REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT COMPETITION ENFORCEMENT IN THE PHARMACEUTICAL SECTOR (2009-2017) European competition authorities working together for affordable and innovative medicines
Date: 2019-01-28
Institutions: Directorate-General for Competition, European Commission
Subjects: EU competition policy, anti-trust legislation, health care, innovation, medicinal product, merger control, pricing of medicines, research and development, restriction on competition, right to health

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 28.1.2019  COM(2019) 17 final  REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT COMPETITION ENFORCEMENT  IN THE PHARMACEUTICAL SECTOR (2009-2017)  European competition authorities working together  for affordable and innovative medicines  
 
 
REPORT FROM THE COMMISSION TO THE COUNCIL AND THE 
EUROPEAN PARLIAMENT 

COMPETITION ENFORCEMENT  
IN THE PHARMACEUTICAL SECTOR (2009-2017) 

European competition authorities working together  
for affordable and innovative medicines 

EXECUTIVE SUMMARY 

Following  the  European  Commission’s  inquiry  into  the  pharmaceutical  sector  in  2009, 
competition  law  enforcement  and  market  monitoring  in  this  area  have  been  a  high 
priority across the EU. This report provides an overview of how the Commission and the 
national  competition  authorities  of  the  28  Member  States  (‘European  competition 
authorities’) have enforced EU antitrust and merger rules in the pharmaceutical sector in 
2009-2017.  It  responds  to  concerns  expressed  by  the  Council  and  the  European 
Parliament  that  anti-competitive  practices  of  pharmaceutical  companies  may  endanger 
patients’ access to affordable and innovative essential medicines. 

together 

to  safeguard  effective 
European  competition  authorities  work  closely 
competition  on  pharmaceutical  markets.  Since  2009,  the  authorities  have  together 
adopted  29  antitrust  decisions  against  pharmaceutical  companies.  These  decisions  have 
imposed  sanctions  (with  fines  totalling  over  EUR  1 billion)  or  made  binding 
commitments  to  remedy  anti-competitive  behaviour.  More  importantly,  some  of  these 
decisions  addressed  anti-competitive  practices  that  had  previously  not  been  addressed 
under EU competition  law. These precedents  give broader  guidance to  industry players 
on how to ensure that they comply with the law.  

In 2009-2017, European competition authorities investigated more than 100 other cases, 
while over 20 cases of possible antitrust infringements are currently being examined. To 
ensure  that  pharmaceutical  markets  do  not  get  too  concentrated  due  to  mergers,  the 
Commission reviewed more than 80 transactions. Competition concerns were detected in 
19  merger  cases,  and  the  Commission  cleared  these  mergers  only  after  the  companies 
offered to address concerns and modify the transaction. 

The  pharmaceutical  sector  requires  close  competition  law  scrutiny  and  the  reported 
antitrust and merger cases provide a range of examples of how enforcing competition law 
specifically  helps  to  safeguard  EU  patients’  access  to  affordable  and  innovative 
medicines.  

Access to cheaper medicines 

High prices of medicines impose a high burden on the national healthcare systems, where 
pharmaceuticals already account for a significant share of spending.  

Effective competition from generics and, more recently, biosimilars typically represents a 
vital  source  of  price  competition  on  pharmaceutical  markets  and  significantly  drives 
down  prices  (for  generics,  by  50 %  on  average).  This  not  only  makes  older  treatments 

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much  more  accessible,  but  also  allows  some  of  the  related  savings  to  be  redirected  to 
newer,  innovative  medicines.  To  mitigate  the  impact  of  generic  entry,  which  greatly 
reduces  revenues  from  commercially  successful  medicines,  originator  companies  often 
implement  strategies  to  extend  the  commercial  life  of  their  older  medicines.  Some  of 
these  strategies  and  other  practices  that  can  impact  price  competition  have  attracted 
competition law scrutiny. 

European  competition  authorities have  vigorously  investigated  and sanctioned practices 
that lead to higher prices. In a series of decisions that build on the Commission’s 2009 
sector  inquiry,  the  authorities  have  targeted  conduct  that  curbs  the  market  entry  or 
expansion  of  generics.  Landmark  decisions  were  taken  by  both  the  Commission 
(Lundbeck,  Fentanyl  and  Servier  cases)  and  the  United  Kingdom  authority  (Paroxetine 
case) against pay-for-delay deals. In such deals, the incumbent originator company pays 
the  generic  company  to  give  up,  or  delay,  its  plans  to  enter  the  market.  This  way,  the 
generic  company  ‘gets  a  part  of  [the  originator’s]  cake’  resulting  from  the  artificially 
high prices (as one company under investigation explained in an internal document found 
by the Commission).  

The  French  competition  authority  has  pioneered  several  decisions  that  prohibit 
incumbents’  disparagement  practices  to  curb  the  uptake  of  newly  launched  generic 
products.  Other  authorities  have  sanctioned  incumbents  that  were  abusing  regulatory 
procedures to keep generics out of the market.  

There have, moreover, been several recent investigations into the pricing of certain off-
patent medicines (in one example, the price rose up to 2,000 %), and several authorities 
have  found  such  pricing  practices  to  be  unfair  and  abusive,  namely  in  Italy  (the  Aspen 
case), the United Kingdom (the Pfizer/Flynn case) and Denmark (the CD Pharma case). 
In addition, competition authorities have prosecuted more classical forms of misconduct, 
such as bid rigging cartels, or strategies to cut off rivals from access to key inputs or to 
customers. 

Higher  prices  may  also  result  from  mergers  of  pharmaceutical  companies  where  the 
pricing power of the merged company is strengthened. The Commission has intervened 
in  a  number  of  mergers  that  could  have  led  to  price  increases,  in  particular  for  generic 
products  (e.g.  the  Teva/Allergan  case)  or  biosimilar  products  (e.g.  the  Pfizer/Hospira 
case).  The  Commission  cleared  these  transactions  only  after  the  companies  had 
committed to divest parts of their businesses to suitable buyers in order to preserve the 
existing degree of price competition. 

Access to innovative medicines  

Innovation is crucial in the pharmaceutical sector, with pharmaceutical companies among 
the leaders in investing in R&D. However, market participants may sometimes engage in 
conduct that affects the incentives to innovate (patenting, interventions before authorities, 
acquisitions of competing technologies, etc.). In doing so, they may breach competition 
law. 

