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PHARMACEUTICAL BUSINESS STRATEGIES: COMPETITION BETWEEN ORIGINATOR AND GENERIC COMPANIES IN EUROPEAN UNION AND ITS RELATIVE IMPACT ON INDIA.
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PHARMACEUTICAL BUSINESS
STRATEGIES: COMPETITION BETWEEN ORIGINATOR AND GENERIC COMPANIES IN EUROPEAN UNION AND ITS RELATIVE IMPACT ON
INDIA.
Authored By - Nivedita Singh 1 & Aryan Singh 2*
1. National Law School Of
India University, Bangalore
2. *Tata
Institute OF Social Sciences, Mumbai
NIVEDITASINGH@NLS.AC.IN
Abstract:
The historical paradigm of unified patent system in Europe is traced back
from 1949 where it was
realized that harmony in patent laws is important for establishing refined relations amongst the European masses. Incentives are necessary to have better
technical innovations and fragmented legal framework would not suffice in incentivizing the rational economic
behavior. The filing of separate application in different countries indicated the unreasonableness of the
process and difficulties faced by innovators in the according
compliance to the process. Not just a separate application was required to be filed
rather there were no uniform standards over which different patent offices were
examining the patent and the practiced procedures were also different. The system lacked coherence in terms of
standard patentability requirements
& standards. To address this coherence in the patent system Council of Europe sought to introduce some changes which in turn will make the process easy for the innovators and less hectic for the patent office to
examine the same patent in different country with different procedures and standards. This
European Idea of Patent system lead
to adoption of two conventions, one conforming consistency in certain
patent application formalities and other stepping
ahead towards an International classification system.
Key words: Conventions, Innovators, Incentivizing, Standard
Patentability, Unified Patent System.
PATENT LINKAGE
SYSTEM IN EU
EU Pharmaceutical policy focuses
primarily on the harmonization of drug regulations across all Member States.
It's targeted at creativity, economic integration, market access and public
health, among other issues. There have been various multinational branded drug
companies located in the EU. It is significant to observe that while it is home
to different branded companies, the viewpoint of the EU is that the patent
connection system inhibits generic entry, which in turn will have an effect on
drug accessibility.
The European Medicines Agency (EMEA)
is the agency for the approval of drugs according to EU law. It's doesn't allow
marketing authorization to be associated to the patent position of the
optimized formulations of reference drugs with that of the originator. Article
81 of the EC Regulation and Article 126 of the EC Directive stipulate that the
approval to manufacture a medicinal product must therefore not be denied temporarily
suspended or permanently revoked except for the reasons set out during the
Regulation and the Directive, where market approval is not connected to the
designation of a patent.
Nevertheless, by providing long-term
data exclusivity, EU incentives the involvement and attention of the
originators. For a novel chemical entity the EU has lengthiest data exclusivity
period in the world. The new EU Directive adopted in 2004 developed an
integrated EU data exclusivity provision for eight years with an additional
two-year market exclusivity requirement. This successful market exclusivity of
10 years may be expanded by an extended one year (maximum), if there is
substantial progress in new drugs in just the first eight years of those ten
years. This pattern of exclusivity for
8 + 2 + 1 years refers to new chemical entities in all EU member states.
As a result of data exclusivity, the
generic market authorization application can only be submitted after 8 years,
and the drug can only be sold after 10th or 11th year. In each Member State
there is a national drug approval procedure, as well as the EC Directive.
Unlike the EU, the US model provides for a shorter data exclusivity period with
patent connection. As a result, some European firms choose US as their
principal place of operations. Nonetheless, several EU countries used the
Patent Linking scheme. In Hungary, Article7(9) of the Ministry of Health Decree
necessitates generic companies seeking marketing authorization to claim that
they do not infringe any patent right and therefore will not promote the
product until the patent has expired. Portugal and Slovak Republic have also
enforce patent linkage.
Similarly, a drug promotion agency in
Italy needs a generic product assurance that the promotion authorization does
not encroach upon any patent. Originator companies will pursue legal action for
marketing authorisation towards generic companies. In Portugal, originator
firms will sue generic firms to get marketing authorisation. For Slovak marketing
authorisation comes into the equation only after patent expiration.
