Alleged Abuse of Patent System the Focus of EU Commission’s Latest Pharma Sector Enforcement Action

November 7, 2022 Advisory

On 10 October 2022, the European Commission commenced formal competition law enforcement proceedings under Article 102 of the Treaty for the Functioning of the European Union (Article 102 TFEU) against global pharmaceutical company Teva in relation to the alleged misuse of patent procedures and the exclusionary disparagement of a competing multiple sclerosis medicine.

This is yet another instalment in a long running fight between pharmaceutical companies and the European competition regulator over the patent tactics of certain pharmaceutical companies, allegedly aimed at foreclosing generic manufacturers from the patent holder’s markets. As far back as 2005, the EU Commission held that Astra Zeneca was abusing its dominant position by misusing patent and regulatory procedures as part of a strategy aimed at preventing and delaying the entry of generic products.

However, it is worth noting the current action also introduces a new form of alleged abuse under Article 102 TFEU. As EU Commission VP Margrethe Vestager emphasised in a recent speech on competition law enforcement, the type and categories of abuse under Article 102 are never closed. In this case, we see an example of where the boundaries of abuse of dominance are being expanded to include allegations of disparaging a competitor’s products as part of an exclusionary strategy. This type of behaviour would normally be associated with unfair competition laws (a form of fair commerce legislation) which exist in member states’ domestic law and not EU competition law. There is also another case on the Commission’s docket involving disparagement of pharmaceutical products which has not yet reached the stage of formal enforcement proceedings. In June 2022, the Commission opened a second investigation into potentially abusive product disparagement. It is considering whether Vifor Pharma has breached Article 102 of the TFEU by disparaging Pharmacosmos, its closest competitor in the supply of high-dose intravenous iron treatment medicine.

Background

Teva is a global pharmaceutical company headquartered in Israel and operating through several subsidiaries in the European Economic Area (EEA). One of Teva’s most successful products, Copaxone, is widely used for the treatment of multiple sclerosis and contains the active pharmaceutical ingredient “glatiramer acetate” over which Teva held a basic patent until 2015. The European Commission carried out a number of inspections at the premises of Teva subsidiaries in the EEA between October 2019 and January 2020. In March 2021, the EU Commission announced that it had opened an antitrust investigation to assess whether Teva may have blocked or delayed the market entry of competitors to Copaxone through the misuse of patent procedures and the exclusionary disparagement of competitor products, in breach of Article 102 TFEU.

Statement of Objections

The issue of a Statement of Objections is the formal commencement of competition law enforcement proceedings under Council Regulation No. 1/2003. It sets out the EU Commission’s case and provides an opportunity for the defendant company to respond to the allegations made against it.

On 10 October 2022, the EU Commission sent a Statement of Objections to Teva setting out its preliminary findings and its allegations that Teva has abused its dominant position in the markets for glatiramer acetate in Belgium, the Czech Republic, Germany, Italy, the Netherlands, Poland and Spain, in breach of Article 102 TFEU. The Commission is concerned that Teva has engaged since February 2015, and continues to engage, in two types of abusive conduct which had the intention of artificially prolonging the exclusivity of Copaxone by hindering the market entry and uptake of competing generic versions of glatiramer acetate medicines.

Misused Patent Procedures

Divisional patents are patents derived from an earlier patent and whose subject matter is already contained in the earlier patent. Divisionals are a known and acceptable manner of ensuring that protection is obtained for different aspects disclosed in a patent application. Divisionals do not extend the term for which protection is obtained.

The EU Commission investigations allege that “after the original basic patent expired, Teva artificially extended the basic patent protection of glatiramer acetate by filing and withdrawing secondary patent applications, so forcing its competitors to file new lengthy legal challenges each time”. The Commission alleges that this process artificially prolonged legal uncertainty of whether a medicine is covered by a patent to the benefit of the patent-holder. The legal uncertainty provided by the process is alleged to have the effect of blocking or delaying the entry of generic or generic-like medicines.

In short, it is not the filing of divisional patent applications that is complained of, but the manner in which divisional patent applications were used.

Disparagement of Competitor Products

The EU Commission put forward a new form of abuse under Article 102 TFEU. It alleged in the Statement of Objections that Teva’s disparagement campaign against competitors’ products targeted health care professionals and was designed to cast doubt on the safety and efficacy of competing glatiramer acetate medicines and their therapeutic equivalence with Copaxone.

Big money is at stake in this market. The Commission estimates that expenditure by public health authorities in the EU on the Copaxone drug amounted to up to €500 million a year. If the allegations of abuse are proved in this case, the effect of Teva’s behaviour will not only harm competitors and patients, but also result in an unnecessary inflation of public health spending on certain multiple sclerosis treatments. Teva now have an opportunity to respond to the Commission’s allegations in the Statement of Objections and to examine the documents on the Commission's investigation file.

Conclusion

This case highlights how the patent protection system could be gamed through the filing of divisional patents. Whether the current allegations are proved or not, it is certain that the use of successive divisional applications is a rarity and in most cases justified. There seems little need to prejudice the interests of the “normal” users of the patent system by introducing significant changes to catch those that indulge in anticompetitive behaviour. However, it is understood that the processing of divisional applications at the European Patent Office is to be accelerated, reducing scope for uncertainty. The EU Commission is sure to remain a guard against anticompetitive behaviour.

This case is also noteworthy for being the standard bearer of cases based on the new abuse of disparagement of competitor products, with other cases based on similar grounds following swiftly.

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