European Union: The Court Of Justice Of The European Union On The Anti-Competitive Practices Between Hoffman-La Roche And Novartis

Last Updated: 27 March 2018
Article by Gaia Gusmini

On 23 January, the European Court of Justice ("CJEU") issued a preliminary ruling upon request by the Italian Council of State in case C-179/16 concerning the interpretation of Article 101 TFEU, in the well-known proceedings between Hoffman-La Roche and Novartis, of the one part, and the Italian competition authority ("AGCM"), of the other.

In 2014, the AGCM imposed financial penalties upon Novartis and Roche because of an agreement contrary to Article 101 TFEU regarding the promotion of the medicinal product Lucentis, developed by Genentech, which entrusted the Novartis group with its commercial exploitation by way of a licensing agreement, and the medicinal product Avastin, of which the same Genentech entrusted the commercial exploitation to Roche, its parent company. These medicinal products can be used in an equivalent manner to treat certain eye diseases, in the case of Avastin due to its "off label" use.

Through the contested agreement, according to the AGCM, the two companies aimed to create an artificial differentiation between the two medicinal products, manipulating the perception of the risks associated with the use of Avastin in ophthalmology in order to promote Lucentis, causing damage to the National Health Service.

As we have discussed here on this blog, the Lazio Regional Administrative Court ("TAR") dismissed the actions proposed by Roche and Novartis against the fine imposed upon them by the AGCM.

The two companies proposed an appeal at the Council of State, which raised preliminary questions with the CJEU.

In reply to those questions, the CJEU first found the existence of a specific relationship of substitutability between Avastin, although in its "off label" use, and Lucentis, stating that, for the purposes of the application of Article 101 paragraph 1 TFEU, the relevant market includes both the medicinal products authorised for the treatment of the diseases concerned, and "another medicinal product whose marketing authorisation (MA) doesn't cover such treatment, but which is used for this purpose and so presents an effective substitutability with the first".

Regarding the licensing agreement between Genentech and Novartis related to Lucentis, the Court answered that the contested actions weren't ancillary to the licensing agreement and therefore couldn't escape the prohibition laid down in Article 101 TFEU. In particular, the CJEU found that these actions were designed to limit not the commercial autonomy of the parties, but the actions of third parties, particularly healthcare professionals, making sure that the "off label" use of Avastin didn't influence the use of Lucentis. According to the CJEU, this wasn't necessary in order to actualise the abovementioned licensing agreement; in fact, it was set many years after the drafting of the latter, and so was subject to the application of Article 101(1) TFEU. In short, the Court declared that "an arrangement put in place between the parties to a licensing agreement regarding the exploitation of a medicinal product which, in order to reduce competitive pressure on the use of that product for the treatment of given diseases, is designed to restrict the conduct of third parties promoting the use of another medicinal product for the treatment of those diseases, does not fall outside the application of that provision on the ground that the arrangement is ancillary to that agreement".

Finally, the Court concluded that practices aimed at the dissemination of misleading information relating to adverse reactions from the use of a medicinal product for the treatment of diseases not covered by the MA for that product, constitute a restriction of competition "by object" for the purposes of Article 101.1 TFEU.

As it is well known, the concept of competition's restriction "by object" must be interpreted strictly and, in order to determine whether an arrangement can be considered anti-competitive, the content of its provisions, its objectives and the economic and legal context of which it forms a part must be taken into account. In this case, anti-competitive practices aimed at the dissemination of misleading information with a view to artificially expand the perception of adverse reactions from the "off label" use of the medicinal product and the risks connected with its use, are "sufficiently harmful to competition to render an examination of its effects superfluous".

Finally, the Court clarified that this kind of anti-competitive practice cannot make use of the exemption provided for in Article 101 paragraph 3 TFEU. This is in fact subjected to the four cumulative requirements laid down in that provision: i) the arrangement concerned must contribute to improving the production or distribution of the goods or services in question, or to promoting technical or economic progress; ii) consumers must be allowed a fair share of the resulting benefit; iii) it must not impose on the participating undertakings restrictions that are not indispensable; iv) it must not afford them the possibility of eliminating competition in respect of a substantial part of the products or services in question. In particular, in the case concerned, the Court stated that "the dissemination of misleading information in respect of a medicinal product cannot be regarded as 'indispensable' within the meaning of the third requirement for the purpose of being exempt under Article 101(3) TFEU".

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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