EU Policy – IPR and Competition Law. the Recently Published European

newsPfLAsh – the newsletter for Pfizer Legal Europe - Issue 13: September 2014

Issue 13: September 2014

EU Policy – IPR and Competition law. The recently published European Commission Staff Working document on the pharmaceutical industry does not carry any ground-breaking news. It acknowledges that a healthy Europe- based pharmaceutical industry is a strategic advantage for Europe, but the question remains whether the European Commission's DG COMP will contribute to creating a truly innovation-friendly environment. Read more. For more information, please contact Dr. Bertold Bär-Bouyssière, Partner, DLA Piper.

Pricing and Reimbursement – International Reference Pricing. A far-reaching proposal by the Swedish government to introduce International Reference Pricing in the current Swedish value-based pricing system was avoided and substituted by an agreement between the Swedish association of research-based pharma companies and the Swedish state. This innovative agreement succeeded in balancing the interests of both the Swedish state and industry. This article explains how the innovative agreement came into existence. Read more. For more information, please contact Ingrid Eliasson, Partner, DLA Piper.

Competition – Patent Settlements. The European Commission imposed fines totalling €427,7 million on Les Laboratoires Servier, the French pharmaceutical company, and five generic drug producers. This case follows the European Commission's recent other decisions against so-called reverse patent settlement agreements. Read more. For further information please contact Michael Marelus, Associate, DLA Piper or Nina Mampaey, Associate, DLA Piper.

Competition – Patent Settlements. This slightly longer paper compares the approaches of EU and US antitrust authorities to patent settlements. It outlines the perceived deficiencies in the European Commission's current approach. The article does not dispute that patent settlements may be anticompetitive in certain circumstances, but the authors contend that only an effect-based approach can adequately distinguish between procompetitive and anticompetitive agreements. Read more. For more information please contact James Killick, Partner, White & Case or Pascal Berghe, Associate, White & Case.

Regulatory – Pharmacovigilance. On 8 July 2014, the UK High Court found that the MHRA has acted lawfully in its inspection of Roche during autumn 2013, following serious concerns of non-compliance with pharmacovigilance obligations. This case emphasizes the importance of understanding pharmacovigilance obligations, as well as the legislation surrounding regulatory inspections and duties of co-operation between the regulators. Read more. For more information, please contact Jim Back, Counsel, Clifford Chance LLP.

Competition – Off-label use. The off-label use of drugs is an exception to the requirement of the prior marketing authorization. Yet, it is more and more favoured by Member States, especially on the basis of budgetary considerations. The recent reforms in Italy and France and the alarming European trend towards the promotion file:///C/Users/Connie/Websites/GCSPfizer/www/pfizerlegalalliance_issue13/index.html[7/20/2017 1:23:50 PM] newsPfLAsh – the newsletter for Pfizer Legal Europe - Issue 13: September 2014

of the off-label use of medicines raise concerns about patients' safety and innovation. Read more. For more information please contact Pascal Berghe, Associate, White & Case or Roberta Rosso, Associate, White & Case.

Competition – Parallel trade. The contentious topic of parallel trade within the pharmaceutical industry has yet again entered the spot light. Recent developments with upcoming appeals to a lower EU Court as well as the Greek authority's actions ensure that a close eye should be kept on this area. An appeal has been filed against the Commission's rejection of a complaint from an association to look more into the dual pricing strategies, which were much discussed in the GlaxoSmithKline Saga cases. Additionally, GSK's attempt to mitigate its losses from parallel trade, by limiting output is on the Greek agenda again, after the matter has returned from its referral to the Luxembourg court. Read more. For more information please contact Dr Assimakis Komninos, Local Partner, White & Case or Jan Jeram, Associate, White & Case LLP.

Regulatory – Environmental. In June 2014, the Commission published a study on the environmental risks of medicinal products. As the EU market for medicinal products grows, the pollution of water and soils with pharmaceutical waste has become an emerging issue. The study describes the causes and impacts of the pollution, along with the factors influencing it. Multiple legislative and non-legislative proposals which could play a role in tackling the problem are included in the study. Read more. For more information, please contact Heleen Engelen, Associate, Clifford Chance LLP.

IPR – Customs. On 31 July 2014, the European Commission published its annual report for 2013 on the European Union customs enforcement of intellectual property rights, and details that customs authorities have intercepted 36 million counterfeit goods at the border in 2013. The retail value of medical products sized in 2013 was around EUR 12 million, which represented around 10% of all goods detained. This report recognizes the importance of international cooperation to prevent the import of counterfeit products into the EU. Read more. For more information, please contact Andriani Ferti, Associate, Clifford Chance LLP.

Click here to keep abreast of legislative and policy initiatives in the EU of relevance to Pfizer.

The two guest editors of this issue, Laura Di Lollo from Italy, and Marie Debrégeas from France, provide an analysis of the interchangeability of biosimilars. This follows the article in the March 2014 issue of NewsPfLAsh that dealt with the concept of biosimilar medicinal products and how they are approved and made available in the EU.

Interchangeability of biosimilars is a much debated issue in the EU, and it highlights the difference between biosimilars and small-molecule generic drugs. Marie Debrégeas The article elaborates on the experience in France, a pioneer country in Europe Laura Di Lollo Senior Legal Counsel for the development of a biosimilars market which recently adopted a legal Senior Legal Advisor Pfizer France Pfizer Italy system allowing substitution of such products under specific conditions. Read Bio Read Bio

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The DLA Piper Life Sciences Survey: The Results

Dear newsPfLAsh reader, Welcome to the 12th edition of newsPfLAsh, celebrating two years since the first issue. It is therefore timely to consider the key issues which keep in-house counsel in the life sciences industry up at night!

In 2013 DLA Piper invited senior in-house lawyers in biopharma, medical device and diagnostics companies from around the globe to complete a short survey to better understand the most Bonella Ramsay pressing needs and challenges they face. We are soon to conduct our 2014 Life Sciences Survey and Partner Global Co-Chair it will be interesting… Life Sciences DLA Piper Read Bio Read more

Jim Back Inger Brattne Adam Cooke Clifford Chance – Antitrust European Legal Platform DLA Piper – IP [email protected] [email protected] [email protected]

Heleen Engelen Jan Jeram Michael A. Marelus Clifford Chance – Antitrust White & Case – Antitrust DLA Piper – EU and Competition [email protected] [email protected] [email protected]

James Pearson Kristine Peers Strati Sakellariou European Legal Platform Global Health & Value, EU/International White & Case – Antitrust [email protected] [email protected] [email protected]

Simon Tihanov European Legal Platform [email protected]

The newsPfLAsh bi-monthly newsletter is produced by the Pfizer European legal team in cooperation with:

Click logos above to visit firms’ websites.

Have questions, comments or suggestions for news items or topics that you would like to see covered in future editions?

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Issue 13: September 2014 Next Article >

"The Commission loves me, loves me not, loves me …."

Dr. Bertold Bär-Bouyssière, LL.M., Rechtsanwalt & Attorney-at-Law (New York), Partner, DLA Piper

On 26 June 2014, the European Commission published a Commission Staff Working document with the heading "Pharmaceutical Industry: A Strategic Sector for the European Economy". This paper of exactly 25 pages focuses mostly on non-legislative actions and does not prejudice the Commission's future legislative activities. Nevertheless, on-going legislative projects such as the revision of the Transparency Directive are given due coverage.

The most interesting part of the document is the final 25 lines on the last page, where the Commission announces the "next steps". All the rest of the document is "stock taking", and it contains not much news for anyone active in the pharmaceutical sector. Of the 25 lines in the concluding section on the next steps, only 12 lines are dedicated to future initiatives. A closer reading further reveals that the paper calls for only one single next step. The working paper concludes that "a comprehensive approach helping to streamline the policy formulation process at European and Member States level could facilitate future decisions." In this regard, the working document proposes to "organize an event bringing together relevant EU and national public and private stakeholders". In its last and final sentence, the document concludes that "[t]his event could provide an important contribution to an extensive debate on the European pharmaceutical industry."

The rest of the working document deals, as the document itself so announces, with stock-taking. One of the two main sections is dedicated to the major drivers and challenges in the pharmaceutical sector. The document evokes the demographic change, current and future health threats resulting from urbanization and increased mobility (which increases the risk of epidemics) from global warming and antimicrobial resistance. On the R&D side, the working document acknowledges that bringing a drug to the market is becoming more and more expensive, and fewer developments result in marketable drugs. The European Union intellectual property regime is also given due consideration, and the section dealing with the ever-increasing budgetary constraints of public health systems takes account of the shift from "one fits all" blockbuster products to customized and personalised drugs, which are at the same time more effective from a therapeutic viewpoint, but also considered to be more expensive, at least according to the Commission's expectations. Several other sections discuss the need for a convergence of policies within the European Economic Area, and the documents also identifies the growing challenges resulting from a continued globalisation of health markets, which on one hand means an increasing demand from patients in emerging countries, and on the other more competition from competitors emerging in such emerging countries. The second main section of the working document enumerates the initiatives that the European Union has taken thus far.

Let us focus on some of the policy factors. On the external trade side, one may welcome the Commission's acknowledgment of the importance of emerging markets for the European pharmaceutical industry with its 800,000 employees and €220 billion output. With an increasing trend towards customized and personalised medicines, it is obviously even more important for European producers to have an as much as possible unrestricted access to world-wide patient pools. A very slight touch of Colbertism may not be wholly unwelcome in this respect. It remains to be seen, of course, how successful the European Union institutions will be in the coming years in securing European manufacturers access to foreign markets, and in ensuring that

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their intellectual property is adequately protected in those destination markets.

Looking at the inside, i.e. the Single Market, the Commission's working paper calls for further policy convergence and harmonisation of the national health systems and, in particular, their reimbursement mechanisms, in a view of creating a level playing field. The document acknowledges to a certain degree that the existing price-setting mechanisms in the Member States may have undesired side effects, for example when they do not take account of low price levels agreed to in the context of genuine emergency situations. Interestingly, the Commission has also identified the model role of European pricing mechanisms for price setting in emerging countries such as Korea or Taiwan, which increasingly look at European price levels as comparison. There is thus a clear awareness that even intra-EEA policies inevitably have effects in third countries and markets. Hence the call made in the Commission's document for an increased consistency of policy regarding the pharmaceutical sector.

The newly formed Commission under the presidency of Claude Juncker, while only a few days old, is already credited by many for its strong political stance. For once, Europe may end up having a Commission that is clearly a political body and not a secretariat general, as it may have appeared to be the case in the last ten years. Indeed a politically strong Commission seems suitable if not necessary to master the manifold challenges lying ahead, and bringing about the desired changes in the pharmaceutical industry - provided the policy goes in the right direction.

For the legal practitioner, and in particular for the competition law practitioner, an important question is and will be whether the overall policy framework would be strong enough to domesticate the insatiable enforcement appetite of the Commission's DG Competition, which over the last 10 years has interfered quite significantly with intellectual property rights, and which has contributed to creating what may be called a "not so innovation-friendly environment." With the Pharma Sector Inquiry Report, the Commission has cast general doubt on follow-on innovation in the pharmaceutical industry, mislabelling it as "lifecycle management" or "evergreening". And some of the decisions taken by the Commission or its national counterparts, both in the pharmaceutical and technology sectors, do raise a number of very important fundamental legal and policy questions.

It can still be hoped that the insensitivity for intellectual property rights that was characteristic for the outgoing EU Competition Commissioner, will be attenuated under the leadership of his successor. However, frequent references throughout the working paper to, for example, the alleged price inelasticity of pharmaceutical products, the increasing constraints on national health budgets, the aging population and the trends to personalized (i.e. more expensive) medicines, to the need to maintain a competitive industry, signal that the problem of over-enforcement will not simply disappear. The section in the working document on intellectual property rights on one hand acknowledges the benefits of proper IP protection and enforcement, but it also emphasizes that "effective competition between innovative medicines and between innovative and generic medicines generates incentives for innovative pharmaceutical companies to continue investing in R&D". One paragraph further below, the working paper states that the "importance of a modern intellectual property regime, including its enforcement and complementing activities in other policy areas (e.g. competition), has been recognized as pivotal."

It does remain to be seen whether DG Competition will modify its enforcement patterns under the new Commission leadership. Most certainly, we all look forward to the announced stakeholder event, at which we can share in the extensive debate and provide an important contribution that may eventually result in answers to our many questions.

