News

EU Commission issues Teva with €462.6 million anti-trust fine for “playing the divisional game”

21 November 2024

In the competitive world of pharmaceuticals, innovators often employ complex strategies to maintain their market dominance. However, care must be taken to ensure that such strategies are not perceived to contravene the European Union’s competition rules, as a recent EU Commission decision shows.

Teva is a pharmaceutical manufacturer which, until the expiration of the basic patent for the pharmaceutically active ingredient glatiramer acetate (GA), had the exclusive rights for the blockbuster drug Copaxone. Copaxone is widely used for the treatment of multiple sclerosis and as a result Teva were considered to have built up a dominant position within this specific market.

According to the European Commission, following the expiration of the basic patent, Teva committed acts which allowed them to artificially prolong the exclusivity of Copaxone by hindering market entry and uptake by competing GA medications. This was in violation of Article 102 of the Treaty on the Functioning of the European Union (TFEU) and resulted in the Commission issuing a fine of €462.6 million, which they deemed proportionate and necessary to serve as a deterrent.

Specifically, the Commission noted that Teva engaged in two separate, yet complementary acts: (1) misuse of the procedures of the European Patent Office (EPO) in relation to divisional patent filings and prosecution (“playing the divisional game”), and (2) engagement in a systematic disparagement campaign against a competing GA product.

(1) Playing the divisional game

After the patent protection of an active ingredient (such as GA) has expired, other characteristics of the originator medicine (crystalline forms, dosage regimes, methods of manufacture, etc.) can still be patented in the form of secondary patents which can then have several offshoot patent applications termed “divisionals”. Divisional patents often cover overlapping inventions, allowing the patentee to establish multiple layers of protection against generic competitors.

Teva adopted a “divisional game” strategy which had four main stages: (i) filing a cluster of divisional applications surrounding a similar characteristic of the invention, for example the dosage regime of GA; (ii) defending such divisional patents in EPO opposition procedures; (iii) enforcing such divisionals in national courts, including seeking preliminary injunctions; (iv) strategically withdrawing a divisional before it is due to be considered by the EPO’s Technical Board of Appeal, thus avoiding a decision confirming invalidity.

Stage (iv) contravened the principle of fair competition as it meant that Teva was able to avoid an invalidity decision being issued which could in turn negatively affect the examination or opposition of the remaining divisionals in the family cluster (so-called “domino effect”, where one invalid divisional falling takes out the others). The competitor was then left to pursue legal challenges against the remaining divisionals – a costly and time-consuming process.

This created a situation where a patent could be fundamentally weak, and yet because of Teva’s divisional clusters it remained legally uncertain whether competitors could operate in the market, prolonging the exclusivity of Copaxone.

(2) Systematic disparagement campaign

In combination with “the divisional game”, Teva implemented a systematic disparagement campaign against competing GA medicines by spreading misleading information about their safety, efficacy, and therapeutic equivalence with Copaxone. This campaign targeted key stakeholders, including healthcare professionals, with the aim of slowing or halting the entry of competing GA medications.

End of the story?

Teva has robustly pushed back against the conclusions of the Commission and indicated they intend to appeal the decision.

How such an appeal plays out remains to be seen, however, what is clear is that pharmaceutical innovators are under the watchful eye of the Commission. It is essential that innovators’ patent strategies are compliant with the fundamental principles of the European internal market – including that of fair competition – which are protectively guarded by the Commission.

Key Points

Legitimacy of the divisional applications

It is important to note that the Commission did not question the validity of the patent system in relation to divisional filings. Rather, it was concerned with what it saw as Teva’s abuse of the system to unjustly prolong their monopoly in the market:

“Patent rights are essential to incentivize innovation and play a crucial role in the competitive process. But we found that Teva disrupted the patent process and delayed a final decision on the validity of its patent claims. By doing so, Teva undermined the objectives of the patent system, which is to provide legal certainty and to protect genuine innovation.” (Executive Vice-President Margrethe Vestager)

Innovators should therefore be mindful when developing filing and prosecution strategies that they are not perceived to breach fair competition practices.

Legal professional privilege

This case is a reminder that professional privilege does not extend to in-house counsel communications under EU law. When investigating the actions of Teva, the Commission was able to consider documents from Teva’s in-house lawyers who were involved in the design and implementation of its abusive strategy to protect Copaxone.

Potential Damages

Finally, the financial pain for Teva may not end here. Any person or company affected by Teva’s anti-competitive behaviour as described above, may in turn bring the matter before national courts and seek damages – which may be awarded without reductions taking into account the Commission fine.

Bradley Wilson

Life Sciences & Chemistry group

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Withers & Rogers LLP November 2024