The team is joined by Guest Kats Rosie Burbidge, Stephen Jones, Mathilde Parvis, and Eibhlin Vardy, and by InternKats Verónica Rodríguez Arguijo, Hayleigh Bosher, Tian Lu and Cecilia Sbrolli.

Tuesday, 25 April 2017

Fordham 25 (Report 7): Pharma, IP & Competition

Friday afternoon.  For those still standing, the Fordham conference opened up a treasure trove of interesting topics with a little something for everyone.  Laura Whiting made her way to the panel discussion on Pharma, IP & Competition where she reports:

Koren Wong-Evrin
"After introducing the speakers, Prof Daryl LimKoren Wong-Ervin explained the background to reverse payment cases in the FTC.  She commented on her surprise that other countries had cases relating to patent settlement despite not applying regulatory procedures comparable to the Hatch-Waxman system.  She noted that she was concerned by the apparent recent approach of the EU General Court to apply a truncated market analysis, as in her opinion it was preferable to apply a full market analysis to each product and case.  She also felt that it was problematic to exclude an evaluation of the validity of the patent(s) from the economic or market analysis. 
Jurgen Dressel
Jürgen Dressel noted that the European cases showed parallels to the "rule of reason" cases coming out of the FTC.  He said that although there was no system similar to the Hatch-Waxman regime in the EU, the Servier and Lundbeck cases had showed that the arrangements that were entered into between companies could be extremely complex.  In his view, the most concerning aspect for the innovator pharmaceutical industry of the recent decisions was the very narrow definition of "market", which was essentially restricted to the particular molecule in question.  The other concerning issue was that the "by object" definition effectively shifted the burden of proof onto the patentee as soon as any payment was identified.  

Cordula Schumacher noted that since the settlement agreements that were the subject of the recent EU decisions involved so many market players, in her view it was not appropriate to reverse the burden of proof – the situation was too complex for such a simplistic approach.

Justin Watts commented that the agreed facts on which the General Court in Lundbeck made its decision were such that the originator had paid the generic an amount equal to the profits it would have made by selling the drug, without regard to this being linked to the (potential) patent infringement that such sales would arguably have amounted to.  In this extreme case, he says it is understandable that the Court found there to have been anticompetitive behaviour.  However he questioned whether this reflected the real world situation of most disputes and whether it was really possible to apply a bright line test holding any transfer of value to be a problem to other cases, which were inevitably more complex than the assumed fact pattern on which Lundbeck was based.  What was needed was a full analysis of the reality of the competitive environment that obtained in fact in every case.  Deputy Director-General, DG-Comp Cecilio Madero Villarejo commented from the audience that last autumn, the General Court had considered revising its decision that the Lundbeck agreements were anti-competitive, since they had replaced the uncertainty of determining the validity of the patents with the certainty provided for by the agreement in question.

Jürgen asked him whether the Commission still considered that there were still issues regarding reverse settlements following the sector inquiry.  Cecilio explained that the reason why Commissioner Vestager has decided to retain the reporting requirements for this year is because the EU Parliament had asked the Commission to keep looking into the pharmaceutical industry.  He commented that the source of this focus from the Parliament appeared to be the recent news stories relating to alleged price hikes for generic products.  Cordula commented on the cost burden that the continued requirement to answer questionnaires imposed on companies within the sector – and queried whether the Commission had considered the investment that is required?  Cecilio answered that this was one reason why the Commission had intended to discontinue the questionnaire this year.  
Justin Watts
Justin reiterated that the results from the sector inquiry demonstrated that only 10% of the agreements collected involved a reverse payment, and of those only 2% were considered by the Commission to be in any way problematic.  He commented that in light of this low prevalence, it would be helpful to have guidance from the Commission, perhaps even a safe harbour, to assist companies and their advisors to settle patent cases.  Cordula agreed that clear guidance would be useful and commented that legal certainty was highly valued by clients, so in effect it did not matter what the law was, as long as it was clear.  Lawyers would then be able to better advise their clients. 
It was suggested from the audience that a suitable safe harbour for the US might be that a settlement agreement should not allow any exclusivity period for the generic (which would in effect waive its Hatch-Waxman rights).  It was suggested that this would bring pharmaceutical settlements into line with other industries where there is always some kind of reverse payment in return for a settlement, but there is not usually any accompanying exclusivity period.  Koren did not agree that the 180 day exclusivity period needed to be waived as it represented a legislative compromise designed to encourage Paragraph IV challenges by generics.  Jürgen said that he admired the US system as it was predictable, in contrast to the European situation which was unpredictable and varied by country.  
In response to a question about whether there were any parallels which could be drawn from the recent cases on SEP licensing, Justin commented that there were interesting lessons to be learned from FRAND cases, but there are huge differences between assessing the royalty rate for a single basic patent to a compound, and the rate to apply to a whole portfolio of patents on eg. LTE technology.  Jürgen saw little interaction between the two licensing models but noted that this might change in the future, perhaps in the area of personalised medicines, if products evolved which involved a more complicated IP position than traditional small molecules."

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