When a pharmaceutical company discovers a new drug patent law gives it market power by guaranteeing?

1Prabhala and Hoen (2020) (“there is every indication that treatments for coronavirus may soon emerge, the mere fact of their existence is no guarantee that people will be able to access them. In fact, Covid-19 is more likely to end in the same way that every pandemic ends: treatments and vaccines will be buried in a thicket of patents – and pharmaceutical companies will ultimately make the decisions about who lives and who dies”. “Remdesivir, a medicine developed for Ebola by the biotechnology company Gilead, has major patents across the world that last until 2038”); Morten and Moss (2020); The Public Citizen (2020) (explaining that “Remdesivir, an experimental COVID-19 treatment, has benefited significantly from public funding”. Despite this the patents protecting Remdesivir are owned by Gilead).

2Mancini (2020) (“Study argues prices for potential treatments are far higher than the actual cost of production”).

3Kesselheim et al. (2016); UNCTAD (2015); Hubbard and Love (2004).

4Pammolli et al. (2011); Scannell et al. (2012); Light and Lexchin (2012).

5IMAK (2018), p. 3; Correa (2011), p. 2; Ho (2015), p. 312; Light and Lexchin (2012), p. 23 (“This is the real innovation crisis: pharmaceutical research and development turns out mostly minor variations on existing drugs, and most new drugs are not superior on clinical measures”).

6EFPIA (2018), p. 6; Keyhani et al. (2005), p. 753; PHARMA (2015); DiMasi et al. (2003); see, however, Berman et al. (2017) (“Evidence has unequivocally shown that high drug prices are not linked to the actual costs of research, development and manufacturing. Instead, inflated drug prices are a result of drug manufacturers’ power to charge whatever price the market will bear”).

7European Commission (2009a, b, c), pp. 181–379.

8European Commission (2009a, b, c), pp. 181–202, 351–368.

9European Commission (2009a, b, c).

10European Commission, “Executive Summary of the Pharmaceutical Sector Inquiry Report” (2009a, b, c).

11Ibid.

12Kesselheim (2007); Kesselheim et al. (2016); Granstrand and Tietze (2015); IMAK (2018).

13Gurgula (2019); other patent law mechanisms may include, inter alia, specific exceptions from patentability (Correa (2015), p. 18) and compulsory licensing (Art. 31 TRIPS).

14This article focuses on the patenting practices related to small chemical compounds, rather than biological medicines. While strategic patenting may be employed in relation to both types of medicines, and hence the analysis in this paper may, to a certain extent, be relevant to biologics, specific patenting strategies may be different due to the nature of these technologies. In particular, while small chemicals can be classified as the discrete technology, biologics may be characterised as the complex technology. Hence, the approach to patenting, as well as to specific patent claims, may be different. Therefore, strategic patenting related to biologic drugs falls outside the scope of this article.

15European Commission (2009a, b, c), p. 9 (“‘Originator company’ is defined as a company that sells originators, while an ‘originator’ is defined as a novel drug that was under patent protection when launched onto the market”).

16European Commission (2009a, b, c), pp. 7–8 (“‘Generic company’ is defined as a company that sells generics, while a ‘generic’ is defined as a medicinal product which has the same qualitative and quantitative composition in active substances and the same pharmaceutical form as a reference (originator) medicinal product, and whose bioequivalence with the reference medicinal product has been demonstrated”).

17UNCTAD (2015), p. 3.

18Medicines can only be marketed after they have been approved under either national or Community marketing authorisation procedures, which confirm their safety and efficacy. The procedure is regulated by Regulation (EC) No. 726/2004 “Laying down Community procedures for the authorisation and supervision of medicinal products for human and veterinary use and establishing a European Medicines Agency” and Directive 2004/27/EC amending Directive 2001/83/EC on the Community Code relating to medicinal products for human use. Generics must also obtain a marketing authorisation; however, “a generic applicant for marketing authorisation is exempted from the requirement to prove safety and efficacy through pre-clinical tests and clinical trials, and the competent authority relies on the proof of safety and efficacy provided by the reference [originator] product” (European Commission (2009a, b, c), pp. 7–8). This means that they only need to provide evidence that their generic version is “essentially similar” to the original product.