In  merger  control,  the  Commission  has  prevented  transactions  that  could  compromise 
R&D  efforts  to  launch  new  medicines  or  to  extend  the  therapeutic  use  of  existing 
medicines. The Commission intervened to protect innovation competition in a number of 
cases  which,  for  example,  threatened  to  thwart  advanced  R&D  projects  for  life-saving 
cancer drugs (Novartis/GlaxoSmithKline Oncology) or for pipeline insomnia medicines at 
an early stage of development (Johnson & Johnson/Actelion). In the Pfizer/Hospira case, 

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the  Commission  was  concerned  that  the  merger  would  do  away  with  one  of  the  two 
parallel  projects  to  develop  competing  biosimilars.  The  Commission  cleared  all  these 
transactions  but  only  after  the  companies  offered  remedies  to  ensure  that  pipeline 
projects were not dropped and found a new operator to drive them forward. 

Competition rules acknowledge that companies may work together to foster innovation. 
However,  companies  sometimes  seek  to  frustrate  rival  innovation  efforts  or  to  relax 
competitive pressures that force them to invest in innovation. For example, action against 
attempts  to  unduly  delay  generic  entry  helps  to  effectively  enforce  the  end  of  the 
innovator’s  market  exclusivity  and  therefore  induce  further  innovation  by  originator 
companies.  In  addition  to  safeguarding  innovation,  antitrust  enforcement  also  fosters 
patients’  choice  by  intervening  against  various  exclusionary  practices  such  as  a  rebate 
scheme  designed  to  exclude  competitors  from  hospital  tenders  or  the  spreading  of 
misleading information about the safety of a medicine when used to treat conditions not 
mentioned in the marketing authorization (off-label use). 

Scope for further enforcement action 

The examples of cases in this report show that competition law enforcement can be very 
effective,  within  its  mandate  and  remit,  namely  to  investigate  anti-competitive 
agreements,  abuses by dominant  firms,  and mergers. However, there  are  limits  to  what 
competition law can do and continuous efforts by all stakeholders are needed to meet the 
societal challenge of ensuring sustainable access to affordable and innovative medicines. 

The  past  enforcement  record  provides  a  solid  basis  for  competition  authorities  to 
continue and to focus their enforcement efforts. 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. 

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Contents 

EXECUTIVE SUMMARY ................................................................................................. 1 

1. 

INTRODUCTION ....................................................................................................... 5 

2.  OVERVIEW  OF  COMPETITION  ENFORCEMENT 

IN  THE 

PHARMACEUTICAL SECTOR ................................................................................ 7 

2.1.  Enforcement of antitrust rules ........................................................................... 7 

2.2.  Merger review in the pharmaceutical sector ................................................... 12 

2.3.  Market  monitoring  and  advocacy  regarding  pharmaceuticals  and 

healthcare ......................................................................................................... 14 

3.  COMPETITION 

ENFORCEMENT 

IS 

SHAPED 

BY 

THE 

PARTICULARITIES OF THE PHARMACEUTICAL SECTOR ........................... 16 

3.1.  Specific structure of demand and supply in pharmaceutical markets ............. 16 

3.2.  The 

legislative  and  regulatory  framework  shapes  competitive 
dynamics .......................................................................................................... 18 

4.  COMPETITION PROMOTES ACCESS TO AFFORDABLE MEDICINES ......... 24 

4.1.  Antitrust enforcement supports swift market  entry  of cheaper  generic 

medicines ......................................................................................................... 24 

4.2.  Enforcement  against  dominant  firms  charging  unfairly  high  prices 

(excessive prices) ............................................................................................. 30 

4.3.  Other anti-competitive practices capable of inflating prices ........................... 32 

4.4.  Merger control and affordable medicines ........................................................ 35 

5.  COMPETITION  DRIVES 

INNOVATION  AND 
CHOICE OF MEDICINES ....................................................................................... 39 

INCREASES  THE 

5.1.  Antitrust enforcement fosters innovation and choice ...................................... 39 

5.2.  Merger control preserves competition on innovation for medicines ............... 41 

6.  CONCLUSION ......................................................................................................... 45 

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1. 

INTRODUCTION 

The  Council  asked  the  Commission  to  prepare  a  ‘report  on  recent  competition  cases 
following the pharma sector inquiry of 2008/2009’1. It expressed concerns that patients’ 
access  to  affordable  and  innovative  essential  medicines  may  be  endangered  by  a 
combination of (i) very high and unsustainable price levels; (ii) market withdrawals, or 
other  business  strategies  by  pharmaceutical  companies;  and  (iii)  the  limited  bargaining 
power  of  national  governments  against  those  pharmaceutical  companies.  The  European 
Parliament  expressed  similar  concerns  in  its  resolution  on  EU  options  for  improving 
access to medicines2. This report is therefore addressed to the Council and the European 
Parliament. 

The pharmaceutical sector and the healthcare sector in general are of particular societal 
and economic importance. Being healthy and having access to affordable and innovative 
medicines  matters  a  lot  to  people.  The  economic  crisis  of  2008  and  its  fallout,  the 
demographic evolution and changes in the types of diseases affecting Europeans have put 
significant  constraints  on  public  healthcare  budgets.  In  recent  decades,  public  spending 
on  healthcare  in  general  has  increased  to  between  5.7 %  and  11.3 %  of  GDP  in  EU 
countries3,  and  is  expected  to  grow  further.  Spending  on  pharmaceuticals  constitutes  a 
significant share of government spending on healthcare4. In this context, the high prices 
of medicines can pose a high burden on the national healthcare systems.  

Moreover, continued efforts  to  innovate and invest  into R&D are  crucial  to  developing 
new or improved treatments that offer patients and practitioners a choice of state-of-the-
art medication. However, incentives to innovate can also be curbed by both mergers and 
anti-competitive practices. 

This  report  shows  the  ways  in  which  competition  law  enforcement,  i.e.  enforcing  both 
the  EU  antitrust  rules  and  the  EU  merger  rules,5  can  help  to  safeguard  EU  patients’ 
access  to  both  affordable  and  innovative  medicines.  It  has  been  drawn  up  in  close 
cooperation  with  the  national  competition  authorities  (‘NCAs’)  of  the  28  EU  Member 
States (the Commission and NCAs are jointly referred to  as the ‘European competition 
authorities’).  

