Introduction

Antitrust agencies around the world have been highly active in recent years, examining a range of practices, including alleged denigration of rivals’ products, price increases, biosimilar entry, delayed entry of generic medicines, collaboration agreements and local regulatory/procurement practices. There is also growing attention to mergers, especially in dynamic, innovation-driven areas. While many of the concerns are similar in most jurisdictions, enforcers have addressed those specific to the functioning of their local markets and antitrust principles. This first edition of Global Competition Review’s Guide to Life Sciences explores how enforcers have approached these practices and where key jurisdictions diverge or converge in their analysis.

Spending on pharmaceuticals constitutes a significant share of government spending on healthcare. This has driven increased regulatory focus on pharmaceutical pricing, including from competition authorities. While competition authorities in the European Union and the United Kingdom have historically been reluctant to intervene, the pharmaceutical sector has seen mounting regulatory interest in alleged excessive pricing practices in recent years. Even with economists highlighting the complexities and shortcomings around the enforcement of exploitative abuses of companies in a dominant position through excessive pricing, antitrust scrutiny of pharmaceutical pricing is expected to continue. By contrast, while we have seen a recent push from academics in the United States to recognise high (excessive) prices of pharmaceuticals as an antitrust violation, US courts have not yet recognised these claims.

Biosimilars, and more generally biological medicines, have received growing attention from competition authorities across Europe. Recent antitrust investigations in the EU and the UK have examined how commercial practices adopted by incumbent suppliers may hinder biosimilar competition. However, the inherent features of biologicals, such as high costs and longer approval times, raise fundamental challenges in increasing biosimilar competition.

Product denigration cases in life sciences have been rare in the EU and around the world, and in most of them the denigration behaviour was combined with other infringements such as abuse of patent procedures or product hopping. There has since been an abundance of similar investigations at national level, with France leading the way, where cases have expanded the scope of the conduct to include product denigration and the provision of unsubstantiated, but not necessarily incorrect, information to consumers and other parties concerning either the company’s own products or competing products.

Cooperative agreements have always played an important role in the pharmaceutical industry with companies partnering from early stage research and development through to late-stage commercialisation. The covid-19 pandemic has been an opportunity for the industry to demonstrate the benefits that expeditious and flexible cooperation can bring, and competition authorities have also recognised this. Beyond the pandemic, the pharmaceutical industry is facing increasing pressure to enhance affordable access to new medicines. In that context, cooperation agreements will remain of central importance to pharmaceutical companies, perhaps increasingly so.

With regard to merger control, clearance processes for some pharmaceutical transactions are expected to become more uncertain. This is due to several procedural developments in many countries designed to broaden jurisdiction over acquisitions by incumbents of nascent competitors that could play a significant competitive role in the market in the future (‘killer acquisitions’), coupled with flexible and creative notification requirements and new theories of harm. The Multilateral Pharmaceutical Merger Task Force (a working group comprised of the US Federal Trade Commission (FTC), the Canadian Competition Bureau, the European Commission (EC) Directorate General for Competition, the UK’s Competition and Markets Authority (CMA), the US Department of Justice Antitrust Division and offices of state attorneys general) can play an important role in brokering alignment in analysis between key jurisdictions.

Competition authorities in Europe, and in particular the EC, have historically been very active in antitrust enforcement and merger control review in the pharmaceutical sector. Consistent with its focus on innovation, the EC has significantly increased its scrutiny in recent years and is expected to continue doing so, including, as we have seen, by way of expanding jurisdictional scope of review. At Member State level, France has been leading the way on enforcement of product denigration, while Germany and Austria have increased their scrutiny of innovation-driven markets with the introduction of alternative transaction value thresholds in 2017, designed to capture high-value/low-revenue deals.

Italy has been a pioneer in antitrust enforcement in life sciences, with landmark cases on excessive pricing and product denigration influencing the EC’s decisional practice. The Italian Competition Authority is likely to continue its enforcement efforts in this area in the future. In contrast, the activity of the Authority in merger control in recent years has been limited.

In the Netherlands, the focus has been on price levels, with the Authority for Consumers and Markets making important contributions to the debate on excessive pricing both through case practice and working papers.

In the UK, the CMA is expected to continue to regard the life sciences sector as an enforcement priority. With regard to merger control, recent cases have illustrated the CMA’s willingness to push the limits of jurisdictional rules and intervene in deals in dynamic, innovation-driven sectors where target companies have limited (or no) revenues or direct activity in the UK. In addition, Brexit has created heightened risks of parallel conduct investigations and merger reviews in the EU and UK.

To date, the life sciences sector has not raised major competition law issues in Switzerland, under neither the cartels, abuse of dominance nor merger control rules. It remains to be seen whether recent and ongoing regulatory changes, as well as mutual market access concerns with the EU, will lead to a different competitive environment in the near future.

In the US, recent merger enforcement in the pharmaceutical sector continues to follow traditional principles and reasoning. However, it is increasingly likely that the FTC’s enforcement actions will reflect more aggressive theories of harm. Recent behavioural enforcement has largely consisted of pay-for-delay litigation and continuing prosecution of price-fixing charges against generic manufacturers. However, the FTC has given strong indications that it has competitive concerns with fees and rebates paid by pharmaceutical manufacturers to pharmacy benefit managers, which is likely to lead to new fronts of enforcement.

In Australia, the life sciences sector is not currently identified as a priority area for Australian Competition and Consumer Commission (ACCC) enforcement. However, there have been some important regulatory developments affecting the sector, such as the repeal of a safe harbour for intellectual property assignments or licensing arrangements, and the ACCC has also taken some significant cases against companies in this sector in recent years. Lastly, in Brazil, the health sector is under close scrutiny from the Brazilian antitrust authorities, and this is not expected to change in the near future.

Notes