For further information, please contact Dr. Bertold Bär-Bouyssière, Partner, DLA Piper.

Issue 13: September 2014 Next Article >

< Previous Article Issue 13: September 2014 Next Article >

International Reference Pricing: the innovative and successful approach by the pharma industry in Sweden

Ingrid Eliasson, Partner, DLA Piper (Nordic)

Background

The level of pricing of medicinal products is free in Sweden. However, in order for a medicine to be included in the state-financed benefits system for prescription medicines, the pharmaceutical company has to demonstrate that the price it intends to charge is cost-efficient when compared to available alternative treatments. This pricing model is called value-based pricing ("VBP") and was introduced in 2002. The basis underpinning this model is that medicines shall be priced on the basis of the value they contribute to patients, to healthcare, and to society in general. The evaluation is based on health technology assessments ("HTAs") provided by the pharmaceutical company to the pricing authority, the Tandvårds- and Läkemedelsförmånsverket ("TLV"). TLV evaluates the HTAs provided, and must, in accordance with the law, consider the principles for setting priorities in healthcare that were approved by the Swedish Parliament in 1997. This includes three guiding principles: (i) the principle of human dignity, (ii) those with the most need shall be prioritised (the needs/solidarity principle), and (iii) the cost-effectiveness principle. Patients pay only a minor part of the price for prescription medicines that are covered by the benefits system. The regional authorities (County Councils) provide almost all of Swedish state-financed healthcare, and receive a dedicated Government grant to cover the cost of medicines prescribed to patients that are not in hospital care.

As in other European countries, the Swedish state started to worry about the increased cost of pharmaceuticals. In 2012, a Government review laid out proposals on how the VBP model should be further developed. In summary, this included

Maintaining the VBP model for setting a maximum price for state-financed prescription medicines;

Introducing International Reference Pricing ("IRP") for medicines that have been on the market for at least five years, where the price set will be an average of prices in Austria, Belgium, Denmark, Finland, the Netherlands, and Norway. Where the medicine has been on the market for at least ten years, the reference price would be an average of the three lowest prices in those countries; and

Negotiations between County Councils and pharmaceutical companies regarding follow up, evaluation and discounts for medicines which in other countries qualified as medicines for hospitalised patients, and where the treatment cost is perceived as high.

This proposal considered neither the protection given to innovations provided by patents nor by SPCs. In addition, it introduced a non-transparent system, which would place a heavy burden on the research-based pharmaceutical companies in Sweden and could jeopardise patients' access to innovative medicines.

So - what happened?

The proposal was presented in October 2012 and led to contacts between the Swedish association of research- based pharmaceutical companies ("LIF") and government officials, where discussions of alternative models

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were held in a constructive and open spirit. The result was that the proposed introduction of IRP was avoided by an agreement between the Swedish state and LIF in September 2013 (see http://www.lif.se/Publik%20webb/Sidinnehall/Publik_Bilder/%C3%96verenskommelse%20LIF%20S- dep%20Slutgiltig%20English%20translation%2020130911.pdf). This agreement was unique, having no precedents.

The change to the Swedish pricing model

Under the agreement, the introduction of IRP was replaced with a voluntary price cut in 2014, and after introduction of legislation widening the scope of price cuts, on all products where generic competition had not occurred after 15 years from market entry. The price reduction agreed was 7.5%, the percentage linked to targeted savings on the national pharmaceutical budgets of 2014-2017 of 800 MSEK (400 MSEK in 2014 and an additional average of over 130 MSEK per year 2015-2017). If the savings are not achieved, the parameters can be changed by regulation. The Government has agreed to continue the dialogue with LIF on how best to achieve the targets.

What made this possible?

The industry association had during almost 10 years worked incessantly, through its secretariat and with invaluable assistance from member companies, to become a partner in dialogue to stakeholders in Swedish healthcare, including the Ministry of Health and the pricing authority;

The Swedish research-based pharma industry's success is quite impressive, as voluntary price cuts were made to achieve the 400 MSEK savings target; and,

The VBP pricing model had been successful for many years. There was a stakeholder interest in preserving the idea of pricing medicines on their value , for which it was worth making concessions in order to maintain that system.

What will happen next?

The agreement runs until the end of 2017. LIF continues its dialogue with the national pricing authority. Sweden is at the time of writing involved in a general election which may replace the centre-right government with a left/green government with an undefined agenda for its interaction with the pharmaceutical industry. Still, the agreement with the Swedish state remains in force and the dialogue between the innovative pharma industry and Swedish stakeholders continues. It is to be hoped that the unique dialogue between the industry and the state will continue in the same constructive spirit.

For further information, please contact Ingrid Eliasson, Partner, DLA Piper (Nordic).

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European Commission fines Servier and generics companies in reverse patent settlement case

Michael Marelus and Nina Mampaey, DLA Piper UK LLP

The patent protecting Les Laboratoires Servier's ("Servier") "Perindopril" medicinal product expired in 2003, and several generic drug companies challenged Servier's remaining secondary patents between 2005 and 2007 in order to access the market.

Servier eventually settled with these competing companies via so called "reverse patent settlement" agreements. In accordance with such an agreement, the producers of generic products stop litigating against the patent and agree to keep off the market for a certain limited period. The originator pharmaceutical company agrees to pay the generic companies in return.

According to the European Commission ("Commission"), the agreements in this case could not be seen as ordinary settlement agreements aiming to save costs and time, but were to be considered as anti-competitive agreements in exchange for a share of Servier's profits. This alleged behaviour amounted to a violation of Article 101of the Treaty on the Functioning of the EU.

The Commission considered that the "object" of the agreements was enough to prosecute Servier and its competitors. This saved the Commission from having to undertake a facts-heavy assessment of the effects of the agreements.

The fines imposed by the Commission is the second time the Commission has acted against reverse patent settlements, and the third recent decision in the sector. The Commission has taken an aggressive view on these type of patent deals. In June last year the Commission imposed a fine of €93,8 million on Lundbeck, and fines totalling €52,2 million on four generic manufacturers in relation to a reverse patent settlement regarding citalopram. In December the Commission imposed fines totalling over €15 million on Johnson & Johnson's Dutch subsidiaries and Novartis in relation to a co-promotion agreement. And the Commission is still investigating a settlement between Cephalon and Teva in relation to Cephalon's branded Provigil.

The Commission's decisional practice on these agreements is particularly important for the pharmaceutical sector, which is wondering how far the Commission might be willing to go in downplaying its valuable intellectual property rights. While the European Commission recently warned the pharmaceutical sector that more enforcement in the sector is to follow, the General Court of the EU is currently reviewing the appeals brought in all cases.

For further information please contact Michael Marelus, Associate, DLA Piper or Nina Mampaey Associate, DLA Piper.

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Applying a by object test to patent settlements is very different from the rule of reason

James Killick, Partner, and Pascal Berghe, Associate, White & Case LLP

Introduction

On 19 June 2013, when the Commission adopted its first-ever infringement decision against patent settlements in the Lundbeck case, Commissioner Almunia boasted that "we are in good company in this approach" and made reference to the US Supreme Court's ruling in Actavis. 1 Since then, Commission officials have repeatedly claimed at public events that the Commission follows an approach similar to the one outlined by the Supreme Court.

This is a misconception. In Actavis, the US Supreme Court adopted a rule of reason approach that requires a full assessment of the effects of the investigated agreement – procompetitive and anticompetitive. By contrast, the Commission classifies patent settlements as 'by object' infringements of Article 101 TFEU without any assessment of whether they produce any actual or (likely) anticompetitive effect. The Commission's approach is actually much more akin to the position rejected by the US Supreme Court in Actavis. Contrary to what is sometimes argued,2 the mere length of the Lundbeck decision does not indicate that the Commission followed a rule of reason but rather evidences the difficulties in placing patent settlements in a category – infringements by object, alongside cartels – in which they clearly do not belong.

This paper will compare the EU and US approaches and outline the perceived deficiencies in the Commission's current approach. We do not dispute that patent settlements may be anticompetitive in certain circumstances. However, we contend that only an effect-based approach can adequately distinguish between procompetitive and anticompetitive agreements.

The US Supreme Court's rule of reason approach in Actavis

The Actavis case involved the settlement of a patent dispute concerning AndroGel3 between Solvay and two generic companies which allegedly agreed not to enter with their own product until a certain date and to promote Solvay's product in exchange for a payment, with a generic company offering additional services, such as serving as a back-up supplier.

In its 17 June 2013 opinion, the US Supreme Court reversed4 the judgment of the 11th Circuit Court of Appeal which had held that patent settlements are immune from antitrust attack so long as the anticompetitive effects fall within the scope of the exclusionary potential of the patent ('scope of the patent test').

A key element in the Supreme Court's findings that patent settlements could have anticompetitive effects were the specificities of the US Hatch-Waxman Act. The Court found that the 180-day exclusivity period granted to the first generic to file for a marketing authorisation and the 30-month suspension of the FDA approval process in case of patent dispute under that Act may create an incentive for the originator and the first filer(s) to share monopoly profits.5

The US Supreme Court also unanimously rejected the quick look approach advocated by the FTC and the 3rd

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Circuit Court of Appeals.6 Under the quick look approach, payment settlements would be considered presumptively unlawful without the need for the authority to prove their effect on competition. The Supreme Court considered that such an approach was inappropriate as patent settlements were not necessarily anticompetitive agreements which "an observer with even a rudimentary understanding of economics could conclude that the arrangements in question would have an anticompetitive effect on customers and markets".7

Instead, the Supreme Court found that the likelihood of a reverse payment bringing about net anticompetitive effects depends upon the circumstances around that settlement, including the size of the payment, other dealings between the parties for which the payment might represent remuneration, and the lack of any other justification.8 In short, the rule of reason weighs procompetitive against anticompetitive effects, once the plaintiff (government or private) has demonstrated anticompetitive effects. The majority concluded that it is for the government authority (or private antitrust plaintiffs) to prove, under the rule-of-reason, that the agreements under examination had restrictive effects on a case by case basis. While a very large unexplained, reverse payment may provide indications of the anticompetitive effects of the agreement in the particular context created by Hatch-Waxman, the Supreme Court held that the parties can still justify the payment and demonstrate pro-competitive effects as well as rebut arguments that the agreement did not bring about anticompetitive effects.9 As the Court stated, the "basic question [is] that of the presence of significant unjustified anticompetitive consequences".10

Since Actavis, District Courts have applied the rule of reason mandated by the Supreme Court in three cases.11 They have made clear that patent settlements will be looked at individually and may not be anticompetitive. In the most recent decision, the District Court of New Jersey started by examining whether (i) there was a reverse payment and (ii) the payment was large and unjustified. If this two-prong test is satisfied, the analysis should be pursued further and the Court used a five-part test to apply the rule of reason.12 It explained that the rule of reason assesses whether "the parties to an agreement creating a restraint of trade had market power and exercised it, whether the restraint had anti-competitive consequences and whether those consequences are otherwise justified"13 and found that the Supreme Court laid down five relevant considerations: (i) does the payment have the potential for genuine adverse effects on competition, (ii) is the payment justified in some ways – e.g. because it amounts to litigation costs or compensates for other services, (iii) does the originator have market power, (iv) does the size of the payment suggests it is intended to maintain supracompetitive prices and serve as a surrogate for the patent's weakness, and (v) could the parties have settled without reverse payment.