In EU even if there is no express
recognition of Patent Linkage System to make the Pharmaceutical Environment
slightly pro-innovator still the balance is maintained by incentivizing the
innovators through extensive data exclusivity of 10 to 11 years and
Supplementary protection certificate and letting the generics obtain marketing
approval once the data exclusivity period is over to compete in the market
along with brand drug manufacturers. But this non-approval of Patent Linkage
system lead to innovators indulging in strategic patenting for increasing the
age of their patented drug and impeding the generics in their entry to the
market which ultimately hampers competition leading to an interface between the
two laws.
EUROPEAN PATENT
SYSTEM: REQUIREMENTS FOR PATENTABILITY
One of the prime elements of new
European Patent system is that by virtue of the Convention on grant of European
Patents, filing of one application for grant of patent in all regimes and a
uniform patent granting procedure has come into place. This does not mean that
all the contracting states are patent bound in the new system but there still
exist limitation to the extent of the designated states in the patent application.
This means that the entire European Community is not bound by that uniformly
granted patent.
The underlying limitation of this
system is the core operating base to be national laws of different countries
due to which their lies a perpetual discordance in the national patent laws
which inventor has to go through with varied treatment of the same subject
matter. Hence, even the revocation and infringement cases will be dealt
applying varied procedures which lead to distinct outcomes. This implies that
for getting the remedy for infringement one might necessarily do that country's
visit which is an expensive task thus discouraging the practice of obtaining
protection in EU regime by smaller innovation firms and also not disputing the
fact of infringement of their patent due to inherent difficulties in the
procedure.The base of European Patent system lies onthe two treaties i.e. the
Paris Convention for the Protection of Industrial Property (ParC), the Patent
Cooperation Treaty (PCT). This research work is confined to the Patent
Cooperation treaty only.
EUROPEAN PATENT
CONVENTION
Its seen that EPC by far has
regulated only few stages of patent grant application i.e. pre-requisites and
rules regarding the application, examination of that patent and final grant of
patent protection whereas in order to obtain a European Patent there are two
phases of evaluation of application. The first phase commences when the
application is filed by fulfilling all the requirements and is hence granted by
European Patent Organisation (EPO). In this application its important for the
applicant to designate the states he wants protection to be granted in. Then
according to the states designation, a designation fee is payable in accordance
with the states in which he is seeking protection.
Second phase of the application has a
different prospect of supervision. Its the authority of the designated
country's which preside over the application in process. This is important for
granting of validation to the patent in the designated country as per their
requirements. This point establishes the fact that the process of granting
validation is not only restricted to validation given by EPO but by the
authorities of other designated countries as well as per their requirements for
the patent application. This is an open for all convention which gives right to
all the individuals to seek European patent.
The regulatory framework of EPC as
given in Art 2(2) articulates that the patent granted shall have the same
effect and would be subject to the same conditions as a regular national patent
in the contracting states as well, if nothing contrary is provided in the EPC.
This provision makes the point clear that though EPC and the respective
national laws do not share the same domain but still the convention extends to
provide a minimum protection which shall not be subject to the national patent
provisions. For instance- protection conferred to the act of patent
infringement are the basic minimum which shall be constant as per 64(3) EPC.
While recognizing the effects of the
European patent, EPC sets its requirements from the national laws as; firstly
dealing with Art 63 EPC which talks about the term of the patent which is given
to be 20 years from the very date of filing but provides an extra hand to
contracting states as they can go on extending this term provided statutorily
or may also grant protection which shall follow corresponding to the expiry of
the patent, thus the extent of protection is not limited. Secondly, it talks
about Art 138 EPC which deals with revocation of European patents and lists the
specific grounds on which revocation can be done. Lastly Art 69 is taken herein
which asserts that the determination of extent of protection is analogous to
the claims and for claims shall be further determined being in correspondence
with tools and drawings.
To determine the patentability of an
invention, there are few requirements to be fulfilled. Substantive examination
is carried on of the patent application to examine whether the patent
applications fulfils the basic requirements of granting procedure. When the application
moves to examination procedure it lays down four criteria's to be complied
with.
