Decision in Servier case
European Commission - SPEECH/14/541 09/07/2014
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Vice President of the European Commission responsible for Competition Policy
Decision in Servier case
Brussels, 9 July 2014
Today the European Commission has imposed fines totalling 427 million euros on Servier and several other pharmaceutical companies because they have breached EU antitrust rules.
Our investigation has shown that Servier committed an abuse by pursuing an anti-competitive strategy to delay the entry of cheaper generic versions of its drug Perindopril. As part of this strategy, Servier entered into anti-competitive agreements with generic makers.
Let me first explain the facts.
Perindopril is a medicine developed by Servier to treat high blood pressure. It was by far its bestselling medicine. Yet, as of 2001, Servier faced increasing competitive pressure. The protection for the Perindopril molecule was gradually expiring across Europe, thus threatening the privileged position of Servier in the market. Generic makers were making progress towards market entry.
Servier tried to keep competitors off the market thanks to secondary patents – that is to say, patents which did not protect the molecule itself but other aspects such as the manufacturing processes of the medicine. To overcome this, generic companies relied on a new technology that would allow them to avoid Servier's secondary patents altogether. However, in 2004, Servier acquired this technology. Not to use it but only to prevent competitors from entering. As a result, a number of projects by generic makers were abandoned and market entry was delayed.
Some generic makers continued in their efforts to launch a generic version of Perindopril by challenging Servier's patents in court and preparing their own products. However, every time a generic company came close to the market, Servier managed to enter into a deal to make sure that it would stay outside the market.
Through these deals, Servier made payments to the generic companies against the certainty that they would not enter the market and refrain from legal challenges for the duration of the agreement. In one case, the settlement was not based on cash payments but on a market-sharing arrangement with the generic company: Servier offered a licence for 7 national markets; in return, the generic company agreed to "sacrifice" all other EU markets.
The generic companies involved in these deals were: Niche-Unichem and Matrix (now part of Mylan), Teva, Krka, and Lupin. All these companies accepted to settle with Servier between 2005 and 2007. They were literally – to quote an internal document from one of these companies -"bought out of the market".
When, after five patent settlements, litigation finally led to a first court judgment, the relevant patent was annulled. But Servier commented that this was still a "great success, as four years were won". Right after the patent was annulled, prices of generic perindopril dropped by as much as 90%.
So for four years, patients and national health systems were deprived of the benefits of competition, meaning earlier access to a cheaper version of the medicine. The taxpayer throughout the EU largely financed Servier's monopolistic rents, which were partially shared with its generic competitors.
This is a serious breach of EU antitrust rules, and the companies have been sanctioned accordingly – with total fines of 427 million euros, 330 million of which should be paid by Servier.
These sanctions are proportionate to the infringement committed. They take into account, in particular, the gravity and duration of the infringement. And they also aim to deter other companies from engaging into the same type of anticompetitive practices in the future.
Throughout this term, the Commission has fought the joint attempts by certain originator companies and their generic competitors to share rents instead of focussing on competing and innovating. In June 2013 we have imposed sanctions on Lundbeck and other pharmaceutical companies for delaying the market entry of a generic antidepressant. In December last year we also imposed sanctions on Johnson & Johnson and Novartis for also delaying the entry in the Netherlands of a generic version of Fentanyl, a major painkiller.
As I said then and I repeat it now, these so-called "pay for delay" agreements are not acceptable. Today's decision draws a clear line on the ground, which will give the entire sector even more guidance on what antitrust rules do not allow.
It is of course entirely legitimate to apply for patents, enforce them, transfer technologies and settle litigation. But patent settlements should not be misused. Engaging in an exclusionary strategy to foreclose important competing technologies and buying one close competitor after another is blatantly abusive.
Indeed, the patent system is designed to reward the efforts made by pharmaceutical companies to innovate and develop new and improved therapies. The benefits their laboratories bring to society are undeniable.
But the same applies to generic companies. They make sure that, once the patent exclusivity is over, less money is spent on older treatments and more resources can be steered towards new medicines. Indeed, both competition and intellectual property drive innovation.
Generics also give citizens access to more affordable healthcare, and they also help Member States to preserve inclusive and sustainable health systems.
This balance is disrupted when companies don't play by the book. In today’s case, a company tried hard to unduly prolong its exclusivity. And it managed to do so not through innovation or the strength of its patents, but thanks to its deep pockets and in complicity with its generic rivals.
Such behaviour is prohibited in the European Union. When companies break these rules, they will be pursued and penalised accordingly. Pharmaceutical companies should focus their efforts on innovating rather than attempting to extract extra rents from patients and taxpayers.