Applying these criteria, the District Court found that a settlement by which the generic company agreed not to enter the market until a certain date against a commitment of the originator not to launch its own authorised generic "does not have the potential for genuine adverse effects on competition" (the potential would be "minimal") and that "the consideration […] is reasonably related to the removal of the uncertainty created by the dispute".14 The Court thus concluded that "the settlement would survive Actavis scrutiny and is reasonable" and affirmed the defendants' motion to dismiss.15

It is understood under American antitrust law that the rule of reason is a highly deferential standard of analysis to the parties' agreement. First, US courts use a market share safe harbour that is generally in the range of 30% to 33% -- meaning that if the product in question does not have at least 34% market share the rule of reason inquiry ends there. Second, even if the market share threshold is met, the plaintiff still has the burden of demonstrating anticompetitive effects and winning the argument that the procompetitive effects of the parties agreement are outweighed by the anticompetitive effects. A recent study showed that in 90% of the cases in which the rule of reason was employed, the defendants won.16

The Commission's infringement by object approach

The Commission's approach is very different. In its 4th patent settlement monitoring report, the Commission stated that patent settlements that restrict the generic company to market its own product and foresee a value file:///C/Users/Connie/Websites/GCSPfizer/www/pfizerlegalalliance_issue13/Pfizer-Legal-Alliance_Newsletter_Article04.html[7/20/2017 1:23:48 PM] Pfizer Legal Alliance - newsPfLAsh :: Issue 13: September 2014

transfer from the originator to the generic company (B.II patents settlements) "are likely to attract the highest degree of antitrust scrutiny".17 In practice, the Commission appears to consider that a patent settlement would constitute an infringement by object as soon as three broadly defined criteria are met, namely:

1. The generic company is a potential competitor: the Commission considers that the existence of a genuine patent dispute provides a solid indication of potential competition and that a generic company would be a potential competitor unless there are insurmountable (and few things are insurmountable in life) difficulties preventing successful product development;

2. There is a major restriction in the generic company's commercial behaviour: according to the Commission, non-challenge clauses, non-compete clauses and, more generally, any agreement that does not allow immediate generic entry constitutes a restriction; and

3. There is a value transfer from the originator to the generic: according to the Commission, a value transfer includes all sorts of concessions from the originator to the generic company and may even consist in a side deal in which the originator company grants a commercial benefit to the generic company, such as a distribution or licensing agreement.

The above analytical framework is flawed in that there is no reason to presume that a value transfer changes the object of a settlement, or that such a settlement is less desirable than the continuation of litigation. The Commission's theory uses the wrong benchmarks and is likely to lead to the prohibition of neutral or even procompetitive agreements, including the sort of agreements that US courts found to have no anticompetitive effects. Indeed, contrary to the rule of reason approach, it fails to recognise that not all patent settlements are anticompetitive.

First and most fundamentally, under EU competition law, the by object infringement categoryis reserved for agreements that are by their very nature injurious to competition,18 and likely to produce negative effects on competition, based on experience.19 For instance, price-fixing cartels are unanimously considered as detrimental to consumers following numerous studies and decades of cases with demonstrated harmful effects. Such cartels can thus be prosecuted on a by object basis without having to look at their negative effects. By contrast, the experience of settlements is different since the advantages of being able to end litigation are widely endorsed. Therefore, unless they relate to sham litigation or a fraudulent patent, or they seek to go clearly beyond the scope of the patents at stake, settlements should not be categorised as object infringements. Where a lawfully obtained patent and a genuine dispute are involved, there is no reason to presume that in the absence of the settlement there would be more competition: it depends intrinsically on the outcome of the litigation, and there is always doubt as to what the latter will be.

Second, the mere fact that a generic company has started to develop or considers developing a product is not sufficient to consider it as a potential competitor. That concept assesses whether a company not yet active on the market could quickly or easily enter the market, thus exercising some competitive pressure. For a company to be a potential competitor, "realistic" possibilities of entering the market "within a short period of time" are required,20 as confirmed in Visa.21 If it faces serious difficulties in obtaining a product of sufficient quality or a marketing authorisation so that its potential entry becomes unlikely or is going to be postponed by a substantial period of time, it cannot be considered as potential competitor.

In addition, the Commission's binary approach (the generic company is a potential competitor unless it is impossible for it to reach the market) does not capture the full 50 shades of grey. A generic challenger may well face difficulties that are not insurmountable in theory (there are few things in this world that can be shown to be impossible), but which in practice render continuing litigation deeply unattractive and completely unrealistic. If the generic company expects not to be able to enter the market even it wins the litigation, e.g. because of deep-seated problems in the production process which cannot be resolved quickly, it may not have any interest in continuing the litigation as winning the latter would offer no benefit, save to help its competitors. Yet, under the Commission's theory, it seems that such a generic company would only have the option of withdrawing from the litigation (which could mean withdrawing its defence and facing a negative

judgment and costs) or continuing it until the bitter end. Any settlement that includes terms that could be beneficial to the generic will be seen as potentially illegal, even if the true object of the agreement was for the generic to be able to end unattractive litigation, without any consideration of restricting competition.

Third, the Commission should consider the impact of the settlement on competition as a whole instead of focusing on the generic's ability to sell its own product. Restrictions of commercial freedom are inherent in any agreement and must be seen in context.22 They cannot be equated to likely anticompetitive harm or likely delay in generic. Non-challenge and non-infringement clauses are necessary to any settlement agreement.23 Any settlement necessarily prevents the objective legal review of the patent to the benefit of all generics amounts and the criterion is therefore inoperative.

Moreover, it makes no sense to consider any form of licence as a restriction of competition since "the generic company's entry is at least partly controlled by the originator company through the terms of the licence agreement".24 The Commission seems to take this view, unless the licence is royalty-free and allows immediate entry of the generic company with its own product.25 Longstanding experience shows that a licence or distribution agreement may often be procompetitive as it can facilitate the entry of generic companies which would face manufacturing or regulatory difficulties in obtaining a product and marketing authorisation.

If patent settlements become more difficult, generic challenges to patents also become more difficult. The possibility of settlements means that patent litigation is not an inevitable fight to the death. With an approach where settlement is difficult, for example based on the Commission's by object theory of infringement, it can be expected that generics will challenge fewer patents – precisely the opposite of the aspirations of those who would use antitrust law to challenge patent settlements. It is well known that barriers to exit are also barriers to entry.

Fourth, the existence of a value transfer is supposed to be the key distinction between 'good' and 'bad' settlements. However, the concept is defined so broadly that any settlement could be viewed as including some sort of value transfer to the generic company (even a release of claims or a covenant not to sue arguably confers some value to the generic).26 Settlements necessarily involve mutual concessions. Moreover, in the pharmaceuticals sector, the asymmetry of risks will almost inevitably enable the generic to leverage the uncertainty of litigation to its benefit. The existence of a value transfer, particularly as broadly defined as the Commission does, is a poor indicator of likely anticompetitive effects, far less illegality of a settlement.

In sum, the criteria on which the Commission relies to assess patent settlements under Article 101 TFEU are the wrong ones to identify anticompetitive patent settlements. A patent settlement is viewed as suspect as soon as the generic company is restricted in any way and the originator makes any concession. In other words, unless one considers that defeats for the originator or the generic company should be classified as 'settlements', as the Commission erroneously does by labelling them respectively A-type settlements and B.I- type settlements,27 the criteria chosen by the Commission render any real settlement potentially problematic without any assessment of its actual or likely effects on competition.

Article 101(3) is not a solution to the flawed analytical structure pursued by the Commission

The Commission seeks to dismiss the criticism against its approach by arguing that infringements by object are not "per se" infringements in that they can be justified under Article 101(3) TFEU.28 This argument does not hold water for anyone familiar with how the EU system works.

First, any practitioner knows that the possibility of obtaining an exemption under Article 101(3) TFEU for an object infringement is at best extremely unlikely.29 Four strict cumulative conditions have to be fulfilled: the agreement contributes to improving the production or distribution of goods or to promoting technical or economic progress; consumers receive a fair share of the benefits; the restriction is indispensable to obtain the benefits; and competition is not eliminated.

Second, even if exemptions under Article 101(3) TFEU were available, the Commission's approach would shift file:///C/Users/Connie/Websites/GCSPfizer/www/pfizerlegalalliance_issue13/Pfizer-Legal-Alliance_Newsletter_Article04.html[7/20/2017 1:23:48 PM] Pfizer Legal Alliance - newsPfLAsh :: Issue 13: September 2014

the burden of proof to the parties which would need to show that the conditions of Article 101(3) TFEU are satisfied. This is bad policy for the type of agreements that cannot be said "by its very nature [to] have the potential of restricting competition […] based on the serious nature of the restriction and on experience showing that restrictions of competition by object are likely to produce negative effects on the market".30 On the contrary, many patent settlements agreements caught by the criteria retained by the Commission have no anticompetitive effects and could even be procompetitive. Moreover, the Commission cannot point to any "experience" or any empirical evidence showing that the majority of the agreements caught are undesirable or likely to lead to a delay in generic entry.

In these circumstances, before forcing parties to try to justify their agreements under the rigid criteria of Article 101(3), the Commission should be required to show that these agreements produce actual or likely anticompetitive effects.

Conclusion The difference between the EU and US approach is striking. Astonishingly, the EU adopts a much more absolutist view than the US despite having no equivalent to Hatch-Waxman.31 The criteria retained by the Commission are so broad that they are useless to distinguish good from bad settlement agreements. They fail to look at effects and come close to the quick look approach rejected by the US Supreme Court: this is clearly shown by the fact that a licence giving immediate early entry is nevertheless classified in the B.II category, i.e. deserving the highest degree of antitrust scrutiny. It is bad policy to shift the burden of proof on the parties under Article 101(3) TFEU whose test is at best difficult to satisfy. The Commission's erroneous policy has serious consequences for the industry. Barriers to exit are also barriers to entry: if no real settlements are possible, there will be less patent challenges. Ironically, this is the exact opposite of what DG Competition is trying to achieve.

For more information please contact James Killick, Partner, White & Case, or Pascal Berghe, Associate, White & Case.

1 Commissioner Almunia, "Commission fines Lundbeck and other pharma companies for delaying market entry of generic medicines: Statement by Vice-President Almunia", Speech/13/553, Brussels, 19 June 2013.

2 Alexander Italianer, "Competitor agreements under EU competition law", Speech 2013/07, 40th Annual Conference on Iternational Antitrust Law and Policy, Fordham Competition Law Institute, New York, 26 September 2013.

3 A prescription gel used to treat hypogonadism, i.e. a medical condition involving underproduction of testosterone.

4 By a majority of five Justices. Three Justices dissented in favour of the scope of the patent test (the "Dissent Opinion"). Justice Alito did not take part in consideration or decision of the case.

5 See FTC v. Actavis a.o., Majority opinion, p. 17.

6 K-Dur Antitrust Litig., 686 F.3d 197 (CA3 2012). The judgment was vacated and the case remanded for further consideration in light of FTC v. Actavis.

7 See FTC v. Actavis a.o., Majority opinion, p. 20

8 Ibid.

9 See FTC v. Actavis a.o., Majority opinion, p. 18, 19 and 20

10 FTC v. Actavis a.o., Majority opinion, p. 21.

11 In re Nexium antitrust litigation (D.C. of Massachussetts, 11 September 2013), in re Lipitor antitrust litigation (D.C. of New Jersey, 5 September 2013) and in re Lamictal antitrust litigation (D.C. of New Jersey, 24 January 2014). file:///C/Users/Connie/Websites/GCSPfizer/www/pfizerlegalalliance_issue13/Pfizer-Legal-Alliance_Newsletter_Article04.html[7/20/2017 1:23:48 PM] Pfizer Legal Alliance - newsPfLAsh :: Issue 13: September 2014

12 In re Lacmital, p. 8;

13 In re Lacmital, p. 9

14 In re Lacmital, p. 18.

15 In re Lacmital, p. 19.

16 Daniel C. Fundakowski, "The Rule of Reason: From Balancing to Burden Shifting", [2013] Perspectives in Antitrust, Vol 1, No 2, p. 1.

17 Commission's 4th report of 9 December 2013 on the monitoring of patent settlements, available at XXX, para. 17.

18 Case C-209/07Beef Industry Development Society et Barry Brothers [2009] ECR I-637, para 17.

19 Commission Guidelines on the application of Article 81(3) of the Treaty, OJ 2004 C 101, para 21.

20 Commission Guidelines on the application of Article 101 of the TFEU to horizontal co-operation agreements, OJ 2011 C11/1, para. 10.

21 Case T-461/07, Visa v Commission, [2011] ECR II-1729, para. 172.

22 Case T-99/04 AC-Treuhand AG v Commission [2008] ECR II-1501, para 126.

23 Non-challenge clauses are generally considered valid in the context of settlement agreements according to the Commission's own guidelines on technology transfer agreements, OJ 2004 C 101, para 209.

24 Report, para. 9.

25 Ibid.

26 Report, para. 12 (B.II settlements).

27 White & Case note, "Patent settlements as an endangered species: DG Comp's latest monitoring exercise on patent settlements in Europe", 20 December 2013. See http://awards.concurrences.com/business-articles- awards/article/patent-settlements-as-an

28 Alexander Italianer, "Competitor agreements under EU competition law", Speech 2013/07, 40th Annual Conference on International Antitrust Law and Policy, Fordham Competition Law Institute, New York, 26 September 2013

29 With all due respect to the Commission, the Star Alliance case does not illustrate a concrete possibility to justify an object infringement pursuant to Article 101(3) TFEU. Had the conditions of Article 101(3) TFEU been satisfied, the Commission should have closed the case instead of adopting an Article 9 commitment decision (Case COMP/AT.39595 – Continental/United/Lufthansa/Air Canada, Decision of 23 May 2013).

