On 9 November 2018, the European Union (EU) delivered the following statement on IP and competition policy at the WTO TRIPS Council under agenda item 13 on Intellectual Property and the Public Interest: Promoting Public Health Through Competition Law and Policy (an item co-sponsored by South Africa, Brazil, and India).
Responding to South Africa’s description of competition policy as a TRIPS flexibility, the EU declared:
While the submission from South Africa seems to consider the use of competition policy a TRIPS flexibility, the EU would be cautious and would emphasise the following: while the TRIPS agreement is obviously compatible with the application of competition policy measures, it clearly does not allow for “absolute policy space”. As provided for in Article 8 (1) and (2), as well as in Article 40 (2), these measures have to be consistent with the provisions of the TRIPS agreement and cannot be used as tools in avoiding the obligations under the Agreement.
In relation to excessive pricing, the EU stated:
Concerning excessive pricing as a competition law infringement in the pharmaceutical sector, there have been only very few decisions in the EU, specifically, by Denmark, Italy, and the United Kingdom.
At the EU level, the European Commission is currently conducting one investigation into unfair pricing of medicines. That case concerns pricing practices by Aspen, a global pharmaceutical company headquartered in South Africa, with several subsidiaries in the EEA. The investigation concerns Aspen’s pricing practices for niche medicines used for treating cancer. Aspen acquired these medicines many years after their patent protection had expired and hence the investigations concerns generic pharmaceutical products. The European Commission’s investigation of Aspen’s pricing in the EU markets with the exception of Italy is ongoing and therefore we cannot comment it any further.
In a related case concerning the Italian market, the Italian competition authority found that Aspen’s pricing amounted to an abuse of dominance, and ordered the company to set new fair prices for the medicines concerned. The Italian authority applied a two step test (referred to as the United Brands test). First, it examined whether the difference between cost and price indicated excessive profit margins and, second, whether that the price was unfair in relation to a number of factors.
The full text of the EU intervention, as delivered, can be found below.
As already stated at the last TRIPS Council, in general, we do not consider the TRIPS Council the appropriate forum to discuss competition policy. There are other international for a, such as the International Competition Network, where such international exchanges and cooperation are taking place.
While the submission from South Africa seems to consider the use of competition policy a TRIPS flexibility, the EU would be cautious and would emphasise the following: while the TRIPS agreement is obviously compatible with the application of competition policy measures, it clearly does not allow for “absolute policy space”. As provided for in Article 8 (1) and (2), as well as in Article 40 (2), these measures have to be consistent with the provisions of the TRIPS agreement and cannot be used as tools in avoiding the obligations under the Agreement.
Generally, competition policy plays an important role in controlling and sanctioning anti-competitive market behaviour in any sector, including the pharmaceutical sector.
Concerning excessive pricing as a competition law infringement in the pharmaceutical sector, there have been only very few decisions in the EU, specifically, by Denmark, Italy, and the United Kingdom.
At the EU level, the European Commission is currently conducting one investigation into unfair pricing of medicines. That case concerns pricing practices by Aspen, a global pharmaceutical company headquartered in South Africa, with several subsidiaries in the EEA. The investigation concerns Aspen’s pricing practices for niche medicines used for treating cancer. Aspen acquired these medicines many years after their patent protection had expired and hence the investigations concerns generic pharmaceutical products. The European Commission’s investigation of Aspen’s pricing in the EU markets with the exception of Italy is ongoing and therefore we cannot comment it any further.
In a related case concerning the Italian market, the Italian competition authority found that Aspen’s pricing amounted to an abuse of dominance, and ordered the company to set new fair prices for the medicines concerned. The Italian authority applied a two step test (referred to as the United Brands test). First, it examined whether the difference between cost and price indicated excessive profit margins and, second, whether that the price was unfair in relation to a number of factors.
Apart from the investigation into unfair, or excessive pricing, the European Commission has sanctioned also other measures. In 2005, the Commission found that AstraZeneca misled patent offices to enjoy a patent extension (in the form of a Supplementary Protection Certificate) to which it was legally not entitled. This finding was confirmed in a final judgment by the Court of Justice in 2012. In 2013 and 2014, the Commission issued three pay-for-delay decisions (Lundbeck, Johnson&Johnson, Servier) against agreements which sought to extend exclusivity of originator products by paying out would-be generic entrants, including for discontinuing litigation to remove patent barriers.
The EU Commission has not pursued any case involving unreasonably high royalties for a technology transfer. Nor has it ordered an originator company as the IP holder to grant a licence for its proprietary technology to remedy a competition law infringement.
At the EU level, the application of competition policy has so far not been needed as a remedy against excessive pricing as a result of IPR protection (i.e. a licence to generics to bring down the price) or to otherwise remedy patent barriers to generic entry.
The above examples show that competition law enforcement in the EU is done on a case-by-case basis. Where the Commission intervenes in cases involving IPRs, it gives particular attention to preserving the balance between static competition (short term price effects) and dynamic competition (long term innovation effects).
On the international level, the EU cooperates with other national authorities, including WTO Members, on competition policy and enforcement issues of mutual interest. Our main objective has been to promote convergence of competition policy instruments and practices across jurisdictions and to facilitate cooperation with competition authorities in other jurisdictions in enforcement activities.
Cooperation with other competition authorities takes place at two levels. First, the Commission discusses competition-related matters in various international fora, such as the International Competition Network (ICN), where excessive pricing was discussed during its annual conference in Portugal in 2017. ICN brings together competition authorities from more than 100 jurisdictions which exchange experiences and best practices in several meetings every year. Second, the Commission is also regularly engaged in bilateral cooperation, including related to the pharmaceutical sector. The nature of the cooperation activity varies between countries and can cover cooperation on specific investigations, dialogue on competition policy issues as well as capacity building support.
Therefore, we remain to be convinced about the need to discuss competition policy at the TRIPS Council.