PATENTABILITY REQUIREMENTS
The basic patentability requirements
are highlighted in Art 52 of EPC
"European patents shall be
granted for any invention, in all fields of technology, provided that they are
new, involve an inventive step and are susceptible of industrial
application."
Thus the requirements highlighted
herein constitute the basis of whether the patent application is contributing
something novel and is innovative enough to grant betterment in human life and
experience. These are commonly accepted requirements by virtue of Art 27(1) of
TRIPS but the difference from country to country lies in its interpretation.
TECHNICAL CHARACTER
Its the very first requirement
provided in the definition that the invention shall have a technical nature.
EPC Rules on technical nature are additive to Art 52 EPC and thus the rules
ascertain that in order to determine whether an invention has technical
character or not it should have some technical contribution to a technical
problem and this solution to the problem is easily got through by the use of
that invention.46 But here we are dealing in the realm of Pharmaceutical
Patents where what shall constitute as technical character is the very
therapeutic nature of that drug which shall give technical solution to a
technical problem. What constitutes an invention here is the property that the
drug possesses and the therapeutic effect it has on the patient. The derivation
of desired technical effect would be established by the clinical testing of the
drug and if this testing establishes that the drug offers the biological
solution to the desired problem its said to have the technical character.
NOVELTY
Novelty of the patent establishes its
uniqueness and gives a reason for letting something new have a monopoly for
certain period which might encourage others to move on the similar lines. Art
52(1) establishes the concept of novelty as a patentability requirement whereas
Art 54 tells that what constitutes a novel invention that which stands alone
from the state of the art, this article also explains further as to what all
shall constitute state of the art. Everything which is already known and is
there in public domain is labelled as state of the art. For an invention to
qualify the criteria of novelty it shall have at least one technical novel
feature which distinguishes it from the rest. In pharmaceuticals whether the
new compound or the New Chemical Entity (NCE) qualifies for the test of novelty
is seen on the basis what addition is done by it in the already present state
of art. What is novel about it, the drug formulation, the way of administering
it etc.
INVENTIVE STEP
This stage comes following
the establishment of novelty test. An invention necessarily needs to have an inventive step involved which is
discussed in Art 56 EPO. This article
asserts that the invention shall be in variation with the obviousness to any person
skilled in the art. Its the non-obviousness
of that invention which clarifies it having an inventive step.
Inventive step requirement helps in the taking up the development process
further. For Instance-
Mere following up for what is existing in the state of art has no
value. Patent values the new biological effect of any drug through its R & D, not a mere follow
up by no improvement in the therapeutic results and the pharmaceutical technology innovation.
INDUSTRIAL APPLICABILITY
Art 57 EPC discusses about the issue
of Industrial Applicability where it looks upon the invention and analyses if
the invention is actually able to be applicable in the industry. Any addition
it would do in the practical arts would lead it to be capable of industrial
applicability.
SUPPLEMENTARY PROTECTION CERTIFICATE
This certificate basically deals with
the patent term and provides an opportunity to the originators in stretching
the patent term of their medical products in the market but it operates as an
impediment to the launch of generics as due to the extension of the term none
can copy the original drug. This certificate grant is an express step to
incentivize R & D as the original drug formulation costs a decent amount of
time & expenses. One more reason to justify the reasonableness of this
certificate is the time elapsed form the stage of filing of application to the
grant of patent. This certificate is specifically granted for one state which
grants patent, so it shall be taken from each member state while the patent
grant and thus is not uniformly available in all nations.
Its important to address that SPC
rewards the similar benefits during the extension period as are given by the
patent protection but the pre-requisite for the grant of SPC is that a drug
shall have been authorized to be in the market. There is a time duration of six
months given from the authorization of drug to be in the market in which an
originator shall apply for SPC. This certificate has the effect from the day
when patent expires and there is a loss of exclusivity. There is a formula
provided for the calculation of duration of SPC that is the duration elapsed
from the date of filing of patent application to the first marketing
authorization in the community, minus five years. Although the maximum duration
of SPC is already fixed for five years from the patent expiry. After expiry of
the exclusivity granted by SPC, generics are free to compete with the original
products.