30 Commission guidelines on the application of Article [101(3)] of the Treaty, OJ [2004] C 101/97, para. 21.

31 The view of the cynic could be that it is because the EU does not have a Hatch-Waxman equivalent that the Commission choses the by-object test. Without Hatch-Waxman, it is unlikely that there could be any effective pay-for-delay, since as soon as the originator considers paying one generic not to enter, there is likely to be another one knocking at the door. Since there is no exclusivity for the first generic, there is no limit to the number which could seek to enter. The chances that there could be demonstrable anti-competitive effects are therefore slim. < Previous Article Issue 13: September 2014 Next Article >

< Previous Article Issue 13: September 2014 Next Article >

The UK High Court found that the MHRA has acted lawfully in its inspection of Roche during the autumn of 2013

Jim Back, Clifford Chance LLP

On 8 July 2014, the UK High Court found that the Medicines and Healthcare products Regulatory Agency ('MHRA') had acted lawfully in its re-inspection of Roche during the autumn of 2013, following serious concerns of non-compliance with pharmacovigilance obligations.

Background

Roche had originally been subject to an investigation by the HMRA during early 2012 in which the MHRA had alleged serious non-compliance with pharmacovigilance obligations. Subsequently, the European Medicines Agency ('EMA') started criminal or quasi-criminal proceedings under the Penalties Regulation (EC) No. 658/2007 ('the Penalties Regulation'), which included an information request from the HMRA under Article 8(3) of the Penalties Regulation.

Roche complained that: (1) the EMA had no power to request information under Article 8(3) of the Penalties Regulation, and accordingly the MHRA's compliance with the request was ultra vires; (2) the MHRA had failed to explain to Roche at the time of the re-inspection that information was being obtained for a criminal or quasi- criminal investigation, leading to procedural unfairness; and (3) that the material provided by the MHRA to the EMA under the Article 8(3) requests contained fundamental errors of law, including a statement of Roche's liability for the default of other group companies and an assessment of compliance under new obligations in force after 2012.

The UK High Court

Roche's application was dismissed by the judge. The first ground was rejected as, irrespective of whether Roche's reading of Article 8 of the Penalties Regulation was correct, the report would have been provided by the HMRA to the EMA pursuant to broad obligations of co-operation between the organisations anyway. The allegations of procedural unfairness were rejected as the judge held that Roche would have been, as a sophisticated commercial business, aware of the legislation and the fact that the EMA and HMRA were cooperating.

Finally, on whether the material provided to the EMA contained fundamental errors of law, the judge held that, under the principle in Masterfoods, a national court could not rule substantively on this ground as they should avoid a risk of reaching conclusions inconsistent with those reached by the Commission, which in this case would take the final decision on penalties. The appropriate forum for Roche to challenge would be on appeal before the General Court and therefore this final ground was rejected.

What does this mean for clients?

This judgment clearly highlights the co-operation between national regulators and the EMA, which may result in information being shared in relation to criminal or quasi-criminal investigations and sanctions under the Penalties Regulation. This development just underlines the importance of regulatory compliance duties,

file:///C/Users/Connie/Websites/GCSPfizer/www/pfizerlegalalliance_issue13/Pfizer-Legal-Alliance_Newsletter_Article05.html[7/20/2017 1:23:47 PM] Pfizer Legal Alliance - newsPfLAsh :: Issue 13: September 2014

particularly in the UK where the courts have shown themselves to be unsympathetic to concerns that information obtained in one context by a national regulator can be used in a differing context by the EU authorities.

For more information, please contact Jim Back, Counsel, Clifford Chance LLP.

< Previous Article Issue 13: September 2014 Next Article >

Off-label use of medicines : patient safety and innovation at risk for the benefit of national budgets

Roberta Rosso, Associate, White & Case LLP

1. Off-label use of medicines

The off-label use of medicinal products is an important aspect of clinical practice. Although Directive 2001/83/EC on the Community Code relating to medicinal products for human use does not define the term off-label use, in Annex I of the Guideline on Good Pharmacovigilance Practices, the European Medical Agency specifies that off-label use relates to "situations where the medicinal product is intentionally used for a medical purpose not in accordance with the authorized product information.."1

While the off-label use of medicines is a legal practice as per the principle of therapeutic freedom enjoyed by doctors, it is, nonetheless, has the potential to undermine the European regulatory system for authorizing medicines.. It is submitted that off-label use cannot be justified for mere budgetary reasons.

2. The AGCM's Avastin/Lucentis decision and other pending investigations

In February 2013, the Italian Competition Authority (Autorità Garante della Concorrenza e del Mercato, "AGCM") opened an investigation against Roche and Novartis following complaints received from the association Aiudapds and the Italian Ophthalmologic Association. Complaints contested an alleged agreement between the two companies intended to exclude the ophthalmic use of Avastin, a drug marketed by Roche, and to promote sales of Lucentis, marketed by Novartis. Avastin is a drug approved to treat various forms of cancer; however, despite the absence of any marketing authorization for ocular indications, it has also been widely used off-label to treat specific eyesight conditions.

One year later, on 27 February 2014, the AGCM imposed fines of EUR 90 million and EUR 92 million on Roche and Novartis, respectively, for allegedly having infringed article 101 TFEU by participating in an anticompetitive agreement in the market for ophthalmic medicines used to treat some serious vascular eyesight conditions, including age-related macular degeneration (AMD)2

The AGCM alleged that, “since 2011, Roche and Novartis colluded to create an artificial product differentiation and purport Avastin as more dangerous than Lucentis, in order to influence prescriptions of doctors and health services.”3 The Italian authority found that Roche and Novartis allegedly set up a complex collusive strategy, with a view to avoiding the hindering of the commercial success of Lucentis by the off-label ophthalmic applications of Avastin. The AGCM concluded that the alleged strategy resulted in the National Health Service (“NHS”) sustaining additional expenses estimated at EUR 45 million in 2012, while increased future costs might possibly exceed EUR 600 million per year.

While the AGCM’s decision has been appealed by the drug companies, the Italian Ministry of Health has already claimed damages for EUR 1.2 billion for losses incurred by the NHS due to the companies’ alleged restriction of competition.4

A month after the Italian Competition Authority had imposed fines on Roche and Novartis, the French Competition Authority opened investigations against the two Swiss companies. The French regulator raided file:///C/Users/Connie/Websites/GCSPfizer/www/pfizerlegalalliance_issue13/Pfizer-Legal-Alliance_Newsletter_Article06.html[7/20/2017 1:23:47 PM] Pfizer Legal Alliance - newsPfLAsh :: Issue 13: September 2014

local offices of Roche and Novartis, apparently looking for evidence of possible collusion to prevent the use of Roche’s Avastin cancer drug as a treatment for AMD.5 The case is still pending and there is little public information on the status.

3. Legislative developments in Italy: applicable law and reimbursement system

Until the most recent developments in the Italian legal system, off-label use of medicines used to be regulated only by Law Decree 536/1996, converted into law by Law 648/1996. Traditionally, in the absence of an approved therapeutic alternative, the NHS has entirely reimbursed: (i) innovative medicines which had received marketing authorization in other countries, but not in Italy; (ii) medicines which lacked marketing authorization, but were subject to clinical trials; (iii) medicines to be used for a therapeutic indication other than the one which had been authorized.6

Reimbursement by the NHS has been ensured by the inclusion of medicines on a specific list (the so-called “648 list”, from the name of the relevant law), prepared and regularly updated by the Scientific and Technical Committee of the Italian Medicines Agency (Agenzia Italiana del Farmaco, “AIFA”). In order to be featured in the 648 list, medicines had to constitute a valid therapeutic alternative for the treatment of a given disease. In addition, phase II results of clinical trials had to be available.7 Indeed, Law 648/1996 had been enacted to guarantee a cure for patients with serious diseases without any therapeutic alternatives.

In line with the above framework, Avastin has been included in the 648 list for its off-label use to treat AMD for several years. Lucentis was brought to the market later. Having considered the marketing authorization granted to Lucentis for ophthalmologic diseases and, therefore, the therapeutic alternative offered by Novartis, AIFA intervened to limit the reimbursable off-label use of Avastin in the ophthalmic sector. On 3 October 2012, AIFA adopted a communication permanently excluding Avastin from the list of reimbursable medicines.8

Following the AGCM’s Avastin/Lucentis decision, the Italian government adopted Law Decree 36/2014. Article 3 of the Law Decree set forth two measures. In light of the first measure, AIFA was enabled to proceed with a registration of the marketing authorization for an additional indication of a given medicine if there was “a justified public interest in its use”.9 In particular, in cases where a “justified public interest” could be identified, the marketing authorization holder had to choose among one of the following options: (a) to transfer without consideration the rights linked to the registration of a given medicinal product to the Ministry of Health in order for AIFA to proceed with the registration process and the extension of the marketing authorization; (b) to proceed directly and at its own expense with the registration of the relevant indication; or (c) to oppose the registration of the therapeutic indication (and, in the case of an unreasonable opposition, AIFA would disclose such intention on its website).

This raised a number of questions. In particular, the Law Decree did not include a definition of “justified public interest”. Moreover, it was necessary to clarify which possible measures AIFA could adopt in case the marketing authorization holder decided to oppose the registration of the additional therapeutic indication. In light of these uncertainties, on the occasion of the conversion into law, such measure of the Law Decree was dropped.

The second measure, also included in article 3 of the Law Decree, gave AIFA the possibility to temporarily include in the 648 list the therapeutic indication for which the registration procedure had been initiated even if another therapeutic alternative among the licensed medicines was available. AIFA could temporarily include the additional indication in the 648 list if it considered that the drug was safe and effective with regard to the proposed indication, in light of two elements: (i) the results or any experiments and research conducted within the national and international medical-scientific community; and (ii) the relative burdensomeness of the licensed drug for the NHS.10

On 16 May 2014, Law Decree 36/2014 was converted into law by Law 79/2014. Upon conversion into law, some provisions were ultimately dropped, while others were simplified. As a result, the new provision establishes that even if another therapeutic alternative among the licensed medicines is available, medicines with a therapeutic indication other than the one which had been authorized may be included in the 648 list by file:///C/Users/Connie/Websites/GCSPfizer/www/pfizerlegalalliance_issue13/Pfizer-Legal-Alliance_Newsletter_Article06.html[7/20/2017 1:23:47 PM] Pfizer Legal Alliance - newsPfLAsh :: Issue 13: September 2014

AIFA and, consequently, may be entirely reimbursed by the NHS.11 Prior to inclusion in the list, AIFA has to assess whether the additional indication is known and complies with research conducted within the national and international medical-scientific community, according to the criteria of cost and appropriateness. If AIFA opts for the inclusion of the additional indication into the list, it will have to activate suitable monitoring tools in order to protect the safety of patients and will promptly undertake the necessary determinations.

Following the recent legislative developments, AIFA has recently re-included Avastin on the 648 list, with the consequence that the off-label use of the drug is entirely reimbursed by the NHS to AMD patients.12

4. Effects of the reform in Italy

Prior to the reform, in line with the European framework, the off-label use of medicines in Italy used to be confined to very narrow circumstances. The recent legislative reform allows easier access to the off-label use of medicines. Given that off-label use is now also permitted in cases for which other therapeutic alternatives are available, patient safety seems to have lost precedence. Indeed, by encouraging and expanding the scope of off-label uses which have not been subject to the same rigorous controls and safeguards which are typically entailed during a marketing authorization procedure, the Italian legislation bypasses the entire regulatory process designed to guarantee patient safety. AIFA’s obligation to activate suitable monitoring tools in order to protect patients’ safety seems a rather weak ex post means of protection as compared to the ex ante system of safeguards included in the marketing authorization procedure.

Moreover, while it is established under EU law that the off-label supply of medicines should not be based on cost considerations, the Italian reform introduced the clear parameters of cost and appropriateness as criteria for inclusion in the 648 list. Interestingly, the provision was introduced shortly after the AGCM’s decision alleging the collusion of Roche and Novartis to favor the distribution of the more expensive Lucentis product.13

5. Legislative developments in France

On 17 December 2012, France amended Article L-5121-12-1 of its Code de la santé publique to authorize the government to issue recommendations encouraging off-label use of a medicine, despite the existence of authorized therapeutic alternatives, for solely economic reasons.14 The French measure has been widely criticized. Medical experts are concerned that allowing the off-label use of a drug without adequate clinical trials could raise health risks.

