Bird & Bird: A View of Competition Law in the Pharmaceutical Industry

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Video title: Bird & Bird: A View of Competition Law in the Pharmaceutical Industry
Released on: April 01, 2008. © PharmaVentures Ltd
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In this interview for PTV, Fintan Walton talks to Richard Eccles, Partner at the international law firm Bird & Bird, on the contents of the report entitled ‘Competition Law and Intellectual Property Strategy in the Pharmaceuticals Sector’, written by Richard and his colleague Gerry Kamstra, of Bird & Bird. This major new report is a co-publication between PharmaVentures and Bird & Bird.

In the interview Richard explains the importance of understanding competition law, and how these operate across the EU. Pricing and regulatory issues are discussed in-depth, and Richard comments on the changing levels of complexity of regulatory laws. He also gives a summary on generic companies’ stance within competition law. Richard illustrates these points using specific cases involving GlaxoSmithKline and AstraZeneca.
Importance of competition law.
Fintan Walton:
Hello and welcome to PharmaVentures Business Review here in London. On this show I have Richard Eccles, who is a Partner at Bird & Birdand you head up the international competition practice within Bird & Bird, welcome to the show.
Richard Eccles:
Thank you.
Fintan Walton:
Richard Eccles, you have been involved in writing a report which is about to be published by PharmaVentures which has been written by you and your colleagues at Bird & Bird on the whole area of competition law. Competition law in the context of the pharmaceutical industry why do you end up writing a report about this?
Richard Eccles:
I think the pharmaceutical industry represents a lot of challenges and it's very fertile grant to competition lawyers and also intellectual property lawyers because of the interplay between competition law, intellectual property and regulation. The conflict in policies the need to protect and safeguard innovation to encourage investment in new drugs that health service need that the consumers need and the medical world needs and the desire also to achieve drugs at favorable prices, prices that are not too high and therefore there is a conflict attention between protecting the innovative research and development based companies and the generic companies and the parallel importers. And we have different systems of regulation at play the medicines authorization regulatory framework and system with intellectual property rights and supplementary patent protections certificates and the whole system of competition law and they all interplay and it's shown to be an area of lot of activity of competition regulators and also in litigation.
How competition law operates across EU.
Fintan Walton:
And of course this report focuses primarily on the European competition or issues which in itself is a complex region because you've got individual states who have got their own regulatory bodies in terms of, particularly in terms of pricing and then you've got this structure positions against the patent issues within Europe as well, so does that make it any easier from the European perspective?
Richard Eccles:
The report essentially looks at things from an EU level perspective together also with specific reference to UK cases where appropriate. The regulatory system is much the same across europe it's laid down by EU directives and is regards central community marketers or marketing authorization through the EMEA there is a European community regulation on that. The intellectual property systems are basically the same orbit separate national systems operating in parallel throughout the EU. And the competition law rules are essentially the same, we basically write the report from the point of view the main EU competition provisions articles 81 and 82 of the EU, EC Treaty on restricted agreements and abusive dominant position. All the member states essentially have their own corresponding systems of EU competition law, in most of the cases have really written at EU level both in terms of competition law and also on the free moment of goods rules and the conflict between the EU free moment rules and the protection of intellectual property rights which are of course in national landscape and the pharmaceutical industry has been absolutely at the centre of all the European case law in this area just it has been to large extent on parallel imports and competition law.
Role of European Commission and specific cases involving GSK and AstraZeneca.
Fintan Walton:
So why is the European Commission want this driving all of this is that is to seek uniformity?