COMPETITION LAW IN
EU
The Competition law advocates for the
prevalence of healthy competition in the relevant market which is beneficial
for the consumers security and for enhancing efficiency of other competing
agencies as well from combination which might take up the whole economic power
in their hand. European Union exercises its complete control in its dealing
with European Competition law. The major competitive policies covered by the
European Union Competition law i.e. agreements between the companies that are
anti-competitive in nature and that tend to impede competition, cartels or
agreements that might turn up making market as one single unit and leaving
little room for competitive activities ,abuse of dominant position,
combinations leading to monopolistic practices and state aid. In Pharmaceutical
market the practice of extending the market position by few players in the
market or increasing the market share shall amount to the deprivation in the
competition by price setting agreements.
The very object of this thesis would
revolve around Art 102 TFEU. This article expressly prohibits the abuse of
dominant position by few undertakings and lists what constitutes abuse i.e.
unfair trading conditions, applying dissimilar conditions to equivalent
transactions etc. The essence of this article prohibits merely the abuse by the
undertaking gaining the control of market power and not the monopoly per se.
THE CONCEPT
OF ABUSE OF DOMINANT &
MONOPOLY POSITION
Art 102 only talks about the
undertaking that obtains the dominant position in the relevant market prohibits
only the behavioral abuse the undertaking having monopoly. Though the abusive
practices are listed in the article but that does not form an exhaustive list
rather only specifies certain examples of abuse.
The article does not within its
meaning specify as to what constitutes dominance but its interpretation is done
by the market control taken over by the undertakings and thus prevent effective
competition due to the occupation of economic strength. In the case of Hoffman La Roche, It was asserted
by ECJ that relevant product market is having a very wide interpretation as to
include within its ambit interchange ability between the products belonging to
the same market. The products can be substituted by the consumers in the
product market on the basis of demand substitutability and by the potential
suppliers on the basis of supply substitutability. European commission has
established a test for analysing demand substitutability and its effect upon
the competition in the market. SSNIP test
focuses on the effect of cartelization or monopoly on the increase in
the price of the product up to some percentage with no improvement upon the
product and keeping up with conditions of sale. This test concluded that if due
to availability of better versions of competitive product in the market and
product switching is done by the sufficient amount of consumers then the
increased price by the dominant undertaking would not invite for Competition
scrutiny.
The most crucial attempt to define
the relevant product market was done in the case of United Brands Continental v
Commission case where United Brands Continental was aggrieved by the fine
imposed upon the undertaking by the commission and brought the matter before
ECJ seeking for the revocation of the decision. In the appeal the point brought
forth was that commission's definition of product market and how undertaking
interpreted it was too narrow for the cause. UBC undertook the market share of
35 percent of world's banana exports and thus constituted the definition of
relevant product market as the market is specifically for bananas and including
all the soft fruits within it would be to generalize the notion. It was held by
ECJ that, since the consumers associated with the banana market are relatively
large and the demand
of banana is comparatively higher
than other fruits hence the substitution of banana market cannot be done with
the other fruit market.
Now in dealing with Art 102 TFEU we
need to have a clear idea of geographical market as the dominant position of an
undertaking and then abuse of that dominance would be restricted to that
geography per se as the article suggests that substantial part of the common
market needs to be considered. For considering the relevant areas under the
geography they shall be possessing similar conditions of market and not the
result of the competition.
DOMINANCE
OF AN UNDERTAKING WITHIN THE SUBSTANTIAL PART OF THE MARKET
In order to attract Art 102 TFEU its
important that the market economic dominance of the undertaking shall be within
substantial part of the common market. This analysis of whether its a
substantial part of the common market or not has to be done in the light of the
specific market of product and not the geographical area concerned with the
market.
This point of determination of
substantial part was done extensively in the case of Suiker Unie. The fact
scenario herein is quite complicated as it involves 16 applicants who were
aggrieved by the decision of the commission by imposition of fines and ceasing
the order taken up by the undertaking. It was alleged by the commission that
plaintiffs were in a dominant position by virtue of their sugar production in Luxembourg
and Belgium, which was in the eye of commission constituting a substantial part
of the Common Market. To this court held that since what is important to take
into consideration herein is he specific market of the product. Sugar
production and consumption in the specified areas and sale and purchase dealing
of the product in that area constituted 15 percent of the total market and
hence considering the volume and pattern of sugar production it was held that
such significant market share necessarily constitutes a substantial part of the
common market.