The  European  competition  authorities  closely  cooperate  to  enforce  competition  law  as 
well as continuously monitor the pharmaceutical markets. Using concrete examples, this 

1   Council  conclusions  on  strengthening  the  balance  in  the  pharmaceutical  systems  in  the  EU  and  its 

Member States, 17 June 2016, paragraph 48. 

2   European  Parliament  resolution  of  2 March  2017  on  EU  options  for  improving  access  to  medicines 

(2016/2057(INI)), 2 March 2017, available at: 
http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+TA+P8-TA-2017-
0061+0+DOC+XML+V0//EN. 

3   5.7 %  in  Latvia  and  11.3 %  in  Germany  in  2016.  Source:  OECD  (2017),  Health  at  a  Glance  2017: 
OECD  Indicators,  OECD  Publishing,  Paris,  pp.  134-135  (http://dx.doi.org/10.1787/health_glance-
2017-en). 

4  Pharmaceuticals  sold  in  retail  represented  16 %  of  healthcare  expenditure  on  average  across  OECD 
countries in 2015 (or the nearest year); this figure does not include expenditure on pharmaceuticals in 
hospitals. Source: OECD (footnote 3), pp. 186-187. 

5  This report does not cover the Commission’s control of state aid (e.g. aid for R&D to pharmaceutical 
companies, or state aid in the field of health insurance) nor cases where competition is distorted due to 
special or exclusive rights granted by a Member State (e.g. complaints by private healthcare providers 
against potential excessive compensation of publicly owned hospitals). 

5 

 
                                                 
 
report describes how the rules prohibiting abuses of a dominant position and restrictive 
agreements have been enforced to ensure that (i) price competition for pharmaceuticals is 
not  artificially  reduced  or  eliminated;  and  (ii)  anti-competitive  practices  do  not  restrict 
innovation  in  the  sector.  Scrutinising  mergers  of  pharmaceutical  companies  for  their 
possible  negative  impact  on  competition  equally  serves  these  two  objectives;  and  the 
report describes how the Commission’s application of the EU merger control rules has in 
specific  cases  contributed  to  having  more  affordable  and  innovative  medicines.  The 
report focuses on medicinal products for human use. 

Antitrust investigations are complex and require considerable resources. This is why the 
European competition authorities focus their investigations on the most important cases, 
including  those  that  can  provide  guidance  to  market  participants  and  deter  them  from 
engaging  in  similar  conduct.  ‘Vigilant  competition  law  scrutiny’6  therefore  helps  to 
improve  competition  on  pharmaceutical  markets  not  only  in  terms  of  the  specific  case 
investigated, but also in a broader sense by guiding the industry in its future behaviour. 
In  recent  years 
the  European  competition  authorities  have  set  a  number  of 
groundbreaking  precedents  which  clarified  the  application  of  EU  competition  law  in 
novel  issues in  pharmaceutical  markets.  These landmark decisions were  often based on 
comprehensive  inquiries  of  the  entire  sector.  The  European  competition  authorities 
continue  to  be  committed  to  ensuring  that  competition  rules  are  enforced  in 
pharmaceutical markets in an effective and timely manner. 

This report covers the period 2009-2017. It provides  

  a  general  overview  of  competition  law  enforcement  by  the  Commission  and  the 

NCAs in the pharmaceutical sector (Chapter 2);  

  a description of the main characteristics of the pharmaceutical  sector that shape the 

competition assessment (Chapter 3); and  

  an  illustration  of  how  competition  law  enforcement  contributes  to  affordable 
medicines  (Chapter  4)  and  to  innovation  and  choice  in  medicines  and  treatments 
(Chapter 5). 

6   European Parliament Resolution, Recital H (see footnote 2). 

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2.  OVERVIEW OF COMPETITION ENFORCEMENT IN THE PHARMACEUTICAL SECTOR 

While  competition  law  enforcement  (antitrust  and  mergers)  contributes  to  securing 
access to innovative and affordable medicines for patients and healthcare systems, it does 
not  replace  or  interfere  with  the  legislative  and  regulatory  measures  aimed  at  ensuring 
that  EU  patients  benefit  from  state-of-the-art  and  affordable  medicines  and  healthcare. 
Competition  law  enforcement  instead  complements  the  various  regulatory  systems.  It 
does  so  mainly  by  intervening  in  individual  cases  against  specific  market  conduct  of 
companies.  Competition  authorities  occasionally  use  also  advocacy  to  propose  to 
decision-makers  in  the  public  or  private  sphere  pro-competitive  solutions  to  systemic 
market malfunctioning. 

This chapter provides an introduction to the rules as well as an overview of some facts 
and  figures  on  enforcement  activities  of  the  European  competition  authorities.  Section 
2.1  addresses  enforcement  of  the  antitrust  rules,  i.e.  the  prohibition  of  restrictive 
agreements and abuses of a dominant position by pharmaceutical companies. Section 2.2 
describes  the  review  of  mergers  and  acquisitions  to  prevent  concentrations  that  could 
significantly impede effective competition. Section 2.3 reports on the market monitoring 
and advocacy measures undertaken by the European competition authorities. 

2.1.  Enforcement of antitrust rules 

2.1.1. What are antitrust rules? 

Article 101 of the Treaty on the Functioning of the European Union (‘TFEU’) prohibits 
agreements  between  undertakings,  decisions  by  associations  of  undertakings  and 
concerted  practices  which  have  as  their  object  or  effect  the  restriction  of  competition. 
Article 102 TFEU prohibits abuses of a dominant position on a given market. Regulation 
(EC)  No  1/20037  empowers  both  the  Commission  and  the  NCAs  to  apply  the 
prohibitions contained in the TFEU to anti-competitive practices. 

Companies  have  to  assess  for  themselves  whether  their  practices  comply  with  antitrust 
rules.  To  safeguard  legal  certainty  concerning  the  application  of  competition  law,  the 
Commission has adopted regulations specifying when certain types of agreements (such 
as  licensing  agreements)  can  be  block  exempted,  and  has  issued  guidelines  that  clarify 
how the Commission applies antitrust rules.8 

2.1.2. Who enforces antitrust rules? 

The  Commission  and  the  28  NCAs  share  enforcement  work.  The  NCAs  are  fully 
empowered to apply Articles 101 and 102 TFEU. The Commission and NCAs co-operate 
closely within the European Competition Network (‘ECN’). A case can be dealt with by 
a single NCA, by the Commission or by several authorities acting in parallel. 