Richard Eccles:
The commission is mainly, has mainly been motivated to ensure single common market without internal national borders. And therefore it is aiming to limit the extent to which intellectual property rights can be fairly used to prevent the free flow of products including pharmaceutical products across internally EU board and also it to prevent companies by their contact, by agreements impeding parallel imports between member states. The commission has always been a great believer in parallel imports as a means of equalizing prices and creating a certainly a genuine common market or single market for consumers, but of course that goes against quite often the pharmaceutical companies at least the research and development based pharmaceutical companies objectives of maximizing the revenue they need to finance research and development in the future innovative products which is of course as you well know highly costly exercise. And we get this and these intentions because of regulation which is national and here there is a lack of uniformity across Europe because as you got the pricing regulation as opposed to medicinal product authorizations based on the quality, safety and efficacy of products, pricing regulation is basically left to the member states and this not harmonized and you find some of the Southern European member states have maintained low prices as a result of their own national strategy or regulatory regimes and this gives rise to the opportunities for the parallel imports as opposed to import from buy the products on the market in this countries and to import them into the high priced countries the under cutting in the high price countries. And the question then is what should competition policy do about this, is it good for consumers? Is it good for the health service to allow parallel importers or does the activity of parallel importing benefit only the parallel importers themselves who take the benefit of the margin between the two. And this has given rise to a lot of case law over the years and most recently the GSK case, GlaxoSmithKline which concerned it's dual pricing system for sales of it's products in Spain where it operated different prices according to whether that it was selling to domestic wholesalers or resellers on the Spanish market or to export at wholesalers and it maintained a high price for the export wholesalers with a commission objecting to and condemned GSK couldn't actually fine GSK, because GSK agrees involved in voluntarily notified the arrangement, but interestingly GSK when it's case in the European court at first instance last September into four hours the European court in a very interesting judgment said that the European Commission in deciding whether to approve the system or not really should have compared and contrasted to different competition policy objectives in these area and should have taken the positive decisions to which one was the most important in this instance and that is to say it is more important to encourage development at innovation level as a way you got products sorry companies competing to develop the next most efficient innovative drug or is it more important to focus regulatory in competition or attention on fostering competition down the line in parallel imports typically in respect of the period after patents have expired and when generics can enter the market.
Fintan Walton:
Right. You talked about this attention and that clearly exists in it's different context as you say whether it's wrapped around particular patents or it's around that the freedom to for citizens within the EU to get access to drugs at a fair pricing and so forth, I suppose in the end the European Unionor the European Commission has to take a leadership role on that and does that mean therefore that the rules and regulations at a national level become less important or it'll be over ruled by the European Commission?
Richard Eccles:
Well to say I think in terms of product regulation marketing authorization is based on quality, safety and efficacy of the products so it is effectively harmonized or of a centralized marketing regulation authorization it's regulated from the centre through the EMEA. Pricing is still separate and there is no way in the short-term it's been reviewed by the European Commission previously that's not like to be regulated in the short-term. What will be interesting is seeing to what extent the European Commission continues to maintain the priority of encouraging parallel imports, because it has received a set back in one or two cases particularly the GSK case which concerns the question of as I say the lawfulness of GSK's agreements with its wholesalers to operate its dual pricing system. There have also incidentally been another cases at national levels in other countries on abusive dominant position about whether the pharmaceutical company can lawfully refuse to supply an export to wholesaler just trying to take advantage of these price differentials and the cases have been tending to go the way of the dominant pharmaceutical company upholding their right to control to what extent they make supplies that would facilitate such parallel exports. And I think new cases particularly in Greece and France and Spain that we've actually covered in the report, but partly because of this the way the case law has simply can be going into we've also seen the European Commission refocusing its efforts a little bit and particularly in the AstraZeneca case which is very interesting case because again shows the interplay of sector regulation and competition law. In that case what AstraZeneca did was compliant with the regulator regime in term at least one of the two abuses it was found to have committed in the sense that it had withdrawn the one version of the product the capsule version and instead introduced a tablet version of the same product or may be the way around withdrawn the tablet using the capsule the capsule, but in anyway that was quite lawful within the regulatory system, but the European Commission said that this is an unreasonable use of the regulatory regime because it was done strategically to make it more difficult for the generic manufacturers to be able to get a parallel authorization because they would to do that they would have to show [ph] their products where substantially the same as one that was already on the market by switching the products around in this way AstraZeneca obstructed that. So what they did was lawful in terms of regulation but was held in a rather novel decision by the commission to be unlawful from a competition law of view point in terms of abusive dominant position. What we are seeing in the pharmaceutical sector in particular is more adventurous use of competition law in a situation which is already regulated, but where there is an additional over lay a trump card that European Commission can play and play if you like using its competition law powers. And also a slightly refocusing your way in terms of current policy from parallel exports although and imports although that is as a said very and still a live issue towards the question of misuse of intellectual property in the field. I assume probably by the AstraZeneca case and this is an ongoing case we believe involving Boehringer Ingelheim all though very little information in the public domain is yet. And also the European Commission has in January this year launched a Sector Enquiry of Pharmaceuticals which according to its public announcement is basically designed to see whether there is a misuse of intellectual property rights going on in the sector. For example through companies one might say harassing companies through patent suits to see to burden competitors use of their resources for example by having to deal with patent in front of litigation or may be carrying out of litigation and then extracting favorable terms to the intellectual property and then through patent settlement disputes in terms of licensing. These are merely ideas nothing is alleged as yet but it is based on what little information has been publicized by the commission, this seems to be the type of concern the commission has got. Now the report is in predate any conclusions that are yet to be received on this sector enquiry, but it does - it is indicative of the way things are going. And for anyone involved in strategic, legal or marketing role in the industry I think there are lot of there are lots of material here, lots of development, lots of conflicting policies under the different regulatory systems that they really need to be aware of.
