1. Overview: scope and relevance of the report

On 26 January 2024, the European Commission (the “Commission”) published a 40-page report (the “report”) providing an overview of the enforcement of EU competition law in the pharmaceutical sector in the period from 2018 to 2022 (the “reporting period”).¹ The report follows a similar report that was published in 2019 and covered the period from 2009 to 2017.

The report sheds light on the number, nature and outcome of antitrust investigations, i.e. investigations involving alleged anticompetitive agreements and abuse of dominance,² conducted in the reporting period by the Commission and the national competition authorities (“NCAs”) of the 27 EU Member States.³ The statistics show a general increase in the level of enforcement in the pharmaceutical sector compared to the previous reporting period of 2009 to 2017, resulting in 26 antitrust decisions which led to fines totaling approximately EUR 780 million, including in one instance fines imposed on company managers, or binding commitments offered by the companies investigated to remedy competition concerns. Other notable differences compared to the previous reporting period include the increased reliance by EU competition authorities on commitment decisions as an enforcement tool as well as the increased proportion of the total fines represented by decisions of NCAs.

Of further interest is that the report describes the types of practices investigated in these antitrust cases. In addition to conduct that is well known to be prohibited (such as cartel-type behavior), these practices include conduct which has less commonly been addressed by EU antitrust enforcement, for example instances of alleged misuse of the patent system, disparagement of rivals’ products, vexatious litigation, and unfairly high pricing. The report highlights EU competition authorities’ investigations into these complex and/or novel issues.
 
As such, the report, drawn up by the Commission in cooperation with NCAs, constitutes a useful and practical overview which provides pharmaceutical and more broadly life sciences companies with indications of the types of conduct which have particularly attracted the attention of EU antitrust enforcers in recent years and may therefore assist industry players in their efforts to manage EU antitrust risks.

The report concludes with a note of caution: “Effective enforcement of EU competition rules in the pharmaceutical sector remains a matter of high priority and the competition authorities will continue to monitor and be pro-active in investigating potential anti-competitive situations.”⁴

The key takeaways from the report for companies are the following:

(1) Companies active in the pharmaceutical and life sciences sectors may expect EU antitrust investigations involving novel and/or controversial issues, such as misuse of patent procedures, disparagement, and unfairly high prices. Assessing when conduct in these areas crosses the line and becomes anticompetitive may be complex. Especially firms that have a dominant market position are well advised to consider these risks as part of their compliance efforts.

(2) Overall, firms active in the pharmaceutical and life sciences sectors should expect continued robust EU antitrust enforcement in the coming years. The report provides useful guidance for compliance efforts aimed at minimizing the associated risks.

(3) Where antitrust infringements are found, the fines imposed may be very substantial, even if the conduct at issue is novel and produces ambiguous effects. In certain EU Member States, penalties may be, and are in fact, imposed on individuals (such as company directors).

The remainder of this article discusses in more detail the statistics on EU antitrust investigations and decisions (Section 2) and the types of practices investigated (Section 3) as set out in the report.  

2. Statistics on EU antitrust investigations and decisions 

At a high level, the report illustrates that antitrust enforcement in the pharmaceutical sector continues to constitute a key priority for EU competition authorities. In the reporting period, EU competition authorities adopted an average number of approximately 5 antitrust decisions per year, compared to approximately 3 antitrust decisions per year in the previous reporting period, revealing “a constant if not increasing inflow” of antitrust cases in the pharmaceutical sector.⁵ This sustained enforcement activity may be explained by the particular societal and economic significance of the pharmaceutical sector and the healthcare sector more broadly which, as observed in the report, became even more apparent during the Covid-19 crisis.⁶

More specifically, the report provides the following statistics on EU antitrust enforcement (i.e. enforcement against anticompetitive agreements and abuse of dominance) in the reporting period.  