7   Council  Regulation  (EC)  No  1/2003  of  16 December  2002  on  the  implementation  of  the  rules  on 

competition laid down in Articles 81 and 82 of the Treaty (OJ L 1, 4.1.2003, p. 1). 

8   By way of example: Guidelines on the applicability of Article 101 of the Treaty on the Functioning of 
the  European  Union  to  horizontal  cooperation  agreements  (OJ  C  11,  14.1.2011).  An  overview  of  the 
applicable rules is available at: http://ec.europa.eu/competition/antitrust/legislation/legislation.html. 

7 

 
                                                 
If certain conduct does not affect cross-border trade, the NCAs only apply their national 
antitrust laws, which are often a reflection of EU law. 

Besides the European competition authorities enforcing EU antitrust rules, the courts of 
the Member States are also fully empowered and called upon to apply Articles 101 and 
102 TFEU.  They  do  this  both  in  appeals  against  decisions  of  NCAs  and  in  litigation 
between  private  parties.  National  courts  and  competition  authorities  (NCAs  and  the 
Commission) also cooperate: courts can request an authority’s opinion on the application 
of  the  EU  antitrust  rules,  and  authorities  can  participate  in  court  proceedings  by 
submitting their written observations. 

2.1.3. What instruments and procedures are available? 

The  European  competition  authorities  can  adopt  decisions  that  find  that  a  certain 
agreement or unilateral conduct breached Article 101 and/or Article 102 TFEU. In these 
cases, the authority orders the companies to cease and desist from the infringing conduct 
and may impose a fine, which can be substantial. Specific remedies may also be imposed. 
The  Commission  and  most  NCAs9  may  also  decide  to  accept  the  investigated  firms’ 
binding  commitments  to  put  an  end  to  the  problematic  practices.  Such  commitment 
decisions do not establish an infringement or impose a fine on the companies, but can be 
key to restoring competition in a market.  

The  main  investigative  instruments  of  the  European  competition  authorities  include 
unannounced on-site inspections, requests for information, and interviews. Requests for 
information  can be powerful  investigation tools as  the companies may be compelled to 
provide complete and correct information with the threat of fines. 

Box 1: What are on-site inspections? 

The Commission as well as the NCAs can carry out unannounced inspections (sometimes called 
‘dawn  raids’),  and  search  the  premises  of  companies  to  collect  evidence  of  suspected  anti-
competitive conduct. Failure to submit to an inspection or obstructing it, for example by breaking 
a Commission inspection seal, can lead to hefty fines. The ECN+ Directive ensures among other 
things  that  all  NCAs  have  the  key  powers  and  tools  to  investigate,  including  more  effective 
inspection  powers  (for  example,  the  right  to  search  information  stored  on  devices  such  as 
smartphones, tablets, etc.).10 

In their proceedings, the European competition authorities safeguard the rights of defence 
of  the  investigated  parties.  For  example,  during  the  Commission’s  administrative 
proceedings,  in  the  event  that  the  Commission  wants  to  raise  objections  against  the 
parties’ conduct, the investigated parties receive a comprehensive statement of objections 
and access to the Commission’s entire case file. They can then reply to the objections in 
writing and in an oral hearing before the Commission issues a final decision. 

The decisions of the European competition authorities are subject to a full and rigorous 
review by the courts competent to scrutinise if such decisions are well-founded in terms 
of substance and if all procedural rights of the parties have been respected. 

9   Directive  (EU)  2019/1  of  the  European  Parliament  and  of  the  Council  of  11  December  2018  to 
empower the competition authorities of the Member States to be more effective enforcers and to ensure 
(https://eur-lex.europa.eu/legal-
internal 
the 
content/EN/TXT/?uri=uriserv:OJ.L_.2019.011.01.0003.01.ENG&toc=OJ:L:2019:011:TOC). 

functioning 

market 

proper 

the 

of 

10   See footnote 9. 

8 

 
                                                 
Antitrust investigations are generally complex as they require a thorough investigation of 
a  broad  range  of  facts  as  well  as  a  comprehensive  legal  and  economic  analysis. 
Investigations  therefore  require  considerable  resources,  and  it  can  take  several  years 
before a final decision is adopted. To ensure efficient use of resources, the competition 
authorities need to prioritise cases where, for instance, the market impact of the practices 
may  be  more  significant  or  where  the  decision  could  establish  a  useful  precedent 
applicable to the pharmaceutical sector or even beyond. 

Box 2: Can victims of anti-competitive behaviour claim damages? 

Victims  of  antitrust  infringements  are  entitled  to  compensation.  An  EU  Directive  ensures  that 
national laws allow for effective actions for damages11. Enforcement by competition authorities 
can  therefore  be  complemented  by  damages  claims  before  national  courts  by  those  harmed  by 
anti-competitive  behaviour.  For  example,  in  2010  the  United  Kingdom  NCA  fined  Reckitt 
Benckiser  GBP  10.2  million  for  abuse  of  a  dominant  position  caused  by  delaying  generic 
competition  for  its  off-patent  heartburn  medicine  Gaviscon  Original  Liquid.  Following  this 
decision,  healthcare  authorities  in  England,  Wales,  Scotland  and  Northern  Ireland  filed  civil 
claims  for  damages  against  the  companies.  The  authorities  claimed  that  they  should  be 
compensated for overpaying for the medicine due to the company’s unlawful conduct. By 2014, 
the claims had been settled for an undisclosed sum.12  

Similarly, the health authorities in the United Kingdom have sued  Les Laboratoires Servier for 
damages  resulting  (partly)  from  infringements  delaying  generic  entry  as  established  in  the 
Commission’s decision in the Servier case.13 These claims for sums exceeding GBP 200 million 
are still pending before the United Kingdom courts.14 

2.1.4. Overview of antitrust enforcement actions in the pharmaceutical sector 

In  2009-2017,  13  NCAs  and  the  Commission  adopted  29  decisions  finding  an 
infringement  or  accepting  binding  commitments  in  antitrust  investigations  related  to 
pharmaceuticals  for  human  use.  The  complete  list  of  the  29  cases  is  available  on  DG 
Competition’s website15. 

