EU/UK Competition Law Newsletter - August 2011

August 1, 2011

Pharmaceutical Developments; EC Reports on Patent Settlements for the Second Time

On July 6, 2011, the European Commission (EC) adopted its second report on the monitoring of patent settlements in the pharmaceutical sector in the EU. The monitoring exercise collected data on settlement agreements between originator and generic companies during 2010. The report follows the EC's EU competition law inquiry into the pharmaceutical sector concluded in July 2009 and the first monitoring exercise, which covered part of 2008 and 2009.

This second monitoring exercise identified 89 patent settlement agreements in the EU between originator and generic companies in 2010. This compares with 207 such agreements during the 8.5 years covered by the sector inquiry and 93 agreements during the 18 months covered in the first monitoring exercise. The report emphasises, however, that the number of settlements potentially problematic from a competition law point of view – in particular those that limit generic entry against payment from the originator to the generic company – decreased significantly more in importance and number.

The EC has indicated that it will continue monitoring the sector to make sure that settlements are not delaying entry of generics into the market and that they do not contain other restrictions that would be problematic under EU competition law. It will repeat the monitoring exercise in 2012.

Pharmaceutical Developments; EC Settles Case Concerning Alleged Patent Misuse

On the same day that it published its second report on monitoring of patent settlements in the EU, the parties settled a live case that the EC had been investigating in the area. The case concerned allegations by Spanish pharmaceutical company, Almirall, that the German pharmaceutical company, Boehringer Ingelheim (BI), had filed for unmeritorious patents regarding new treatments of chronic obstructive pulmonary disease (COPD). The EC’s investigation concerned whether this was an alleged misuse of the patent system in order to exclude potential competition in the area of COPD, in breach of EU competition law rules.

Under the settlement agreement, the alleged blocking positions will be removed for Europe, a licence will be granted for two countries outside Europe and pending litigation between the parties will be ended. Almirall will therefore be able to launch its competing medicines after obtaining marketing authorisation from the competent bodies.

The case is interesting generally as it provides an example of the EC taking a pragmatic approach to the investigation (it had suggested that the parties reach a commercial settlement) and as it provides another example of the EC’s focus on the pharmaceutical industry, in particular the need to increase competition in relation to medicines.

UK Office of Fair Trading Publishes Competition Compliance Guidance for Directors

Following a consultation carried out last year by the UK Office of Fair Trading (OFT) on competition law compliance guidance for companies and directors, the OFT published on June 27, 2011 the final versions of its guidance material.

The two principal documents published by the OFT are worth reading in detail. The OFT expects to see active engagement by directors. It comments that a director with overall responsibility for a business area (but not immediate management responsibility over individuals responsible for an infringement) should make "reasonable enquiries" so as to seek to identify competition law breaches (presumably on a fairly regular basis). Non-executive directors similarly should make "reasonable enquiries" of the executive directors so as to satisfy themselves that the executive directors have, amongst other things, "taken appropriate steps to identify and assess the company's exposure to competition law risks".

Although these materials relate specifically to the UK, they represent best practice in the EU in the area of competition law compliance.

Additional EU/UK competition law news coverage can be found in our news section.

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