On 12 December 2018, the General Court of the EU delivered its judgment in the patent settlement case involving Servier group and relating to its perindopril, a medicine used for the treatment of hypertension and heart failure. The case concerned the decision of the European Commission to impose a fine for anticompetitive practices on the pharmaceutical company Servier, which had concluded patent settlement agreements with generic medicines companies in order to prevent them from entering the market and contesting the validity of the patent.
This judgment contains interesting developments in relation to agreements constitutive of restrictions of competition “by object”, as well as to market definition in abuse of dominant position cases.
With regard to the infringements of Article 101 TFUE, the General Court stated that patent settlement agreements are in principle beneficial and do not involve any per se competition law infringement (§§246-252). A further analysis of the content of such agreements is nevertheless necessary in order to examine their real purpose. In the case at hand, the General Court confirmed that the agreements reached by Servier and several of the generic medicines producers were to be considered as “by object” restrictions of competition, in view of their anti-competitive content. The General Court pointed out that these agreements contained non-challenge and non-commercialisation clauses and that the reversed payment at the core of the settlement did not just cover litigation costs. In such circumstances, the payment in question was therefore to be considered as an inducement not to compete.
However, the General Court did not uphold the European Commission’s findings with regard to the agreement entered into by Servier and one of the generic medicines producers which contained a licence agreement, because it was not established that the agreement in question was not concluded at arm’s length. Without establishing the existence of an inducement, the Commission could therefore not conclude that there was a restriction of competition by object. In addition, the General Court considered that there was no restriction of competition by effect and annulled the fines imposed on Servier in respect of that agreement.
As far as the abuse of dominant position is concerned, the General Court considered that the market defined by the European Commission was too narrow. It underlined that the specificities of the medical sector were to be taken into consideration, and that not only pricing aspects were to be considered, but also the therapeutic effects of molecules. Specifically, the demand for prescription medicines is determined for the most part not by the end consumers, but by the doctors prescribing those medicines, who not only take into consideration the price of a molecule but also its effects and potential secondary effects. In this respect, other molecules belonging to the same category (ACE inhibitors) were also to be considered as substitutable. Given these errors in defining the relevant market, the General Court considered that the European Commission wrongly concluded the existence of a dominant position and annulled the fine imposed on the basis of Article 102 TFEU.
The issue of patent settlement is, however, not over, as the Court of Justice will have to rule on relatively similar questions in an appeal of the Lundbeck judgment (T-472/13) of the General Court (in case C-591/61 P) and on a reference for a preliminary ruling by the Competition Appeal Tribunal in the UK (in case C-307/18).
An appeal was filed against this judgment.
Please contact Pierre de Bandt or Jeroen Dewispelaere for further information on this case and/or for general advice on competition law.