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AstraZeneca loses appeal over anti-competitive Losec patent abuse

A major drugs company has lost its appeal against a ruling by an EU court which had ordered it to pay €52.5 million for abusing a dominant market position in the market for ulcer medicines.07 Dec 2012

The Court of Justice of the European Union (CJEU) dismissed AstraZeneca's (AZ) appeal against a 2010 ruling by the EU General Court in which the company was found to have breached competition laws.

The General Court had found that AZ misled patent-granting authorities in the 1990s in a bid to increase the life of its patents on Losec, the world's best-selling drug at the time. It also ruled that AZ had taken advantage of gaps in the drug regulation system to delay the ability of competitors to release rival drugs.

Both these actions unfairly restricted the ability of generic firms to release competing drugs, the Court had said, and because AZ dominated the market this activity was considered to be a practice falling outside the scope of competition and infringed European competition law.

However, AZ, together with the European Federation of Pharmaceutical Industes and Associations (EFPIA), acting as intervener, which has been a highly vocal opponent of the Commission's activity in this area challenged the ruling and claimed that the General Court had made "errors of law" when forming its judgment. It appealed against the finding that it had acted anti-competitively and against the level of fine it was ordered to pay. However, the CJEU rejected each ground of appeal brought by the pharmaceutical giant.

Among its findings, the CJEU said that AZ "knowingly" made "misleading representations" to patent offices in relation to the date of marketing authorisations – regulators' permissions to sell a drug – in a way which allowed it to unlawfully exploit 'supplementary protection certificates' (SPCs) for its drugs.

In some circumstances, drugs companies can apply for SPCs  , which if granted, extends the company's patent protection to those drugs.  It is designed to "guarantee sufficient protection for the development of medicinal products in the European Union" by ensuring that drugs companies are given the necessary incentive to allow for a return on significant investment into research and development. .

"As regards, in particular, those countries where the misleading representations enabled AZ to obtain unlawful SPCs, [AZ] cannot deny the anti‑competitive effect of those representations on the ground that the applications for the SPCs were filed between five and six years before the entry into force of those SPCs and that, until that time, AZ’s rights were protected by lawful patents," the CJEU said in its judgment.

"Not only do such unlawful SPCs lead, as the General Court observed ... to a significant exclusionary effect after the expiry of the basic patents, but they are also liable to alter the structure of the market by adversely affecting potential competition even before that expiry," it added.

AZ's actions in delaying the ability of generic companies to compete with it had unfairly impinged on market competition in some countries, the CJEU said.

The European Commission, which is responsible for investigating possible abuses of dominant market position under the Treaty on the Functioning of the European Union (TFEU), originally fined AZ €60m over the infringements, but the level of fine was reduced to €52.5m by the General Court when hearing the company's appeal.

Companies which occupy a dominant position are under a special responsibility not to allow their conduct to impair genuine undistorted competition. Failure to observe that special responsibility will amount to an abuse of a dominant position under the TFEU.

Competition law specialist Natasha Pearman of Pinsent Masons, the law firm behind Out-Law.com said that "Whilst a list of abusive conduct is included in the TFEU, it is important to note that the list is not exhaustive and as the CJEU's judgement demonstrates, for dominant companies the illegality of abusive conduct is unrelated to its compliance or non-compliance with other legal rules."

"In short, even if a dominant company is technically abiding with the rules of a regulatory procedure it cannot use regulatory procedures in such a way as to prevent or make more difficult the entry of competitors on the market without a legitimate interest", she added.

The CJEU's ruling follows the recommendations of an advisor to the Court who said, in May this year, that the Court should reject AZ's appeal.

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