First, EU competition authorities (i.e. the Commission and the NCAs of EU Member States) adopted 26 antitrust decisions related to pharmaceutical products (for human use), of which 17 were prohibition decisions (i.e. decisions which found an infringement) and 9 were commitment decisions (i.e. decisions which made binding commitments proposed by the companies under investigation to address competition concerns).⁷ The total amount of fines imposed by these decisions represented approximately EUR 780 million.⁸ The highest fines were imposed by the NCAs of France (EUR 444 million), Romania (EUR 86.4 million) and Lithuania (EUR 72.6 million), followed by the Commission (EUR 60.5 million), which emphasizes the importance of national enforcement in the EU Member States alongside enforcement by the Commission at the EU level. The report provides further details on said 26 antitrust decisions, including a breakdown depending on (i) which investigatory instruments were deployed, (ii) how the investigations were triggered, (iii) which level of the supply chain was concerned by the case (manufacturers, wholesalers, retail distributors), and (iv) which type of medicine was concerned (7 out of the 26 cases concerned cancer medicines). The fact that of the 26 antitrust decisions, 9 were commitment decisions⁹ (i.e. approximately 34% of all decisions) is notable, representing a substantial increase compared to the previous reporting period (where this concerned only 5 out of 29 decisions, i.e. approximately 17% of all decisions), and demonstrating that commitment decisions are increasingly used as an enforcement tool.     

Second, EU competition authorities conducted investigations in more than 40 (other) cases in the pharmaceutical sector which were closed without giving rise to a prohibition or commitment decision, in particular because these cases were no longer considered a priority after the alleged anticompetitive practices had been discontinued during the investigation or because a preliminary investigation did not identify sufficient evidence of an infringement.¹⁰ As noted in the report, the fact that no decision was adopted in these cases does not mean that the investigations did not have an impact. In fact, the opposite is true for those instances where companies under investigation changed their conduct during the course of the investigation: examples where this happened include the removal of a long-lasting non-compete obligation concerning cardiovascular disease testing kits, and the discontinuation of alleged exclusionary practices in the contract development and manufacturing of biological medicines.¹¹
  
Third, the report discloses that EU competition authorities currently investigate some 30 ongoing cases of possible antitrust infringements in the pharmaceutical sector.¹²

Source: Commission, Update on Competition Enforcement in the Pharmaceutical Sector (2018-2022), page 9

3. Types of practices investigated 

The EU antitrust enforcement in the pharmaceutical sector must be considered against the background of the broader policy objectives pursued by that enforcement, which are emphasized in the report. These objectives include, in particular, safeguarding EU patients’ access to affordable and innovative medicines.¹³

The report breaks down the 26 prohibition and commitment decisions adopted by EU competition authorities in the reporting period into broad categories, by type of alleged competition concerns: 50% of the decisions concerned abuse of dominance (i.e. unilateral anticompetitive conduct), 31% outright cartels (e.g. bid rigging), 11% vertical agreements (such as clauses prohibiting distributors from promoting and selling products of competing manufacturers) and 8% restrictive horizontal agreements between competitors other than outright cartels (such as pay-for-delay agreements). 

Source: Commission, Update on Competition Enforcement in the Pharmaceutical Sector (2018-2022), page 9

Moreover, the report describes in more detail the nature of the specific practices investigated. This part of the report is particularly rich, and the practices and cases referred to below are only mentioned by way of example, with a focus on more complex and/or novel issues.¹⁴ Reference is made to the full report for additional detail. As summarized in the report, “[i]n recent years the European competition authorities have set a number of important precedents which clarified the application of EU competition law to novel issues in pharmaceutical markets.”¹⁵

First, EU competition authorities investigated a variety of alleged practices and strategies which, in their assessment, artificially extended the commercial life of innovative medicines and/or hindered or delayed the market entry of competing medicines and therefore the resulting price competition.¹⁶

Examples of such investigations (some of which are still ongoing) are set out below. 

• Alleged misuse of patent procedures: In a Statement of Objections issued in 2022, the Commission reached the preliminary view that Teva had abused a dominant position by, inter alia, misusing patent procedures with the objective of artificially prolonging the exclusivity of its multiple sclerosis drug Copaxone. The Commission’s concern relates to the alleged staggered filing of applications for divisional patents with largely overlapping content and the subsequent withdrawal of the parent patent application, which could have obstructed the legal review of Teva’s patents by forcing competitors to legally challenge essentially similar Teva patent claims multiple times.¹⁷ 

• Alleged abusive/vexatious litigation: In 2022, the Spanish NCA issued a prohibition decision for alleged abuse of dominance to MSD, including a fine of EUR 38.9 million, finding that MSD’s filing of a patent infringement action against a competing manufacturer of contraceptive rings, which included a request for fact-finding and interim measures in ex parte proceedings, was contrary to competition on the merits. According to the findings of the Spanish NCA, the purpose of MSD’s legal actions was to foreclose competition rather than to enforce its patents reasonably and legitimately.¹⁸
  
