Guest author Jacquelyn D. Veraldi is Assistant Professor of European Law at the University of Groningen. Guest author Tais A. Ruiz Palacios is a Legal Research Master student at Utrecht University.
The European Commission’s report on the ‘Update on Competition Enforcement in the Pharmaceutical Sector 2018-2022,’ published on the 26th of January, 2024, paints a positive picture for the future of pharmaceutical markets. While there has been increasing attention and scrutiny upon pharmaceutical undertakings and competition authorities, at the same time, the report reflects the fact that gaps exist and tensions remain unaddressed in the enforcement of competition law in the pharmaceutical sector, giving rise to questions as to what is next for this legal discipline.
While the Commission and national competition authorities (NCAs) have challenged many anticompetitive practices in generics markets, there is a clear gap in enforcement concerning cases involving exclusivity-protected, monopolised, medicines. Many of the highlighted cases in the report concern off-patent pharmaceuticals, such as the Cephalon (modafinil) case (reverse payment patent settlement), the Teva Copaxone case (patent abuse), and the Leadiant cases (excessive pricing). Nevertheless, as evidenced by the Pharmaceutical Accountability Foundation’s case against AbbVie, as well as this working paper by the Dutch NCA, there is already some movement towards expanding the scope of competition enforcement beyond off-patent pharmaceuticals. This is true for both public enforcement bodies (the Commission and NCAs) as well as private actors, such as non-governmental organisations. The Commission should therefore be encouraged to consider the position of exclusivity-protected pharmaceuticals.
Another issue that must be considered is the role of market definition, particularly in relation to abuse of dominance and mergers. In Servier, for instance, the General Court erroneously rejected the Commission’s definition of the relevant product market (perindopril), allowing the undertaking to escape liability for the infringement of the abuse of dominance prohibition. The case is currently on appeal before the ECJ. As for mergers, the markets are so narrowly defined that they miss concentrations that are certainly harmful to consumer welfare.
A concerning element that is missing from the Commission’s report on competition enforcement is the final consumer, who arguably has the most to lose from infringements of competition law, and who lies at the centre of the public interest of ensuring access to medicines. Foreclosure-related theories of harm do make headway in ensuring greater innovation, choice, and lower prices, which ultimately benefit consumers by ensuring the competitive structure of the market. Foreclosure occurs when companies exclude others from the market. Nevertheless, given that ensuring consumer welfare is one of the main aims of competition law, and that the functioning of the pharmaceutical industry is liable to heavily impact consumer well-being, it is worrying that this is not usually addressed by competition authorities in these cases. More attention to this ambit of competition law and policy is due in future enforcement cases.
Overall, it remains the case that the Commission shelters the Union pharmaceutical sector from proper competition. Competition authorities should have as their primary objective the protection of consumers and should therefore be prepared to challenge practices that harm the public.