Changing levels of complexity of regulatory laws.
Fintan Walton:
That's the key thing and I think one of the things going through this report it is it's very clear that for a pharmaceutical company these days trying to think about launching a product in Europe or has it already got products in the market there are so many different issues they need to think and even those issues that we think we are clear on there is no guarantee that you won't come across or stumble across a block later on for an example in the GSK case as you just mentioned. So the pharmaceutical industry always says, they are always looking for guidance, they are looking for clarity from the regulators not complexity. And having freshly written this report yourselves do you have any clue or indication that we are getting to a simpler system or is it still lying in the rocks of complex, of complexity?
Richard Eccles:
I think a lot is beginning to become clear actually as the law developed in a regulatory area. And in the competition law area certainly there been some developments in the regulatory field which is beneficial to companies and clarifying to some extent notions that of long being considered as, that's also apply like the (indiscernable) defence on it's a balancing of the period data [ph] it's conservating the regulatory field for companies which has been lengthened under the EU law under the (indiscernable) the idea that generic companies should be able to use this data for experimental purposes prior to the expiry of the of this data (indiscernable) before they are authorized to bring products on to the market. There are some something that have become clarified, but there is plenty more important issues that again have to be faced more is clear but is the case probably is the case of the more you know more you can still find out I think.
Fintan Walton:
But is it in the end is it more difficult these days or the threats for a pharmaceutical company with patents to try and protect those patent rights in the fashion that they've done in the past you know in another words staving off generic competition is it a lot easier for generic competition to come in now for product, against the product which is already, which has been patent is about to come off patent?
Richard Eccles:
I think the recent European Commission action has shown itself to be seeking to as much as able to protect the position of generic companies and to achieve a fair balance I think between the intellectual property owning pharmaceutical company and the generic. It the system the systems are becoming more sophisticated. I think as between however by contrast as between the ethical pharmaceutical company and the - and parallel importers because this can be an issue you endure in patent life. I think we've seen the recent competition case laws have shown the balance shifting in favor of the pharmaceutical to patent any pharmaceutical company trying to control take reasonable steps to protect it's own position safe guard it's position reasonable by doing what it can to control the flow of products across borders. That's not to say this is free for all and that pharmaceutical companies can relax far from it, but there are certain developments which if applied sensibly in their strategies will be to their benefit.
Fintan Walton:
Richard Eccles, it is a fascinating report and congratulations on such a comprehensive guide to competition well in the Europe and then the UK. So we like to thank you very much indeed for coming on the show and telling us all about it. Thank you very much indeed.
Richard Eccles:
My pleasure. Thank you.
Richard Eccles
Richard Eccles qualified as a solicitor in 1985 and is a Partner in Bird & Bird's Competition Law Group. He is experienced in all aspects of EC and UK competition law (and merger control), including competition regulation of network industries, EC (and UK) competition rules on undertakings granted special or exclusive rights by the state, and the EC state aid rules. He has advised extensively on the competition regulation of network industries and liberalized utilities and also has particular experience inter alia in the life sciences and oil and gas sectors. Richard Eccles is included in the rankings of leading competition lawyers in all the top legal directories. He is a frequently published author on competition law and regulatory subjects. He regularly speaks at conferences and is Chairman of The Law Society's European Group. Richard Eccles is the lead author of the PharmaVentures Report, 'Competition Law and Intellectual Property Strategy in the Pharmaceuticals Sector'.
Bird & Bird
Bird & Bird is an international commercial law firm which operates on the basis of an in-depth understanding of key industry sectors. The firm focuses on aviation and aerospace, financial services, communications, e-commerce, IT, life sciences, media and sport. The firm operates offices in Beijing, Brussels, Dusseldorf, Frankfurt, The Hague, Hong Kong, London, Lyon, Madrid, Milan, Munich, Paris, Rome and Stockholm, and has close ties with firms in other key centres in Europe, Asia and the United States.