EC issues report on antitrust enforcement in the pharma sector

Overview of the Report

A decade on from the inquiry of the European Commission (EC) into the pharmaceutical sector in 2009, on 28 January 2019 the EC issued a report providing an overview of antitrust enforcement (antitrust and mergers) in the EU from 2009-2017 in the pharmaceutical sector (the Report).

The Report responds to concerns expressed by the Council and the European Parliament about the threat that the alleged anticompetitive practices of pharmaceutical companies pose to access to affordable and innovative essential medicines. It is intended to illustrate how antitrust enforcement can contribute to safeguarding such access, by (i) putting an end to anticompetitive practices or preventing the concentration of excessive pricing power and the curbing of incentives to innovate; and (ii) guiding the industry in its future behaviour, in particular by targeting anticompetitive practices that had previously not been addressed under EU antitrust law.

While confirming that effective enforcement of EU antitrust rules in the pharmaceuticals sector remains a matter of high priority, the EC recognises that there are limits to what antitrust law can do and that enforcement should be complementary to legislative and regulatory action.¹

The Report emphasises the scale of intervention by national competition authorities (NCAs) and the EC since the sector inquiry:

• 29 antitrust decisions against pharmaceutical companies, with fines totalling over EUR1 billion;
• Over 100 investigations started, with more than 20 cases still on-going; and
• More than 80 mergers reviewed with antitrust concerns identified in 19 transactions, an intervention rate of 22% (compared to 6% across all sectors).

While the authorities have continued to pursue enforcement action against ‘traditional’ infringements of antitrust law (e.g., bid rigging, price fixing, market sharing, prevention of parallel imports, tying/bundling of products, and exchanges of competitively sensitive information), the Report also highlights enforcement targeted at novel infringements in the pharmaceutical sector since 2009:

• At EU level, the EC initially focused its enforcement on pay-for-delay cases and, since 2009, has published annual reports monitoring the settlements and value transfers made between originator and generic companies in patent disputes. According to the latest of such annual reports, the EC appears to consider this a more settled area, noting that, while the number of settlements has increased, the proportion of those which raise prima facie antitrust concerns has decreased.
• At national level, the French authority has developed a track record of enforcement against strategies deployed by dominant companies to prevent the entrance of generic companies (e.g., measures such as coordinating negative or misleading publicity about the safety of competitors’ generic products or the granting of commercial advantages and discounts to dispensing bodies). Both the UK and Italian authorities have taken action against parties for misusing regulatory frameworks to prevent generic entry.
• Another new focus has been a recent wave of cases brought against parties for charging allegedly unfair (excessive) prices, with decisions adopted by the UK, Italian and Danish authorities and an on-going probe by the EC.
• In relation to mergers, the EC has requested structural remedies in a number of cases including requiring the divestment of products in early-stage development (pipeline products) as well as R&D capacities with a particular focus on protecting innovation in the field. What is particularly noticeable is the EC’s willingness to require divestments at even earlier stages of development than seen previously (e.g., products which are only in the early phases of clinical trials and still years from entering the market).

Looking ahead

Going forward, companies can expect the sector to remain under the spotlight for the EC and NCAs, with excessive pricing practices representing a particular area of focus. The report also identifies the preservation of effective pricing pressure from biosimilars as a key concern.

It should be noted that a number of the most significant infringement decisions featured in the Report are currently being appealed before EU and national courts. As a result, there remains a degree of legal uncertainty around some of the most significant areas of EC antitrust enforcement in this sector. However EU competition authorities’ appetite to pursue enforcement against practices which, until recently, had not been the object of antitrust scrutiny means it is as important as ever for businesses operating at all levels of the pharmaceutical value chain to review and maintain a robust antitrust compliance programme and to monitor the changing enforcement landscape closely.

¹ See also the recent OECD policy paper issued in advance of its roundtable discussion on excessive pricing practices, which concludes that antitrust enforcement is not always the appropriate response. For further information see our Lifescience hub.