In  addition, 
the  European  competition  authorities  also  carried  out  substantial 
investigation work on competition concerns in more than 100 cases (which did not lead 
to an intervention decision), and they are currently investigating over 20 cases involving 
pharmaceuticals.  They  have  also  adopted  17  infringement  or  commitment  decisions  in 
cases concerning medical devices and 23 in cases related to other healthcare matters. 

11   Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain 
rules  governing  actions  for  damages  under  national  law  for  infringements  of  the  competition  law 
provisions of the Member States and of the European Union (OJ L 349, 5.12.2014, p. 1). 

12   OECD  document  ‘Generic  Pharmaceuticals,  –  Note  by  the  United  Kingdom’,  18-19 June  2014, 

DAF/COMP/WD(2014)67, paragraph 11. Available at: 
http://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=DAF/COMP/WD(2014)67&d
ocLanguage=En 

13   Commission  Decision  of  9  July  2014  in  case  No  COMP/AT.39612  –  Servier.  For  more  details  see 

Section 4.1.1. 

14   [2015] EWHC 647 (Ch) – Secretary of State for Health and Others v Servier Laboratories Limited et al. 
15   In  this  report,  the  29  antitrust  cases  are  referred  to  in  footnotes  with  the  name  of  the  competition 
is  available  at: 
authority  and 
http://ec.europa.eu/competition/sectors/pharmaceuticals/report2019/index.html.  This  list  also  includes 
links to public information (e.g. press release, text of the decision, Court judgment). 

the  decision.  The  complete 

the  date  of 

the  cases 

list  of 

9 

 
                                                 
Figure  1:  Antitrust  investigations  in  the  pharmaceutical  sector  by  European  competition 
authorities (2009-2017) 

>100 

>20 

Intervention decisions

Investigation, but no intervention

29 

On-going investigations

Competition authorities intervene and impose sanctions 

In 24 of the 29 intervention cases involving pharmaceuticals, the case was closed with a 
prohibition decision finding an infringement of EU competition law. Fines were imposed 
in  21 cases (and in  87 % of all infringement decisions) for  more than EUR 1 billion in 
total for the relevant period (see Figure 2 below)16. In 5 cases, the investigation could be 
closed without finding an infringement or imposing fines because competition concerns 
were  sufficiently  addressed  by  the  commitments  of  the  investigated  companies.  These 
were made binding by a decision of the competition authority. 

16   The  reported  fines  are  not  final  as  appeals  are  ongoing  in  a  number  of  cases.  In  three  infringement 

decisions, the NCA did not impose a fine. 

10 

 
 
                                                 
Figure 2: Fines totalling EUR 1.07 billion imposed by European competition authorities in 
cases involving pharmaceuticals (2009-2017) 

Other € 2.1 m 

€ 175.7 m 

€ 14 m 

€ 198.5 m 

€ 590 m 

European Commission

France

Hungary

Italy

Romania

€ 7.9 m 

€ 81.6 m 

United Kingdom

Other (Bulgaria, Cyprus, Portugal, Spain)

To  collect  evidence,  unannounced  inspections  were  carried  out  in  around  62 %  of  the 
investigations which lead to an intervention decision. In almost all cases (90 %), requests 
for information were used. Interviews were conducted in 45 % of the cases. 

Most  (17)  of  the  investigations  that  lead  to  an  intervention  decision  were  triggered  by 
complaints, 8 were initiated ex officio, and 4 were started on other grounds (e.g. indicia 
gathered during a sector inquiry). The investigations related to anti-competitive practices 
by  manufacturers  of  pharmaceuticals  (11  cases),  wholesalers  (5  cases)  and  retail 
distributors  (2  cases),  and  a  number  of  cases  related  do  practices  involving  both 
manufacturers  and  distributors.  The  investigations  involved  a  wide  range  of  medicines, 
for  example  cancer  drugs  for  chemotherapy,  antidepressants,  strong  painkillers, 
medicines to prevent heart failure or vaccines. 

As  shown  in  Figure  3,  the  most  widespread  type  of  competition  concerns  leading  to 
intervention decisions are abuses of dominance (45 % of the cases), followed by different 
types  of  restrictive  agreements  between  companies.  These  include  (i)  restrictive 
horizontal agreements between competitors such as pay-for-delay agreements (31 %); (ii) 
outright  cartels  (such  as  bid  rigging);  and  (iii)  vertical  agreements  (such  as  clauses 
from  promoting  and  selling  products  of  competing 
prohibiting  distributors 
manufacturers), accounted for in 17 % of the cases each17. 

17   Decisions  may  establish  more  than  one  infringement;  therefore  the  combined  percentages  exceed 

100 %. 

11 

 
 
                                                 
Figure 3: Type of competition concerns where European competition authorities intervened 

14

12

10

8

6

4

2

0

Cartel

Other horizontal
agreement

Vertical restraints

Abuse of dominance

Competition authorities promote competition rules by carrying out investigations 

Besides those cases that ended with an intervention decision, the European competition 
authorities  also  carried  out  substantial  investigation  work  on  competition  concerns  in 
more  than  100  cases  that  were  closed  for  various  reasons  (in  particular  because  the 
preliminary  investigation  did  not  find  sufficient  evidence).  Even  if  no  sanctions  were 
imposed  or  no  commitments  reached  in  these  cases,  the  work  involved  close  contacts 
with  different  players  in  the  pharmaceutical  markets,  which  often  helped  to  clarify  the 
competition rules and their application in the pharmaceutical sector. In about one third of 
these  cases,  the  competition  issues  investigated  related  to  alleged  collusion  between 
companies,  another  third  related  to  alleged  refusal  or  restriction  of  the  supply  of 
medicines, while some 13 % related to alleged barriers to generic or biosimilar entry and 
some 9 % to alleged parallel trade restrictions. 

The European competition authorities are currently investigating more than 20 cases in 
the pharmaceutical sector. 

2.2.  Merger review in the pharmaceutical sector 

2.2.1. What are the EU merger rules? 

Pharmaceutical companies regularly enter into mergers or acquisitions (‘mergers’). Some 
of these transactions aim to achieve economies of scale, extend R&D to new therapeutic 
areas, meet increased profit targets etc. 