19See e.g. Roin (2009), p. 545 (“More than firms in any other industry, pharmaceutical companies rely on the patent system to secure a return on their R&D investments, particularly the large investments they make in clinical trials”); Ho (2015), p. 310 (“It is widely recognized that the pharmaceutical industry is unique among most industries in that patents are considered essential”); Commission on Intellectual Property Rights (2002), p. 29 (“The pharmaceutical industry in developed countries is more strongly dependent on the patent system than most other industrial sectors to recoup its past R&D costs, to generate profits, and to fund R&D for future products”).

20European Commission (2009a, b, c), para. 253, citing EFPIA (“Given the clear disparity between the high cost and risk of innovation in the pharmaceutical sector and the low cost and risk of imitation, it is self-evident that exclusivity and thus protection from imitation is needed if there is to be innovation”).

21See text accompanying supra note 18.

22UNCTAD (2015), p. 14; OFT Decision in Case No. CE/8931/08 (12 April 2011) (Gaviscon) (“In the EU generic medicines typically come onto the market at prices that are about 25 per cent lower than the price of the originator product immediately prior to the loss of exclusivity. Generic entry also has the effect of decreasing the price of the originator product. In markets where generic entry occurs, average prices drop by almost 20 per cent one year after the loss of exclusivity and about 25 per cent after two years. In some cases the decrease can be as much as 80–90 per cent”); see also FTC (2011), p. ii.

23European Commission (2009a, b, c), p. 6 (“Blockbuster medicine” is defined as being one that achieves annual revenues of over US$1 billion at global level).

24Cheng (2008).

25European Commission (2009a, b, c), para. 138 (“during the lead identification/optimisation process, a company will begin to consider filing a patent application … these applications will be concerned with the active molecules themselves … the resulting patents are often referred to as ‘primary patents’ because they relate to the first patents for the active molecules. Later during the development phase and, … not uncommonly after the product launch, further patent applications will be made for other aspects of these active molecules … [s]uch patents … are often referred to as ‘secondary patents’”).

26European Commission (2009a, b, c), para. 486.

27Ibid.; Ho (2015), p. 313.

28European Commission (2009a, b, c), para. 487.

29See text accompanying supra note 25.

30Case CE-9531/11 – Paroxetine (2016), paras. 3.70–3.71.

31Ibid., para. 3.71.

32Ibid.

33FDA (2007), p. 1 (“A drug substance may exist in many polymorphic forms”); Srivastava (2004), p. 339 (“Generic drugs may be pharmaceutically and therapeutically equivalent to a brand-name drug without infringing the innovator patents that the drug references”).

34European Commission (2009a, b, c), para. 467 (“the term ‘patent strategies’ should be understood to encompass all strategies of a company concerning the use of the patent system to the benefit of the company in relation to generic competition. The term includes strategies on the timing and scope of filing as well as the manners in which patents are applied for”).

35European Commission (2009a, b, c), para. 128.

36Gaviscon, supra note 22, para. 2.77.

37Burdon and Sloper (2003), p. 227.

38Hemphill and Sampat (2011) (their study “provide[s] the first comprehensive evidence that allegations of attempted evergreening are real, and that such efforts have grown over time”); Kapczynski et al. (2012) (“Secondary patents provide substantial additional patent life in the pharmaceutical industry…. Evidence that they are also more common for best-selling drugs is consistent with accounts of active ‘life cycle management’ or ‘evergreening’ of patent portfolios in the industry”).

39Ho (2015), p. 314; Myers (2008), p. 774.

40Bansal et al. (2009), p. 299.

41European Commission (2009a, b, c), p. 8 (“INN is the International Non-proprietary Name for pharmaceutical substances”).

42European Commission (2009a, b, c), para. 488.

43Ibid., para. 489.

44Ibid., para. 492 (the EU Commission calls this practice “patent thickets” or “patent clusters”); see, however, Gurgula (2017) (discussing the difference between the concept of patent thickets in complex technologies and strategic accumulation of patents employed by pharmaceutical companies).

45Ho (2015), p. 314; Kapczynski et al. (2012), p. 1.

46European Commission (2009a, b, c), para. 1118.

47European Commission (2009a, b, c), para. 994; FTA (2003), p. 9, citing the National Institute for Health Care Management, “Changing Patterns of Pharmaceutical Innovation” (2002), p. 7.

48UNCTAD (2015), p. 6.

49Ibid., p. 7.

50Ibid.

51Ibid.; Abud et al. (2015), p. 2; Ho (2015), p. 314.

