EN Official Journal of the European Union C 393/7

Summary of Commission Decision

of 9 July 2014

relating to a proceeding under Articles 101 and 102 of the Treaty on the Functioning of the European Union

(Case AT.39612 — Perindopril (Servier))

(notified under document C(2014) 4955)

(Only the English and French texts are authentic)

(2016/C 393/05)

On 9 July 2014, the Commission adopted a decision relating to a proceeding under Articles 101 and 102 of the Treaty on the Functioning of the European Union. In accordance with the provisions of Article 30 of Council Regulation (EC) No 1/2003 (1) , the Commission herewith publishes the names of the parties and the main content of the decision, including any penalties imposed, having regard to the legitimate interest of undertakings in the protection of their business secrets.

1. INTRODUCTION

(1) The Perindopril (Servier) decision concerns (i) five patent settlement agreements between Servier (2), an originator pharmaceutical producer company, and five generic producers (2005-2007); and (ii) a technology acquisition by Servier (2004), which sought to delay generic entry in the perindopril market, a medicine to treat cardiovascular diseases.

(2) The patent settlement agreements were signed between Servier and respectively: — Niche Generics Limited (‘Niche’) and Unichem Laboratories Limited (‘Unichem’): an agreement covering all Member States except Italy and Croatia. The start date of the infringement was 8 February 2005 (3); and the end date was 15 September 2008 (4), — Mylan Laboratories Limited (formerly known as Matrix Laboratories Limited) (‘Matrix’) and Mylan Inc. (‘Mylan’): an agreement covering all Member States except Italy and Croatia. The start date of the infringement was 8 February 2005 (5); and the end date was 15 September 2008 (6), — Teva UK Limited, Teva Pharmaceutical Industries Ltd, and Teva Pharmaceuticals Europe B.V. (‘Teva’): an agreement covering the United Kingdom from 13 June 2006 to 6 July 2007, — Krka, tovarna zdravil, d.d., Novo mesto (‘Krka’): three agreements, which constitute a single and continuous infringement, covering all Member States except Croatia, the Czech Republic, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia. The start date of the infringement was 27 October 2006 (7); and the end date was 6 May 2009 (8), — Lupin Limited (‘Lupin’): an agreement covering all Member States except Croatia. The start date of the infringement was 30 January 2007 (9); and the end date was 6 May 2009 (10).

(3) Perindopril is an angiotensin converting enzyme (ACE) inhibitor product, used for the treatment of cardiovascular diseases such as hypertension. Perindopril became Servier's most successful product, with annual global sales for the years 2006 and 2007 exceeding USD 1 billion.

(4) The Commission investigated whether Servier had devised, updated and implemented a strategy to confront generic entry, which became possible due to the expiry of Servier's key compound patent in the period 2001-2005. Generic entry for products like perindopril typically leads to two notable changes in the market. First, there is a significant decrease in prices (as much as 90 %) and, secondly, there are substantial volume shifts from the originator company to generic companies.

(5) The evidence showed that Servier devised a strategy to prolong its exclusivity over perindopril. Servier relied on and applied for a number of processes and crystalline form patents. In 2004, Servier bought from Azad technology to produce perindopril, removing a close source of competition out of the market, which went beyond simply meeting competition and legitimate defence of its intellectual property. Subsequently, Servier also asserted its patents and was involved in patent litigation with a number of its generic challengers, which believed there were chances that their perindopril products may not infringe Servier's patents, and/or that Servier's '947 patent was invalid.

(6) In addition, between 2005 and 2007, Servier concluded five patent settlement agreements on the basis of significant inducements to the respective generic companies (so-called reverse payment patent settlements). These inducements most often took the form of direct payments, totalling possibly in excess of EUR 90 million. In the case of Krka, it took the form of a market sharing agreement whereby Servier granted a licence for Krka's core markets in return for Krka withdrawing from competition in Servier's biggest markets (in particular the United Kingdom and France). The five patent settlement agreements prohibited entry with the developed generic product before the lapse of the patents in suit, and discontinued a number of legal challenges to the validity of the '947 patent which was later annulled and described by a UK Court as ‘the sort of patent which can give the patent system a bad name.’