Consolidation that affects the market structure can however also thwart competition. For 
example,  the  merged  company  may  acquire  market  power  allowing  it  to  hike  up  the 
prices of its medicines, or to abandon the development of promising new treatments. The 

12 

 
 
Commission’s  merger  control  seeks  to  ensure  that  consolidation  does  not  significantly 
impede effective competition in the pharmaceutical sector. 

The Commission is entrusted with reviewing mergers with an EU dimension, i.e. where 
the  merging  companies’  turnovers  meet  the  thresholds  laid  out  in  the  EU  Merger 
Regulation18.  If  these  thresholds  are  not  met,  a  merger  can  be  caught  by  national 
jurisdictions  and  reviewed  by  one  or  several  NCAs.  The  Merger  Regulation  includes  a 
system of referrals from NCAs to the Commission and vice versa to ensure that the best 
placed authority is in charge of reviewing any transaction19. This report focuses only on 
those merger control proceedings in which EU merger control law is applied, i.e. mergers 
that were investigated by the Commission. 

The  legal  framework  for  the  assessment  of  mergers  by  the  Commission  consists  of  the 
EU  Merger  Regulation  and  the  Implementing  Regulation20.  In  addition,  there  are  a 
number  of  notices  and  guidelines  which  serve  as  guidance  on  how  the  Commission 
would carry out its merger review in various circumstances21. 

When reviewing a merger, the Commission makes a prospective analysis of whether the 
transaction would significantly impede effective competition in the EU, in particular by 
creating  or  strengthening  a  dominant  position.  In  its  assessment,  the  Commission 
considers  in  particular  (i)  what  behaviour  the  merged  entity  could  adopt  post-merger 
(‘unilateral effects’); (ii) whether other companies would retain the incentives to compete 
or would instead align their commercial strategy with the merged company (‘coordinated 
effects’); and (iii) whether access to suppliers or to customers could be denied (‘vertical 
and conglomerate effects’). 

A merger review is initiated when the Commission receives notice from the companies 
involved  of  their  intention  to  merge,  often  in  advance  of  a  formal  notification.  The 
merger must not be implemented until the Commission has given its authorisation. 

2.2.2. What can the Commission do if a merger is problematic? 

If a deal raises competition concerns, for example due to the risk of a price increase for 
medicines  or  harm  to  innovation,  and  the  merging  companies  do  not  propose  suitable 
modifications, the Commission may prohibit the transaction. 

18   In 2016, the Commission launched a public  consultation on the functioning of certain procedural and 
jurisdictional aspects of EU merger control, for example in relation to the notification thresholds in the 
pharmaceutical sector, the results of which are under assessment. 

19   For example, merging companies as well as one or more Member States can ask for the Commission to 
review a merger falling below the EU turnover thresholds in specific circumstances (e.g. such a request 
may come from the merging companies provided that the  merger  would be reviewed in at least three 
Member  States  and  these  agree  to  the  referral).  Similarly,  merging  companies  as  well  as  a  Member 
State can ask for a merger meeting the EU turnover thresholds to be reviewed by a NCA if the impact 
of the merger will be in that specific Member State. 

20   Council  Regulation  (EC)  No  139/2004  of  20 January  2004  on  the  control  of  concentrations  between 
undertakings (the EC Merger Regulation) (OJ L24, 29.1.2004, p. 1) and Commission Regulation (EC) 
No 802/2004 of 7 April 2004 implementing Council  Regulation (EC)  No 139/2004 on the control of 
concentrations between undertakings (OJ L133, 30.4.2004, p. 1). 

21   An overview of the applicable rules is available at: 

http://ec.europa.eu/competition/mergers/legislation/legislation.html.  

13 

 
                                                 
 
To  avoid  this,  companies  can  propose  modifying  the  concentration  to  eliminate  the 
competition  concerns.  Such  modifications  are  commonly  referred  to  as  remedies  or 
commitments. If proposed remedies appear fit for purpose, the Commission carries out a 
so-called market  test by  soliciting views, in  particular from  competitors and customers, 
on whether the  commitments would effectively  eliminate the competition  concerns. On 
this  basis,  the  Commission  decides  whether  to  approve  the  transaction  subject  to  the 
conditions  and  obligations  of  implementing  the  remedies  either  before  or  after  the 
companies merge, depending on the specific circumstances of the case.  

The  Commission  considers  structural  remedies,  in  particular  divestitures,  to  be  the 
preferred way to solve competition issues in merger cases. Accordingly, the remedies in 
the  pharmaceutical  sector  often  consist  of  a  divestiture  of  marketing  authorisations  for 
problematic  molecules  in  the  relevant  Member  State.  This  is  usually  accompanied  by 
intellectual property and technology transfer of manufacturing and sales know-how, the 
transitional  supply  or  other  agreements  and,  where  relevant,  product  facilities  and 
personnel. 

2.2.3. Commission merger control in the pharmaceutical sector in numbers 

the  Commission  analysed  more 

During  2009-2017, 
the 
pharmaceutical sector. Out of these, 19 were problematic from a competition standpoint. 
The  potential  competition  concerns  identified  related  mainly  to  the  risk  of  (i)  price 
increases for some medicines in one or several Member States; (ii) depriving patients and 
national healthcare systems of some medicinal products; and (iii) diminishing innovation 
in relation to certain treatments  developed at European or even global level. The issues 
identified by the Commission typically involved a small number of medicines compared 
to the overall size of the companies’ portfolio. 

than  80  mergers 

in 

Taking  into  account  the  remedies  offered  by  the  merging  companies,  the  Commission 
was  able  to  clear  all  of  the  mergers  that  raised  these  targeted  concerns,  allowing  the 
merger to go ahead and protecting competition and consumers in Europe. 

As  a  result,  the  intervention  rate  in  the  pharmaceutical  sector  was  around  22 %22.  In 
comparison, the total intervention rate across all sectors during the period was 6 %.  