As a consequence, the French government also amended its social security budget bill to allow the prescription and reimbursement of Avastin for AMD.15 The government has argued that encouraging the use of Avastin, despite not being formulated to be injected directly in the eye, would bring significant annual savings as an injection of Avastin costs significantly less than an injection of Lucentis.

The Italian and the French regulatory developments might not be isolated cases, and analysts have pointed out that there is a risk of a “Europe-wide contagion”.16

6. European overview and criticism

Despite the current European regulatory framework and case-law, several Member States have considered adopting regulatory measures encouraging the off-label use of medicines. The Italian example does not seem to be isolated; on the contrary, in Europe, forthcoming reforms seem to reveal a trend toward the encouragement of off-label use of medicines, especially due to financial considerations.

The Court of Justice, in Commission v Poland, ruled that financial reasons do not justify derogation from the marketing authorization requirements. Recently, the Director General of DG SANCO confirmed the Court’s finding, stating that financial considerations must not take precedence over the safety of patients. Yet, in the UK, the National Institute for Health and Clinical Excellence has included off-label recommendations in some of its clinical guidelines and has used an off-label medicine as a relevant comparator in the scope of a cost- effectiveness assessment, planning to continue off-label comparators in the future. Similarly, in Germany, several healthcare funds entered into agreements with doctors’ associations which provide financial incentives file:///C/Users/Connie/Websites/GCSPfizer/www/pfizerlegalalliance_issue13/Pfizer-Legal-Alliance_Newsletter_Article06.html[7/20/2017 1:23:47 PM] Pfizer Legal Alliance - newsPfLAsh :: Issue 13: September 2014

to use off-label medicines.17

The described trend has not been immune from criticism. In particular, the European Federation of Pharmaceutical Industries and Associations (“EPFIA”) noted at least three negative effects. First, the promotion of off-label use of medicines undermines the rigorous EU regulatory approval process. Second, it has the potential to impact patient safety. Third, it creates legal uncertainty with regard to product liability and accountability for safety issues.18

Conclusions

Off-label use of medicines by physicians has played an important role in healthcare. Such use is driven by medical need and considerations. Now there is an increasing trend by Member States to encourage such use for budgetary reasons. . The recent Italian and French legislative reforms have the effect of bypassing the rigorous European regulatory framework and medicinal approval system, as well the potential to compromise patient safety and innovation.

For further information, please contact Roberta Rosso, Associate, White and Case LLP, at [email protected].

1 Please refer to the European Medical Agency’s Guideline on good pharmacovigilance practices, Annex I, available at http://www.ema.europa.eu/docs/en_GB/document_library/Scientific_guideline/2013/05/WC500143294.pdf

2 Decision of the AGCM of 27 February 2014 in Case I760 – Roche-Novartis/Farmaci Avastin e Lucentis, provvedimento n. 24823, available at http://www.agcm.it/concorrenza/intese-e- abusi/open/41256297003874BD/AF96880B5B6A7C6FC1257C9F0053DDF3.html

3 AGCM press release of 5 March 2014.

4 Please refer to the press release of 28 May 2014 published on the website of the Ministry of Health and available at http://www.salute.gov.it/portale/news/p3_2_4_1_1_stampa.jsp?id=4230

5 Please refer to http://www.bloomberg.com/news/2014-03-11/french-competition-regulator-probes-roche-novartis-on- avastin.html

6 Please refer to article 1(4) of Law Decree 536/1996.

7 For more detailed information please refer to AIFA's website at http://www.agenziafarmaco.gov.it/sites/default/files/bif000443.pdf

8 AIFA communication of 3 October 2012 available at http://www.agenziafarmaco.gov.it/it/content/uso-intravitreale-label-della-specialit%C3%A0-medicinale- avastin%C2%AE-bevacizumab-modifiche-del-riass

9 Please refer to article 3 of the Law Decree 36/2014.

10 Please refer to article 3 of the Law Decree 36/2014.

11 Please refer to article 3(2) of the Law Decree 36/2014 read in conjunction with Law 79/2014.

12 Please refer to AIFA's Communication n. 366 of 10 June 2014, available at http://www.agenziafarmaco.gov.it/it/content/avastin-nella-lista-dei-farmaci-di-uso-consolidato-la- degenerazione-maculare-senile

13 It is known that in Italy an injection of Lucentis costs more than an off-label injection of Avastin.

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14 Please refer to http://legifrance.gouv.fr/affichCodeArticle.do;jsessionid=8E83713249B5C717EBB75F730A4B8F5D.tpdjo15v_ 3?idArticle=LEGIARTI000029354480&cidTexte=LEGITEXT000006072665& categorieLien=id&dateTexte=20140828

15 Please refer to http://www.reuters.com/article/2014/07/08/france-roche-idUSL6N0PJ1XA20140708. Note that the price difference might partly be due to the fact that Avastin is authorized for the treatment of cancers and that such treatment requires a higher volume of products. If the price of Avastin and Lucentis were compared in terms of treatment rather than in terms of cost/ml of product, the cost difference would be smaller.

16 Please refer to http://www.reuters.com/article/2014/07/08/france-roche-idUSL6N0PJ1XA20140708

17 For the various developments in Europe, please refer to EPFIA's Position Paper – Promotion of off-label use of medicines by European healthcare bodies in indications where authorized medicines are available, of May 2014 available at http://www.efpia.eu/uploads/Modules/Documents/efpia-position-paper-off-label-use-may-2014.pdf

18 The EPFIA's Position Paper of May 2014 also points out that the promotion of off-label use by healthcare bodies sets double standards and discourages innovation and the development of new medicines.

< Previous Article Issue 13: September 2014 Next Article >

Parallel Trade Comes to Light Again

Dr Assimakis Komninos, Local Partner, and Jan Jeram, Associate, White & Case LLP

1. Introduction

In recent months, we have observed some movement in the pharmaceutical sector on the topic of parallel trade. The Commission recently rejected a complaint filed against GlaxoSmithKline ("GSK") by the parallel traders' umbrella association, the European association of Euro-pharmaceutical Companies ("EAEPC"). The EAEPC was urging the Commission to investigate the old Spanish "dual-pricing" case again, which the Commission essentially closed in 2009, after the Court of Justice of the EU ("Court of Justice") partially upheld the General Court of the EU's ("General Court") judgment, which had annulled the Commission's 2001 infringement decision. The EAEPC has now appealed against the Commission's rejection of their complaint. At the same time, the Hellenic Competition Commission ("HCC") has recently addressed a Statement of Objections against GSK in the aftermath of the Syfait and Lelos rulings of the ECJ. The HCC alleges that GSK's limitation of supplies to Greek wholesalers and parallel exporters amounts to abuse of a dominant position. The HCC is called upon to apply and interpret, for the first time, the "ordinary quantities" criterion of the Lelos judgment of the ECJ.

2. Background

At the end of the 1990s, GSK sought to implement a so-called "dual pricing" scheme in Spain in order to mitigate losses due to the activities of parallel traders. Typically, the losses arise when parallel traders purchase exorbitant amounts of pharmaceuticals in low cost countries, often in Southern Europe, so as to later re-sell them in high cost countries in Northern Europe. GSK's medicines were to be sold to Spanish wholesalers at two different prices according to whether or not they were reimbursable under the Spanish health insurance scheme. In practice, medicines intended to be reimbursed in other Member States were to be sold at a higher price than those intended to be reimbursed in Spain, where the Spanish government had set maximum prices. The case is known as the "dual pricing" case, but this is rather a misnomer, as in reality GSK had agreed to only one price with its wholesalers, the price which referred to medicines not reimbursable under the Spanish legislation. There was another, much lower price for medicines reimbursable in Spain under the national legislation, but this was a price set by the Spanish State and not by GSK. GSK sought to have its pricing practice exempted via the application of Article 101(3) TFEU, but the Commission rejected GSK's exemption request, stating that the object of the pricing strategy was to restrict competition.

3. Decisions of the EU Courts

Following the Commission's infringement decision, GSK appealed to the General Court of the EU (the Court of First Instance, at the time). GSK disagreed that the agreements in question amounted to an "object" infringement of Article 101(1) TFEU and argued that the Commission did not properly examine its request for an exemption under Article 101(3) TFEU. In a revolutionary judgment, the General Court concluded that the practice in question could not be considered as an "object" infringement and that the specific context of the pharmaceutical sector made it necessary for the Commission to undertake an effects-based analysis under Article 101(1) TFEU. Ultimately, the General Court upheld the Commission's subsidiary conclusion under Article 101(1) TFEU, and found that the notified agreement restricted competition by effect, albeit only slightly. Then,

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the General Court annulled those parts of the decision that rejected GSK's request for an exemption under Article 101(3) TFEU, because the Commission had not appropriately addressed GSK's "relevant, reliable and credible" arguments about the effects of parallel trade on its research and development.

On appeal, the Court of Justice did not follow the General Court's reasoning that there was no "object" infringement. The competition provisions, according to the Court of Justice, protect consumer welfare, but also the single market and competition as such, which means that parallel trade should be considered beneficial to final consumers, regardless of the sector. Nevertheless, the Court of Justice agreed with the General Court that the Commission was wrong to reject GSK's request for an exemption under Article 101(3) TFEU.

Following the Court of Justice's judgment in 2009, the Commission decided to close the file of the case. However, this decision did not please the EAEPC, which thought that the Commission should still assess its complaint against GSK.

4. Recent developments

Earlier this year, in May, the Commission rejected the EAEPC's original complaint, dating back to 1999. Hence, there will be no additional Commission investigations into GSK's behaviour. Parts of the reasoning behind the Commission's decision, according to press reports, include the lack of "persisting effects", due to the pricing conduct not being long-lasting, as well as a lack of "EU interest" in the matter. Specifically, the Commission reportedly concluded that GSK's conduct "lasted for seven months, more than 15 years ago". The Commission found some support for its conclusions in the responses to questionnaires sent to the Spanish wholesale market in 2012. The responses to these questionnaires showed that GSK today does not have a "dual pricing" scheme in place in Spain. The Commission also stated that GSK's 1998 arrangements in Spain do not influence today's market and prices.

The EAEPC filed an appeal against this decision to the General Court on 1 August 2014. In the appeal, the EAEPC argues that the Commission wrongly interpreted previous case law and that it had not upheld the association's right to be heard.

5. Greek developments

A further development on the parallel trade front is the sending of a Statement of Objections by the HCC to GSK for alleged abuse of a dominant position. This case goes back to the Syfait and Lelos rulings of the Court of Justice. In the late 1990s, orders for certain GSK pharmaceutical products in Greece were several times higher than the national Greek demand for those products, so GSK was supplying Greek wholesalers with exorbitant quantities amounting on occasion to 7 times Greek consumption. This was because Greek wholesalers were engaged in lucrative export activity to higher-priced Member States, profiting from the fact that between 1997 and 2005, Greek law required Greek prices for prescription medicines to be fixed at the level of the lowest price in the EU. As a result, by mid-1999, parallel trade was leading to serious shortages on the Greek market.

As a result, GSK introduced certain supply quotas, which were attacked by the wholesalers before the HCC and Greek courts. These proceedings gave rise to two Court of Justice rulings, in Syfait and Lelos. The latter ruling of 2008 set some satisfactory standards as to the duties of dominant pharmaceutical companies. On the issue of how much GSK should supply to the wholesalers, the Court of Justice held that pharmaceutical companies were not obliged to supply quantities which were out of the ordinary. The Court of Justice also considered that a dominant pharmaceutical company must be able to defend its own commercial interests by adopting reasonable and proportionate measures.

