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Patent Settlement Agreements - Antitrust Challenges in the Pharmaceutical Sector within the EU in Comparison with the U.S.

Umiastowska, Karolina LU (2015) JURM01 20151
Department of Law
Abstract
In the pharmaceutical sector, originator companies that invest large sum of money in R&D of new medicines usually file patent applications for several areas of protection. They try to take advantage of a monopoly that a patent grants to protect their medicines against generic entry on the market and consequently the loss of profits. Generic companies in order to be able to launch their generic products and enter the market often have to challenge the validity of originators’ patents. Originators need then to bring patent litigation to enforce their challenged patents. To avoid time- and cost-consuming litigations, with an uncertain outcome, the originators and generic companies often choose to enter into a settlement. The terms and... (More)
In the pharmaceutical sector, originator companies that invest large sum of money in R&D of new medicines usually file patent applications for several areas of protection. They try to take advantage of a monopoly that a patent grants to protect their medicines against generic entry on the market and consequently the loss of profits. Generic companies in order to be able to launch their generic products and enter the market often have to challenge the validity of originators’ patents. Originators need then to bring patent litigation to enforce their challenged patents. To avoid time- and cost-consuming litigations, with an uncertain outcome, the originators and generic companies often choose to enter into a settlement. The terms and conditions of the settlement agreements vary, but many of them involve a payment, where an originator company pays off a generic competitor in return for delayed market entry of a generic medicine. These settlements are known as reverse-payment patent settlements or pay-for-delay settlements and their legality has been a subject of widespread and ongoing debate in both the U.S. and the EU. Competition authorities in both jurisdictions are concerned that the delayed market entry of generic medicines could distort competition and consequently harm consumers and national health care budgets.

In June 2013, both the U.S. Supreme Court and the European Commission dealt with the legality of pay-for-delay settlements between originator and generic companies in two landmark decisions and they reached different conclusions. In Actavis decision, the Supreme Court ruled in favor of a rule of reason analysis and confirmed that reverse-payment patent settlements cannot be considered per se illegal. The European Commission presented in the recently officially published Lundbeck decision, an approach that is considerably less favorable to originator companies. It decided that the settlement in question was presumptively illegal, i.e. anticompetitive by object.

Against this background, this paper seeks to provide an insight into issues regarding patent settlement agreements in the EU in comparison with the U.S. The current developments show some guidance on how these legal issues might be treated in the future. However, it still remains uncertain how lower courts will apply the Actavis decision in the U.S. Also the European Commission’s decision remains to be subject to appeal to the EU courts, which will clarify how to apply the Lundbeck decision. Until the legal position is rectified, the possible effect could be that companies may play safe and restrain from entering into pay-for-delay settlements in the EU. (Less)
Abstract (Swedish)
Inom läkemedelssektorn, originalföretagen som investerar stora summor pengar i forskning och utveckling av nya läkemedel vanligtvis söker patent för flera skyddsområden. De försöker utnyttja det monopol ett patent ger för att skydda sina egna originalläkemedel mot generiska läkemedels marknadsinträde och utebliven vinst som det för med sig. Generiska företag för att kunna lansera sina generiska produkter och komma in på marknaden måste ofta utmana giltigheten av patentinnehavarens patent. Patentinnehavaren behöver då inleda en patenttvist för att upprätthålla sitt patent. För att undvika tids- och kostnadskrävande tvister, med en oviss utgång, orginalföretagen och generiska företag väljer ofta att ingå en patentförlikning. Villkoren i... (More)
Inom läkemedelssektorn, originalföretagen som investerar stora summor pengar i forskning och utveckling av nya läkemedel vanligtvis söker patent för flera skyddsområden. De försöker utnyttja det monopol ett patent ger för att skydda sina egna originalläkemedel mot generiska läkemedels marknadsinträde och utebliven vinst som det för med sig. Generiska företag för att kunna lansera sina generiska produkter och komma in på marknaden måste ofta utmana giltigheten av patentinnehavarens patent. Patentinnehavaren behöver då inleda en patenttvist för att upprätthålla sitt patent. För att undvika tids- och kostnadskrävande tvister, med en oviss utgång, orginalföretagen och generiska företag väljer ofta att ingå en patentförlikning. Villkoren i förlikningsavtalen varierar men många av dem innehåller en värdeöverföring från orginalföretaget till den generiska konkurrenten i utbyte mot ett fördröjt marknadsinträde med det generiska läkemedlet. Dessa förlikningsavtal kallas på engelska för “reverse-payment patent settlements” eller “pay-for-delay” och deras laglighet har varit föremål för en omfattande och pågående debatt i både USA och EU. Konkurrensmyndigheterna i de båda jurisdiktionerna är oroliga för att det fördröjda marknadsinträdet med de generiska läkemedlen skulle kunna snedvrida konkurrensen, missgynna konsumenterna och de nationella sjukvårdsbudgeterna.

