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Few pharmaceutical patent settlements face competition law problems, says report

Most pharmaceutical patent dispute settlements between originator and generic companies are agreed in ways that avoid competition law problems, the European Commission has said. 03 Dec 2015

But a competition law expert has said that while two critical pay-for-delay cases go through an appeals process there will continue to be legal uncertainty for businesses.

In its latest report on patent settlements, covering 2014, the Commission said that the number of disputes has dropped to 76 from 146 in 2013 and 183 in 2012, and is closer to the levels when monitoring began in 2009 and 2010. However, the Commission said that annual dispute numbers have risen since 2000 to 2008, when the average was only 24.

"At the same time, the number of settlements that might attract competition law scrutiny remains at a low level. This shows the industry's continued ability to effectively settle patent disputes in ways that raise no antitrust concerns," the Commission said in a statement.

88% of settlements fall into categories that raise no need for competition law scrutiny, the Commission said, and companies are able, in most cases, to "solve their disputes in a manner that is typically considered unproblematic from a competition law perspective", the report said.

The Commission's report is likely to be of little reassurance to the pharmaceutical sector which will continue to operate in a considerable amount of uncertainty until the appeals in the Lundbeck and Servier pay-for-delay cases are concluded, said competition law expert Natasha Pearman of Pinsent Masons, the law firm behind Out-Law.com.

'Pay to delay' cases involve companies entering into agreements to delay the launch of rival products even after patent rights to the drug have expired. In 2014, the European Commission fined Servier for abusing its dominant position in relation to the drug perindopril. Among the issues relevant to the case was the fact that Servier had filed a patent cluster as a tactic to delay generic entry into the market. The Commission also fined Lundbeck €93.8 million in June 2013, in relation to anti-competitive agreements concerning its blockbuster drug Citalopram.

"The classification of potentially problematic patent settlements being those where a 'value transfer' is made to delay the launch of generic products is now an all too familiar concept to the pharmaceutical industry," Pearman said.

A value transfer can take different forms, such as the payment of a lump sum or a distribution agreement, Pearman said.

"However, the Commission's report continues to identify, within this category, those agreements which simply consist of a licence agreement being granted. This classification, combined with the Commission's assessment of such patent settlement agreements as having as their 'object' the infringement of competition law, creates a high level of legal uncertainty for the industry. Presently, whether such a patent settlement could be viewed as an object infringement seems to hang on the monetary value of the value transfer," said Pearman.