​Servier contests anticompetitive aim behind drug-patent deals

6 June 2017. By Lewis Crofts.

EU officials were wrong to conclude that agreements between Servier and generic rivals to settle patent litigation were shady deals designed to keep cheaper drugs off the market, the French pharmaceutical company told judges this afternoon.

At a hearing in the EU's lower-tier General Court, Servier argued that the European Commission had failed to understand the context of these deals.

But the EU hit back, saying that the settlements had been aimed at dividing the market and "buying off" competitors.

Servier is seeking to overturn a 2014 decision imposing 331 million euros in fines for illegally wielding its power on the market for a cardiovascular medicine called perindopril. It was also found to have entered patent settlements deals with generic rivals, which were designed to limit the flow of cheaper drugs onto the market.

This afternoon, appearing before the General Court in Luxembourg, Servier's lawyers said it was wrong to conclude that the "object" of the agreements was to limit competition. They were simply the best way to end disputes over patent validity and did not amount to underhand attempts to delay the arrival of cheaper drugs.

Tomorrow, the court will start combing over specific settlement agreements — which, for example, ended patent litigation with manufacturers including Niche and Matrix. But this afternoon judges heard arguments on the legal approach to such deals.

The commission said that they were designed to limit the market entry of cheaper versions of hypertension drug perindopril. In antitrust speak, this constituted an agreement which was illegal "by object."

But Servier's lawyers said such an approach was reserved for conduct that was clearly anticompetitive and likely to harm consumers — such as price fixing in cartels — and which warranted no further analysis. Patent settlement deals weren't in this category, they argued.

Olivier de Juvigny, for Servier, said the commission had failed to reconcile antitrust law with patent law and the right of companies to settle litigation. Moreover, the regulator's approach was out of step with other EU judgments on "by object" behavior.

"Experience has to show that such agreements are anticompetitive," de Juvigny said. The lawyer explained that settlements could easily be neutral or pro-competitive, and the EU's approach could "dissuade some generic manufacturers from starting settlement talks."

Jeremie Jourdan, also representing Servier, said there could be numerous reasons for generics companies to settle their litigation with a drugmaker.

"The simple fact that [a generic manufacturer] is being compensated isn't enough to put the settlement in doubt," he said.

Jourdan noted that a commission monitoring exercise had come across 80 settlements where there had been a "value transfer" — usually a cash payment — to end the litigation, but officials hadn't pursued investigations against any of them.

Servier was backed by the drugmakers' lobby, European Federation of Pharmaceutical Industries and Associations, or EFPIA.

Represented by Fiona Carlin, EFPIA argued that a "value transfer" between the litigating parties — often a cash payment — wasn't enough to condemn the settlement as anticompetitive. Rather, it was a "reflection of the asymmetry of risks between the parties."

Market sharing

Bernard Mongin, representing the European Commission, said Servier's patent settlement deals were aimed at dividing the market between it and the generic makers, and therefore they fell clearly under EU antitrust law.

He pointed to two settlement deals where Teva got 10 million pounds to stay off the market, and Krka had spoken of "sacrificing" western European markets to gain share in eastern Europe.

"A settlement is a compromise," Mongin told the court. "Both sides give something up and gain something. But, here, Servier gains all."

He said generics companies "obtained the equivalent of entering the market but at no commercial risk. And, in the end, it's the consumer that loses and continues to pay the prices for Servier's monopoly."

"When a generic company accepts the restrictions [within a patent settlement] because of the payment…this decision is no longer taken independently, it is bought."

Mongin argued that the settlement deals eliminated commercial and legal risks for Servier and its rivals.

Stephane Gervasoni, the judge leading the court's questions, pushed the commission on when a generic company might be seen as a "potential competitor."

EU law applies when competition is affected and so understanding when a rival could be considered a viable competitor is important to the analysis of the case.

Gervasoni pointed to the example of Niche, which had started developing a potential perindopril product in 2001, but only struck a settlement with Servier in 2005.

The judge said the commission was arguing that Niche, in this example, was a competitor from the moment it starting development. And, for Gervasoni, that seemed "rather early."

Flor Castilla Contreras, a lawyer representing the commission, said what was important was that Niche was a potential competitor at the time the settlement deal was signed. She said Teva was "weeks or months" away from launching its own drug when it signed its deal.

Gervasoni also asked what the commission meant by a generic manufacturer's product being "viable" and whether this meant it was ready to be put on the market.

Castilla Contreras said there may have been concerns over the state of the packaging for one rival's product, but the treatments were ready to launch and were capable of entering the market.

Facts

Gervasoni also directed questions towards the facts laid out in the EU's antitrust decision. These were supposed to underpin the legal findings of infringement.

But the judge said he was "perplexed" by some of the statements, implying they were "stigmatizing" and seemed to "paint a bad picture" of the activities, without being a formal accusation of illegal conduct that Servier could contest.

Flor Castilla Contreras, for the commission, said it was crucial to "understand the context" of Servier's conduct.

"We haven't said these are infringements. But it is important to understand why Servier had an interest in keeping the generics off the market: because it was developing a new drug," she said.

Olivier de Juvigny, for Servier, argued that the commission had to put antitrust accusations squarely to the company so it had a chance to contest them.

If this approach isn't followed, "there is no longer any limit on the commission for our defense rights and its exercise of impartiality," de Juvigny said. "If they are important aspects, they need to appear in the Statement of Objections."

Gervasoni said he would continue asking the parties questions about the legal framework behind the settlement deals tomorrow morning, before moving onto a closer analysis of the specific agreements.

The case reference number is Servier SAS and Others v Commission T-691/14.

	Eliot Gao