EFPIA regrets court ruling on Lundbeck patent settlement

The European Federation of Pharmaceutical Industries and Associations (EFPIA) has come out in support of the Danish company, saying it regrets the General Court (GC) of the European Union’s decision to uphold the European Commission’s classification of the Lundbeck (LUND: CO)  patent settlement agreements as restrictions of competition “by object” thereby judging them to be unlawful.

The ruling runs contrary to recent case law from the European Court of Justice, which states categorically that the concept of a restriction “by object” – a restriction that by its very nature is presumed to have a negative effect on competition – must be interpreted narrowly, taking into account the specific economic and regulatory context (Case C-67/13, Cartes Bancaires), the EFPIA argues. The Court indicates that the Commission has satisfied this test by virtue of “the broad logic of the contested decision” but at the same time finds that the Commission is not required to fully assess “a specific category of an agreement in a particular sector”.

EFPIA contends that:

• it is inappropriate to classify a lawful settlement agreement as an illegal market-sharing cartel because early generic market entry constitutes potential competition;
• the complexity of patent litigation in the pharmaceutical sector makes a presumption of unlawfulness without concrete analysis inappropriate; and
• value transfers must be considered against background of the considerable damage that the early entry of a generic – prior to patent expiry – may have in a market in terms of  irreversible reimbursement price cuts and the knock-on effects caused by international reference pricing.

The fact or size of any value transfer must be considered in terms of the considerable and disproportionate economic risks at stake in Europe. In many markets the lack of injunctive relief – a court order for the defendant to stop a specified act or behaviour – makes the problem worse.  It is troubling that the Court has summarily dismissed the need to take into account the specificities of the pharmaceutical sector.

The ruling disputes that patents are a legal bar to market entry that prevent potential competition within the scope of their claims. That creates uncertainty for many collaborative relationships between innovators with large patent portfolios, the trade group states.

The EFPIA says it will continue to support Lundbeck if the company decides to appeal this judgment to the European Court of Justice.