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AstraZeneca misled regulators and abused market dominance, says EU court

Out-Law News | 01 Jul 2010 | 4:59 pm | 3 min. read

Pharmaceuticals giant AstraZeneca (AZ) abused its dominance in the drugs market and delayed the sale of competitors' drugs using tactics that, because of the company's dominance, broke competition law, an EU court has ruled.

The EU General Court has upheld a decision by competition law enforcer the European Commission that the pharmaceutical firm abused its dominance in the anti-ulcer drug market to stop generic companies competing with it.

The Court reduced the total fines levied on AZ from €60 million to €52.25m, but a competition law expert has said that fines for any future cases are likely to be higher.

AZ misled patent-granting authorities in the 1990s in a bid to increase the life of its patents on Losec, the world's best-selling drug at the time, the Court found.

It also took advantage of quirks in the drug regulation system to delay the ability of competitors to release rival drugs. By withdrawing market authorisations – regulators' permissions to sell a drug – and reissuing the drug in a slightly different form and with a different market authorisation, AZ was able to stop competitors using vital data that would allow them to enter the market, effectively preventing competition from generic manufacturers.

Both these actions unfairly restricted the ability of generic firms to release competing drugs, the Court said, and because AZ dominated the market this activity broke competition law.

"AZ adopted a consistent and linear course of conduct, characterised by the communication to the patent offices of misleading representations for the purposes of obtaining the issue of [patent extensions] to which it was not entitled (Germany, Finland, Denmark and Norway), or to which it was entitled for a shorter period (Austria, Belgium, Luxembourg, Ireland and the Netherlands)," said the ruling.

"AZ’s deregistration of the marketing authorisations was only such as to prevent applicants for marketing authorisations in respect of essentially similar medicinal products from being able to make use of the abridged procedure … and, therefore, to obstruct or delay the market entry of generic products," said the Court's ruling.

AZ's actions only became illegal because it was the dominant supplier in its market, which brings with it particular responsibilities. Other companies behaving in the same way may not have broken the law, said one expert.

"This shows pharmaceutical companies who are in a dominant position that they can't do things that were ostensibly thought to be common practice," said James Bryan, a competition law specialist at Pinsent Masons, the law firm behind OUT-LAW.COM. "What the Court is really saying is that if you're in a dominant position you have a special responsibility over and above the normal, and that this extends to practices that would be okay for non-dominant companies."

Bryan said that this was the first market-dominance case to cover this ground and that while AZ was given some leniency in the fines, future infringers are unlikely to be so fortunate.

"This investigation was novel for this specific industry and type of practice," he said. "It was new that abusing the regulatory system and patent systems in member states by misleading them to gain extra protection - regardless of the moral rights and wrongs of it – might also now be an abuse."

"For a long time dominant companies were in the dark about what they could and couldn't do. At the time when the Commission issued its decision, it admitted that AZ's abuses were novel. The fine could have been higher but in this case it was calculated on the basis that AZ might not have known that this was an abuse," he said.

Life sciences law expert David Bloom, also of Pinsent Masons, said that the case was important because it opened up a whole new front on which companies would have to defend themselves.

"This is groundbreaking in that the regulatory strategy employed by AZ was found to be anti-competitive, and that hasn't happened before," he said. "If you are using a regulatory strategy to prevent competitors, this could fall foul of competition law.

Bloom said that this case prompted a full European Commission inquiry into pharmaceutical companies' practices which concluded in 2009.

"The preliminary findings accused research and development companies of having a tool box of tricks they used to delay the entry of generics," he said. "The final report watered that down but pharma companies need to be aware that it is not just commercial strategies that can be found to be anti-competitive but also IP and regulatory strategies, if they lead to prevention or delay of generic competition."

Bryan said that major pharmaceutical companies will have to be careful about how they behave, especially because they could be dominant in very narrow markets. "Whenever you do anything now you will have to stop and think what effect will this have on generic medicines. Dominance triggers this special responsibility," he said.