The Italian Competition Authority launches an investigation into suspected pay-for-delay agreements between 8 pharma companies concerning a biosimilar drug (Biogen / Samsung / Genentech...)

Factual background and preliminary objections

In short, Samsung and Biogen are under investigation for suspected collusion with the rightsholders to Lucentis (the originator) to delay entry of the generic/biosimilar drug into the Italian market after the SPC expiration date in exchange for early entry into the U.S. market before expiration of U.S. IP rights. The ICA established the following timeline of facts:

• On August 18, 2021, the EMA issued Market Authorization (MA) for Byooviz to Samsung.
• In September 2021, Samsung and Biogen published press releases announcing that they had entered into a “global license agreement” with Genentech that would allow Samsung and Biogen to market Byooviz in the United States before Genentech’s SPC expired. The news was also published by trade magazines that speculated that, a few weeks after Byooviz received its EMA MA, Samsung and Biogen had agreed on different launch dates for the U.S. and European markets.
• The Byooviz procedure before the Italian Drug Authority (AIFA) to obtain provisional classification as a drug admitted to market in Class C-nn^[1] commenced in October 2021 but it was not completed until April 18, 2023, because Samsung was reticent and uncooperative (despite multiple reminders, Samsung allegedly failed to send the AIFA the documentation needed to complete the procedure).
• After C-nn classification of the drug, Samsung never submitted a request to negotiate the reimbursement price of Byooviz and never formally applied to list Byooviz as a reimbursable drug, which means it never filed “ready to market” communication with the AIFA.
• As a result, as of today biosimilar Byooviz has never been launched in Italian the market, though Genentech’s SPC for the active ingredient expired on July 23, 2022.
• The delay caused Italy’s National Health System (NHS) to pay a higher reimbursement price for the relevant drug than it would have paid if the biosimilar had entered the market.
• The AIFA flagged the conduct as anomalous because (i) biosimilar manufacturers naturally have an incentive to enter the market as fast as possible (e.g., by negotiating the reimbursement price before the patent’s expiration date, as specifically allowed by law, and/or by beginning storage pursuant to Reg (EU) 2019/933) and (ii) the drug market for Byooviz is notably profitable. Additionally, according to the ICA’s preliminary assessment, there was no barrier to entering the market after July 2022 (i.e., after the SPC’s expected expiration date).

Against this backdrop, the ICA assumed that there might have been a coordinated commercial strategy for entry of Byooviz into the Italian market that resulted in prolonging the originator’s exclusive rights to Lucentis possibly also for the economic benefit of Novartis, which is in charge of commercialization. Supporting evidence includes the following:

• As of now (June 2024), Byooviz has never been launched in Italy (and Europe), even though Genentech’s Italian SPC expired in July 2022.
• The Samsung press release and news briefs imply that parties to the global license agreement agreed on launch dates in countries other than the United States well beyond the expected expiration date of the patent/SPC.
• Samsung and Biogen may have received an abnormal transfer of value (e.g., early access to the U.S. market) to induce agreement to delay the launch of Byooviz in Italy.

The ICA has opened a formal investigation that may or may not end in an infringement decision and sanctions, depending on the elements collected during the investigation and the defenses of the parties. There is no maximum duration for the investigation, as the ICA may extend the initial deadline for finishing the investigation until it has collected enough evidence and information either to issue a statement of objection or to close the investigation without a finding of infringement.

Comments and takeaways

This is the first significant proceeding on pay-for-delay agreements launched by a national competition authority in the EU since the renowned Lundbeck (citalopram) and Servier (perindropil) decisions of the European Commission, the substance of which was upheld by the Court of Justice of the European Union.^[2] Another pay-for-delay case (Teva/Cephalon^[3]) is still pending before the Court of Justice of the European Union. Stakeholders in the sector are eagerly awaiting the results, as the judgement should offer guidance about which agreements between originators and generics may constitute infringement of competition law.

In assessing pay-for-delay conduct, courts and authorities must strike a delicate balance between potentially conflicting legal interests, though both aimed at safeguarding incentives for innovation. On the one hand, IP law grants patent exclusivity to foster private investment in innovation that brings new and more effective medicines to market; on the other hand, competition law protects the competitive process to ensure that pressure to innovate remains strong, that innovation (i.e. new technologies or cheaper medicines) are delivered in a timely fashion to the benefit of patients and public health spending, and that artificial delays caused by exploitation of loopholes in the patent system are avoided. Indeed, establishing infringement of competition law in a scenario where undertakings might argue that they exercised their rights in compliance with patent law and sector regulation is tantamount to finding an “abuse of right,” which is always challenging.

