The latest in pharma antitrust – and lessons for other industries

The pharmaceutical industry is a traditional focus for antitrust scrutiny, with regulators around the globe cracking down on practices that they think stifle competition and keep prices high. This post delves into recent developments in several jurisdictions, highlighting the different ways companies can get into antitrust trouble and summarising key lessons for businesses in all sectors.

Biosimilars: A global concern

Biosimilars are biological medicines highly similar to another already approved biological medicine. As (not identical) “copies” of previously approved pharmaceuticals, they tend to be significantly cheaper than the “original” – therefore the owner of the original product has somewhat of an incentive to keep biosimilars at bay.

A recent case in Italy and a statement from the US FTC provide a showcase of how antitrust can come into play:

• Italy: The Italian regulator is investigating pharma companies for allegedly coordinating commercial strategies to delay the market entry of a biosimilar and thereby causing higher prices for the national health service and patients. The investigation started with dawn raids in Italy and in the Netherlands.
  
• US: Just last week, the US FTC submitted a comment to the US Food and Drug Administration (FDA) to express its support for the FDA’s draft guidance on biosimilars. The FDA has proposed removing the requirements for certain clinical studies in the approval process for biosimilars, which the FTC – noting it is the primary US enforcer of antitrust in the pharma industry – thinks will reduce barriers to entry and facilitate competition.

On a related note (not directly linked to biosimilars), yesterday the Greek regulator sent a statement of objections to a global pharma company. The regulator accuses the company of implementing a systemic strategy to exclude competitors from the market and thereby abusing its dominant position. That strategy allegedly included direct and indirect payments and benefits (e.g., conference travels and donations) and defamatory claims against the competition (a perfect hook for the next topic below).

While trying to protect one’s market share is of course a legitimate aim, these cases highlight scenarios in which companies have allegedly overstepped the line, and how regulators are willing to step in to actively facilitate competition. They show how careful pharma companies have to be in developing strategies around new product launches or managing existing ones.

Disparaging the Competition: A European issue (?)

As already foreshadowed in relation to the Greek investigation above, another recurring theme in recent pharma antitrust cases is the practice of disparaging competitors’ products: Last month, the European Commission concluded a proceeding against a pharmaceutical company that had allegedly disseminated potentially misleading information about the safety of a competing product. The investigation had been ongoing for more than two years (click here for details).

Interestingly, the investigation did not end with a fine for an abuse of dominance, but with commitments. The pharma company under investigation committed – for an entire decade – to launch a comprehensive communication campaign to “rectify and undo” the effects of its previous messages; not to engage in communications about the competing product’s safety; and to implement measures and safeguards to ensure compliance, including trainings for staff. The fact that the company under investigation and its competitor had entered into a commercial settlement earlier this year might have facilitated the Commission’s decision to conclude the investigation with commitments rather than pursuing a fine.

The Commission and the Greek cases demonstrates the seriousness with which competition regulators might go after disparagement tactics. Another Commission investigation into such tactics in the pharma space is currently ongoing.

Cartels: A classic

The Commission is actually also busy with another pharma case: Recently, the regulator sent a statement of objections to yet another pharma company, alleging that the company has coordinated with other market participants to fix minimum prices and allocate quotas, and has exchanged competitively sensitive information. For the same conduct, the Commission has already fined a number of other pharma companies last year.

Cartel activity is of course a “classic” in antitrust and can lead to hefty fines. Businesses should be vigilant against any attempts to engage in price-fixing or market allocation agreements or in the exchange of information, even with seemingly unrelated competitors.

Lessons learned: Beyond pharma

While these cases focus on the pharmaceutical industry (see inter alia here and here for more on antitrust in pharma), the underlying lessons are widely applicable:

• Don’t Stifle Competition: In particular dominant companies should tread carefully when considering strategies that hinder the entry or growth of competitors, especially innovative ones that offer consumers more choice and potentially lower prices.
  
• Truthful Marketing: Again a point that in particular applies to dominant companies – marketing and promotional activities should be truthful and avoid disparaging competitors’ products.
  
• Stay Away from Cartels: Nothing new, but does not get old – price-fixing, market allocation and exchanging competitively sensitive information are illegal and can have severe consequences.

Photo by Michał Parzuchowski on Unsplash