The response to the European Commission’s Preliminary Report from the European innovator drug community was swift and unequivocal. The European Federation of Pharmaceutical Industries and Associations (EFPIA), the community’s principal trade association, argued that the practices cited in the Preliminary Report are lawful, and called the Preliminary Report a ‘missed opportunity’ to encourage innovation by increasing patent protection, and by wringing substantial healthcare savings out of the generic drug marketplace by increasing competition. The EFPIA pointed out that while Europeans pay less than their US counterparts for branded medicines, they pay more for generics.

What does it mean for pharma in the US?

Ordinarily, European competition enforcement actions are of limited importance to the American market. Many points of difference exist between US and European pharmaceutical antitrust law, including differences in the regulatory structures governing drug pricing and generic drug entry.

The Preliminary Report notes that generic manufacturers won 60% of the patent infringement cases studied. In the US, a track record of that sort would hardly suggest that most such suits were ‘objectively baseless’, which is but one of the requirements for a patent infringement action to trigger antitrust consequences.

Consider these points, however: the commission’s inquiry followed announcement of a similar study by the FTC. While cataloguing the differences between US and EU law the Preliminary Report does what it can to minimise them. It gives a place of honour to the FTC’s enforcement position on patent settlements, while largely ignoring the growing body of US case law (and even the contrary position of the US Department of Justice) rejecting the FTC’s categorical legal analysis.

However, it would be wrong simply to presume that most of the legal theories reflected in the Preliminary Report will be imported to American shores.

In the US, far more so than in Europe, control over legal theories as a practical matter rests not with the antitrust enforcers but with the courts, whose support for the FTC positions on IP issues has been inconsistent to say the least. Still, there seems no question that claims of IP-related abuses by innovator drug companies will increase, and the data collected in the Preliminary Report will provide a blueprint for industry-wide information-gathering or discovery in litigation.

What remains open is whether differences among national patent and antitrust/competition law will defeat what looks like a coordinated global effort by regulators to change the commercial implications of drug industry patents.

Robert P Reznick and James B Kobak Jr are partners at Hughes Hubbard & Reed LLP

This article first appeared in IP Review, issue 26

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