WHAT CONSTITUTES ABUSE OF DOMINANCE
Since its clear that the basic tenet
of abuse lies not in sole dominance of the undertaking in the market rather the
behavior of the undertaking in the economy after acquiring the dominant
position and its effects on other competing partners and consumers is where
abuse is brought home. When the market structure in particular is hindered or
put in jeopardy due to an undertaking acquiring dominance and weakening the
degree or further growth of competition.
Here the emphasis also lies upon the
special responsibility which Dominant undertaking withholds by virtue of being
in dominant position as that not prohibited per se. So the undertaking
acquiring dominance has to maintain its conduct of such sort that competition
in no way shall be hindered or distorted. The undertaking can surely take care
of its interest but a conduct beyond that would be deemed to unfair due to its
position in the market.
Though abuse can take various forms
and can be done in various way. In this paragraph only few practices are
highlighted to clear the context. If the dominant undertaking involves in
practices where the entry of new product is being hindered by its conduct where
there is potential consumer demand for that product would amount to abuse.
Another such practice to eliminate or jeopardize the competition is Predatory
pricing by the dominant undertaking to do away with the competitors offering
their products on fair competitive prices by selling their products at the
minimum price or the lowest possible price at the cost of short term
loss-making to attract the customers. But the prime objective involved here is
to suddenly raise the prices above competitive levels when no player in that
relevant product market is left and that ultimately harms the customers.
Seeking such an advantage of dominant position leads to abuse.
APPLIED PATENT STRATEGIES DURING THE DRUG LIFE CYCLE BY THE INNOVATORS & COMPETITION INTERFACE
The competition in pharmaceutical
sector began to be regulated and investigated in 2008-2009 when the European
commission indulged in Pharmaceutical sector inquiry. It lead a step towards
conducting inspections of various innovator and generic companies and
inspections directed towards focusing upon the barriers in entering the market
by generics. Here the applied conduct of innovators were under the scrutiny of
European Competition Law by acknowledging the fact that legality of such
behaviors to impede the generic entry might be challenged.
During the drug life cycle there are
multiple phases involved before the original innovation drug reaches the
market. The primary division can be done into three phases wherein the first
phase involves R & D of the drug before its launch and the regulatory
approvals attached thereby. Secondly, the period of exclusivity enjoyed by the
originators by virtue of patent protection of their drug and putting the drug
into marketing and sales phase. Third phase comes up when the particular
original drug loses its exclusivity and the generics start to enter the
competitive market due to the patent expiry. The initial two phases are of
extremely great importance to the innovator company, as they seek the maximum
profit in these two phases from their patented product which in turn helps them
to finance the expenses incurred in R & D and NCE which had failed during
the test process. In all these phases different strategies are adopted by the
innovator companies with respect to generic entry in the relevant drug market.
Its possible for originators to turn up to these strategies by the backing
provided to them by the patent law system. These strategies weigh too much for
the originators for the retaining their market position which can sometimes be
dominant.
Measures vary in their form according
to the phase in which they have their original product such as taking
precautions of the time and scope of filing by strategic patenting, patent
litigations and putting their submissions before National regulatory authority.
Product switching by laying emphasis upon the follow on product or enhancing
product loyalty. Now the strategies also seek the possibility of generics
entering the product market even before patent expiry by finding loopholes in
the protection granted to the drug or challenging the validity of the patent
and if they succeed then the generics can successfully enter the market before
the patent term expires.
SECOND GENERATION OR FOLLOW ON DRUGS &
INFLUENCING MEDICAL FRATERNITY
Follow on drugs are such which are developed upon the original product
but are structurally distinct
enough to get patented. These are strategically made by improving structural formulations in order
to extend the patent protection term which is
nearing expiry. These are introduced some few years before the patent
expiration so that the switch which
is done over the product takes place well to market it amongst the consumers. The idea to capture the
relevant drug market by a follow on drug can
only be accomplished if the
drug offers sufficient clinical advantage.
