On May 13, 2014, the Competition Bureau ("Bureau") announced that it was discontinuing its investigation of Alcon Canada Inc. ("Alcon"). The Bureau was investigating whether Alcon's product life-cycle management strategy for its drug, Patanol, was intended to hinder competition from generic drug companies contrary to the abuse of dominance provisions of the Competition Act ("Act").

Alleged Violations of the Competition Act

"Product hopping" or "product switching" is a strategy designed to switch prescriptions from one product to a second generation formula of the same drug. Alcon's patent in the medicinal ingredient in Patanol was expiring in November 2012. In January 2011, Alcon received its notice of Compliance (NOC) from Health Canada for Pataday, a new once-a-day dosing with the same medicinal ingredient as Patanol.

In July 2012, just four months before Patanol's patent expiry, Alcon stopped supplying Patanol, allegedly designed to force consumers to alternative treatments such as Pataday, Alcon's reformulation of Patanol, which is patent protected until 2022.

The Bureau was concerned that Alcon's product switching would delay or prevent the availability of generic alternatives,1 forcing patients to purchase Pataday at a higher price. The Bureau investigated whether product switching had any anti-competitive effects, such as precluding/delaying the entry of generic medicines. After the inquiry began, Alcon resumed its sales of Patanol in January 2013 and by May 2013 sales were where they had been before the supply disruption. Subsequently, generic versions have captured significant market share from Alcon prompting the Bureau to discontinue the investigation.

Practical Business Implications

Despite ending its investigation, the Bureau made clear that it does not consider product life-cycle management strategies in the pharmaceutical sector to be inherently anti-competitive. However, life-cycle management strategies that are designed to impede competition from generic drug companies "may cause significant harm to competition".2 For example, disrupting market supply for the purpose of switching demand, including by termination, repurchase or recall of supply or similar action to frustrate supply raises potential concerns under the Act.

The Bureau did not make a statement about the circumstances in which replacing a product with a new version will be anti-competitive or an abuse of dominance. It is not clear whether simply replacing one product with a newer one will in and of itself raise flags, nor is it clear when a limitation of supply will amount to an anti-competitive market disruption.

In order to reduce or eliminate risk under the Act, pharmaceutical companies should carefully consider the implications of this investigation and seek legal counsel before making strategic decisions about product life-cycle management.

Footnotes

1. Apotex was challenging Patanol's patents pursuant to the Patented Medicines (Notice of Compliance) Regulations from 2010 to April 2013 when Alcon discontinued the litigation. On November 22, 2012, Health Canada issued Apotex an NOC for the generic verson of Patanol.

2. Competition Bureau Statement Regarding the Inquiry into Alleged Anti-Competitive Conduct by Alcon Canada Inc., May 13, 2014.

Originally published June 2014

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