Highlights: Competition Bureau workshop on antitrust issues in the pharmaceutical sector
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On November 13, 2013, the Competition Bureau held a one-day workshop on antitrust issues in the pharmaceutical sector at the Ottawa Convention Centre. The workshop focused on the potential competition law implications of certain strategies and practices employed by pharmaceutical firms that may have the effect of diminishing competition between branded and generic pharmaceuticals. It also featured a keynote address by Michael Carrier, notable academic and Distinguished Professor at Rutgers Law School.
Approximately 100 participants from both Canada and abroad attended the workshop, including representatives from the Bureau, Health Canada, the US Federal Trade Commission, the pharmaceutical sector, the legal community and academia. The participants actively discussed a number of ongoing competition law issues facing the pharmaceutical sector, such as "pay for delay" or "reverse payment" settlements and the life cycle management strategies employed by drug patent holders.
B. Rationale and objectives
According to the Canadian Institute for Health Information, expenditures on pharmaceuticals by public and private spenders in Canada were estimated to be $34.5 billion in 2013. The same organization reports that in 2011, pharmaceuticals were the second largest category of health care spending in Canada, accounting for over 16 percent of all dollars spent by public and private spenders. Prescription drugs made up almost 85% of that amount. The health care sector is a key component of the Canadian economy, and effective competition from generic pharmaceuticals helps to restrain health care expenditures and ensure the well-being of Canadians.
Internationally, 2013 saw significant antitrust law developments in the pharmaceutical sector. Almost simultaneously, the United States Supreme Court and the European Commission released landmark decisions confirming that so-called "pay-for-delay" patent infringement/invalidity settlements (also referred to as "reverse payment" settlements) are valid targets for antitrust scrutiny. These types of settlements involve generic pharmaceutical manufacturers agreeing to delay the launch of a competing generic product in exchange for a value transfer (e.g., direct payments, lucrative agreements for services, or other forms of compensation) from the branded pharmaceutical manufacturer.
Due in part to these developments, the Bureau hosted the workshop to bring together stakeholders to discuss the Bureau’s role in the pharmaceutical sector. The objective of the workshop was to hear views from all sides relating to the enforcement and policy stance the Bureau should take on issues specific to the pharmaceutical sector.
- Welcoming remarks by John Pecman, Commissioner of Competition
- Panel 1 — International perspective on antitrust in pharmaceuticals
- Moderator: Jay Holsten, Torys LLP
- Panel Members:
- Markus Meier, United States Federal Trade Commission
- Marta Giner, Norton Rose Fulbright (Europe)
- Alan Gunderson, Competition Bureau of Canada
- Aidan Hollis, University of Calgary Department of Economics
- Keynote Address: Michael Carrier of Rutgers School of Law
- Panel 2 — Pay-for-delay settlements
- Moderator: Bill Miller, Competition Bureau
- Panel Members:
- Bill Vanveen, Gowling Lafleur Henderson LLP
- Tim Gilbert, Gilbert’s LLP
- Michelle Lally, Osler Hoskin & Harcourt LLP
- Panel 3 — Life-cycle management strategies
- Moderator: Denis Gascon, Norton Rose Fulbright LLP
- Panel Members:
- Douglas Clark, Patented Medicine Prices Review Board
- Denis Martel, Industry Canada’s Strategic Policy Sector
- David Lee, Health Canada
- Kevin Zive, Apotex Inc.
- Closing Remarks by Martine Dagenais, Deputy Commissioner of Competition
Experts from the United States and Europe provided perspectives on antitrust developments in the pharmaceutical sector in their respective jurisdictions, while Canadian representatives provided insight on the past and present circumstances in Canada.
So-called "pay-for-delay" settlements occur when a patentee agrees to a value transfer to a generic manufacturer to settle a legal proceeding that the patentee itself initiated. If the parties had not settled, a court may have issued a legal judgment, allowing for the possibility of generic entry on the grounds that the patent was invalid or uninfringed.
Critics of pay-for-delay settlements submit that pharmaceutical patent holders use the agreements to, in effect, pay potential generic competitors not to enter the marketplace, thereby lessening competition between branded and generic pharmaceuticals. On the other hand, proponents of such settlements contend that they remove uncertainty surrounding patent litigation, allow litigants to effectively and efficiently settle disputes, and are merely a lawful application of the exclusionary powers granted by a patent.
Life-cycle management strategies
"Life-cycle management strategies" is an umbrella term that covers many practices designed to maximize the value of pharmaceutical patents. While many of these practices are uncontroversial and pro-competitive, certain tactics have raised concerns with regulators.
Of particular concern are so-called "product switching" or "product hopping" strategies. In a product switching strategy, when faced with the prospect of generic entry, the branded pharmaceutical firm obtains one or more additional patents for variations on the same general medicinal compound while the drug is still covered by one or more pre-existing patents. The branded firm introduces a new product covered by the additional patents, and then uses various strategies to encourage prescriptions for the new product instead of the old one. Should the market be converted to the new drug, there may no longer be demand for a generic version of the old patented product.
Critics contend that the additional patents are sometimes for very minor reformulations, such as the switching from a capsule to a tablet, which are of little therapeutic benefit, but which allow the branded firm to extend its exclusivity over the therapeutic compound. In contrast, proponents argue that firms are under no obligation to promote old products or refrain from promoting new products to the benefit of competitors, and that the new patents protect reformulations that provide real therapeutic benefits.
E. Next steps
The Bureau is in the process of updating its Intellectual Property Enforcement Guidelines (IPEGs). This update will occur as part of a two-stage process.
In the first stage, the Bureau will update the IPEGs to reflect legislative changes that have occurred over the past 13 years and the Bureau’s enforcement experience. This update will also ensure that the IPEGs are consistent with other, more recently issued, Bureau guidelines.
The second stage will involve the Bureau considering whether to update the IPEGs to address particular competition/IP issues that were not addressed in the original document. These issues may include conduct such as pay-for-delay settlements and life-cycle management strategies, which were discussed at the workshop.
When deciding whether to update the IPEGs to address additional competition/IP issues, the Bureau will take into consideration the information it receives as part of its public consultation during the first phase, as well as the information it learned during the discussions at the workshop. After careful consideration, the Bureau may release another draft update of the IPEGs for further public consultation as part of phase two, or it may decide to finalize the IPEGs according to the changes it made in phase one.
The Bureau released a draft update of the IPEGs that incorporates the first-stage changes on April 2, 2014. Interested parties have 60 days to provide their comments on the draft update, as well as their views regarding other competition/IP issues that they believe the Bureau should address.
Should the Bureau decide to release another update of the IPEGs following the second stage, stakeholders will be consulted in due course. The Bureau’s position on these matters is evolving, and the Commissioner of Competition remains committed to enforcement action when appropriate in cases where he believes conduct contravenes the Competition Act.
Additional comments on antitrust issues in the pharmaceutical sector may be sent to the Bureau Information Centre.
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