Innovators
also indulge in practices where they earn the trust and loyalty of doctors and pharmacies for prescribing their drugs
as the consumer in the pharmaceutical domain
does not have a direct choice rather blindly goes upon the prescriptions of doctors and pharmacies. Hence conquering
the support of these two bulwarks can lead
to enough marketing of the innovator's drug by default and it also
becomes one of the reliable choice
for consumer due to which they gain implied monopoly in the relevant drug market.
PATENT
CLUSTERS
The
clustering of patent happens when numerous number of applications are filed for seeking the patent protection due to the
different patent claims. The
variation in claims might be there on
the basis of the dosage of a particular drug, the process
of its production or different
pharmaceutical formulations. But the essence of this whole process lies in it possessing the same
NCE. If one of the patent is challenged by the
generic company and it succeeds in the suit then also it cannot enter
the market due to several other patents obtained
on various other claims of the same drug, This practice by the originators is called
'multilayered defense'. This is one of the biggest barriers for entry of generics as when several
additional patents happen to be there
on the same drug in the course of the
base patent protection, there is a certain increase in patent protection term and the following SPC term. Its for the
commission to be cognizant of all the
additional applications filed due to different claims over the base patent for a given NCE.
DIVISIONAL PATENT
APPLICATION
This strategy brings in the confusion
and uncertainty among generics because they are unsure of the what patents have
been granted or revoked and which
patent claims are still pending over the same NCE. In a divisional patent
application, the 'parent application' and 'divisionals' are separated by the
applicant from the main patent application. It can only be done when the scrutiny
of parent application is still unresolved. Once the divisionals are culled out
from the main patent applications, ten they operate as a separate application
altogether having no nexus whether the parent application have been granted
patent or is revoked. This is merely to put the generic entry on hold for quite
long period of time. Divisional applications give the originators more time
while they are pending and there is a period of legal uncertainty as to which
part of the patent claims have been granted patent protections and what all
claims are pending as each of the divisional application needs individual
assessment. Hence this invites a lot of uncertainty among generics as to use of
what part of the drug would constitute infringement and what not and hence
their entry into the market is delayed by default.
PATENT LITIGATION
In this case the generics tend to
make AT RISK ENTRY into the market by producing the generic versions of
original drug. In such cases the originators take a different path by taking up
the procedural enforcement strategies which step up to the path of patent
settlements or patent litigation further. Why patent litigation is looked
upon as one of the efficient strategies
is due to the fact that during the litigation period the originator can seek
for temporary injunction which in turn will restraint the generics to enter the
market and sell the drug until there is a final decision given on merits. But
for the issuance of injunction the originator needs to appraise the court with
the grounds for its claim of the Enforcement Directive.
DEVELOPMENT OF PATENT PORTFOLIO
The patent portfolio is made stronger
by taking up the patent on follow on drugs, which is an applied strategy to
extend the patent protection term beyond the pure patent strategy which is
inclusive of various other aspects like marketing and production. Herein the
main focus is just on the improvement over or developing upon the already
existing drug which might be called as a follow on product of the original drug
but are seen as important improvements to satisfy the needs as the invention
need not necessarily be a NCE. For instance the applicability of a follow on
drug can be seen as useful and enhanced if the development upon it makes its
administration process easier like from being an inject able fluid to a drug
which can be swallowed, then there will be a switch of the product from
original NCE to the follow on drug.
All these five strategies adopted by
the innovators lead to the situation where patent law is providing a backing to
such acts but when these acts are applied in pharmaceutical market they are
directly coming into interface with EU Competition law.