(7) An overview of the acquisitions and settlements in question is provided below: Competitors Azad Niche/Unichem Matrix Teva Krka Lupin Practice Technology acquisition Patent settlement agreement Area covered EU EU EU UK 20MS EU Signing date 9.11.2004 8.2.2005 8.2.2005 13.6.2006 27.10.2006 30.1.2007 End date n/a Effects ended with the annulment of the so-called ‘alpha-crystalline’ patent (UK: 6.7.2007, NL: 12.12.2008, IT: 13.2.2009, EPO: 6.5.2009) (11) Value transfer (in EUR million) 13,4 17,2 (12) 17,2 15,6 Market sharing with duopoly profits in 7 MS (13) 40 (presented as payment for IPRs) Infringement Art. 102 Art. 101/102

2. PROCEDURE

(8) In November 2008, the Commission carried out unannounced inspections at the premises of Servier and several generic companies. On 2 and 27 July 2009, the Commission formally opened proceedings and adopted the Statement of Objections addressed to Servier, Niche/Unichem, Matrix/Mylan, Teva, Krka and Lupin, including certain group companies affiliated to these undertakings (together, the ‘Parties’). The Oral Hearing took place between 15 and 18 April 2013. A Letter of Facts was sent to the Parties on 18 December 2013 and, on 4 April 2014, Letters of Facts concerning the issue of parental liability were sent to Niche/Unichem and Matrix/Mylan.

(9) On 30 June 2014 and 7 July 2014, the Advisory Committee on Restrictive Practices and Dominant Positions issued a favourable opinion to the adoption of a Prohibition Decision pursuant to Articles 7 and 23 of Regulation (EC) No 1/2003.

(10) On 7 July 2014 the Hearing Officer issued his final report.

3. SUMMARY OF THE COMMISSION'S LEGAL ASSESSMENT

(11) The patent settlement agreements are assessed under Article 101 of the Treaty. With respect to Servier, those agreements, as well as the technology acquisition, are also assessed under Article 102 of the Treaty.

1. Market definition and dominance

(12) The Commission found that perindopril constituted a separate relevant market in the United Kingdom, France, the Netherlands and Poland.

(13) While a certain degree of functional substitutability between perindopril and other ACE inhibitors was acknowledged with respect to first-time use patients, the Commission was led to its overall conclusion by the following observations related to the sales of perindopril: a non-negligible degree of differentiation between perindopril and other treatments, a nature of experience good exhibited by perindopril, important switching costs (because of associated risks, patients tended to stick to the successful treatment) affecting the bulk of perindopril patients, presence of loyalists among prescribers (who tended to prescribe the product that had proven to be successful for their previous patients), the general price insensitivity of demand for perindopril, the regulatory framework, which shielded perindopril from competitive pressures, and the fact that the price pressure over perindopril from its own generics was by several orders of magnitude greater than that exercised by alternative medicines. All those elements were found mutually reinforcing.

(14) Servier was found to be dominant on the market for perindopril in the United Kingdom, France, the Netherlands and Poland, for the period starting in 2000 and ending between 2007 and 2009 (depending on the specific national market).

(15) The decision also delineates a market for the technologies to produce perindopril API. The conclusion was notably based on the inelasticity of demand as highlighted by several factors (for instance, the lack of possibility to use API technology for other medicines to make perindopril API). Servier was equally found to be dominant on the technology market at least in the period 2001-2007.

2. Application of Article 101 of the Treaty to patent settlement agreements

(a) Assessment as restrictions by object within the meaning of Article 101(1) of the Treaty

(16) Based on the jurisprudence of the Court of Justice of the European Union, the Commission found in its decision that patent settlements agreements, like any other agreements, are subject to Union competition law. The decision takes the view that an agreement which settles litigation and entails limitations on the generic company's commercial freedom in return for a value transfer may, in the specific circumstances of the case, be considered as a restriction of competition by object within the meaning of Article 101(1) of the Treaty.

(17) In order to identify whether each agreement covered by the decision had the potential to restrict competition by its very nature, the Commission analysed the specific facts of the case relating to each agreement to determine whether: — the generic undertaking and the originator undertaking were at least potential competitors, — the generic undertaking committed itself in the agreement to limit, for the duration of the agreement, its independent efforts to enter one or more EU markets with a generic product, and — the agreement was related to a transfer of value from the originator undertaking, as a significant inducement, which substantially reduced the incentives of the generic undertaking to independently pursue its efforts to enter one or more EU markets with the generic product. The Commission's assessment took into account the economic and legal context leading up to the agreement's conclusion, the actual content and objectives of the agreement, and each party's subjective intentions, as evidenced by the facts of the case.

(18) In the present case, other important factors were also taken into consideration. — First, the restrictions either lasted throughout the entire period of the patent term, or did not contain any commitment by Servier to refrain from infringement proceedings in case of independent entry with the relevant generic products after the expiry of the agreement. — Second, in most, if not all, agreements, the value Servier transferred to generics took into consideration the turnover or the profit the generic undertaking expected if it had successfully entered the market. — Third, the obligations on certain generic undertakings in the agreement went beyond the rights granted to patent holders, as the restrictions in some agreements went beyond what Servier could have legally obtained through successful enforcement of its patents in the underlying disputes/litigation.