Meanwhile, in 2006, the HCC took a decision which was broadly positive for GSK, finding no infringement of Article 102 TFEU. However, this decision was then appealed to the Greek courts, which rendered their judgments in 2009 and 2010, i.e. after the Lelos ruling. The Greek courts annulled the HCC decision and held that a dominant pharmaceutical company may not entirely refuse to supply existing customers-wholesalers with medicines. If it does so, it is presumed that it has abused its dominant position. The court held that in cases of total refusal of supply there is no need to examine whether the orders by the wholesalers were "out of the ordinary" or whether there were any negative effects on the market. file:///C/Users/Connie/Websites/GCSPfizer/www/pfizerlegalalliance_issue13/Pfizer-Legal-Alliance_Newsletter_Article07.html[7/20/2017 1:23:49 PM] Pfizer Legal Alliance - newsPfLAsh :: Issue 13: September 2014

As a result of this unfavourable outcome for GSK, the case is now again in the hands of the HCC, which has now addressed a Statement of Objections to GSK. The case will be heard by the HCC by the end of 2014 and a final decision is expected in early 2015.

Conclusion

These developments show that the parallel trade discussion in Europe is far from being over and deserves close attention. The Greek case also shows that it may not always be easy for national courts and authorities to apply the Court of Justice's Lelos criteria.

For further information, please contact Dr Assimakis Komninos, Local Partner, White & Case LLP or Jan Jeram, Associate, White and Case LLP.

< Previous Article Issue 13: September 2014 Next Article >

Study on the environmental risks of medicinal products: key points and legislative proposals

Heleen Engelen, Clifford Chance LLP

The pollution of the environment by pharmaceutical residues is an emerging issue. Therefore, the European Commission ("Commission") has been asked to develop a strategic approach to the water pollution by pharmaceutical substances by the end of 2015. In June 2014, the Commission published a study on the environmental risks of medicinal products. This study provides a basis for the approach, outlining the issues, factors influencing the pollution and possible legislative and non-legislative solutions.

The issue Given that the EU market for medicinal products is expected to reach EUR 242 billion in 2014, the lack of knowledge concerning the consequences of discharging these products in the environment is, according to the Commission, problematic.

Medicinal products mainly enter into the environment through consumption, notably via incorrect disposal in sinks or via excretions. Waste treatment (e.g., incineration, land-filling or wastewater treatment) can reduce waste, yet because this does not specifically target medicinal products they still may be released into the environment. In addition they may have the ability to bio-accumulate in the fat tissue of animals. Furthermore, the reuse of possibly contaminated sewage sludge and/or manure may also be a source of emissions.

As a consequence, various types of active pharmaceutical ingredients ("API"), (of which there are currently some 3000 authorised on the EU market as a whole), have been detected in the environment but especially in aqueous media such as drinking water. Not all these APIs are equally hazardous (some even have a rather negligible effect on the environment) and degradation does reduce their potency. However other products, such as anti-parasiticides, anti-mycotics, antibiotics and (xeno)estrogens, could give rise to environmental risks (e.g., affecting fish populations, bacteria and algae, dung fauna, etc.). That said, the situation is far from clear due to insufficient publicly available knowledge on the ecotoxicology of many of these products.

The impact of environmental exposure to APIs on humans is discussed in chapter 6 of the study. Individuals can be chronically exposed to a low level of medicinal products through drinking water and residues in leaf crops, root crops, fishery products, dairy products and meat. Most of these pathways are considered to have a negligible effect on human health, although long-term exposure may lead to anti-viral resistance in the human gut and as a consequence to less effective responses to antibiotics. This development of antimicrobial resistance is one of the major emerging global threats to human health today. Unfortunately current knowledge on the risks of exposure to medicinal waste is very sparse. No data exists on the combined effect of all exposure pathways nor on the mixture effects of medicinal products, either in and of themselves or in combination with other relevant organic pollutants. The European Commission intends to increase the amount of data available.

Factors of influence In chapters 7 and 8 the study discusses the following factors which may contribute to the presence of medicinal products in the environment:

Non-legislative factors.Important influencing factors are the technical and economic challenges in

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developing greener medicinal products and the overconsumption of such products. Other non- legislative factors include the effectiveness of waste management practices, the lack of awareness of the problem and the lack of knowledge.

Legislative factors. Of most relevance is the Environmental Risk Assessment ("ERA") which is included in the Market Authorisation ("MA") process for medicines. The ERA cannot currently lead to a refusal of MA for human medicinal products and the level of information required by an ERA is mostly substandard. Currently, if an environmental risk emerges based on the ERA results, Risk Mitigation Measures ("RMM") are recommended. However compliance with regard to these is only voluntary. In addition, some regulatory frameworks prescribe an assessment for Persistence, Bioaccumulation and Toxicity ("PBT") potential. However, this has no influence on the MA process.

Legislative proposals and potential impacts The most important legislative proposals contemplated in the study are outlined below. The strengthening of the ERA in the framework of the MA constitutes the basis of these proposals. It should be noted that no impact assessment of these options has been made, but the impact on pharmaceutical companies may well be significant.

Focus on the APIs. The ERA should focus on APIs instead of the final products. The results could then be fed into a monographic system. This way the harmonisation of reference data would be possible which in turn can be used to assess the risks of all products containing the same active substance.

ERA requirement. It is proposed to make the MA subject to the submission of a full ERA, thereby making it possible to refuse authorisation if the medicinal product does not have significant therapeutical benefits and also poses environmental risks. Furthermore, an ERA would be required for medicinal products authorised prior to October 30th 2005, (prior to this date, there was no ERA requirement) and all ERA results should be made available in a centralised database and/or be published in a public assessment report. The additional potential burdens on manufactures are evident.

Revision of ERA guidelines. The report recommends a revision of ERA guidelines so that all medicinal products would undergo a thorough environmental risk assessment. Furthermore, multiple changes in scientific requirements are proposed to improve the effective knowledge of how medicinal products end up in the environment and the impact that they have once there. All this adds up to additional burdens in the ERA process.

Reorganisation MA assessment. It is suggested that the Committee for Human Medicinal Products should include at least one environmental risk assessor and that the European Chemicals Agency's PBT Working Group should be involved in the ERA.

Re-evaluation MA. The study recommends the use of monitoring data in order to re-evaluate, or perhaps even withdraw a MA and/or revise the RMM. Another suggestion is to use the Water Framework Directive to facilitate the consideration of an ERA in assessing whether a substance needs to be on the priority substances list. Again the additional burdens on companies currently marketing products are clear.

In summary The study begins by analysing the issue of pharmaceutical waste and its impact and continues by describing the factors influencing pollution. It concludes by contemplating multiple legislative proposals which focus on strengthening the impact of an ERA in the MA process. This study provides a basis for the strategic approach to counter pollution of the environment by pharmaceutical waste and while the goal is clearly laudable, the additional burdens it will impose on industry are significant. This is notable in the context of the little available information on environmental impact currently available.

For more information, please contact Heleen Engelen, associate, Clifford Chance LLP.

1 See: BIO Intelligence Service (2013), Study on the environmental risks of medicinal products, Final Report prepared for Executive Agency for Health and Consumers, available at: http://ec.europa.eu/health/files/environment/study_environment.pdf.

< Previous Article Issue 13: September 2014 Next Article >

A summary of the Commission's annual report on the European Union customs enforcement of intellectual property rights

Andriani Ferti, Clifford Chance LLP

On 31 July 2014, the European Commission (the "Commission") published its annual report for 2013 on the European Union customs enforcement of intellectual property rights ("IPR"). The EU customs authorities detained around 36 million counterfeit goods at EU border control in 2013. The value of these goods represents more than EUR760 million, with medical products alone accounting for almost EUR12 million.

Background The report has been published annually since 2000 and highlights the importance within the European Union of IPR enforcement. It is therefore in line with the messages of the EU 2020 Strategy, which highlights the need for protection of IPR as a cornerstone of the EU economy as a key driver for growth and essential for the protection of health and safety within the European Union.

The statistics and information contained in the report is based on data transmitted by national customs authorities in accordance with customs legislation. They form a useful tool for the development of countermeasures against the problem. Importantly, China, as in the past, continues to be the main country of provenance for counterfeit goods, with around 66% of all imitation products originating from there. According to the report, counterfeit medical products specifically tend to originate from China (65.30%), India and the Czech Republic.

The importance of international cooperation and protection at the border The European Commission recognizes the importance of and need for international cooperation to prevent the import of counterfeit products into the EU. The EU is currently cooperating with China through the framework of the newly signed EU-China customs action plan on IPR enforcement that focuses on:

exchange of statistical information;

creation of a network of customs experts in key ports;

promoting cooperation with other enforcement agencies and authorities;

development of partnerships with business communities; and

exchange of knowledge and experience of each other's IPR enforcement policies and practices.

The retail value of medical products seized in 2013 was around EUR12 million, which represented around 10% of all goods detained. Whilst there has been a decline in the number of items detained in 2013 as compared to 2012, from 40 million to 36 million, the number of instances where goods were found in small consignments such as from postal or courier services increased to 72%, which the report considers is likely to be the result of increasing levels of e-commerce trade. Interestingly, medical products remain one of the categories which is more likely to be shipped in large quantities, and infringements tend to be found against patent, design and model rights (as opposed to trademark or copyright.)

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Rightholders may ask EU customs to protect their IPR at EU borders, and if customs officials suspect goods to be infringing the relevant IPR they can detain the goods, or suspend their release and inform the relevant rightholders. In 92% of cases, the infringing goods were destroyed, but of the remainder a court case was brought by the rightholder where in only 2.9% of instances the goods were found to be original and released.

An update on the EU Customs Action Plan On 10 December 2012, the EU Customs Action Plan was adopted by the Council of the European Union, which was intended to address IPR infringements in the period 2013-2017. Its strategic objectives included:

effectively implementing and monitoring the new EU legislation on customs enforcement of IPR;

tackling trade of IPR infringing goods throughout the international supply chain;

tackling major trends in trade of IPR infringing goods; and

strengthening cooperation with the European Observatory on infringements of IPRs and law enforcement authorities.

Whilst the recent report does not consider to what extent the EU has achieved the objectives of the 2012 Action Plan, it clearly looks to be monitoring some of these key objectives, most notably in relation to the trade of IPR infringing goods in international supply chains and the current trends in IPR infringing goods.

As noted above, IPR enforcement is important to the EU strategy. In June 2013, Regulation 608/2013 was adopted on IPR enforcement at customs to reinforce the rules for customs authorities. Moreover, a recent ruling in February 2014 by the CJEU in Martin Blomqvist v Rolex recognized that the powers of customs authorities under the Regulation also covers goods imported by consumers within the EU via non-EU import channels, even where those goods have not been targeted at EU consumers prior to the sale. The pharmaceutical industry has estimated the financial impact of counterfeit medicines on Europe to be around EUR 1.4 billion per year. In view of the retail value of medical products seized in 2013 being around EUR 12 million, it means that while there has been progress in addressing counterfeiting in the pharmaceutical sector, there is still a lot that needs to be done in order to ensure the eradication of counterfeit medicinal products.

For more information, please contact Andriani Ferti, Associate, Clifford Chance LLP.

< Previous Article Issue 13: September 2014 Next Article >

What's on the Horizon

EU legislative and policy developments – The newsPfLAsh Timeline

PFIZER : OVERVIEW OF DEVELOPMENTS IN EU LEGISLATION AND POLICY AFFECTING THE PHARMACEUTICAL SECTOR

Type of act / stage in the process Key dates Common European Sales Law Regulation on a Common European Sales Law 11 October 2011: European Commission published a proposal for a (ordinary legislative procedure) Regulation The proposal is being considered by the European 26 February 2014: The legislative resolution adopted by the European Parliament and Council Parliament (first reading) Date to be announced: Vote in the Council 2015: Negotiations between the Parliament and Council on a final draft, which must be agreed upon by both institutions before it becomes law, are unlikely to begin until 2015, at the earliest

Competition Directive on antitrust damages claims (ordinary 11 June 2013: European Commission published proposal and legislative procedure) Guidance on quantifying harm The Commission's proposal on antitrust damages 17 April 2014: the European Parliament adopted a text of the claims will be considered by the European directive as agreed with the Council Parliament and Council. Later in 2014: Final approval of the text by the Council of Ministers By 2016 (at the earliest): Implementation by Member States

Revised block exemption for technology transfer 1 May 2014: New Regulation entered into force (with transitional agreements arrangements) The European Commission is considering a new 30 April 2015: One year transitional period for the New Regulation Regulation for the assessment of technology transferends agreements under competition rules. The proposals are particularly relevant for assessing reverse payment settlements and patent pools.