2.3.  Market monitoring and advocacy regarding pharmaceuticals and healthcare 

In  addition  to  their  direct  enforcement  activities  –  decisions  and  investigations  on 
(potential)  anti-competitive  practices  in  the  pharmaceutical  and  healthcare  sectors  –  in 
2009-2017, the competition authorities took also more than 100 market  monitoring and 
advocacy  activities.  Monitoring  activities  include  sector  inquiries,  market  studies  and 
surveys to identify obstacles to the proper functioning of competition that may exist in a 
sector. Advocacy  activities are also  an important (albeit  sometimes less  visible) part of 
the work of competition authorities and include consultative opinions, ad hoc advice and 
other measures that promote – for instance vis-a-vis legislative and administrative bodies 
– approaches and solutions that are conducive to effective and fair competition in a given 
sector  or  market.  In  the  pharmaceutical  sector,  such  initiatives  are  of  particular 
importance given the specific challenges for competition in this area (see Chapter 3). 

22   The  intervention  rate  is  calculated  comparing  the  number  of  merger  prohibitions,  merger  approvals 
subject to remedies and withdrawals of a merger notification in Phase II to the overall number of cases 
notified to the Commission. 

14 

 
                                                 
Competition  authorities  may  conduct  market  monitoring  investigations  where,  for 
example, ‘the rigidity of prices or other circumstances suggest that competition may be 
restricted or distorted’23. Generally, sector inquiries and other monitoring activities also 
provide  guidance  to  the  market  participants  and  may  lead  to  a  follow-on  antitrust 
enforcement. Some NCAs even have far-reaching powers, allowing them for instance to 
conduct inquiries so they can prepare opinions on legislative projects or other regulatory 
measures that may have an impact on competition conditions in a specific sector.  

Of the 30 sector inquiries or market studies undertaken, around a third focused on retail 
distribution of medicines and competition between pharmacies. Another main focus was 
the wholesale distribution of medicines, including specific competition issues related to 
parallel trade or pricing issues. A third main focus of the monitoring activities related to 
the  penetration  of  generic  medicines.  This  was  the  focus  in  particular  of  the 
Commission’s  inquiry  into  the  pharmaceutical  sector,  for  which  the  final  report  was 
adopted in 2009, followed by 8 annual monitoring reports. 

More than 70 advocacy activities mostly involved opinions on draft legislative proposals 
or  recommendations  to  avoid  distortion  of  competition  in  the  pharmaceutical  and 
healthcare sectors. The range of issues covered by  such advocacy  reports is  broad,  and 
includes (i) the removal of barriers to entry for innovative medicines; (ii) the deregulation 
of pharmacies  and online sales of medicines; (iii) better access  to  medical  services and 
competition  issues  in  relation  to  medical  devices;  and  (iv)  the  removal  of  barriers  to 
competition among manufacturers of originator medicines (‘originators’) and biosimilars. 
Many  of  these  advocacy  activities  helped  creating  or  restoring  conditions  more 
conducive to effective and fair competition, and to better access to medicines or medical 
care for patients. 

A  complete  list  of  the  monitoring  and  advocacy  activities  undertaken  by  the  European 
competition authorities in 2009-2017 is available on DG Competition’s website24.  

23   Article 17 of Council Regulation (EC) No 1/2003, with respect to the Commission’s power to conduct a 

sector inquiry. 

24   http://ec.europa.eu/competition/sectors/pharmaceuticals/report2019/index.html.  The  list  includes  links 

to public information and/or the reports itself. 

15 

 
 
                                                 
3.  COMPETITION  ENFORCEMENT  IS  SHAPED  BY  THE  PARTICULARITIES  OF  THE 

PHARMACEUTICAL SECTOR 

For competition policy and its enforcement activities in the pharmaceutical sector to be 
effective,  they  need  to  take  account  of  the  particularities  and  the  resulting  competitive 
dynamics of this sector. These particularities include, for instance, the specific structure 
of  demand  and  supply  involving  a  variety  of  stakeholders  (Section  3.1)  and  the 
comprehensive  legislative  and  regulatory  framework  in  the  different  Member  States 
(Section 3.2). 

3.1.  Specific structure of demand and supply in pharmaceutical markets 

Each  analysis  of  how  a  market  functions  and  each  assessment  of  conduct  under 
competition  law  has  to  take  due  account  of  the  structure  of  supply  and  of  demand.  A 
variety  of  stakeholders  pursue  different  interests  in  the  pharmaceutical  markets.  The 
demand side is characterised by consumers (patients), prescribers, pharmacies and health 
insurance schemes: 

  Patients are the final users of medicines. They generally only pay – if at all – a small 
portion of the price of prescribed medicines, the rest being covered by the healthcare 
system. 

  Prescribers, usually medical doctors, decide which prescription medicine the patient 
will  use.  They  may  also  advise  patients  about  which  over-the-counter  medicine  to 
use. However, they do not bear the cost of the treatment they have prescribed. 

  Pharmacies  may  also  impact  the  demand  for  medicine,  for  example  when  there  are 
incentives  for  pharmacists  to  dispense  the  cheapest  available  version  of  a  given 
medicine (such as a generic version or a parallel imported product). Pharmacists are 
often also the main source of advice for patients on over-the-counter medicines. 

  Private  and  public  health  insurance  schemes  are  financed  by  their  members  (and/or 
the  State)  and  cover  patients’  medical  costs  on  their  behalf.  The  reimbursement 
regime  for  medicines  in  a  country  impacts  demand  and  influences  prescribers’  and 
pharmacists’ behaviour. 

On  the  supply  side,  there  are  manufacturers  with  distinct  business  models  (supplying 
originator  medicines,  generic  medicines  or,  increasingly,  both  types  of  products), 
wholesalers and different types of pharmacies: online pharmacies, mail order pharmacies, 
traditional ‘brick and mortar’ pharmacies and hospital pharmacies: 

  Originators  are  active  in  research,  development,  manufacturing,  marketing  and  the 
supply of innovative medicines. They typically compete ‘for the market’ by trying to 
be the first to discover, patent and bring to the market a new medicine, but they may 
compete  also  ‘in  the  market’  when  different  drugs  are  relatively  substitutable  for 
similar indications.  

  Manufacturers  of  generic  products  supply  non-innovative  generic  versions  of  the 
originator medicine after the originators lose exclusivity, and they do so normally at 
significantly lower prices. A generic product has the same qualitative and quantitative 
composition  in  active  substance  and  the  same  pharmaceutical  form  (e.g.  tablet, 
injectable)  as  an  originator  product  that  has  already  been  authorised  (the  ‘reference 
medicine’),  and  its  bioequivalence  with  the  reference  medicine  needs  to  be 
16 

 
demonstrated by studies. Generic products are usually used to treat the same disease 
as  the  reference  medicine.  Generic  companies  thus  compete  to  win  markets  from 
originators (or from other generics already on the market). 