Notwithstanding the complexity and thorny assessment of this type of conduct, with this new investigation the ICA is once again showing its willingness to test the boundaries of competition law in its interplay with patent protection principles and regulation in the pharmaceutical sector. Over the last ten years, the ICA has positioned itself as one of the leading national authorities in enforcing competition law in this field by investigating and sanctioning conduct based on the abuse and misuse of IP rights and sector regulation, starting with the abuse case against Pfizer/Xalatan (2014), then followed by the seminal excessive pricing cases (which also involved misuse of regulation) against Aspen^[4] and Leadiant^[5] with respect to drugs for very rare diseases (aka “orphan” drugs). These cases have been upheld by the courts. Notably, in the Xalatan abuse case the Italian Civil Supreme Court (Corte di Cassazione) recently upheld the award of damages to the NHS because it was overcharged for the medicine due to antitrust infringement.^[6]

Arguably, the investigative effort and standard of evidence required to establish that the alleged “concerted practice” is an anti-competitive “by-object” pursuant to Article 101 TFEU—in line with the Lundbeck and Servier judgements and meaning that the conduct is presumed unlawful with no need for a full analysis of actual effects on the market—is greater than in the case of existence of a formal license or settlement agreement expressly linking both early marketing in US and suspending entry in Europe. Indeed, unless the ICA can rely upon a written text expressly mentioning that linking, the ICA would have to find circumstantial evidence to prove that the license to enter the U.S. market with Byooviz was intertwined with the decision to suspend biosimilar entry into the European market. Under existing case law of the CJEU, to this end the ICA will ultimately have to demonstrate that this conduct cannot be explained by any plausible alternative economic rationale or legitimate objectives other than delaying price competition that would otherwise have existed between the parties (counterfactual analysis).

More specifically, the ICA would need to find that (i) the unique plausible rationale for the parties’ conduct was to buying off biosimilar competition into the European and Italian markets for a certain time after the scheduled expiration of the originator’s exclusivity protection in those jurisdictions and (ii) Samsung/Biogen agreed to enter the European market later than initially planned in exchange for a “reverse payment,” i.e., a transfer of value from the originator to the generic consisting of “abnormal inducement” to delay entry in the face of legal uncertainty on actual patent validity or expiration date, and irrespective of subsequent assessment of it by competent courts. To this end, the ICA will ultimately need to demonstrate that the value of the Byooviz’ license to enter the U.S. market earlier than the scheduled Lucentis’ expiration date can only be explained as payment for Samsung/Biogen accepting late entry in Europe and Italy. Such analysis—which is key to assessing whether pay-for-delay conduct is anti-competitive by-object— likely also requires economic analysis of the actual and hypothetical cost/profit ratio of the transfer of value to be confronted with the parties’ incentives in the counterfactual scenario. However, this must not be confused with analysis of the actual (and potential) effects of the conduct on the market, evidence of which is only relevant when by-object infringement is not found, or if the defendant claims that the conditions for individual exemption are satisfied pursuant to Article 101(3) TFEU.

In principle, under EU competition law and case law, any inducement to carry out conduct that does not reflect merit-based competition and may restrict it (e.g. a conduct replacing the uncertainty of competition with the sharing of certain profits), can be characterized as “unfair or “abnormal”, i.e. unnecessary or disproportionate to exercise a right or to attain a legitimate objective. The assessment of the unfairness or “abnormality” of a conduct is particularly challenging when it may reflect the exercise of IP rights, considering that competition authorities (and appeal courts) cannot ascertain or delve into the scope and validity of a patent—not even incidentally—and that, by definition and statute, IP rights protect the right to market exclusivity and, thus, to exclude competitors.

To conclude, the ICA’s willingness to undertake cases like this one clearly signals a competition enforcement policy in the pharmaceutical industry aimed at encouraging the fastest possible entry of generics/biosimilars in the medicine market. This was the goal of the “SPC Waiver” introduced by Regulation (EU) No. 933/2019 (also cited in the ICA decision discussed here), as well as of the EU proposal for a new code for medicinal products for human use to be discussed by the European Parliament as part of the EU Pharma Package.

In this context, it is essential for both originators and generic or biosimilar manufacturers to assess their conduct and strategy concerning management of patent lifecycle, including from a competition law perspective. This is particularly important if the conduct or strategy concerned can potentially delay market entry of a generic product. Any agreement or concerted practice resulting in delaying generic or biosimilar entry later than initially planned by generics based on the originator’s expected patent expiration date (even if genuinely disputed) is likely to be closely scrutinized by the ICA, and perhaps by other NCAs, to seek out potential “abnormal inducements” or transfer of value to that effect.

This article has been published also on Concurrences.com on May 21, 2024.

[1]Class C-nn is a provisional listing for drugs admitted to market that are set to undergo the negotiation process with the AIFA to establish the reimbursement price. However, the price cannot yet be reimbursed by the NHS, and therefore their cost is borne entirely by the hospital or patient.

[2]See here and here our previous articles on these cases, as well as the recent CJEU judgements of June 27, 2024 in Servier/perindropil, in particular Case C‑176/19 P and Case C‑151/19 P.

[3]Decision of the European Commission of November 26, 2020 in case AT.39686. See also judgement of the General Court of October 18, 2023 in Case T-74/21, now under appeal before the CJEU (Case C-2/24).

[4]See here our previous article on this case.

[5]See here our recent article on this case on Concurrences.com.

[6]See here our recent article on this case.