  
• Alleged disparagement of a competitor’s products to protect the dominant company’s sales: In 2020, the French NCA addressed a prohibition decision for alleged abuse of a collective dominant position to Novartis, Roche and Genentech and imposed total fines of EUR 444 million. The French NCA found that Novartis had disparaged Avastin, a medicine that was frequently used off-label to treat eye diseases instead of another medicine (Lucentis) because of its significantly lower price, by unjustifiably exaggerating the risks associated with the off-label use of Avastin. It also considered that Novartis, Roche and Genentech had unduly interfered with the French healthcare authority’s initiatives to encourage this off-label use.¹⁹ In 2022, the Belgian NCA adopted a decision targeting similar conduct, by which it imposed a fine of EUR 2.7 million on Novartis for alleged abuse of a collective dominant position it held together with Roche. Moreover, two currently ongoing abuse of dominance investigations conducted by the Commission also relate to, or include, allegations of possible anticompetitive disparagement campaigns by dominant firms targeting healthcare professionals and casting doubts on the safety and/or efficacy of competing medicines.
  
  
• Alleged pay-for-delay agreements: In 2020, the Commission addressed a prohibition decision to Teva and Cephalon, imposing fines of EUR 60.5 million, finding that the two companies had agreed to delay for several years the market entry of a less expensive generic version of Cephalon’s drug for sleep disorders, modafinil, after Cephalon’s main patents had expired.²⁰
  
  
• Alleged abusive rebates and predatory pricing: In a number of separate cases, the Dutch and the Austrian NCAs identified competition concerns associated with the use of specific rebate schemes or pricing structures, following which the companies concerned agreed to alter their pricing practices and resulting (depending on the case) in the closure of the investigations or a commitment decision. The rebate schemes investigated allegedly provided, in one case, for significant conditional discounts granted to hospitals if all existing patients continued to use the company’s medicine and did not switch to a biosimilar and, in another case, for a significant reduction in the discount applied to future volumes if the quantities purchased by hospitals decreased by more than a pre-specified percentage. The pricing system investigated allegedly involved setting prices to hospitals below cost, with free samples being made available. 

Second, EU competition authorities intervened several times against what they found to amount to unfairly high prices of medicines.

While it is well established that charging unfairly high prices (frequently referred to as excessive pricing) is prohibited as abuse of dominance under EU antitrust law, such cases are generally very complex to pursue and tend to be rare. Nevertheless, as illustrated by the report, this complexity has not deterred EU competition authorities from intervening on this basis through multiple recent decisions, which include:²¹

• a commitment decision addressed by the Commission in 2021 to Aspen in relation to cancer medicines, as part of which Aspen accepted, in particular, to reduce its prices across Europe for the medicines under investigation by, on average, approximately 73%;
  
  
• a prohibition decision addressed by the Danish NCA in 2018 to a pharmaceutical distributor, CD Pharma, in relation to oxytocin, a medicine given to pregnant women during childbirth;²²
  
  
• a series of prohibition decisions addressed by the Dutch, Italian and Spanish NCAs in 2021-2022 to Leadiant in relation to the treatment of a rare disease, including fines of EUR 19.6 million (subsequently reduced to EUR 17 million by the Dutch NCA in the context of an administrative appeal), EUR 3.5 million and EUR 10.25 million respectively;²³ and
  
  
• a prohibition decision adopted by the UK NCA in 2022 addressed to Pfizer and Flynn in relation to an epilepsy medicine and imposing fines of GBP 70 million (EUR 80.9 million).²⁴

As summarized in the report, [r]ecent investigations and enforcement in the EU, leading to several decisions concerning excessive pricing, show that a heightened degree of vigilance under competition law is merited with respect to possible excessive pricing practices by dominant companies in the pharmaceutical sector.”²⁵

Third, EU competition authorities investigated various alleged anticompetitive practices capable of hindering price competition. These cases are very diverse and include, in particular, alleged cartels and cartel-type infringements (including bid rigging, price fixing, market sharing, and the exchange of commercially sensitive information) as well as alleged restrictions in relations between suppliers and their distributors (such as resale price maintenance).²⁶

Examples include: 

• a decision adopted by the Lithuanian NCA in 2022 imposing fines of EUR 72 million, finding that several pharmaceutical companies and a pharmacy association had colluded in submitting proposed margins of reimbursable pharmaceuticals to the Lithuanian Ministry of Health;²⁷
  
  
• a decision adopted in 2021 by the Romanian NCA imposing fines of EUR 71 million on several suppliers and a related association, finding that the producers had coordinated their actions to limit or interrupt the supply of immunoglobulin (used to treat severe inflammatory and autoimmune diseases);²⁸
  
  
• a decision adopted in 2021 by the Spanish NCA in relation to alleged bid rigging and market sharing, whereby it imposed not only fines of EUR 5.7 million on two suppliers of PET radiopharmaceuticals but also fines of EUR 46,000 on two of the managers of those companies, after finding them personally responsible for the alleged infringements. 