(19) The Commission's analysis of the individual patent settlement agreements established that the content, objectives, and legal and economic context of the patent settlement agreements concluded between Servier and the generic companies constituted restrictions by object.

(b) Assessment as restrictions by effect within the meaning of Article 101(1) of the Treaty

(20) According to settled case law, there is no need to take account of the concrete effects of an agreement when it is established that it has as its object the restriction of competition.

(21) For the sake of completeness, the Commission analysed the likely restrictive effects of the patent settlement agreements on competition. In doing so, it took into account the actual conditions in which the agreements produced their effects, namely the economic and legal context, the nature of the product concerned, the real operating conditions and the structure of the market concerned; as well as, the existing and potential competition.

(22) For the markets in the United Kingdom, France, the Netherlands and Poland (14), the Commission concluded that each of the patent settlement agreements (including related agreements) was likely to entail restrictive effects on competition in view of the competition that would have existed absent the agreement and the limited degree of remaining competition.

(c) Assessment under Article 101(3) of the Treaty

(23) None of the parties submitted the evidence necessary to show that all four conditions for the application of Article 101(3) of the Treaty had been met.

3. Application of Article 102 of the Treaty to a technology acquisition and patent settlement agreements

(24) The decision established that Servier abused its dominant position by pursuing an exclusionary strategy consisting of a series of transactions (a technology acquisition and five patent settlement agreements). Servier's exclusionary strategy aimed at removing the closest sources of competition to its branded perindopril.

(25) Concerning the technology acquisition, the decision found that the Azad technology to produce an API not covered by Servier's patents was potentially enabling and represented a potential source of competition on the API market and the final product market. The acquired technology was never put to use by Servier. Evidence shows that it was a part of Servier's ‘defence mechanism.’ Servier's acquisition foreclosed an important and very scarce source of potential competition. Competition was not removed on the merits of Servier's technology, but by an acquisition eliminating this independent source. This distorted the competitive structure of the perindopril markets identified by the Commission and contributed to the likely foreclosure effects of Servier's exclusionary strategy, making generic entry more difficult, or delayed.

(26) The technology acquisition was complemented by Servier's successive conclusion of five patent settlement agreements, which were capable of protecting or likely to protect Servier's market position and deviated from competition on the merits, and contributed to the overall effects of Servier's single and continuous infringement of Article 102 of the Treaty.

(27) Servier's consistent and linear course of action in buying out potential sources of competition both by means of an intellectual property acquisition and reverse payment patent settlements was found to deviate from competition on the merits. Servier's efficiency claims concerning the technology acquisition and patent settlement agreements were unsubstantiated and did not meet the conditions for such conduct to be objectively justified.

(28) Servier's exclusionary strategy, implemented through the aforementioned six transactions concluded within the space of 27 months, thus constitutes a single and continuous infringement of Article 102 of the Treaty in the period 2004-2009 on the market for perindopril formulations in the United Kingdom, France, the Netherlands and Poland, and on the EU market for perindopril API technology. In the decision, none of the constitutive elements is found to constitute a stand-alone infringement of Article 102 of the Treaty.

4. PARENTAL LIABILITY

(29) All subsidiaries of parent companies held liable for the relevant infringement were wholly-owned by their parent company, except Niche and Matrix. The Commission considered that the presumption of decisive influence applied in this case and held the parent jointly and severally liable with the subsidiary.

(30) With respect to Niche, 60 % of its shares were owned by Unichem for part of the infringement period. As to Matrix, 71,5 % of its shares were acquired by Mylan during the infringement period. The Commission found that Unichem and Mylan exercised decisive influence over their respective subsidiaries, and held these parent companies jointly and severally liable for the fine.

5. ADDRESSEES

(31) The following companies were addressees of the Commission's decision: — Servier S.A.S. — Servier Laboratories Limited — Les Laboratoires Servier — Biogaran — Niche Generics Limited — Unichem Laboratories Limited — Mylan Laboratories Limited — Mylan Inc. — Teva UK Limited — Teva Pharmaceuticals Europe B.V. — Teva Pharmaceutical Industries Ltd — Krka, tovarna zdravil, d.d., Novo mesto — Lupin Limited

6. FINES

(32) Taking into account the gravity and duration of the infringements to Articles 101 and 102 of the Treaty, and pursuant to the Guidelines on fines (15), the Commission imposed on Servier a total of fines of EUR 330 997 200 for the infringements in question; and on the generic undertakings (and their parent companies) a total of fines of EUR 96 699 308 for the infringement of Article 101 of the Treaty.