52European Commission (2019), p. 17.

53EU Commission (2009a, b, c/C 45/02), para. 5.

54OECD (2007).

55Lianos (2016), p. 3.

56Hettinger (1989), pp. 47–51; Machlup and Penrose (1950), p. 21.

57Machlup and Penrose (1950), p. 21.

58Anderman and Schmidt (2007), p. 37.

59See e.g. C-274/11 and C-295/11 Spain and Italy v Council, EU:C:2013:240, para. 22.

60Anderman and Schmidt (2007), p. 12.

61Ibid., p. 14.

62Ibid., p. 37.

63Ibid., pp. 14–15 (explaining that this approach “draws some support from the work of Kenneth Arrow and others who maintain that competition may provide more incentives for innovation than monopoly”).

64Ibid., p. 12.

65Hovenkamp et al. (2016), Sect. 1.03.

66Guidelines on the application of Article 101 Treaty on the Functioning of the EU to technology transfer agreements (2014/C 89/03), para. 7; similarly, see Department of Justice and the Federal Trade Commission in the US, “Antitrust Enforcement and IPRs: Promoting Innovation and Competition” (2007), p. 1 (“antitrust enforcers and the courts have come to recognize that intellectual property laws and antitrust laws share the same fundamental goals of enhancing consumer welfare and promoting innovation”).

67Anderman and Schmidt (2007), pp. 12–13.

68Ibid., p. 13.

69Ibid.

70T-321/05 AstraZeneca v Commission [2010] ECR II-2805; 5 CMLR 1585, para. 367.

71ITT Promedia v EC Commission [1998] ECR II-2937; C-241/91 P and C-242/91 P RTE and ITP v Commission [1995] ECR I-743; [1995] 4 CMLR 718 (Magill).

72T-201/04 Microsoft Corp v Commission [2007] ECR II-3601; [2006] 4 CMLR 311.

73Case AT.40220 Qualcomm (Exclusivity Payments), Commission decision of 24 January 2018.

74The Long-Term Evolution standard.

75European Commission (2009a, b, c), p. 9; Summary of Commission Decision of 24 January 2018 relating to a proceeding under Article 102 of the Treaty on the Functioning of the European Union and Article 54 of the EEA Agreement (Case AT.40220 – Qualcomm (Exclusivity Payments)).

76Press Release, “Antitrust: Commission fines Qualcomm €997 million for abuse of dominant market position” (24 January 2018) <https://ec.europa.eu/commission/presscorner/detail/en/IP_18_421> ac-cessed 20 March 2020.

77Case AT.40099 Google Android, Commission decision of 18 July 2018 <https://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=1_40099> accessed 20 March 2020.

78Press Release, “Antitrust: Commission fines Google €1.49 billion for abusive practices in online advertising” (20 March 2019) <http://europa.eu/rapid/press-release_IP-19-1770_en.htm> accessed 20 March 2020. See also the discussion of this case in European Commission (2019), p. 9.

79Summary of Commission Decision of 4 May 2017 relating to a proceeding under Article 102 of the Treaty on the Functioning of the European Union and Article 54 of the EEA Agreement (Case AT.40153 – E-Book MFNS and related matters), para. 8. The European Commission adopted a decision that rendered legally binding the commitments offered by Amazon, which addressed the Commission’s preliminary competition concerns relating to a number of clauses in Amazon’s distribution agreements with e-book publishers in Europe. See Press Release, “Antitrust: Commission accepts commitments from Amazon on e-books” (4 May 2017) <https://ec.europa.eu/commission/presscorner/detail/en/IP_17> accessed 20 March 2020.

80Summary of Commission Decision of 4 May 2017 in Case AT.40153, supra note 79, para. 12 (for example, it considered that “the business model parity and the respective notification provisions are capable of (i) reducing e-book suppliers’ incentives to support and invest in alternative new and innovative business models; (ii) reducing Amazon’s competitors’ ability and incentives to develop and differentiate their offerings through such business models; (iii) deterring entry and/or expansion by e-book retailers, thus weakening competition at the e-book distribution level and strengthening Amazon’s dominant position”).

81See e.g. AstraZeneca, supra note 70, para. 313.

82European Commission (2009a, b, c), para. 253, citing EFPIA (“Given the clear disparity between the high cost and risk of innovation in the pharmaceutical sector and the low cost and risk of imitation, it is self-evident that exclusivity and thus protection from imitation is needed if there is to be innovation”).

