The French Competition Authority ("FCA") has issued a rare decision sanctioning three laboratories active in treatment of age-related macular degeneration on the basis of collective abuse of dominance practices designed to sustain the sale of an expensive drug, Lucentis, to the detriment of a cheaper drug, Avastin.
| whAT YOU NEED TO KNOW - Key takeaways |
- The FCA found that three pharmaceutical firms held a collective dominant position on the basis of their structural and strategic links (including licence agreements and cross-shareholdings). The General Court has also previously held (T-342/99, Airtours) that collective dominance can be established by the existence of economic links or other factors giving rise to a connection between the undertakings concerned.
- The anti-competitive practices concerned an exploitative abuse – which is rare in the FCA's decisional practice – since the actions taken by the three pharmaceutical companies was aimed at withdrawing one of their own products from the market, in order to maximise profit by promoting a more expensive product.
- This is the first time that the FCA has found anti-competitive practices solely on the basis of a collective abuse of dominance under Article 102 TFEU (in earlier decisions, practices giving rise to a collective abuse of dominance also involved an anti-competitive agreement under Article 101 TFEU).
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Background
Age-related macular degeneration ("AMD") is a disease causing severe impairment of central vision and is the main cause of low vision for people over the age of 50 in industrialised countries. During the relevant period investigated by the FCA, there were two treatments for AMD:
- Lucentis, developed by Genentech, which has a marketing authorisation for AMD treatment. Novartis had been granted a licence for Lucentis.
- Avastin, also developed by Genentech but which, despite being regularly used by doctors for the treatment of AMD, does not have a marketing authorisation for AMD treatment (only for cancer treatment). Roche has been granted a license for Avastin.
Both drugs have been recognised by specialists (primarily ophthalmologists) as effective treatments, but Lucentis is almost 30 times more expensive than Avastin.
The FCA's investigation
The FCA found that the three laboratories – Genentech, Roche and Novartis – collectively held a dominant position in the AMD market and were tied by significant close structural and strategic links:
- First, the laboratories were found to be connected through licensing agreements, which provided them with a highly-organised system of feedback, discussion forums and joint management committees.
- Second, each of Genentech, Roche and Novartis were found to have significant cross-shareholdings, as Roche was the majority shareholder in Genentech, and Novartis was also a major shareholder in Roche.
The existence of these links was found to have enabled the three laboratories to implement a common strategy based on a strong financial incentive to favour the use of Lucentis. The FCA concluded that the three firms operated as a united entity that held a collective dominant position.
The FCA considered that this collective dominant position enabled the laboratories to implement two types of anti-competitive practices:
- First, Novartis was found to have led a global communication campaign targeting ophthalmologists, doctors, associations and the general public in order to discredit the use of Avastin as a treatment for AMD in comparison to Lucentis. This had the effect of reducing the use of Avastin and preventing Avastin being used in comparative trials organised by health authorities in charge of setting the price of medical products (which may have otherwise led to a reduction in the price of Lucentis).
- Second, Novartis, Roche and Genentech were found to have initiated a series of blocking tactics and alarmist discourses in order to block initiatives undertaken by public authorities to establish a procedure for the safe use of Avastin. This had the effect of amplifying the concern of health authorities and influencing them to maintain a position of extreme prudence in relation to the use of Avastin. In doing so, the three companies ensured that Avastin would not be recognised by the French health authorities as an appropriate comparator in trials alongside Lucentis, which may have had the effect of substantially reducing its price.
On account of the gravity of the anti-competitive practices, the FCA imposed fines of €444 million on Genentech, Roche and Novartis, for both practices. The fine was calculated using 14% of the value of sales to establish the base amount of the fine, which is relatively high compared to the recent decisional practice of the FCA.
With thanks to Hélène Fricaudet of Ashurst for her contribution.
