Patently unfair: Advocate General agrees that Lundbeck's 'pay for delay' agreements with generics were anti-competitive

Advocate General Kokott has recently given an opinion in which she proposed that the CJEU uphold the significant fine imposed on the Lundbeck pharmaceutical group in relation to agreements with generic manufacturers to delay the marketing of generic versions of its leading antidepressant.

Background

Lundbeck manufactured an antidepressant under the brand CIPRAMIL containing the active pharmaceutical ingredient (‘API’) citalopram, in respect of which it had obtained patent protection in a number of European countries. This patent protection was due to expire between 1994 and 2003. Between 2001 and 2003, Lundbeck separately obtained a number of additional patents for a novel method of production of citalopram. It also planned to launch a new antidepressant medicine, under the brand CIPRALEX, which was designed for the same patients as those who could be treated by the CIPRAMIL product.

In 2002, Lundbeck entered into six agreements concerning citalopram with a number of generic manufacturers, including Generics UK, Arrow Generics, Alpharma and Ranbaxy. Based on these agreements, the generics effectively undertook not to manufacture or sell pharmaceutical products containing citalopram in a number of EU countries, including the UK and Denmark, in exchange for a value transfer by Lundbeck.

In 2013, the European Commission found that these agreements were restrictions of competition by object and were therefore made in breach of Article 101 of the Treaty on the Functioning of the European Union (TFEU). The Commission also imposed heavy fines on Lundbeck of almost EUR 100 million (as well as the other parties involved). Lundbeck appealed this decision to the EU General Court; this appeal was dismissed in September 2016.

Lundbeck then appealed the General Court's decision to the CJEU on the basis that the General Court had erred in finding that:

 (i) there was a potential competitive relationship between Lundbeck and the generic manufacturers at the time the agreements were concluded; and

(ii) the agreements were restrictions of competition by object.

Advocate General's opinion

On ground (i), the Advocate General agreed with the General Court that the fact Lundbeck had patent protection for its product which 'blocked' the generic manufacturers in question from entering the market did not preclude the finding of a competitive relationship between them. She commented that a patent is not an "insurmountable barrier" to a generic entering the market because "the presumption of validity of patents is merely the automatic consequence of the registration of a patent…and therefore sheds no light on the outcome of any dispute relating to the validity of that patent."

The Advocate General also agreed with the General Court that the fact a generic manufacturer has not yet obtained a marketing authorisation (MA) for a medicinal product should not preclude a finding of a competitive relationship between that generic and the holder of the patent for that medicinal product - they need only to have made "sufficient preparatory steps to enable it to enter the market concerned within such a period of time as would impose competitive pressure on the patent holder" (which may or may not include obtaining an MA).

On ground (ii), the Advocate General agreed with the General Court's finding that the agreements in question were restrictions of competition by object and was not persuaded by Lundbeck's argument that the agreements did not go beyond the scope of the restrictions imposed by its patents. While she acknowledged that it is indeed possible for a generic manufacturer to decide independently not to enter the market and to conclude a patent dispute settlement agreement in that context, Article 101 TFEU prohibits operators from knowingly substituting practical cooperation between them for the risks of competition. Consequently, she commented that a patent dispute settlement agreement is akin to a restriction of competition by object if the value transfer from the patent holder to the generic manufacturer "has no explanation other than the common commercial interest of the parties not to engage in competition on the merits".

(For further details, see the opinion and CJEU's press release.)

Comment

This opinion closely follows the CJEU's decision in Generics (UK) and Others (C-307/18) of earlier this year, in which the CJEU found – on the basis of another opinion from Advocate General Kokott – that certain patent settlement agreements between GSK and a number of generics also breached Article 101 TFEU.

Although her findings are unsurprising, the Advocate General's opinion emphasises the European courts' continued strict approach to anti-competitive elements in patent settlement agreements and willingness to impose prohibitively large fines on patent holders for such behaviour. In particular, she was not amenable to Lundbeck's arguments that a fine was unjust given the amount of uncertainty that there was back in 2002 (when the agreements were concluded) regarding how patent settlement agreements would be assessed under competition law.

Advocate General Kokott's opinion is of course not binding and will only inform the CJEU's ultimate decision on Lundbeck's appeal. However, it would be very surprising if the CJEU were to diverge substantially from her opinion given its recent decision in Generics (UK) and Others. It therefore remains important for rights holders (for all IP rights) to carefully consider relevant competition law when entering into settlement agreements and in particular whether such agreements – even if they purportedly only resolve future disputes between the parties – could be read as having restriction of competition as their object.