THE ASTRAZENECA CASE
FACTS-
AstraZeneca AB of Sweden &
AstraZeneca Plc (hereinafter AZ) of the UK were imposed heavy fines by the
European Commission in its decision for abusing the dominant position over the
blockbuster drug Losec basically meant for treating the acid related gastro-intestinal
diseases. This drug was one of the best selling drugs in the constituting a
turnover of 63 billion dollar. The superseding drug which was of second
generation was named as Esomeprazole which was claimed to have improved
efficacy and therapeutic benefits over the original drug so it was intended by
AZ that the patents shall be switched to the new product. This follow on
product was developed but the switch was a time taking process and the patent
term of the original product was about to expire and it was likely that
generics gets launched and if the product switching happened after the launch
of generics then AZ would no more have market dominance with its switched
patent and there will be huge prize difference between the secondary product of
AZ and generics.Now this time gap had to be resorted between the patent expiry
and secondary product launch , so for this 'bridging strategy' was applied the
originators. This involved drawing out of the marketing authorization of the
active ingredient Omeprazole, which in turn would have the effect of
eliminating the reference drug so what shall constitute the substitution for
generics which they were needful of while procuring market authorization for
themselves.
The administration technique of the
original drug Losec was changed due to which a follow-on product was developed
in place of it named as Losec MUPS tablets, this swifter development upon the
original drug also resulted in delaying the generic entry for some time. Above
all of these strategies, AZ applied for SPC which will grant more addition
exclusive period to it and more time to switch. The Commission while holding AZ
responsible for unfair conduct and abuse its conduct by being in dominant
position is due to taking into consideration all these strategic applications
for extending the exclusivity period. The Commission gave two bases for coming
to te adoption of such a decision which are-
(i)
There
was a misuse done by AZ of the patent protection provision by seeking for SPC to extend the protection for some additional period.
(ii)
By
playing strategically with the market authorization criteria for generics AZ misemployed the withdrawal of its own
original product and also embezzled with the
pharmaceutical regulatory system.
FIRST ABUSE:
The
first abuse determined by the general court was regarding the
misrepresentations made by AZ for
seeking SPC certificate to the patent offices of various member states.
The misstatement was regarding the date of the market authorization which was
one of the core rounds for calculating
the term for which the SPC
certificate has to be granted.82
This extended exclusivity is granted from the date of the grant of marketing
authorization for the patented drug. Since the dates
were misstated in different member states as there are divided into
three dates; '1982-states', '1985- states'
and '1988-states' and then the determination would be done on the basis of
first date of marketing
authorization. So, in order to obtain
SPC AZ misrepresented that the first
authorization date was in 1998 Luxembourg whereas commission found it to be in France 1987. This implied that for
seeking addition patent term protection for Losec AZ has wronged
the whole patent system of the Union and deliberately excluded the generic competition.
The court therefore held that employment of such strategies hindered the
competition and no submission on the
part of AZ could be entertained as it was truly a deliberate conduct
to mislead various member states to obtain SPC protection.
SECOND ABUSE
The second listed abuse was misemploying the rules of national regulatory
authority for the purpose of
misdealing with grant marketing authorization regulations. The generics have been given the leverage of
not getting into clinical trials for the bio
equivalents of the original drug hence are given allowance for using the clinical information from the test of the original
product and do not need to conduct these tests by themselves. Due to this reason,
for generics the already available data of tests conducted for the original drug is the major reliance for
obtainment of marketing authorization
for their products. It is due to this reason that that it was found out by the
court that deregistering was a step not required for the introduction of Losec Tablets in the market. Also the
undertaking acquiring the dominant position in the market has some special responsibility and has to take care of
its conduct necessarily. Its conduct
should not hamper the competition in the market but here in this case the undertaking made use of the whole
regulatory process itself to delay the generics thus this act is no way objectively justified. Thus it was concluded
by the general court that the conduct of AZ here itself was
condemnable as it withdrew
the data so that generics
have no reference medical product
which was essentially seen as not competing on merits.
CONCLUSIVE ANALYSIS
OF JUDGMENT
This judgment shows a very detailed
interface of European Union Competition Law & IPRs in context of Pharmaceutical
framework. This ruling also holds significance since in this judgment all the
applied strategies by AZ were critically looked upon by the commission and it
was held that any strategy which hampers the potential and effective
competition in the market would be faced by strict measures to overcome such
impediments upon the competition.
