Patent Systems

Pharmaceutical - Misuse of Patent System - Abuse of Dominant Position - The European Commission fined AstraZeneca €60 million

The European Commission recently fined AstraZeneca (AZ) €60 million (£40 million) for misusing the patent system and procedures for marketing pharmaceuticals to block and/or delay market entry of generic competitors for its ulcer drug Losec. These were cheaper versions of Losec. The Commission decided that AZ's actions constituted serious abuses of its dominant market position in violation of European Community (EC) and European Economic Area (EEA) competition rules. AZ's misleading conduct amounted to an abuse in Belgium, Denmark, Germany, the Netherlands, Norway and the United Kingdom. It should be noted that this is the first Commission application of Article 82 EC to filing practices.

The European Commission found that AZ infringed EC and EEA competition rules from 1993 to 2000 by blocking and/or delaying market access for generic versions of Losec and by preventing parallel imports of Losec. Losec pioneered a new generation of medicines to treat stomach ulcers and other acid-related diseases - so-called proton pump inhibitors. Losec initially received patent protection in Europe in 1979. The patent protection for Losec expired in 1999 which meant that generic products could be marketed for this product creating steep competition for AZ.

During part of this period, Losec was the world's best-selling prescription medicine with sales of around $6 billion a year. A patent last for 20 years and pharmaceutical products have an additional 5 year protection under supplementary protection certificates (SPCs). SPCs were introduced in 1992, but only cover drugs which had gained marketing authorisation in 1998 or later in several countries. The Commission claimed that AZ concealed the marketing authorisation it obtained for Losec's in 1987. AZ argued that it acted in good faith and that relevant aspects of the SPCs regulation were only clarified by the European Court of Justice in 2003.

The company was held to have breached competition rules by:

• Providing misleading information to several national patent offices in the EEA in order to extend the patent protection for Losec through SPCs. The point was that these national patent offices relied primarily on the information supplied by AZ. They did not consider whether the generic products were innovative and were not obliged to do so (as they would ordinarily have done);
• misusing regulatory rules and procedures that are applied by national medicines agencies which issue marketing authorisations for medicines. AZ selectively deregistered the market authorisations for Losec capsules in Denmark, Norway and Sweden to block or delay entry by generic firms and parallel traders. The reasons for such actions by AZ are that unless there was an existing reference market authorisation for the original corresponding product (Losec), generic products could not be marketed and parallel importers could not obtain import licenses. At the time, generic products could only be marketed and parallel importers only obtain import licenses if there was an existing reference market authorisation for the original corresponding product (Losec). A marketing authorisation for a medicinal drug gives the holder of the licence the right to sell a medicine but not to exclude competitors such as generic companies.

The case fuels a major debate as to whether Article 82 catches only intentional behaviour in relation to determining abuse of dominant position, or whether it includes all sorts of unintentional behaviour.

AZ says it will appeal the Commission's decision.

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© RT COOPERS, 2005. This Briefing Note does not provide a comprehensive or complete statement of the law relating to the issues discussed nor does it constitute legal advice. It is intended only to highlight general issues. Specialist legal advice should always be sought in relation to particular circumstances.