83Schumpeter (1976).

84Lowe (2008), p. 3.

85European Commission (2009a, b, c/C 45/02), para. 30.

86See Gurgula (2019).

87Case AT.39612 – Perindopril (Servier) [2014] (Perindopril), para. 122.

88Ibid., para. 123.

89Ullrich (2013), pp. 265–266.

90COMP/A. 37.507/F3 – AstraZeneca [2005], para. 274.

91UNCTAD (2015), p. 7; Abud et al. (2015), p. 2; Ho (2015), p. 314.

92European Commission (2009a, b, c), para. 523; Correa (2015); Kesselheim (2007); Eisenberg (2008); Hemphill and Sampat (2011).

93Ullrich (2013), p. 242 (internal citation omitted).

94AstraZeneca, supra note 70, para. 367.

95Ibid.

96European Commission (2009a, b, c), para. 525.

97Ibid.

98Perindopril, supra note 87, para. 2815.

99European Commission (2009a, b, c), para. 530.

100Ibid.

101Ibid., para. 528.

102Maggiolino (2011), p. 92.

103Ibid., p. 98.

104Maggiolino (2011), p. 101.

105C-56/64 and 58/64 Consten and Grundig v Commission [1966] ECR 299.

106Case T-691/14 Teva UK and Others v Commission (12 December 2018), para. 201.

107Ibid., referring to the judgment of 6 October 1982, Coditel and Others, 262/81, EU:C:1982:334, para. 13.

108Ibid., para. 204, referring to the judgment of 31 October 1974, Centrafarm and de Peijper, 15/74, EU:C:1974:114, paras. 39 and 40.

109See e.g. Magill, supra note 71; C-418/01 IMS Health GmbH & Co OHG v NDC Health GmbH & Co KG [2004] ECR I-5039.

110Kjølbye (2009), p. 180 (discussing a “plus factor”); see also Report of the Attorney General’s National Committee to Study the Antitrust Laws (1955), p. 337 (“violation of the Sherman Act should … require abuse of the patent grant or proof of intent to monopolize beyond the lawful patent grants”).

111AstraZeneca, supra note 70.

112ITT Promedia, supra note 71.

113Magill, supra note 71; IMS Health, supra note 109.

114Perindopril, supra note 87, para. 2766.

115Perindopril, supra note 87, para. 2766.

116See e.g. Kjølbye (2009).

117Report of the Attorney General’s National Committee to Study the Antitrust Laws (1955), p. 337.

118Kjølbye (2009), p. 181.

119Ibid.

120Ibid.

121Ibid.

122Ibid.

123Ibid., p. 182.

124Kjølbye (2009), p. 182; Jacob (2013), p. 206; Straus (2010), p. 198.

125Siegel (1967), p. 76.

126Ibid.

127Kjølbye (2009), p. 182; Jacob (2013), p. 206; Straus (2010), p. 198.

128Kjølbye (2009), p. 186.

129Ibid., p. 180.

130Anderman and Ezrachi (2011), p. 7.

131Kjølbye (2009), p. 188; European Commission (2009a, b, c), para. 253.

132Kjølbye (2009), pp. 180–181; Straus (2010), p. 198.

133AstraZeneca, supra note 70, para. 362.

134AstraZeneca, supra note 70, para. 362.

135Ibid.

136Whish and Balley (2015), p. 840; 24/67 Parke Davis & Co v Probel [1968] ECR 55.

137AstraZeneca, supra note 70, para. 677.

138Ullrich (2013), p. 258.

139See Gilbert (1987), p. 209 (arguing that a firm may be able to protect and maintain its monopoly position by developing and patenting substitute technologies. Gilbert explains that the protection of monopoly power through internal research and development, may be more profitable than the acquisition of exclusive licences from potential rivals).

140Ullrich (2013), p. 263.

141See United States v Aluminum Co. of America, 148 F.2d 416 (2d Cir. 1945) (where judge Learned Hand observed that “drastic expenditures of research and development with knowledge or intent to pre-empt and dominate an industry” may raise competition law concerns).

Olga Gurgula is a Lecturer in Intellectual Property Law at Brunel Law School, Brunel University London. She is also a Visiting Fellow at the Oxford Martin Programme on Affordable Medicines, University of Oxford.

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