I juni 2013, både den amerikanska högsta domstolen och EU-kommissionen behandlade lagligheten av pay-for-delay förlikningar mellan orginalföretag och generiska företag i två viktiga beslut och kom fram till olika slutsatser. I Actavis beslutet, tillämpade högsta domstolen rule-of-reason analysen och bekräftade att reverse-payment förlikningavtal inte kan anses vara illegala per se. EU-kommissionen lade fram i det nyligen officiellt publicerade Lundbeck beslutet ett angreppssätt som är betydligt mindre gynnsamt för orginalföretagen. Det beslutades att förlikningen i fråga var presumtivt illegal, dvs. hade ett konkurrensbegränsande syfte.

Mot denna bakgrund syftar uppsatsen till att ge inblick i patentförlikningsfrågor i EU i jämförelse med rättsläget i USA. Den nuvarande utvecklingen ger en viss vägledning kring hur dessa rättsliga frågor kan behandlas i framtiden. Det är dock fortfarande osäkert hur domstolar av lägre instans kommer att tillämpa Actavis prejudikatet i USA. Även EU-kommissionens beslut kvarstår som föremål för överklagan till EU domstolarna, vilka kommer att tydliggöra hur man ska tillämpa Lundbeck beslutet. Tills rättsläget är utrett kan den eventuella effekten bli att orginalföretagen väljer att spela säkert och avstå från att ingå pay-for-delay förlikningsavtal i EU. (Less)
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author
Umiastowska, Karolina LU
supervisor
organization
course
JURM01 20151
year
type
H3 - Professional qualifications (4 Years - )
subject
language
English
id
7456434
date added to LUP
2015-06-30 17:45:16
date last changed
2017-01-27 15:56:43
@misc{7456434,
  abstract     = {In the pharmaceutical sector, originator companies that invest large sum of money in R&D of new medicines usually file patent applications for several areas of protection. They try to take advantage of a monopoly that a patent grants to protect their medicines against generic entry on the market and consequently the loss of profits. Generic companies in order to be able to launch their generic products and enter the market often have to challenge the validity of originators’ patents. Originators need then to bring patent litigation to enforce their challenged patents. To avoid time- and cost-consuming litigations, with an uncertain outcome, the originators and generic companies often choose to enter into a settlement. The terms and conditions of the settlement agreements vary, but many of them involve a payment, where an originator company pays off a generic competitor in return for delayed market entry of a generic medicine. These settlements are known as reverse-payment patent settlements or pay-for-delay settlements and their legality has been a subject of widespread and ongoing debate in both the U.S. and the EU. Competition authorities in both jurisdictions are concerned that the delayed market entry of generic medicines could distort competition and consequently harm consumers and national health care budgets.

In June 2013, both the U.S. Supreme Court and the European Commission dealt with the legality of pay-for-delay settlements between originator and generic companies in two landmark decisions and they reached different conclusions. In Actavis decision, the Supreme Court ruled in favor of a rule of reason analysis and confirmed that reverse-payment patent settlements cannot be considered per se illegal. The European Commission presented in the recently officially published Lundbeck decision, an approach that is considerably less favorable to originator companies. It decided that the settlement in question was presumptively illegal, i.e. anticompetitive by object.

Against this background, this paper seeks to provide an insight into issues regarding patent settlement agreements in the EU in comparison with the U.S. The current developments show some guidance on how these legal issues might be treated in the future. However, it still remains uncertain how lower courts will apply the Actavis decision in the U.S. Also the European Commission’s decision remains to be subject to appeal to the EU courts, which will clarify how to apply the Lundbeck decision. Until the legal position is rectified, the possible effect could be that companies may play safe and restrain from entering into pay-for-delay settlements in the EU.},
  author       = {Umiastowska, Karolina},
  language     = {eng},
  note         = {Student Paper},
  title        = {Patent Settlement Agreements - Antitrust Challenges in the Pharmaceutical Sector within the EU in Comparison with the U.S.},
  year         = {2015},
}