Finally, while the report focuses on investigations that have already been concluded, it also refers, as noted above, to a “pipeline” of over 30 ongoing cases of possible antitrust infringements in the pharmaceutical sector. The conclusion of those ongoing investigations in the coming months and years will provide further guidance to companies active in the pharmaceutical and life sciences sectors. 

For many decades, Baker Botts LLP’s antitrust and competition law teams in Washington D.C, Brussels, London, and Riyadh have assisted clients active in human and animal health and other life sciences sectors on antitrust and competition law matters, including investigations, administrative and civil court appeals, and merger filings. Additional information on Baker Botts LLP’s related experience, lawyers and thought leadership may be found on the dedicated webpage https://www.bakerbotts.com/services/practice-areas/antitrust-and-competition-law/antitrust-life-sciences-and-healthcare.

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¹ The report is available on the website of the Commission relating to competition policy: https://competition-policy.ec.europa.eu/sectors/pharmaceuticals-health-services/overview_en.
² In addition to these antitrust cases, which constitute the focus of the present article, the report also covers other enforcement instruments including merger control as well as market monitoring and advocacy measures.
³ For the period between 2018 and the end of 2020, the report also covers enforcement in the United Kingdom, which has since withdrawn from the EU.
⁴ Report, page 37.
⁵ Report, page 37.
⁶ Report, page 5.
⁷ Report, pages 8-9. The list of these decisions is available on the website of the Commission relating to competition policy: https://competition-policy.ec.europa.eu/document/552ebb75-e502-491a-9fbd-f0f9d61dac39_en. In addition, EU competition authorities adopted 10 prohibition or commitment decisions in cases concerning medical devices and 13 prohibition or commitment decisions in cases related to other healthcare matters.
⁸ In light of ongoing appeal proceedings, these fines are not final.
⁹ These commitment decisions related to a variety of competition concerns including, for example, alleged unfairly high pricing, alleged predatory pricing, and alleged vertical restraints including resale price maintenance.
¹⁰ Report, pages 9-10.
¹¹ Report, page 9, footnote 24.
¹² Report, page 10.
¹³ Report, page 5.
¹⁴ A number of the decisions referred to below are subject to ongoing appeal proceedings and therefore not final. To the extent known, the status of these appeal proceedings is indicated in this article.
¹⁵ Report, page 5.
¹⁶ Report, pages 22-27.
¹⁷ The Commission has not yet reached a final conclusion in this investigation, which is ongoing.
¹⁸ According to publicly available information, the decision of the Spanish NCA is subject to an ongoing appeal before the Spanish High Court of Madrid. In 2023, that court suspended the enforcement of the decision while the appeal proceeds.
¹⁹ In 2023, the decision of the French NCA was annulled by the Paris Court of Appeal. Further appeal proceedings are ongoing before the French Court of Cassation.
²⁰ In 2023, the EU General Court 30 ongoing cases of possible antitrust infringements in the pharmaceutical sector.12 the decision of the Commission. Further appeal proceedings are ongoing before the EU Court of Justice.
²¹ Report, pages 27-30.
²² On appeal, the decision of the Danish NCA was upheld (in 2018) by the Danish Competition Appeal Tribunal and subsequently (in 2020) by the Danish Maritime and Commercial High Court.
²³ Some of these decisions are, or may be, subject to ongoing appeals (in 2023, the Italian Regional Administrative Court of Lazio upheld the decision of the Italian NCA). Therefore, they are not necessarily final.
²⁴ This decision is subject to an ongoing appeal. It was preceded by an initial decision adopted in 2016 by the UK NCA in the same case, which was remitted back to the UK NCA for further consideration following judgments of the UK Competition Appeal Tribunal (in 2018) and the Court of Appeal of England and Wales (in 2020).
²⁵ Report, page 27.
²⁶ Report, pages 30-32.
²⁷ This decision is subject to an ongoing appeal.
²⁸ This decision is subject to an ongoing appeal.

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