European Union: ECJ Dismisses Astrazeneca Appeal Over Abusive Misuse Of Patent System And Regulatory Procedures Involving Anti-Ulcer Pharmaceutical Losec®

On 6 December 2012, the Court of Justice of the European Union ("ECJ") handed down its judgment in the AstraZeneca case, following an appeal against a 2010 judgment of the General Court ("GC") which itself had upheld in large part an earlier decision of the European Commission (the "Commission") that had imposed a € 60 million fine on the company for abuse of the patent system and regulatory procedures in the pharmaceutical sector.

In June 2005, the Commission had found that AstraZeneca had committed two abuses of its dominant position on the market for proton pump inhibitors ("PPI's"), contrary to Article 102 TFEU (see VBB on Competition Law, Volume 2005, No. 6, available at www.vbb.com). According to the Commission, AstraZeneca made misleading representations to national patent offices in order to obtain supplementary protection of its patent for the active ingredient (omeprazole) of its anti-ulcer medicine, Losec®. The Commission also found against AstraZeneca because the latter had withdrawn marketing authorisations for Losec® on a number of Nordic markets in order to delay rival generic competitors from launching their products and to prevent parallel imports from other EU Member States.

On appeal, the GC mainly upheld the Commission's findings but partially annulled the decision insofar as the second abuse was concerned, reducing AstraZeneca's fine from € 60 million to € 52.5 million (see VBB on Competition Law, Volume 2010, No. 7, available at www.vbb.com). AstraZeneca subsequently appealed before the ECJ to have the GC's judgment set aside.

The ECJ acknowledged that a strategy of a company in a dominant position "to minimise the erosion of its sales and to enable it to deal with competition from generic products is legitimate and is part of the normal competitive process". However, the ECJ added that the conduct envisaged should not depart from practices coming within the scope of competition on the merits that should benefit consumers (AstraZeneca, at paragraph 129).

The ECJ rejected AstraZeneca's arguments on the GC's alleged errors of law in relation to the two disputed abuses of dominant position (i.e. on misleading representations to national patent offices in order to extend its patent protection, and on inappropriate deregistration of market authorisations). The ECJ also dismissed AstraZeneca's attempts to obtain a further fine reduction.

First, on the abuse relating to supplementary protection certificates, the ECJ noted that Article 102 TFEU prohibits a dominant undertaking from eliminating a competitor and thereby strengthening its position by using methods other than those which come within the scope of competition on the merits. Applying this principle, the ECJ considered that the GC was fully entitled to hold that AstraZeneca's consistent and linear conduct fell outside the scope of competition on the merits. According to the ECJ, this was particularly characterised by the notification to patent offices of highly misleading representations and by a manifest lack of transparency by which AstraZeneca deliberately attempted to mislead the patent offices and judicial authorities in order to keep for as long as possible its monopoly on the PPI market.

Second, the ECJ also took the view that as far as the second abuse was concerned, deregistration of the market authorisations did not come within the scope of competition on the merits. The ECJ found that the deregistration was carried out without objective justification and after the expiry of the exclusive right granted by EU law, with the intention of hindering the introduction of generic products and parallel imports.

With regard to the fine imposed on AstraZeneca, the ECJ held that the GC had not erred in law in concluding that the novelty of the abuses and the fact that they did not always produce the effects expected by AstraZeneca did not justify either changing the classification of those abuses as serious infringements or a finding that there were mitigating circumstances.

The ECJ also rejected a cross-appeal by the European Federation of Pharmaceutical Industries and Associations ("EFPIA") which had argued that the GC had failed to take account of the State's role in its assessment of AstraZeneca's market power. EFPIA also challenged the GC's finding that AstraZeneca's Intellectual Property Rights ("IPRs") along with its first-mover status and financial strength constituted evidence of dominance.

According to the ECJ, the GC had taken into account a range of factors in determining market power and dominance, including the State's role as a price regulator and buyer with monopsonist power. Furthermore, the ECJ found that pharmaceutical companies still had the capacity to raise prices and that, if anything, national health systems tended to reinforce certain pharmaceutical companies' market power when these offered added-value products.

As for the arguments related to AstraZeneca's first-mover status and financial strength as evidence of its dominant position, the ECJ felt that these were unsubstantiated in showing how the GC might have erred in law. The ECJ also held that the GC had been correct in its view that, although the mere possession of IPRs cannot be considered to confer such a position, this is nonetheless capable, in certain circumstances, of creating a dominant position, in particular by enabling an undertaking to prevent effective competition on the market. The ECJ took the view that as the first PPI to be introduced on the market, Losec® enjoyed particularly strong patent protection which enabled AstraZeneca to impose significant constraints on competitors and dictate to a large extent market-entry terms. The ECJ added that, in any case, the existence of IPRs was only one of the various factors on which the Commission had based its findings of evidence.

Finally, the ECJ also dismissed another cross-appeal by the Commission against the GC's findings that the Commission had not shown that for Denmark and Norway the deregistration of Losec® marketing authorisations could exclude parallel imports thereof. The ECJ held that the GC was entitled to find that it was incumbent on the Commission to adduce tangible evidence showing that, in the present case, in view of the regulatory context in question, the national authorities were liable to withdraw or did usually withdraw parallel import licenses following the deregistration of marketing authorisations, at the request of the holder. It could not be assumed that, in the absence of such evidence, national authorities were likely to react to deregistration in the way that AstraZeneca wished. Therefore, on those grounds, the ECJ rejected the Commission's cross-appeal.

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