2014
… originator companies can adopt diverse and creative strategies to delay
or prevent generic entry. Such practices allow originator pharmaceutical
companies to prevent entry of generic medicines to the market even after
the period of patent protection has come to an end…
Source: OECD, Annex to the Summary Record of the 121st Meeting of the Competition Committee held on 18-19 June 2014.
DAF/COMP/M(2014)2/ANN6/FINAL.
6. Originator company strategies that may delay
or prevent generic entry
Reverse payment (pay-for-delay) agreements
Patent clusters (patent thickets)
Divisional patent applications
Product hopping (product switching)
Defensive patenting
Data and market exclusivity
7. Reverse payment agreements:
European Union
• The Commission has launched investigations and issued decisions against:
– Servier: fine of €330 million and fine of €97 million for several producers of generic
medicines in 2014 for delaying market entry of generic high blood pressure medicine
perindopril;
– Johnson & Johnson and Novartis: fine of €16 million in 2013 for delaying market entry
of generic painkiller fentanyl;
– Lundbeck: fine of €93.8 million and fine of €52.2 million for several producers of
generic medicines in 2013 for delaying market entry of generic antidepressant
citalopram.
• The Commission found that in all three cases the agreements caused
consumer harm by delaying generic entry and maintaining unnecessarily
high prices.
8. Patent clusters I
Generic companies increasingly view the practice of broad
patenting of secondary patents around the basic product, which
they often describe as "patent thickets", as an obstacle, which is
only being pursued in order to de facto extend the exclusive
position of the originator in respect of the active ingredient.
Source: European Commission, Pharmaceutical Sector Inquiry: Final Report, 8 July 2009, para 192.
9. Patent clusters II
When the number of patents and in particular of pending patent
applications is high (patent clusters), this can lead to uncertainty
for generic competitors – affecting their ability to enter the
market. Statements in internal documents collected in the context
of the sector enquiry point at the awareness by patent holders
that some of their patents might not be strong.
Source: European Commission, Pharmaceutical Sector Inquiry: Final Report, 8 July 2009, para 201.
10. Divisional patent applications I
Generic companies pointed out that divisionals may be filed to
prolong the period of legal uncertainty, since an applicant could
use this procedure to "reset the clock" and gain more time for
patent examination, thus extending the period where applications
are pending. Also … each divisional application has to be assessed
individually. Thus a successful challenge of a parent application
will not create legal certainty as long as several other divisional
applications are still pending.
Source: European Commission, Pharmaceutical Sector Inquiry: Final Report, 8 July 2009, para 193.
11. Divisional patent applications II
Generic companies emphasised that in such cases it is virtually
impossible for them to predict when which divisional application
will possibly be granted. As a consequence they are unsure as to
what they can reproduce without infringing any patents, even if
the parent patent application has been refused or revoked. This is
particularly pertinent, as a divisional application, as already
explained, can confer claims for reasonable compensation on the
applicant and under certain conditions lead to damages claims.
Source: European Commission, Pharmaceutical Sector Inquiry: Final Report, 8 July 2009, para 194.
12. Effects of patent thickets
and divisional patent applications
The intended effects of both patenting strategies as analysed
above are identical: in some case both patent clusters and
divisionals seemingly serve to prevent or delay generic entry.
While this, during the period of exclusivity, is generally in line with
the underlying objectives of patent systems, it may in certain cases
only be aimed at excluding competition and not at safeguarding a
viable commercial development of own innovation covered by the
clusters.
Source: European Commission, Pharmaceutical Sector Inquiry: Final Report, 8 July 2009, para 195.
13. Product hopping I
• Product hopping is a practice that “evergreens” a drug by patenting minor
changes and shifting the market to this new version of the drug before
generics are able to enter the market.
• Product hopping (or product switching) involves the introduction of a new
version of a patented drug that will shortly face expiration of a patent
protection.
• In order to induce such a product switch, originator companies may employ
different tactics such as withdrawing the old drug from the market, raising
the relative price of the old drug, or promoting the new drug differentially.
14. Several generic companies and their industry associations and consumer
associations have, on the other hand, strongly criticised life cycle strategies
leading to second generation products. They refer to these practices as
"evergreening" and have raised concerns about their effects, in particular when
there are no improved therapeutic effects. They claim that some of the new
products show little if any innovation and limited if any additional benefits, and
that they serve primarily to retain the revenue streams of the first generation
product.
Source: European Commission, Pharmaceutical Sector Inquiry: Final Report, 8 July 2009, para 352.
Product hopping II
15. Defensive patent applications usually refer to inventions which the
applying company considers to have little or no prospect of being
developed and/or commercialised and/or which, once granted, the
company holds primarily to protect itself against actual or
potential competition.
Source: European Commission, Pharmaceutical Sector Inquiry: Final Report, 8 July 2009, page 386.
Defensive patenting
16. Directive 2004/27/EC, Article 10:
1. …without prejudice to the law relating to the protection of industrial and commercial
property, the applicant shall not be required to provide the results of pre-clinical tests and of clinical
trials if he can demonstrate that the medicinal product is a generic of a reference medicinal product
which is or has been authorised under Article 6 for not less than eight years in a Member State or in
the Community.