(33) Regarding Servier, the fines take into account Servier's actual perindopril sales. Regarding Servier's generic counterparts, the fines cannot be calculated on the basis of sales value, since the anti-competitive behaviour was aimed at keeping them off the market. Therefore, the decision applied paragraph 37 of the Guidelines on fines (16) and relied on the value transfer received by the generic counterparts. The amount of the value transfer made by the originator to the generic undertaking encompasses various aspects that the parties may have considered when entering into the agreement, notably the strength of the potential entry. The fine calculated for Niche/Unichem exceeds the 10 % turnover limit and therefore the final amount of the fine was reduced. For all other undertakings, the fine remains below the 10 % turnover limit.

(34) The specific fines imposed for the infringement of Articles 101 and 102 of the Treaty were as follows: — For the infringement between Niche/Unichem and Servier of Article 101 of the Treaty: (a) Niche Generics Limited and Unichem Laboratories Limited, jointly and severally liable: EUR 13 968 773; (b) Servier S.A.S.; Les Laboratoires Servier; Servier Laboratories Limited, and Biogaran, jointly and severally liable: EUR 131 532 600. — For the infringement between Matrix/Mylan and Servier of Article 101 of the Treaty: (a) Mylan Laboratories Limited: EUR 17 161 140, of which EUR 8 045 914, jointly and severally liable with Mylan Inc.; (b) Servier S.A.S. and Les Laboratoires Servier, jointly and severally liable: EUR 79 121 700. — For the infringement between Teva and Servier of Article 101 of the Treaty: (a) Teva UK Limited; Teva Pharmaceuticals Europe B.V. and Teva Pharmaceutical Industries Ltd, jointly and severally liable: EUR 15 569 395; (b) Servier S.A.S.; Les Laboratoires Servier and Servier Laboratories Limited, jointly and severally liable: EUR 4 309 000. — For the infringement between Krka and Servier of Article 101 of the Treaty: (a) Krka, tovarna zdravil, d.d., Novo mesto: EUR 10 000 000; (b) Servier S.A.S. and Les Laboratoires Servier, jointly and severally liable: EUR 37 661 800. — For the infringement between Lupin and Servier of Article 101 of the Treaty: (a) Lupin Limited: EUR 40 000 000; (b) Servier S.A.S. and Les Laboratoires Servier, jointly and severally liable: EUR 37 102 100. — For the infringement of Servier of Article 102 of the Treaty: (a) Servier S.A.S. jointly and severally liable with Les Laboratoires Servier: EUR 41 270 000.

(35) The Commission ordered the undertakings concerned to refrain from repeating any act or conduct having the same or similar object or effect.

(1) OJ L 1, 4.1.2003, p. 1.

(2) Companies of the Servier group will be referred to as ‘Servier.’

(3) Except as regards: Latvia, where the infringement started on 1 July 2005; Bulgaria and Romania, where the infringement started on 1 January 2007; and Malta, where the infringement started on 1 March 2007.

(4) Except as regards: the United Kingdom, where the infringement ended on 6 July 2007; and the Netherlands, where the infringement ended on 12 December 2007.

(5) See footnote 3. Mylan Inc.'s infringement started on 8 January 2007 until the end date of the infringement.

(6) See footnote 4.

(7) Except as regards: Bulgaria and Romania, where the infringement started on 1 January 2007; Malta, where the infringement started on 1 March 2007; and Italy, where the infringement started on 13 February 2009.

(8) See footnote 4.

(9) Except as regards: Malta, where the infringement started on 1 March 2007; and Italy, where the infringement started on 13 February 2009.

(10) Except as regards: the United Kingdom, where the infringement ended on 6 July 2007; the Netherlands, where the infringement ended on 12 December 2007; and France, where the infringement ended on 16 September 2008.

(11) With regard to Lupin, the end date in France was 16.9.2008, which was the last day before limited-scale generic entry freed Lupin from the non-entry obligation.

(12) Niche concluded an additional deal with Biogaran, Servier's generic subsidiary, for an extra GBP 2,5 million as part of ‘the overall settlement consideration.’

(13) Followed by an IPR purchase by Servier for EUR 30 million on 5 January 2007.

(14) The Teva patent settlement agreement was only found to restrict competition in the United Kingdom, and the Krka patent settlement agreements in the United Kingdom, France and the Netherlands.

(15) Guidelines on the method of setting fines imposed pursuant to Article 23(2)(a) of Regulation (EC) No 1/2003 (OJ C 210, 1.9.2006, p. 2) (‘Guidelines on fines’).

(16) Paragraph 37 of the Guidelines on fines foresees that ‘the particularities of a given case or the need to achieve deterrence in a particular case may justify departing from [the general] methodology.’