Review of the European Commission's De Minimis 25 June 2014: Commission adopted revised safe harbours for minor Notice agreements ("De Minimis Notice") and provides guidance on "by object" restrictions of competition

Review of EU Merger Regulation with specific 20 June 2013: Consultation launched focus on minority shareholdings and transfer of 12 September 2013: Consultation closed cases between European Commission and 9 July 2014: Commission adopted the White Paper "Towards more national competition authorities effective EU merger control" By 3 October 2014: comments on the White Paper to be submitted

New framework on state aid for research, 1 July 2014: New framework entered into force development and innovation Romanian Competition Council (RCC) inquiry 19 March 2013: Launch of inquiry into the pharmaceutical sector focusing on generic penetration and changes in the distribution system French Competition Authority inquiry into the 25 February 2013: Launch of inquiry distribution of medicinal products by 19 December 2013: French Competition Authority's report published pharmaceutical companies, wholesalers and 9 July 2014: The Commission closed its investigation pharmacists, and online sale of medicines The Authority consulted on the provisional results of the inquiry.

UK Office of Fair Trading antitrust investigation

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August 2011: Investigation opened into dispute settlement agreements relating to October 2013: Oral hearings with parties on written presentations on paroxetine SO October 2014 (estimate): OFT final decision

European Commission antitrust investigation 30 July 2012: SO sent to parties against Les Laboratoires Servier concerning 15 ‐18 April 2013: Oral hearing before the European allegedly anticompetitive agreements to delay Commission generic entry of perindopril 9 July 2014: the Commission fined Servier and five generic companies for concluding patent settlement agreements and Servier for abusing its dominant position in the market for perindopril by acquiring process technology

Consumer affairs Commission Recommendation on collective 11 June 2013: European Commission published Recommendation redress 6 January 2014: UK response to EC Recommendation suggests "opt- The Commission Recommendation recommends all out" model EU Member States to have collective redress 21 January 2014: Belgian Government submitted a draft federal bill mechanisms for injunctive relief and compensation on collective redress for approval in the caused by violations of EU rights. Parliament

12 February 2014: French legislation reforming inter alia collective redress was approved by the French Parliament. A new collective redress mechanism in French law was codified in Articles L. 423-1 et al of the French Consumer Code. Directive on Consumer Rights 22 November 2011: Final act published in Official Journal The Directive will replace, as of 13 June 2013, 13 December 2013: Deadline for national transposition Directive 97/7/EC on the protection of consumers in From 13 June 2014 Member States must apply national laws respect of distance contracts and Directive implementing the Directive 85/577/EEC to protect consumer in respect of contracts negotiated away from business premises. Directive 1999/44/EC on certain aspects of the sale of consumer goods and associated guarantees as well as Directive 93/13/EEC on unfair terms in consumer contracts remains in force.

Corporate governance Directive on improving the gender balance among 14 November 2012: European Commission published a proposal for a non‐executive directors of companies listed on Directive on improving the gender balance among non‐executive stock exchanges and related measures (ordinary directors of companies listed on stock exchanges legislative procedure) 20 November 2013: European Commission's Directive is approved by the European Parliament The Commission's proposal is being considered by June 2014: Progress Report on the EU directive indicates that there is the European Parliament and Council. not yet consensus on passing this Directive within the Council of Ministers

Data privacy Regulation on data protection (ordinary legislative 25 January 2012: European Commission published a proposal for a procedure) Regulation 31 May 2013: Council published summary of negotiations and latest The European Commission proposed an update of version of the Regulation Directive 95/46/EC on the protection of personal 21 October 2013: Report voted in LIBE Committee of data. The Directive will be replaced by a Regulation European Parliament Committee on Civil Liberties that will be directly applicable in the Member States. 24-25 October 2013: Council Conclusions – not asking for a quick The proposal is being considered by the European adoption of the Regulation – not to be concluded before 2014, more Parliament and Council. likely in 2015 6 December 2013: Council fails to commence negotiations; possible delay of first reading by Parliament 12 March 2014: vote in plenary of the European Parliament endorsing the Commission's proposal 13 May 2014: ECJ's ruling on the right to be forgotten (Google v Spain) 6 June 2014: The Council reached a partial general approach on specific issues of the Data Protection Regulation Industrial policy 2012 European Commission Communication on 10 October 2012: European Commission issued a Communication

industrial policy 22 January 2014: the Commission adopted the Communication "For a The Communication outlines the EU's approach to European Industrial Renaissance" industrial policy to promote growth. It does not 26 June 2014: Commission publishes Staff Working Document on include pharmaceuticals as a priority sector but it "Pharmaceutical Industry: A strategic sector for the European does Economy" commit to introducing a pharmaceutical sector- Autumn 2014: Commission to issue a wider policy strategy agenda specific strategy by 2014. and roadmap for pharmaceutical sector Autumn 2014: Commission to organise an event in order to prepare future policy decisions by bringing together relevant decision makers from public European and Member States' administrations responsible for industrial competitiveness, health, research and innovation with patients, healthcare professionals, trade unions and industry representatives

Intellectual Property Unitary patent package (enhanced cooperation December 2012: European Parliament and Council adopted Unitary procedure) Patent proposals – Regulations EU 1257/2012 (unitary patent) and The package provides for the creation of a unitary 1260/2012 (UP translation arrangements) patent with uniform effect in 25 EU Member States 19 February 2013: International agreement establishing Unified (Spain and Poland have opted out) and a Unified Patent Court (UPC) was signed by all Member States except Poland Patent Court. It will enter into force once ratified by and Spain 13 Member States. 16 April 2013: CJEU ruled against Spain and Italy's challenge The use of the enhanced cooperation procedure was 31 May 2013: Publication of Rules of Procedure for Unified challenged by Spain and Italy but their actions were Patent Court (15th draft) dismissed by the Court of Justice of the EU. Spain 17 December 2013: Patent Translate coverage complete. The has brought two new actions against the proposed European Patent Office added the final set of languages to its free unitary patent. machine translation service Patent Translate, which now offers on- the-fly-translation of patent documents for all 28 official languages of the EPO's 38 member states, plus Chinese, Japanese, Korean and Russian. 6 May 2014: Council adopts Regulation amending the Brussels I Regulation to allow its rules to be applied by the UPC 1 July 2014: CJEU heard the action brought by Spain challenging both of the regulations that create the unitary patent. 8 July 2014: 6th Meeting of the Preparatory Committee 21 October 2014: Advocate-General's opinion is expected in relation to Spanish action 26 November 2014: public hearing in Brussels re draft Rules of Procedures (16th draft). Early 2015: Estimated date by the preparatory committee of the unified patent court for entry into operation of the UPC. However, the Unified Patent Court Agreement will need to be ratified by at least 13 states, including France, Germany and the United Kingdom to enter into force. The early 2015 target date is aspirational as the UP/UPC is unlikely to enter into force before late 2016. Regulation and Directive on Single EU Trademark 23 July 2014: Council agreed on a Council common position for the (ordinary legislative procedure) modernisation of the EU trade mark system, calling for "a swift The Draft Regulation and Draft Directive aim to agreement" with the Parliament streamline the procedures for obtaining a single trademark valid throughout the EU. The proposals are being considered by the European Parliament and Council.

Directive on the protection of trade secrets 28 November 2013: European Commission published a proposal for a Directive 9 December 2013: Committee referral announced in Parliament for 1st reading/single reading Awaiting the Legal Affairs Committee Report - to be dealt by the new European Parliament 26 May 2014: the Council of the EU took position on the trade secrets-draft Directive 10 July 2014: EP's analysis of Commission's impact assessment Pharmaceutical regulatory issues Regulation on clinical trials (ordinary legislative 16 April 2014: Adoption of the Regulation procedure) 16 June 2014: the Regulation entered into force but it will apply not The European Commission has proposed a earlier than 28 May 2016. Regulation on clinical trials on medicinal products for

human use, to replace the current Directive 2001/20/EC. The proposal is currently being considered by the European Parliament and Council.

European Medicines Agency (EMA) guidance on 22 November 2012: Consultation on the publication of clinical trial clinical trials data The EMA consulted on the publication of clinical trial 24 June 2013: Draft guidance issued data in November 2012. 12 June 2014: EMA agreed policy on publication of clinical trial data EMA then published draft guidance on the with more user-friendly publication and access to clinical trial results in June amendments 2013. 9 July 2014: Management Board delays formal adoption of EMA publication of clinical trial data policy to October 2014 Two new Regulations on medical devices (ordinary 26 September 2012: European Commission issued its proposals legislative procedure) 2 April 2014: Vote in the plenary of the European Parliament The European Commission has proposed a Regulation on medical devices and a Regulation on in vitro diagnostic (IVD) medical devices. The proposals are being examined by the European Parliament and Council.

Advanced therapy medicinal products 20 December 2012: European Commission launched a public The European Commission has consulted consultation stakeholders to assist with a report on the 28 March 2014: European Commission publishes Report on the application of the Regulation on advanced therapy application of the Regulation on advanced therapy medicinal medicinal products (Regulation 1394/2007). products

Transparency Directive (ordinary legislative 1 March 2012: European Commission published a proposal for the procedure) Transparency Directive The European Commission proposed a review of 21 March 2013: Amended proposal sent to European Parliament Directive on the transparency of measures regulating the prices of medicinal products for human use and their inclusion in the scope of public health insurance systems The proposal proved controversial with Member States. The Commission therefore issued an amended proposal in March 2013, seeking to address Member States' concerns. The amended proposal is being considered by the European Parliament and Council. Member States continue to have concerns. Consultation on Commission guideline on 9 October 2013: Consultation launched paediatric investigation plans 2 May 2014: the Commission published the responses to the public In accordance with the Paediatric Regulation (EC) consultation 1901/2006, in 2008 the Commission guidelines on detailed arrangements concerning the format and content of paediatric investigation plans. The Commission is seeking input in order to revise the 2008 Guidelines.

Consultation on the revision of European 6 February 2014: Consultation launched Commission Guidelines on Good Manufacturing 31 May 2014: Deadline to respond to the consultation Practice for Medicinal Products The revision refers only to Annex 15 of the Guidelines: Qualification and Validation

Consultation on Concept paper on review and 7 February 2014: Consultation launched update of European Medicines Agency guidelines 31 May 2014: Deadline to respond to the consultation to implement best practice with regard to 3Rs From June 2014: Review and update of relevant guidelines, with (replacement, reduction and refinement) in adoption of revised guidelines or update plans in parallel regulatory testing of medicinal products The Joint CHMP/CVMP ad-hoc expert group on the application of the 3Rs in the regulatory testing of medicinal products (JEG 3Rs), in coordination with relevant CHMP and CVMP working parties, has been reviewing existing EMA guidance documents with a view to ensuring that these reflect current best

practice with regard to implementation of 3Rs approaches. In light of the work undertaken so far it seems likely that revisions to some guidelines may be warranted.

Delegated Regulation on post-authorisation 30 April 2014: Delegated Regulation entered into force efficacy studies The European Commission has adopted a Delegated Regulation that concerns the efficacy of medicines, and which complements new EU pharmacovigilance legislation adopted in 2010 and 2012, by specifying the situations in which post-authorisation efficacy studies are required

Consultation on the Green Paper on mobile health 10 April 2014: Green Paper and Staff Working document published The European Commission launched a public and consultation launched consultation on the Green Paper on mobile health, 3 July 2014: Deadline to respond to the consultation inviting comments on the barriers and issues related to the use of mHealth. The Commission also published a Staff Working Document on the existing EU legal framework applicable to lifestyle and wellbeing apps, aiming at providing simple guidance to app developers on EU legislation in the field

EFPIA Disclosure Code 31 December 2013: deadline for the implementation in national 2014 codes Following the EU Commission initiative on Ethics & 6 June 2014: final general approval by the EFPIA General Transparency in the pharmaceutical sector, the Assembly EFPIA Disclosure Code imposes obligations to 11 July 2014: final editing of the consolidated version of the disclose transfers of value to healthcare code professionals and healthcare organisations, 2016: starting of the obligation to report the trasfers of value to HCPs commencing with reporting in 2016 in respect of and HCOs for the calendar year transfers of value for the calendar year 2015. The 2015 provisions of this Code shall be implemented by EFPIA's member associations in a manner consistent with applicable competition and data protection laws and regulations and all other applicable legal requirements. Public Procurement Directive on electronic invoicing in public 14 April 2014: Council approved Directive procurement (ordinary legislative procedure) By 27 November 2018: to be implemented into national law The Directive has been approved by the European Parliament and Council

Joint Procurement Agreement on vaccines and 10 April 2014: Adoption of the Joint Procurement Agreement -- The medicines Joint Procurement Agreement is voluntary, and will enter into force The Commission has approved a Joint Procurement two weeks after it has been signed by a third of participating member Agreement, which will enable all EU countries to states (10 countries) and the procure pandemic vaccines and other medical Commission countermeasures as a group, rather than individually 20 June 2014: European Commission and the Health Ministers of 15 Member States signed the JPA for Medical Countermeasures

END OF TABLE < Previous Article Issue 13: September 2014 Next Article >

< Previous Article Issue 13: September 2014 Next Article >

Biosimilars and interchangeability – focus on France

Laura Di Lollo and Marie Debrégeas

Interchangeability of biosimilars is a much debated issue in the EU and highlights the difference between biosimilars and small molecule generic drugs. France has taken a particular position in this debate by adopting a legal system allowing substitution of such products, under specific conditions.