A generic medicinal product authorised pursuant to this provision shall not be placed on
the market until ten years have elapsed from the initial authorisation of the reference product.
...
The ten-year period referred to in the second subparagraph shall be extended to a
maximum of eleven years if, during the first eight years of those ten years, the marketing
authorisation holder obtains an authorisation for one or more new therapeutic indications which,
during the scientific evaluation prior to their authorisation, are held to bring a significant clinical
benefit in comparison with existing therapies.
Source: Directive 2004/27/EC of the European Parliament and of the Council of 31 March 2004 on the Community code relating to
medicinal products for human use, L136/34, 30 April 2004.
Data and market exclusivity in the EU
17. OECD Meeting of the Competition Committee
18-19 June 2014
...originator companies can adopt diverse and creative strategies
to delay or prevent generic entry. Such strategies include misuses
of the patent system (e.g. ever-greening or patent clustering),
spreading misleading information, inducing product switching and
refusal to licence an essential patent. Competition enforcement in
this context is essential, but it also seems to be sometimes
compensating for failures in the IP and regulatory systems.
Source: OECD, Annex to the Summary Record of the 121st Meeting of the Competition Committee held on 18-19 June 2014,
Executive Summary of the Discussion on Competition and Generic Pharmaceuticals, DAF/COMP/M(2014)2/ANN6/FINAL.
18. The strategic behaviour of
originator companies
• Strategic behaviour by originator companies may block the entry of both
generic and innovative medicines and can, as a result, stifle competition and
harm consumers.
• One way to deal with these practices is through changing the patent system,
for example by raising the bar of patentability standards.
• While some changes may indeed decrease the scale of the problem, it will
not resolve it entirely - strengthening patentability requirements may even
discourage future inventions.
19. Policy coherence between competition
enforcement authorities and IP offices
• While strategic accumulation of patents and product hopping are currently
viewed as lawful business practices in the EU, the Commission has identified
these practices as potentially problematic because they may prevent generic
competition.
• The patent system has facilitated strategic accumulation of patents and
product hopping as lawful activities.
• Can competition enforcement authorities scrutinise practices that utilise
perfectly legal strategies under the law of patents and related rights?
20. The international perspective
Competition law may be an effective tool in dealing with these
types of practices. In the pharmaceutical industry, competition
policy benefits consumers in the form of increased access to
affordable medicines by detecting, halting, and correcting anti-
competitive practices.
Source: UNCTAD, The role of competition in the pharmaceutical sector and its benefits for consumers, 2015.
21. Competition law and TRIPS Agreement
Article 8 TRIPS Agreement:
(1) Members may, in formulating or amending their laws and regulations,
adopt measures necessary to protect public health and nutrition, and to
promote the public interest in sectors of vital importance to their socio-
economic and technological development, provided that such measures are
consistent with the provisions of this Agreement.
(2) Appropriate measures, provided that they are consistent with the provisions
of this Agreement, may be needed to prevent the abuse of intellectual
property rights by right holders or the resort to practices which
unreasonably restrain trade or adversely affect the international transfer of
technology.
22. United Nations Secretary General’s High-Level
Panel on Access to Medicines
Article 8(2) of the TRIPS Agreement provides an insufficiently used
opportunity for governments to prevent abuse of intellectual
property rights by right holders and achieve price reductions for
health technologies depending on the provisions of local
competition laws. One such avenue is competition law and policy,
which can be used to balance proprietary interests with economic
and social interests to advance public welfare.
Source: Report of the United Nations Secretary General’s High-Level Panel on Access to Medicines, September 2016, page 44.
23. South Africa
submission to WTO TRIPS Council
26 October 2018
IP protection per se cannot be presumed to confer market power or to indicate
anti-competitive behaviour. It is also apparent that clearer competition policy
treatment if IPRs has evolved over time through either iterative processes or
evolving practice of competition authorities. This evolution is informed by
jurisdictional cross-fertilisation and peer learning as evidenced by greater
interest in and concerns with using an appropriate balance between IP and
competition law and policy in these jurisdictions. This development underscores
the need for further debate and analysis since competition law and policy is no
longer the preoccupation of only a few jurisdictions.
Source: Intellectual Property and the Public Interest: Promoting Public Health Through Competition Law and Policy. Communication
from South Africa, 26 October 2018, IP/C/W/649.
24. European Commission
statement to the WTO TRIPS Council
13 February 2019
…it is not the IPR system as such that is problematic. In fact, it is
the opposite, competition issues originate from the unlawful
conduct of pharmaceutical companies, which go against the
objectives of the IPR system, for example fraud on the patent
office, vexatious litigation, or pay for delay settlement of patent
disputes.
Source: European Commission response to South Africa submission to the WTO TRIPS Council on Intellectual Property and the Public
Interest, 1 February 2019, IP/C/W/651.
25. South Africa
submission to WTO TRIPS Council
1 February 2019
The proponent wishes to continue the discussion on the linkage
between intellectual property and competition law and policy …
with specific reference to exploitative excessive pricing and
restrictive practices such as reverse payment agreements,
strategic patenting and more lately, the evolution of niche pricing
of off-patent pharmaceuticals.
Source: European Commission response to South Africa submission to the WTO TRIPS Council on Intellectual Property and the Public
Interest, 1 February 2019, IP/C/W/651.