The Italian Competition Authority launches an investigation against pharmaceutical companies suspected of restricting drug salesdi GiovanniScoccini pubblicato in Concurrences
On February 6, 2013, the Italian Competition Authority (“ICA”) launched a cartel investigation against Hoffmann-La Roche (“Roche“), Novartis, their respective Italian subsidiaries, and Genentec, a US company controlled by Roche and in which Novartis holds a 33% shareholding.
The companies are suspected to have agreed to restrict the therapeutic applications of Avastin, a drug marketed by Roche, in order to advantage the sales of Lucentis, which is marketed byNovartis.
Avastin is a drug patented by Genentech. It is treatment for patients with colon cancer, but it also cures certain ophtalmic diseases (i.e. wet age-related macular degeneration). However, the use of Avastin for the cure of ophthalmic diseases is possible only “off-label”, becauseRoche has not requested the authorization for this use from the competent medicine agencies.
In Italy the regulation of off-label use is very strict. According to the Italian regulation, off-label prescriptions of medicines can be reimbursed by the national health system only if there are not any on-label medicines for the treatment of the same disease. Therefore, the cure of ophthalmic disease with Avastin was reimbursed by the Italian health system (“IHS”) until Lucentis, a specific drug patented for the cure of ophthalmic disease, was marketed byNovartis.
Lucentis has been patented by Genentec which has licensed it to Novartis for commercial use outside the US. Pursuant to the licence agreement Novartis pays Genentec royalties on the net sales of Lucentis products.
After the marketing of Lucentis, Avastin could be used by the Italian health system only for the cure of a few eye diseases. On October 3, 2012, following a report on the contraindications of Avastin in the cure of eye diseases, the Italian Medicine Agency (“IMA”) prohibited the IHS from using Avastin for the cure of any eye diseases. According to the ICA, Roche played an active role in the decision of the IMA. Roche is suspected to have submitted misleading evidence of contraindications of its product for the cure of ophthalmic diseases.
Due to the decision of the IMA, the IHS had to substitute Avastin for Lucentis because it is the only real alternative available for the cure of certain ophthalmic diseases. The substitution of Avastin with Lucentis has dramatically increased the costs for the Italian health system, since the price of Lucentis is much higher than the price of Avastin. The price of a dose of Avastin is €15, while a dose of Lucentis costs around €800 and it was even more expensive in the past. The ICA has calculated the increase of cost for the IHS around €400 million.
In order to limit the increase of costs several Italian regions have authorized the use of Avastin for the cure of eye diseases despite the decision of the IMA and even though this goes against the advice from Roche itself. These authorizations have been challenged by Novartis before the Administrative Courts.
According to the ICA, the Roche’s opposition to the use of its drug Avastin for the treatment of ophthalmic diseases is the result of an unlawful agreement with Novartis aimed to eliminate the competition between their products in order to increase the sales of the more profitable Lucentis.
According to the ICA, the existence of an unlawful agreement is the only possible explanation why Roche has never filed an application to the competent Medicines Agencies in order to obtain an authorization for the use of Avastin even though several independent studies proved the efficacy of Avastin for the cure of ophthalmic diseases.
According to the ICA, Roche considers the royalties that its subsidiary Genentech receives fromNovartis on the net sales of Lucentis more profitable than the income it would achieve if Avastin was also marketed for the treatment of eye diseases.
This case is arguably one of the most complex and high profile cases opened by the ICA in the last few years. The case presents several delicate issues. The most interesting are:
Concerted practice or unilateral behaviour?
The ICA infers the existence of an agreement aimed to eliminate the competition between Avastin and Lucentis from the behaviour of Roche. However, it should be considered that Rochecould have unilaterally decided not to compete with Lucentis, because, as the ICA admits, the royalties on Lucentis could be more profitable than the sales of Avastin for the cure of eye diseases.
The dominant position of Roche in the technology market
According to the ICA, apart from a third medicine, Macugen, which is rarely used, Avastin and Lucentis, which are both patented by Roche through its subsidiary Genentec, are the sole medicines available for the cure of certain eye diseases. Consequently, the power of Roche to sacrifice Avastin for the success of Lucentis seems to stem from its dominant position in the technology market of drug patents for the cure of certain ophthalmic diseases. Even if Rochehad not licenced Avastin to Novartis, it would have the ability to restrict the therapeutic applications of Avastin in order to increase the sales of Lucentis, because it is not constrained by competition from other drugs.
The role of Italian regulation in respect of inter-brand technology competition
While the exclusive licence granted to Novartis does not seem to raise intra-technology competition concerns, the core issue of this case really is inter-technology competition. What truly reduces inter-technology competition in this case, is the Italian regulation that prevents competition between off-label medicines and on-label medicines. The Administrative Court of the region of Emilia Romagna has in fact referred this issue in the case regarding the authorizations to use Avastin off-label to the Constitutional Court and asked it to determine the validity of this regulation in light of the Italian Constitution.