UK: AstraZeneca Loses Appeal At ECJ

Last Updated: 25 January 2013
Article by Ruxandra Cana, Claudio Mereu and Koen Van Maldegem

On 6 December 2012, the Court of Justice of the European Union (CJEU) dismissed AstraZeneca ("AZ")'s appeal against the EU General Court's ruling in Case AstraZeneca v Commission, in which it was fined AZ €52.5 million for breaching competition laws.

The case deals with two forms of abusive conduct on the part of AZ. First, AZ made "misleading representations" to - and withheld regulatory information from - the patent offices of certain Member States in order to obtain or maintain supplementary protection certificates (SPCs) for its ulcer treatment drug, Losec, for the purpose of improperly extending patent protection in order to block generic competition. And second, AZ selectively delisted its marketing authorisations of Losec capsules in certain EU countries to replace them with Losec tablets and thus prevent the introduction of generic products via parallel imports.

The CJEU dismissed AZ's arguments and upheld the General Court's ruling that AZ's regulatory strategies in respect of Losec constituted an abuse of dominant position in violation of EU laws. 

In essence, the CJEU has confirmed that dominant companies have a "special responsibility" and a duty to behave in a "transparent" way when dealing with regulatory authorities.

Misleading patent authorities

The General Court's 2010 ruling (which largely dismissed AZ's action for annulment of Commission Decision C(2005) 1757) found that AZ had submitted "misleading information" to patent-granting authorities in various EU Member States during the 1990s.  AZ had submitted applications to acquire supplementary protection certificates (SPCs) which would increase the life of its patent protection of Losec, the world's best selling ulcer drug at the time. 

Each application included the date on which the supplementary patent protection should begin.  This date was calculated by AZ according to its interpretation of the applicable EU law which provides that the date should begin on the date of "the first authorisation to place the product on the market".  AZ's interpretation of this provision meant that the SPC would begin on a later date, when the market authorisation became effective, rather than when it was granted, thereby giving a longer period of patent exclusivity.   

The General Court held that since AZ had not explained this interpretation, it had retained critical information and misled the national patent offices who were likely to assume that the date referred to by AZ was the date when the market authorisation was actually granted.  According to the CJEU these "highly misleading representations" were made with a "manifest lack of transparency" to mislead the patent offices and judicial authorities "in order to keep for as long a possible its monopoly" on the market.  This, the CJEU ruled, fell outside the scope of competition on the merits and accordingly this ground of appeal was dismissed.

Abuse of dominant position

The General Court had also ruled that AZ abused its dominant position by withdrawing its marketing authorisations for the original 'capsule' version of Losec, whilst at the same time launching a new 'tablet' form of Losec that could be dissolved in water. 

The withdrawal of the marketing authorisations relating to the original version of Losec prevented competitors from relying on the data and clinical trails conducted in relation to it, and this in turn delayed the ability of competitors to release rival drugs.

The CJEU held that this type of conduct "hindered the introduction of generic products and parallel imports [and] does not come within the scope of competition on the merits".  Accordingly this ground of appeal was dismissed.

However, the CJEU did observe that it is perfectly legitimate and "part of the normal competitive process" for an organisation (even one with a dominant position such as AZ) to prepare a strategy to "minimise the erosion of its sales and to enable it to deal with competition from generic products".

Proceed with caution

The fact that the CJEU upheld the ruling of the General Court, combined with a significant lack of practical guidance, will offer little in the way of comfort to organisations, particularly those with a dominant position in the market.

Whilst the CJEU acknowledged that it is legitimate for organisations to adopt competitive strategies, this was merely an observation, and there remains some uncertainty as to how the CJEU's judgement will be applied in practice. Some observers see a parallel between this judgment and other industry sectors with similar registration systems, such as pesticides, although any such comparison will have to be assessed on a case-by-case basis. All organisations (and not just those in the pharmaceutical industry) must therefore proceed with caution both in the way they manage their IP portfolios and the way in which they engage with regulatory authorities. 

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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