AstraZeneca Commission reasons 60 million fine

08 December 2006

Richard Eccles

The European Commission has now published the full reasoning behind its decision adopted on 15 June 2005 fining AstraZeneca (“AZ”) €60 million for abuse of dominant position through misuse of supplementary protection certificate (“SPC”) and marketing authorisation procedures as part of a strategy to exclude competition from generic manufacturers. AZ’s appeal against the decision is pending before the European Court of First Instance.

The types of abuse condemned by the Commission in this case do not fall into any of the well established categories of abuse of dominant position and indicate that the European Commission will be prepared to find new types of misconduct as infringing Article 82 of the EC treaty where the aim and effect is to foreclose competition from new entrants.

As with all Article 82 cases, it was first necessary for the European Commission to establish that AZ was in a dominant position. The relevant market concerned products to treat acid-related gastro-intestinal diseases and conditions, in which AZ is a leading player with Losec. In particular, AZ was the pioneer inventor of proton pump inhibitors (“PPIs”) and held the key technology protecting the active ingredient omeprazole. In order to show that AZ was dominant, it was necessary for the Commission to define the market by reference to the fourth ATC level (which refers to a medicine’s mode of action), departing from the normal starting point of the third ATC level (which refers to the therapeutic indications). Since PPIs are one of five categories of medicines within the third level ATC class A2B, drugs for treatment of peptic ulcer, it was necessary for the Commission to demonstrate that PPIs constitute a distinct market from the other categories, in particular H2 blockers. The Commission did so by reference to detailed data on the inter-relationship on price and sales trends during a 10 year period of PPIs on the one hand and H2 blockers on the other, and also a dynamic analysis of trends in usage and demand patterns and prescribing practice over the same period, in order to show that there was a significant patient population for which only prescription PPIs provide appropriate treatment.

The first abuse of dominant position, according to the Commission, involved findings concerning what the Commission termed misrepresentations, comprised in statements made by AZ to patent offices in various EEA contracting states (and to patent agents for purposes of applications or representations to those patent authorities), regarding the first authorisation date and first marketing date for Losec in the EEA. AZ consistently referred to March 1988 as the first authorisation date, by reference to the Luxembourg liste, whereas the Commission referred to a body of evidence showing that the product had been placed on the market much earlier and that, moreover, a market authorisation had been issued in France in April 1987. These misrepresentations, it was held, served to achieve a later start date for the SPCs thus in effect prolonging patent protection for Losec and excluding the possibility of generic competition for a period of several months longer than what was justified under the SPC and marking authorisation rules. Moreover, AZ continued to make such misrepresentations originally made to patent offices and patent agents, to national courts of various EEA contracting states, after the grant of their SPCs was challenged by competitors. The overall duration of the first abuse comprising these misrepresentations varied as between the different affected EEA contracting states, but overall ran from 1991 to 2000.

The Commission concluded that it was not necessary to show that the misrepresentations were relied upon by patent agents, patent offices or the courts in order to be abusive. The aims were anti-competitive whether or not they were fully successful. The qualification of a practice as abusive was considered by the Commission not to require that the intended effects were achieved in full. The presumption of validity in favour of the SPCs that resulted from AZ’s conduct resulted in potential generic entrants being obliged to spend time, effort and money in challenging the SPCs before national courts and patent offices in several countries where AZ’s strategy had resulted in SPCs which either would not have been granted or would have been granted for shorter duration absent the misrepresentations which were found to be abusive.

The second abuse, according to the Commission, involved selectively de-registering Losec capsules or substituting Losec tablets for capsules in various EEA contracting states in order to take strategic advantage of the marketing authorisation rules as they existed at the relevant time (between March 1998 and the end of 2000 overall). This conduct was carried out in order to prevent generic omeprazole manufacturers from showing that their products were essentially similar to those covered by the original reference product, for purposes of obtaining their own marketing authorisation. In addition, AZ exploited the requirement that existed at the relevant time that the reference product is marketed in the member state where the application is filed, by withdrawing the capsule formulation authorisation. Therefore even though the exclusivity protecting the clinical trials data of the reference products had expired, the generic manufacturers were unable to obtain their own marketing authorisations. The Commission concluded that this strategic use by AZ of a marketing authorisation, in particular de-registering it to prevent or delay generic entry, does not form part of the “subject matter” of the marketing authorisation. The subject matter consists only in allowing the holder to market the medicine in question, but does not confer any right to prevent any parties from entering or operating in the market place.

The Commission’s analysis and conclusions are interesting on two levels, quite apart from the novel nature of the abuses of AZ’s dominant position identified by the Commission. First, as regards the first abuse, they indicate that misrepresentations can be treated as an abuse even where the relevant regulations providing the context for the misrepresentations themselves provide for remedial action against such behaviour, i.e. invalidity. As regards the second abuse, the Commission’s decision shows that conduct which is prima facie legitimate in itself can be abusive where it cannot be considered to be reasonable. The Commission stated that dominant companies must use specific entitlements such as marketing authorisations “in a reasonable way”. For the Commission, the linking factor for each type of conduct here was that it formed a key part of a strategy which was planned and implemented to strengthen a pre-existing dominant position by obstructing market entry by generic manufacturers.

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