An agreement between two companies to promote the use of one product over the other in the market could be considered to be anti-competitive, the Court of Justice of the European Union has recently affirmed.
EU competition rules strictly prohibit any type of agreement between companies which has the object or effect of restricting competition within the single market. Only limited exceptions are provided to this general prohibition. The most flagrant example of illegal conduct infringing competition law is the creation of a cartel between competitors, which may involve price-fixing or market sharing.
The facts of this case which came before the CJEU were briefly as follows. Avastin and Lucentis are medicinal products developed by Genentech, a company which belongs to the Roche group. Genentech entrusted the commercial exploitation of Lucentis to the Novartis group by way of a licensing agreement. On the other hand, Roche markets the product Avastin. Lucentis is authorised for the treatment of eye diseases. Avastin, while authorised only for the treatment of tumorous diseases, is also frequently used to treat eye diseases because it costs less than Lucentis.
In 2014, the Italian competition authority (the AGCM) imposed fines on both Roche and Novartis for having put in place an arrangement in order to achieve an artificial differentiation between Avastin and Lucentis. The AGCM was of the opinion that Avastin and Lucentis are equivalent in all respects for the treatment of eye diseases. It observed that the arrangement was intended to disseminate information, giving rise to concerns regarding the safety of the use of Avastin in ophthalmology.
The objective of this arrangement was to cause a shift in demand towards Lucentis. The companies filed an action before the national courts against the fines imposed. This action was, however, dismissed. They then lodged an appeal before the appellate national court which in turn referred the matter to the Court of Justice for a preliminary ruling on the interpretation of EU competition law.
The CJEU examined primarily as to whether the two products could be considered to be substitutable and hence fall within the same relevant market. One of the main bones of contention was the fact that Avastin, although not authorised for the treatment of eye diseases, could be considered to be substitutable with Lucentis, which is specifically authorised for such diseases.
The court remarked that, in principle, medicinal products that may be used for the same therapeutic indications belong to the same market. However, the fact that pharmaceutical products are manufactured or sold unlawfully prevents them from being regarded as substitutable with products manufactured and sold lawfully.
The court observed that EU rules governing pharmaceutical matters prohibit neither the prescription of a medicinal product outside the conditions laid down in its marketing authorisation nor its repackaging for such off-label use, provided that they comply with certain conditions. It is up to the national courts or the competent authorities to verify that these conditions are satisfied.
In so far as the products in question are concerned, the court noted that, for the treatment of eye diseases, there is a specific relationship of substitutability between Lucentis and Avastin when used off label.
The CJEU concluded that, unless the competent authorities or the national courts declare that the conditions for repackaging and the off-label prescription of Avastin was unlawful, the competition authorities had every right to consider the two products as competing medicinal products.
The court then proceeded to observe that the arrangement between the Roche group and the Novartis group could not be justified as being ancillary and objectively necessary to their licensing agreement. The arrangement was not designed to restrict the commercial autonomy of the parties to the licensing agreement regarding Lucentis but rather the conduct of third parties and, in particular, healthcare professionals, with a view to reducing the prescription of Avastin in ophthalmology for the benefit of Lucentis. The CJEU concluded that such an arrangement promoting, in a context of scientific uncertainty, misleading information relating to adverse reactions resulting from the off-label use of one of those products with a view to reducing the competitive pressure it exerts on the other product, constitutes a restriction of competition.
Companies need to tread very carefully when entering into any type of agreement, be it horizontal or vertical, that is whether with a distributor or a competitor, and this in order to ensure that such an agreement has no anti-competitive implications. The fines imposed for the breach of competition rules are often hefty ones in order to serve as a deterrent to those traders that seek to impede competition on any particular market to the detriment of consumers and competitors alike.
Mariosa Vella Cardona is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law.
mariosa@vellacardona.com