Skip to content

Report on Competition Policy 2018: The pharmaceutical sector remains a priority

Last week, the European Commission (EC) published its Report on Competition Policy 2018, which provides a non-exhaustive summary of the activities undertaken by the EC in the field of competition law and policy in the year 2018.Whilst this report does not specifically refer to the pharmaceutical sector, the accompanying Commission Staff Working Document, which was issued on the same day, contains more detailed information concerning legislation, enforcement action and policy developments in specific key sectors, including the pharmaceutical and health services sector.

The Commission Staff Working Document supplements the EC’s earlier report titled “Competition enforcement in the pharmaceutical sector (2009-2017) - European competition authorities working together for affordable and innovative medicines” (Pharma Report), which provides an overview of the enforcement activity by the EC and national competition authorities in the pharmaceutical sector over the period 2009-2017. Notably, the Commission Staff Working Document identifies the pharmaceutical and health services sector as one requiring competition law scrutiny and gives an indication of the priorities the EC will continue to pursue through its competition policy. Indeed, the EC notes that it is actively monitoring and screening markets for diverse competition issues concerning pharmaceuticals.

In this post, we outline the most significant developments relevant to the pharmaceutical and health services sector in 2018 across two competition instruments: (1) antitrust and cartels; and (2) mergers. More information on the EC’s Pharma Report, published in January, can be found here.


A general, noteworthy development is the EC’s extensive use of a still developing ‘non-cartel cooperation procedure’, modelled on the cartel settlement procedure combined with elements of the cartel leniency policy. In 2018, five antitrust cases were concluded on the basis of such cooperation, with an acknowledgment by the companies involved that they committed an infringement in return for reduced fines. In these cases, all five companies provided new evidence that added significant value to the investigation and complemented evidence already on the EC's file at the time when the voluntary submissions were made. The individual fine reductions granted - ranging between 40% and 50% - reflected the timing of their cooperation, both in terms of acknowledging liability and providing evidence, as well as the extent to which the evidence strengthened the EC's case. On 17 December 2018, DG Competition published a fact-sheet setting out the framework for cooperation cases in the antitrust field. Whilst none of these cases involved companies active in the pharmaceutical sector, this new procedure may well be used in the future in the context of non-cartel antitrust cases in the sector, for example in the ongoing excessive pricing cases should it be deemed appropriate.

Over the last year, the EC conducted proceedings in two cases in the pharmaceutical sector, namely Aspen Pharma and Cephalon. The first case concerns an alleged abuse of dominant position through the imposition of unfair and excessive prices for a range of cancer medicines, whilst the second case deals with so-called ‘pay-for-delay’ agreements in relation to the generic medicine Modafinil. More information on the Aspen Pharma case and the recent spate of antitrust cases in the EU involving excessive pricing allegations can be found here: on the OECD roundtable discussion; on the EC’s position; and on the complaints in Belgium and the Netherlands. The Cephalon investigation is expected to be concluded in the course of 2019.

With regard to enforcement activity by the EU courts, it is worth mentioning that, in September 2018, the General Court (GC) upheld the EC’s refusal to investigate a complaint by the European Association of Euro-Pharmaceutical Companies alleging that GlaxoSmithKline SA had violated Article 101(1) TFEU by applying a dual pricing scheme, in light of the lack of Union interest. The GC considered, amongst other things, that the conduct at issue took place many years ago, was only in operation for a very short period of time, did not produce any persisting effects, and the case could be brought before the national authorities.

In December 2018, the GC then issued its judgments in the last wave of cases involving alleged pay-for-delay agreements after Lundbeck (a previous post on this judgment can be found here). The cases are: Case T-677/14 - Biogaran v Commission; Case T-679/14 - Teva UK and Others v Commission; Case T-680/14 - Lupin v Commission; Case T-682/14 - Mylan Laboratories and Mylan v Commission; Case T-684/14 - Krka v Commission; Case T-701/14 - Niche Generics v Commission; Case T-705/14 - Unichem Laboratories v Commission; and Case T-691/14 - Servier and Others v Commission. Whilst the GC confirmed that patent settlement agreements by which companies are to refrain from entering the market or challenging a patent may constitute a restriction of competition by object under Article 101(1) TFEU, it also noted that not all side deals form an anticompetitive inducement and indicated that actual and potential effects on competition should be assessed by also taking into account factual developments occurring after the agreements had been concluded.

