Imagine. A patient has a specific medical condition. He can be helped by prescribing either an extremely expensive drug tailored to treating that specific medical condition or a cheaper one which works in the same way but was designed to treat other conditions. Which option is a public health body more likely to want to pay for? But what if the authority cannot select the cheaper option because of the terms on which both drugs have been licensed? What can a public authority do? Can EU cartel law come to the rescue when both drugs have been invented by one company?
Genentech is a pharmaceutical company. It invented a drug whose active ingredient is known as ‘bevacizumab’. This drug slows down the growth of new blood vessels. It was designed to be an anti-cancer drug. Genentech licensed the making of its pharmaceutical invention to its sister company Roche, which sells the drug around the world as Avastin.
Because of Avastin’s ability to slow the growth of new blood vessels, some doctors started using it to treat various eye diseases that can cause blindness. However, Genentech’s researchers did not approve of this ‘off-label’ use of Avastin. Consequently, they set about inventing a different drug just for eye conditions. This time, the active ingredient in their new invention was not ‘bevacizumab’ but ‘ranibizumab’, a drug that would become sold around the world under the name of Lucentis.
However, the license to make Lucentis was not kept within the pharmaceutical companies under the corporate control of Hoffmann La Roche. Instead, the license to make Lucentis was sold to a rival pharmaceutical group headed up by Novartis, which had no real presence on the anti-cancer drug market but did have a presence in the market for treating eye diseases.
Thus, here is a situation where a medical condition could in theory be treated by two drugs. Those drugs have been invented by the same company. Yet they have been licensed for different uses to two different companies. The problem is that the price of the two drugs is not similar, Lucentis is an extremely expensive drug (Wikipedia provides some indications as to the relative cost of the two drugs).
In the Italian courts
In Italy, it was perfectly legal to use Avastin as a substitute to Lucentis under the Italian regulatory system until about 2012. After that time, any off-label use of Avastin was no longer permitted.
Faced with a regulatory and licensing set-up which could be duping patients and the public purse, the Italian Competition and Markets Authority, [the Autorità Garante della Concorrenza e del Mercato], decided to step in.
The Italian authority looked at the terms of the licensing of the two drugs, the behaviour of the companies, and how this was affecting the Italian market. The authority took the view that the companies were making an artificial differentiation or distinction between the two drugs. The authority also noted that the companies were encouraging the notion that it was not so safe to use Avastin in peoples’ eyes. The authority also took the view that the companies were downplaying scientific data that discredited the company-propogated safety concerns.
Consequently, the authority believed that the companies were coordinating their corporate behaviour to the extent it inferred the existence of a ‘horizontal agreement’ between the two companies. Such an agreement can be banned by EU cartel law, for example where it artificially partitions the market. Thus, the authority decided to fine both companies for breaching EU cartel law. It handed out one fine just shy of 100m euro to Hoffmann-La Roche, and a similar one to Novartis.
Both companies challenged the legality of the Italian authority’s fines in the Italian courts. The litigation was escalated up to the Italian Council of State, where Judge Baccarini and the other judges decided that they were unable to determine how EU cartel law should be applied. Consequently, a preliminary reference to the CJEU was on the cards.
The official translation of the questions has yet to be published on the Curia website.
Judge Baccarini and the other judges were unable to determine how EU cartel law should be applied. Curiously, they did not trot through any CJEU case law or EU legislation. Besides Cilfit, the only CJEU judgment cited in the Italian court’s order of reference related to the issue of whether it was the court or the parties who are responsible for the wording of the questions. It seems as if the Italian Council of State is trying to show the CJEU that it has learned the lesson of the bizarre situation which arose in the Italian reference leading upto Case C-136/12, Ordine dei geologi; see further, Case C-136/12, Consiglio Nazionale dei Geologi – professions and cartel law. However, the fact remains that the Italian Council of State in this present reference has not mentioned any EU cartel law which could be relevant to help the CJEU answer the questions asked of it.
This is all the more strange because the Italian Council of State had recently made another preliminary reference about Avastin and Lucentis (now docketed as Case C‑520/15, Associazione Italiana delle Unità Dedicate Autonome Private di Day Surgery e dei Centri di Chirurgia Ambulatoriale (Aiudapds)). Curiously, on 25 February 2016, the Eighth Chamber of the CJEU decided not to hear the Aiudapds reference under the accelerated procedure, and indeed declined competence.
EU Law Radar readers who are interested in Avastin and Lucentis might also recall that both Roche and Novartis have already attempted to use EU law to exert control over how the two drugs are used. In Germany, the use of Avastin and Lucentis was at the centre of a dispute about the legality of a repackaging process known as ‘refilling’; see further, Case C‑535/11, Novartis Pharma GmbH v Apozyt GmbH, ECLI:EU:C:2013:226.
The issue of repackaging pharamaceuticals and the potential to use trade mark law to produce an artificial partitioning of the market, is now at stake in Ferring; see further, Case C-297/15, Ferring Lægemidler – artificially segmenting the market in laxatives?
The issue of artificially partitioning the pharmaceutical market is at stake in a further preliminary reference currently pending before the CJEU, a dispute which also involves Roche; see further, Case C-277/15, Servoprax – challenging language obstacles to parallel imported medical products.
Update – 20 June 2016
According to today’s Official Journal (OJ  C222), the Italian Council of State has asked:
1. On a proper construction of Article 101 TFEU, can the parties to a licensing agreement be regarded as competitors if the licensee company operates on the relevant market concerned solely by virtue of that agreement? Do possible restrictions of competition between the licenser and the licensee in such a situation, although not explicitly provided for in the licensing agreement, fall outside the scope of Article 101(1) TFEU or fall within the scope of the exception set out in Article 101(3) TFEU and, if so, within what limits?
2. Does Article 101 TFEU allow the National Competition Authority to define the relevant market autonomously vis-à-vis the content of marketing authorisations (MAs) for medicinal products granted by the competent pharmaceutical regulatory authorities (the Agenzia Italiana del Farmaco and the European Medicines Agency), or must the relevant market for the purposes of Article 101 TFEU instead be held to be primarily shaped and established in respect of the authorised medicinal products by the appropriate regulatory authority in a way binding on the National Competition Authority also?
3. In the light of the provisions of Directive 2001/83/EC, […] in particular Article 5 thereof, which relates to marketing authorisations for medicinal products, does Article 101 TFEU allow a medicinal product used off-label and a medicinal product that has received an MA in respect of the same therapeutic indications to be regarded as interchangeable and, thus, to be included in the same relevant market?
4. Pursuant to Article 101 TFEU, for the purposes of defining the relevant market, is it important to establish, in addition to the essential fungibility of pharmaceutical products on the demand side, whether or not those products have been supplied on the market in accordance with the regulatory framework concerning the marketing of medicinal products?
5. In any event, can a concerted practice intended to emphasise that a medicinal product is less safe or less effective be regarded as intended to restrict competition, when the idea that that product is less effective or less safe, although not supported by reliable scientific evidence, cannot, in the light of the level of scientific knowledge available at the time of the events in question, be indisputably excluded either?
Update – 4 August 2016
The French State is also trying to reduce its drugs bill. To that end, it has introduced laws that require the manufacturers of software used by drug prescribers to display for example the price of generics; see further, Case C-329/16, SNITEM – against state diktats for healthcare software.