Introduction

EU law provides the first example of legal regulation of the biosimilar authorization process. Thus, countries including the USA, Canada, Australia and Japan have been inspired by EU law in introducing their own regulatory procedures for biosimilars.

The concept of a "similar biological medicinal product" was adopted in EU pharmaceutical legislation in 2004 and came into effect in 2005. The first biosimilar medicine was approved by the European Commission in 2006 and biosimilar versions of somatropin, G-CSF, and epoetin are already available and on September, 2013 the the European Commission granted marketing authorisation for the first two biosimilar monoclonal antibodies (Infliximab biosimilars) in the EU.

What does similarity means?

Biosimilars are structurally highly similar versions of an already authorized biological medicinal product (the reference product) with demonstrated similarity in physicochemical characteristics, efficacy, and safety, based on a comprehensive comparability exercise.

Interchangeability / substitution of a biosimilar

Interchangeability (the medical practice of changing one medicine for another) is standard with small molecule generic drugs, but there is an ongoing debate about whether biosimilars should be considered to be automatically interchangeable with their reference drugs.

Although considered an available therapeutic option which may represent an economic advantage, it is clear that biosimilars are not identical to their respective reference product because there are many factors that must be taken into consideration (such as immunogenicity, manufacturing processes peculiarities) which may impact safety and efficacy of the products.

While the EMA is responsible to assess the similarity of two biological products through the comparability process, the decision on whether to substitute a biological medicinal product lies outside the remit of the EMA/CHMP and is the responsibility of the relevant competent authorities within each EU Member State.

France, a European pioneer for biosimilars substitution

France has recently adopted a legal system1 which allows, under specific circumstances and conditions, the

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substitution of biosimilars. Such system will only be fully applicable upon publication of an implementation decree which will further describe practical conditions of such substitution. While this decree was expected during summer 2014, we understand that its publication should be postponed until early 2015.

This system provides for two major provisions, which aim at authorizing biosimilars substitution upon the following conditions:

1. The French health agency2 shall create "similar biological groups" assembling a reference biological medicine with all of its biosimilars. Registration of a biosimilar in such a group will be mandatory for this product to be delivered upon substitution.

2. A biosimilar could only be delivered upon substitution (within the same similar biological group) at the stage of initiation of treatment for a patient under a biological product. In such case, the physician should mention in his/her prescription, as the case may be, "initiation of treatment" or "not substitutable, continuity of treatment", it being specified that the physician remains free to exclude substitution in limited situations (express hand-written mention on the prescription). The pharmacist shall then make the substitution decision when the above conditions are met, subject to mentioning on the prescription the name of the delivered product and to informing the physician of the substitution.

A substitution system which raises various criticisms

Professionals of the pharmaceutical sector and health agencies generally agree on the fact that biological medicines are, due to their nature, not automatically substitutable as they are not identical copies of their reference biological products but "similar" to them. Moreover, biosimilars have been developed relatively recently, so it can be argued that at this point, there is insufficient scientific data on the risks and side effects of biosimilars. This substitution system could be considered as being "premature".

Moreover, several safeguards should be introduced to the French law to ensure an appropriate "substitution" system which does not pose any risk for patient safety. Importantly these safeguards should include

1. Precautionary principle: in cases where the prescriber omits to indicate whether it is the initiation or the continuation of a treatment, the precautionary principle should apply and no substitution should be permitted.

2. Brand name prescribing: to ensure treatment continuity, all prescriptions should be by brand name.

In addition up-to-date electronic patient medical records for all pharmacists at the point of dispensing must be available to ensure full information about past prescriptions and traceability in case of adverse events.

Issues related to liability towards patients and/or other operators, may occur. In particular, the French State, which indirectly decides on registrations of medicines into similar biological groups, could be held responsible towards patients, physicians and pharmacists. Physicians and pharmacists might also be held responsible (under criminal, civil, deontological and contractual liabilities), for allowing and/or operating substitution, for example in case of a side effect linked to substitution. Finally, biosimilars manufacturers shall be aware that despite the substitution right, their responsibility is particularly high (as biological products manufacturers), notably pharmacovigilance obligations. This implies a specific focus and a reinforced vigilance on the clear identification of the product which could have caused a side effect and a clear vision of the probable specific requirements of health authorities (RMP/PGR3 and post-registration studies).

Despite criticisms, biosimilars development seems essential to French authorities

Development of biosimilars is seen as a way to control public health expenditures, as it was the case with generics. Pharmacists have been granted substitution right for generics since 1999 and are regularly and strongly encouraged to substitute such products (various measures taken by authorities such as incentives, rebates for generics manufacturers for sales to pharmacists…).

Prescription of medicines with their International Nonproprietary Names (INN) strongly facilitates substitution file:///C/Users/Connie/Websites/GCSPfizer/www/pfizerlegalalliance_issue13/Pfizer-Legal-Alliance_Newsletter_Article11.html[7/20/2017 1:23:49 PM] Pfizer Legal Alliance - newsPfLAsh :: Issue 11: May 2014

of medicines. It has been highly encouraged by French authorities since 2002 and regularly strengthened upon successive laws and thanks to the Medical Convention between private physicians and the social security body (e.g., financial advantages for physicians reaching a fixed volume of prescription with INN). French regulations stating obligation of prescription with INN (applicable early 2015) will be amended for biological products as they run counter to European legislation4 (requiring prescription of biological medicines using with their brand names for cross-border prescriptions).

Expectations of public health expenditures savings was mostly justified for generics by the large difference between the prices of reference products and of generics (about 60%) and the direct impact on the public expenses (social security system). As concerns biosimilars in France, no mandatory rules or guidelines for price determination have been settled yet. French authorities only mentioned a price reduction of 20% to 30% for biosimilars compared to their reference products as well as a likely decline in the reference products prices, which is far from the generics market. As a consequence, French authorities don't anticipate significant savings before 2017 (around 50 M€).

Conclusion – Penetration of biosimilars in the French market and industry position

The French health authorities believe that free market forces do not suffice for penetration of biosimilars in France and that intervention is needed through substitution guidelines and mandates. The French authorities however do seem to recognize that biosimilars differ from small molecule generics and cannot be regarded as interchangeable with the originator product or with each other. France therefore does not allow automatic substitution but designed this unique approach with safeguards. Industry however believes that the measures currently proposed are unlikely to be sufficient to protect patient safety and minimize the risk of inappropriate substitution. Much more work needs to be done in the Decree and additional safeguards will be needed.

For further information, please contact Laura Di Lollo for questions regarding biosimilar EU legislation and Marie Debregeas for questions regarding the French system.

1 Law n°2013-1203 dated December 23rd, 2013.

2 Agence Nationale de Sécurité du Médicament et des Produits de Santé

3 Plan de Gestion des Risques – Risk Management Plan.

4 Directive 2012/52/EU dated December 20th, 2012.

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Marie Debrégeas

Senior Legal Counsel Pfizer France

Marie is a qualified lawyer in France, specialized in business, contracts and regulatory law. She started her career working in private practice as an attorney in US law firms based in Paris (Coudert Brothers/Dechert Price and Rhoads) in corporate & securities/lifesciences divisions, for four years.

In 2008, Marie joined Wyeth Pharmaceuticals France as an in-house lawyer where she handled all day-to-day business activities contracts and general legal advice. Since she joined Pfizer in France in 2010, she provided local legal support to some enabling functions and BUs. Now Marie supports French Vaccines, Oncology and Inflammation (GIP) teams as well as the European Vaccines team.

In particular, Marie has been working with Enbrel teams for more than eight years, always aspiring to provide key advices and support to face challenging issues and evolutions, such as biosimilars competition.

Laura di Lollo

Senior Legal Advisor Pfizer Italia

Laura di Lollo, Senior Legal Advisor, Pfizer Italia, is the Lead Counsel for the GEP BU in Italy and the Legal Lead for the Inflammation & Haemophilia European Specialty Asset Teams (ESAT) based in Rome. She is also specialized in Data Privacy, Labour & Employment laws, Compliance and various litigation matters.

Before Joining Pfizer in February, 2010, she worked in several legal roles of increasing seniority and responsibility at Wyeth for twelve years (Legal Lead for Specialty and Established products BUs, Data Privacy Country Coordinator, Litigations Coordinator). At Wyeth, Laura was also responsible for compliance training and played an important role in the implementation of Pfizer's Anticorruption/Anti-bribery Corporate Procedure #115 (Foreign Corrupt Practices Act) across legacy Wyeth operations in Italy.

She obtained a degree in Law at Rome State University and had been admitted at Rome Bar Association in 1996.

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Bonella Ramsay

Partner, Global Co-Chair Life Sciences DLA Piper

The DLA Piper Life Sciences Survey: The Results

Dear newsPfLAsh reader,

Welcome to the 12th edition of newsPfLAsh, celebrating two years since the first issue. It is therefore timely to consider the key issues which keep in-house counsel in the life sciences industry up at night!

In 2013 DLA Piper invited senior in-house lawyers in biopharma, medical device and diagnostics companies from around the globe to complete a short survey to better understand the most pressing needs and challenges they face. We are soon to conduct our 2014 Life Sciences Survey and it will be interesting to see if times have changed or it is a case of "plus ça change, plus c'est la même chose". As we all are acutely aware, our industry remains subject to significant political and market dynamics.

In 2013, the most pressing issue was overwhelmingly compliance. As we have all been aware in 2014, developing businesses in new markets with differing regulatory procedures and cultures has made many pharmaceutical companies subject to anti-bribery and anti-corruption investigations and enforcement. As a result, a number of pharmaceutical companies are proactively re-assessing their business conduct procedures and monitoring approach in new markets.

Alliances, collaborations and technology transfer are also a major issue for survey respondents. With the development of new models of R&D to rationalise excess capacity/assets, share cost and risk, there is understandably an increase in the legal needs associated with developing these types of business structures. This trend is particularly prevalent in the emerging markets and it is interesting to note that patents also scored very highly as being a major issue, perhaps indicating a renewed focus on patent protection in emerging markets as local competition develops.

Emerging markets also featured strongly in respect to where legal talent is needed in-house to meet the future demands of your internal clients; principally China, but also India and Latin America.

In summary, access to and the protection of business interests in emerging markets is an area of concern for all those in the sector. To successfully navigate these issues in the short and long term, life sciences companies need to ensure they are compliant with local regulatory conditions with the support of sector legal experts at a local level.

The near future will no-doubt continue to bring many legal developments, challenges and also opportunities, all of which newsPfLAsh will continue updating you on. Interesting times lay ahead.

file:///C/Users/Connie/Websites/GCSPfizer/www/pfizerlegalalliance_issue13/Pfizer-Legal-Alliance_Newsletter_Article13.html[7/20/2017 1:23:49 PM] Pfizer Legal Alliance - newsPfLAsh :: Issue 13: September 2014

Yours faithfully,

Bonella Ramsay Partner Global Co-Chair Life Sciences DLA Piper

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Bonella Ramsay

Partner, Global Co-Chair Life Sciences DLA Piper

Bonella Ramsay is a partner in DLA Piper's London office, supporting the firm's global relationship with Pfizer. Bonella also Co-Chairs DLA Piper's Global Life Science Sector. She has worked with Pfizer since the start of the PLA on a wide range of transactions across the product life cycle, from clinical trials, R&D spin-outs and collaborations to restructuring, outsourcing and co-promotion arrangements and related regulatory advice. As an intellectual property lawyer, Bonella is involved in IP rights management and strategy for a wide range of clients as well as structuring and negotiating the exploitation of IP rights. She can be reached at [email protected].

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