In the Servier judgment, the GC further annulled the EC’s finding that Servier had abused its dominant position as, according to the GC, the EC made an incorrect assessment of the substitution of perindopril with other medicines, relying excessively on price-related factors, which led to an incorrect finding that Servier held a dominant position. The GC explained that the pharmaceutical sector is different from other markets, since customer choice primarily depends on the prescribing doctors rather than the ultimate consumers. Doctors are primarily guided by therapeutic use when choosing what to prescribe, rather than by the cost of treatment. Therefore, the freedom of doctors to choose between medicines available on the market enables, in some circumstances, significant competitive constraints of a qualitative nature not based on price to be exercised, outside the usual mechanisms of price pressure. In particular, when prescribing doctors have the choice, for treating the same condition, between medicines none of which is recognised or perceived as being superior to the others, the market analysis must be attentive to any non-price competitive pressures. Ultimately, the GC found that the EC, inter alia, wrongly considered that perindopril differed, in terms of therapeutic use, from other ACE inhibitors, underestimated the propensity of patients treated with perindopril to change medicines and attributed excessive importance to the price factor in analysing competitive constraints.

In the Hoffman-La Roche case, the highest EU court ruled on 23 January 2018 that an arrangement between two companies to disseminate misleading information about adverse reactions to the off-label use of a product for a particular indication, with a view to reducing the competitive pressure on another product, may constitute a restriction of competition by object under Article 101(1) TFEU. According to the European Court of Justice (ECJ), such an arrangement cannot be said to fall outside the scope of application of that provision on the ground that the arrangement is ancillary to an agreement concluded several years earlier between the companies in question, and can also not be exempted under Article 101(3) TFEU. This is the first time that the ECJ has reviewed the spreading of misleading information and found it anticompetitive. On market definition, the ECJ stated that the relevant market under Article 101 TFEU may include both the authorised medicinal product for a specific indication as well as any medicinal products that are used off-label for the particular indication and are, thus, actually substitutable with the authorised product.


In Takeda/Shire, the EC approved the acquisition of Shire - a global biopharmaceutical company headquartered in Ireland and specialised in the development of treatments for rare diseases - by Takeda - a global pharmaceutical company headquartered in Japan - subject to conditions. The EC expressed its concern that the takeover would lead to a loss of innovation and a reduction in potential future competition. Indeed, the market investigation had found that Takeda would be unlikely to continue developing Shire's new medicine, which would have meant a serious loss of innovation on a market where patients currently have few treatment options available. In order to address this concern, Takeda offered to divest Shire's pipeline product that was expected to compete with Takeda’s existing product to a purchaser that had an incentive to develop the drug.

Although assessing the effects of mergers on innovation is not new - the EC’s Horizontal Merger Guidelines state that “effective competition may be significantly impeded by a merger between two important innovators” - innovation concerns have featured more prominently in merger control review under Ms Vestager’s leadership and this trend is expected to continue following the appointment of the new European Commissioner for Competition. Also in the United States, the FTC has in recent years challenged multiple mergers between pharmaceutical companies, in particular where the merger would eliminate likely entry of a generic medicine in development by one manufacturer that, once launched, would offer significant price savings and take sales from a medicine sold by the other merging party. In this respect, the FTC has signalled that it may well take a harder stance in the future in relation to overlaps in pharma mergers between a pipeline product and an existing medicine – in a speech in February 2018, Bruce Hoffman, then acting director of the Bureau of Competition, announced that the FTC would no longer accept divestitures of pipeline products but would rather require divestiture of the manufactured product. It remains to be seen whether the EU may similarly adopt an even more rigorous approach in relevant transactions.