Commission opens first investigation into potential abuse of patent procedures in the pharmaceutical industry

In a blog published four years ago, we speculated whether Abbvie's conduct of continued threats of infringement proceedings, coupled with its consistent cycle of patent creation, abandonment and divisional applications, which created a "perfect storm" of commercial uncertainty might be an abuse of a dominant position contrary to the Treaty on the Functioning of the European Union.

It seems that the European Commission now will be looking into similar such conduct by Teva.
 
Earlier this month the Commission opened its first formal investigation into potential abuses relating to the misuse of patent procedures in the pharmaceutical industry. The Commission has said it will investigate whether Teva broke antitrust rules under Article 102 of the Treaty on the Functioning of the European Union (TFEU) in its efforts to protect the market position of its blockbuster drug after the expiry of the company's patent.

Background

 Teva is a global pharmaceutical company headquartered in Israel and operating from several subsidiaries in the EEA. Teva's blockbuster drug is sold under the brand name COPAXONE, which is widely used for the treatment of relapsing forms of multiple sclerosis (MS), a chronic illness that affects the daily lives of more than half a million Europeans. COPAXONE contains the active pharmaceutical ingredient glatiramer acetate. In 2015, Teva's patent covering glatiramer acetate expired, which in theory made it possible for generic versions of the drug to enter the market and compete with Teva's COPAXONE drug.

Conduct under investigation

The Commission carried out unannounced inspections of Teva's EU-based subsidiaries in 2019 and 2020 and a preliminary investigation was announced in November 2020. However, it was not until 4 March 2021 that the Commission announced that they had opened formal proceedings to assess whether Teva may have blocked or delayed the market entry of competitors to COPAXONE in breach of Article 102 TFEU, which prohibits the abuse of dominant market positions.
 
The Commission will examine two aspects of Teva's conduct. The first will be directed to the company's patent filing strategy. The Commission will investigate whether, following the 2015 patent expiry, Teva may have sought to, and achieved, an artificial extension of the market exclusivity of COPAXONE by strategically filing and withdrawing divisional patent applications, thereby frustrating the ability of a generic competitor to clear a path through Teva's patent applications.
 
While divisional patents can be a lawful and legitimate method of covering overlapping inventions, the Commission is concerned that a strategy of filing and then withdrawing divisional patent applications can create barriers to potential competitors (who have to challenge each such patent application and can then be faced with a withdrawal and have to restart the legal challenges) is conduct aimed at obstructing competitors from legitimately entering the market, which could be an abuse under Article 102 TFEU.
 
The second form of conduct under examination is Teva's alleged communication campaign that may have been designed to unduly hinder the use of competing glatiramer acetate products. The Commission has indications that this exclusionary disparagement, primarily directed at healthcare bodies and professionals, may have targeted competing products to create a false impression of health risks associated with their use, despite these generic medicines having been approved by competent public health authorities.

 Comment

If the Commission concludes that Teva's conduct was anti-competitive, it could lead to hefty fines for the pharmaceutical company, including a sanction of up to 10% of its global turnover. The standard for finding abuse is very high, however. The opening of a formal investigation is simply a procedural step, meaning that the Commission will be able to dedicate more resources to examining the information collected during the inspection in October 2019; it does not mean that an infringement has been established, nor does it prejudge the outcome of the investigation which is still ongoing.
 
This is the EC's first formal investigation into potential abuses relating to possible misuses of patent filing strategies. In the past there have been previous cases (for example, see our previous blog referred to above: Playing the patent system to advantage??) where a pharmaceutical company's filing conduct has been deemed to prevent competitors from bringing revocation or invalidity proceedings. There have also been cases (see our previous blog in 2013 regarding a ruling of the CJEU – The AstraZeneca dominance decision) in which a pharmaceutical company misused the divisional patent filing system through providing misleading representations.
 
Here, however, there is no allegation of any illegal or fraudulent use of the patent system or misleading representations. The Teva investigation seems to go further by focusing on conduct which, on its face, is legitimate but could still be seen as abusive if Teva's aim was to put up barriers and prolong patent protection artificially.
 
This is unlikely to be the Commission's last investigation into abusive conduct in the pharmaceutical sector. With repeated allegations of misuse of patent procedures riddling the pharmaceutical market, companies in this sector, who will often find themselves in a dominant position based on their IP rights, will need to take particular care to ensure that their IP filing and enforcement strategies are not perceived as abusive by the regulatory authorities.
 
With special thanks to trainee Kristina Holm for her contribution to this blog.