Tuesday, 24 April 2012

Beware of competition law! Relying on patents to extend protection for medicines may be anticompetitive

Author: Michele Giannino (Desogus Law Office, Italy)

Case A431 Ratiopharm v Pfizer, Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato), Decision no 23194, Italy, 11 January 2012

 Journal of Intellectual Property Law & Practice (2012) doi: 10.1093/jiplp/jps065. first published online: April 23, 2012

 The Italian Competition Authority holds that the patentee of a brand medicine who files an application for a divisional patent and the related supplementary protection certificate with the intention to hinder the entry of generic firms abuses its dominant position and infringes Article 102 TFEU.

 Legal context

In AstraZeneca (COMP/A.37.507/F3 Generics v AstraZeneca), the European Commission ruled that AstraZeneca infringed Article 102 TFEU because (i) it had obtained supplementary protection certificates (SPCs) for Losec with the submission to the patent authorities of deliberately misleading information; (ii) it had withdrawn its marketing authorization to commercialize Losec in the form of capsules with the result that generic firms were unable to rely on its authorization for capsules to commercialize the generics. On appeal (Case T-321/05, AstraZeneca v European Commission), the General Court (GC) substantially upheld the Commission rulings but it ruled out the prospect that the deregistration of the market authorization Losec capsules infringed Article 102 TFEU. In the Pharmaceutical Sector Inquiry Report (Pharma Inquiry), the European Commission confirmed the idea that patent procedure misuse could trigger competition liability, establishing that, under certain conditions, applications for divisional patents could delay entry of generic firms.

 Facts

Pfizer was the owner of the parent patent EP0364417 for the active ingredient of latanoprost for the glaucoma medicine Xalatan. Its patent protection was due to expire in July 2011 except for Italy where the protection ended in September 2009 because it had not applied for an SPC. In 2009, the EPO granted Pfizer's divisional patent EP1225168 for which it sought an SPC only in Italy. In this way, it extended the patent protection of Xalaton in this country until July 2011. However, in 2010, the divisional patent was revoked by the EPO and the SPC was annulled. Then Pfizer obtained a further one-year extension of patent protection until January 2012 for paediatric trials under EC Regulation 1901/2006. It also warned generic firms against entering the market before July 2011 and it sued some of them.

 Analysis

Pfizer enjoyed a dominant position in the market for glaucoma medicines based on latanaprost because of its high market share and entry barriers. The Italian Competition Authority (ICA) was of the view that Pfizer pursued a complex strategy to drive generic firms off the market. This strategy comprised vexatious litigation and patent process misuse in the shape of deliberately filing divisional and SPC applications to extend patent protection.

The ICA based this view on a series of indicia and evidence. First, Pfizer filed the divisional application 13 years after it had applied for the parent patent. Secondly, the divisional did not protect any additional therapeutic use of Xalatan. Thirdly, Pfizer applied for the SPC only in Italy where its protection was due to expire 2 years earlier. Fourthly, Pfizer did not employ the divisional patent to market new medicinal products, which indicated that the only reason why it had filed the divisional application was to block out generic firms. Fifthly, the documents gathered by the ICA showed Pfizer's fear of Xalatan being outpriced by generics and its intention to delay entry of generics through vexatious litigation and by seeking to extend the patent protection.

The ICA also considered that the GC in AstraZeneca reached similar conclusions on when patent misuse amounts to competition infringements. It then showed the anticompetitive effects of the contested conduct by observing that Pfizer caused a 7-month delay in the market entry of generic firms. During this period, the national health system suffered an estimated €14 million in lost savings, while Pfizer extracted a monopoly rent of €17 million. The ICA thus found Pfizer to have breached Article 102 TFEU and imposed on it a €10,677.71 fine. The amount of this fine was lower than the alleged profits of Pfizer.

The ICA's analysis of the competition impact of the divisional application, however, is vitiated by inconsistencies and misunderstandings. The reference to AstraZeneca is misplaced since the GC based its finding of the competition infringement on a narrow set of circumstances: (i) the dominant undertaking's false representation to the patent authorities in support of the SPC application; (ii) the false information being instrumental in obtaining an extension of patent protection to which AstraZeneca was not entitled. Yet Pfizer made no false representation to the Italian authorities and its applications for the validation of the divisional and for the SPC were legitimate means to seek an extension of patent protection.

In the Pharma Inquiry, the Commission expressly recognized divisional patents as a legitimate way to split a patent application. However, the Commission pointed out that, under certain conditions, extension of the examination period brought about by a divisional application could hinder the entry of generic firms by increasing legal uncertainty for them. The ICA, in contrast, found a competition infringement in filing applications for divisional patents and SPC with the purpose of prolonging patent protection. Is it possible to reconcile Ratiopharm v Pfizer with the Pharma Inquiry? Can Pfizer's intent to close off competition from generic companies be considered one of those conditions in the presence of which, according to the Pharma Inquiry, divisionals may restrict competition from generics?

In any event, it seems that the ICA misunderstood the regulatory regime for divisionals and SPCs. Divisionals serve to ensure unity in patent applications and have the same filing date as the parent patent. As acknowledged in the Pharma Inquiry, divisionals can extend neither the content of the original application nor the protection period. Similarly, SPCs are subject to the same limitations and obligations as the basic patent. Therefore, contrary to the ICA assumptions, the protection conferred by an SPC for divisionals cannot be longer than the protection resulting from an SPC awarded for the basic patent.

 Practical significance

The message of Ratiopharm v Pfizer is that a dominant undertaking, as patent holders usually are, may be held to have infringed competition rules when it files a divisional application with the view to hold up the entry of generic firms. The ICA decision is good news for generics in that it limits the options for generators to protect their blockbuster medicines from generic products. However, Ratiopharm v Pfizer is expected to increase compliance costs and legal uncertainty for originators. Arguably, originators may abstain from applying for divisionals lest they receive painful fines for competition liabilities and that may ultimately chill innovation. Considering the relevance of Pfizer's intention in the ICA's reasoning, originators should be advised to clean their internal documents from any statements that can be read as evidence of intention to exploit patent procedures to delay generics entry.

In conclusion, Ratiopharm v Pfizer reshaped the delicate competition/patent law balance by stretching the scope of application of competition law to issues that are at the core of patent law. The underlying rationale for this is to regulate the conducts of patent holders that seek to protect their market position on means other than competition on the merits. However laudable this objective may be, the question whether a firm has misused the patent regulation should be tackled by patent authorities. This what the EPO did when in 2009 it introduced a 24-month time limit for filing divisional applications in order to deal with the issue of abuse of divisionals.

1 comment:

  1. The reason for this result is that over the longer term, competition in the market is expected to benefit more from the innovation encouraged by a patent grant than it is to suffer from the time-limited monopoly granted.

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