This judgment has challenged the very
legality of these applied strategies by originators and has brought them on the
ground that any imposition or implied constraints on generic market due to the
application of these strategies would not be appreciated. It is stated
specifically in the judgments that it is legitimate for the originators to
protect their legitimate interest in the commercial market when they see and
impending danger from generics but strategically doing away with that danger by
mend ling with the regulatory framework and withdrawing the data available to not let generics pass the
stage of marketing authorization even has no objective justification.
Since the provisions of data
exclusivity are already available so protecting any data which is a result of
extensive R & D beyond the exclusivity period does not fall in the
legitimate conduct.
CONCLUSION OF STRATEGIES LEGALITY
The reason why it is important to
determine the legality of the of these strategies is the fact that these
applied strategies being well within the contours of IP law still are seemed to
be infringing the competition law. So, when these applied strategies are
applied by the innovator companies, a vacuum is formed where there occurs no
correspondence between IP Law & EU Competition law, hence it becomes
primary to determine the threshold of application of these strategies as to
when can they be applied without attracting penalty.
The object of this study is to decide
the legitimacy of the strategies applied by the originators, and it can be
described in simple terms; the legality of the strategies is currently
ambiguous and unclear.
The originators' applied practices
are legally, quite often, under patent law but, illegitimately, far too away
from EU competition law. How so? For what? The rationale for this deformity is
due to the two legal disciplines not being in connecting correspondence.
The techniques are applied to shield their
products from generic competition by the originators. Different types of
strategies are applied , for example where the originators build patent
clusters which mean that one product is covered by multiple layers of patent
protection they deprive the market of potential competition and the consumers
of their rights to have variation in the relevant drug market by practicing the
formation of such patent clusters . Some other illustration is to build up a
follow- up product of the original drug with a view to prolonging the first
drug's lifetime. The strategies can, however, constitute violation of EU
competition law, and are therefore unlawful. The difficulty in deciding whether
or not a technique constitutes competition law violation is indicative of the
fact that's it's legal under IP law. The IP law grants the originators legal
protection for their innovations.
Yet, at around the same time, as they
exercise certain rights, the originators will infringe the rule. In the AZ
case, the European Court asserted that any behaviour that 'may' just stifle
competition, irrespective of its validity under other laws, entails a
violations of the antitrust law.
The word "may" is one
aspect of the nature of the issue, because the courts do not offer sufficiently
specific explanations why IPR practice conditions constitute an infringement of
competition law. The declarations in the rulings result in the originators'
ambiguity about the level to which they can protect their drug.
To sum up, competition between drug firms
must be fostered so that generics can reach the market during the prescribed
timeframe, resulting in costs being reduced for the benefit of consumers and
public wellbeing in general. Competition law must be applied to keep that
effect as far as probable. However, careful consideration should be given to
the originators of their huge R&D costs, and even the time-consuming
aspect. Therefore, the inventions of originators must be sufficiently covered
under the law to make R&D feasible and productive.
As discussed earlier in this thread,
there are developments that the creators suggest relocating their facilities
outside of Europe. The expectations of the European Court when reviewing the
patent policy are to encourage competition and guarantee that the conduct of
the originators does not result in a limitation of trade or in a hindrance to
generic entry. There is therefore no independent corroboration on the
healthcare market of the long-term effects that this implementation of the law
would have. If the originators believe they are not utilizing their protection,
they will want to relocate their business outside the European Union. For this
reason, it is currently important for EU legal bodies to carefully examine the
potential dangers of their application of the law. The aim can not be to
promote competition at all costs, at the detriment of intellectual property
protection to new innovative products. Furthermore, while they may have
believed themselves to do so in previous decisions, the courts must have explicit
judgments where the criteria for what constitutes abuse of dominant position
are evident. This implies that both the originators and the generics are more
willing to adjust their business effectively to the laws and regulation.
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Article Information
PHARMACEUTICAL BUSINESS STRATEGIES: COMPETITION BETWEEN ORIGINATOR AND GENERIC COMPANIES IN EUROPEAN UNION AND ITS RELATIVE IMPACT ON INDIA.
Authors: Nivedita Singh, Aryan Singh
- Journal IJLRA
- ISSN 2582-6433
- Published 2023/07/14
- Issue 7
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International Journal for Legal Research and Analysis
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