investigation": two words to strike fear into the heart of any
IP owner. In the EU, fines can total 10% of turnover; in the
US, you face treble damages. Then there are the possible
criminal penalties (including company directors being sent to
jail), not to mention the burden of protracted litigation.
Companies such as Microsoft and AstraZeneca are among those who bear the
financial scars from encounters with antitrust authorities.
The pharmaceutical industry is particularly vulnerable to
accusations of abuse, partly thanks to a business model that
hinges on monopoly protection arising from patents and other IP
rights, and partly because many governments have a direct
interest in keeping prices down. Over the past few years,
attention has focused on so-called pay-for-delay (or reverse
payment) deals where a patent owner agrees to pay generic
rivals to delay entering the market.
agreements typically arise when a generic company is
threatening to challenge the validity of the patent: the patent
owner benefits by retaining its monopoly, while the generics
earn something for nothing. You can see why, to an independent
observer, pay-for-delay deals smell a bit: why is someone being
paid not to manufacture? What if the patent might
be invalid? Does maintaining the patent monopoly mean that
prices are kept artificially high?
Addressing some of these questions, the US Supreme Court
ruled this month in FTC v Actavis, a case where manufacturer
Solvay had paid Actavis and others not to manufacture generic
rivals to its AndroGel product. Coming down 5-3, the Court said
essentially that reverse-payment deals can be
anti-competitive, and it is down to lower courts to examine the
facts in each particular case. This seems like a recipe for
longer, more intensive litigation.
Coincidentally, last week the European Commission fined branded company Lundbeck and various
generic rivals a total of €146 million over
pay-for-delay agreements with generics (including, as it
happens, Actavis) over citalopram (branded as Celexa). The case
is slightly unusual in that it involves process patents that
extended protection after the basic patent had expired.
Lundbeck is challenging the decision before the courts in
Luxembourg, so we’ll see what facts come out.
argue that pay-for delay deals "harm patients and national health systems"
by keeping prices artificially high. But in a strong dissent in the Actavis
case, Chief Justice Roberts noted that the effect of the ruling
might be to discourage generics from challenging pharma
patents. That could mean that patents that should be
invalidated remain in force, keeping prices artificially high.
And, as Jason Rutt of Rouse in London (formerly
head of patents at Pfizer UK) told me this week: "Most pharma
companies will not take the risk of settling these disputes.
No-one wants to be found guilty of anticompetitive
So cases where the patent is likely valid (where, say, the
patentee thinks they have a 60% to 70% chance of success) will
probably be fought rather than settled – with all the
extra costs that involves. Lawyers will win, but innovators,
generics and consumers will lose. The industry might also look
beyond patents: in Europe, regulatory data protection must seem
increasingly attractive and companies might also consider trade
secrets (though they are probably of limited value in this
industry where licensing is so common). Neither is ideal for
industry or the public.
The interventions of competition authorities and courts so
far have alarmed the industry, increased risk and potentially
killed off settlements. As Rutt says, what we need now are some
positive rules and examples of model behaviour.
That’s the best way to ensure a healthy