  Some  manufacturers  supply  both  originator  and  generic  products.  These  companies 

develop distinct business strategies for each type of product. 

  Wholesalers  organise 

the  distribution  of  pharmaceuticals  by  purchasing 
pharmaceutical  products  from  manufacturers  and  selling  them  to  pharmacies  and 
hospitals. 

  The  different  types  of  pharmacies  fulfil  the  dual  role  of  advising  patients  and 

dispensing them the required medicines. 

Finally,  Member  States  also  play  a  significant  role  in  this  highly  regulated  sector  – 
various  agencies  administer  the  marketing,  pricing,  procurement  and  reimbursement  of 
pharmaceuticals. By using regulations, governments aim to achieve several goals such as 
(i)  maintaining  a  high  quality  of  pharmaceuticals,  safety,  efficiency  and  efficacy;  (ii) 
making  pharmaceuticals  affordable  to  everyone  by  negotiating  prices  and  setting  up 
public health insurance schemes; (iii) promoting innovation and medical research etc. 

As shown in Figure 4 below, the demand side in pharmaceutical markets is therefore not 
driven  by  a  single  market  operator,  but  is  shaped  by  the  multiplicity  of  stakeholders 
whose  interests  are  not  necessarily  aligned:  the  patient  and  his/her  medical  needs,  the 
physician who is responsible for the effective treatment of the patient but not for the cost, 
and  the  reimbursement  body  and  insurers,  whose  role  is  to  ensure  that  medicine 
expenditure  is  sustainable  for  the  collective  benefit  of  the  beneficiaries  of  health 
insurance schemes. 

Figure 4: Demand and supply in pharmaceutical markets 

17 

 
 
3.2.  The legislative and regulatory framework shapes competitive dynamics 

Competition  in  pharmaceutical  markets  depends  on  multiple  factors,  including  R&D 
activity,  marketing  authorisation  requirements,  access  to  capital25,  intellectual  property 
rights,  pricing  regulation,  promotional  efforts,  commercial  risks  etc.  A  thorough 
understanding of these factors is necessary to assess whether certain conduct or a specific 
transaction  is  anti-competitive.  It  is  also  key  to  understanding  what  constitutes  the 
relevant market – a key concept in competition law analysis.  

Box 3: Definition of relevant markets for pharmaceuticals 
The definition of the relevant market26 serves to identify the sources of competitive pressure that 
can constrain the investigated parties. The relevant market comprises both the product dimension 
(which other products exert significant competitive pressure on the investigated product) and the 
geographic  dimension  (sufficiently  homogeneous  area  from  which  significant  competitive 
pressure is exerted). To understand which medicines belong to the same market, the authorities 
need to assess both demand side substitution (e.g. whether prescribers and patients would readily 
switch  from  one  product  to  another)  and  supply  side  substitution  (the  existence,  or  not,  of 
suppliers that could also start producing a specific medicine). 

The  market  definition,  i.e.  identifying  the  sources  of  competitive  pressure,  helps  competition 
authorities to assess whether the investigated company enjoys market power, or dominance, and 
whether  the  conduct  being  investigated  would  be  likely  to  harm  competition  rather  than  being 
offset by offers from the remaining competitors. 

With  regard  to  the  relevant  product  market,  understanding  which  other  products  are 
therapeutically  substitutable  is  a  necessary  first  step  in  identifying  relevant  competing  drugs. 
However, the determining factor is whether the relevant drugs can effectively be substituted also 
in economic terms. Only medicines that are actually able to substitute the investigated product in 
response  to  changes  in  market  conditions  can  be  considered  as  belonging  to  the  same  product 
market.  For  example,  if  the  positioning  of  a  medicine  (price,  quality,  innovative  activity, 
promotional activity) is geared against losing prescriptions to another medicine with a different 
molecule, this suggests that the products based on two different molecules are likely to be in the 
same  market.  However,  if  the  main  competitive  threat  comes  from  generic  versions,  which 
contain  the  same  molecule,  and  the  pressure  from  medicines  containing  other  molecules  is 
significantly weaker, this may indicate that the market is narrower and limited to the investigated 
molecule alone. The degree of competitive pressure faced by a  medicine can  change over time 
and  not  only  depends  on  the  availability  of  substitutable  medicines,  but  is  to  a  large  extent 
affected by pricing and reimbursement regulation27. 

25   Pharmaceutical  innovation,  in  particular  in  biologicals,  is  shifting  from  big  pharma  companies  to 
smaller  players.  While  big  companies  continue  to  invest  heavily  in  clinical  trials  and  bringing 
innovation to the market, today core innovation is increasingly generated by small and medium sized 
companies (SMEs). Innovative SMEs in Europe face a funding challenge, partly due to the fragmented 
European public markets.  

European Investment Bank publication: Financing the next wave of medical breakthroughs - What 
works and what needs fixing? March, 2018 
http://www.eib.org/attachments/pj/access_to_finance_conditions_for_life_sciences_r_d_en.pdf 

26   Commission notice on the definition of the relevant market OJ C 372, 9.12.1997, p. 5-13. 
27   See section 3.2.2. 

18 

 
                                                 
3.2.1. Product life-cycle and the evolving nature of competition driven by regulation 

The  focus  of  competition  law  scrutiny,  whether  in  merger  control  or  in  antitrust 
investigations, will vary depending on the stage of the product life-cycle. Life-cycles of 
medicines are relatively long and comprise three main phases as shown in Figure 5.  

Figure 5: Pharmaceutical product life-cycle 

The  life-cycle  of  a  new  drug  begins  with  a  new  chemical  compound,  which  is  usually 
discovered through basic research conducted by originator manufacturers or independent 
research  facilities  (universities,  specialised  laboratories),  often  supported  by  public 
funding. Originator manufacturers then test whether a pharmaceutical product containing 
the chemical compound would be safe and effective. During the development stage, the 
candidate medicines are first assessed in laboratory tests (including on animals) in the so-
called pre-clinical stage, followed by the clinical trials (on humans) which comprise three 
phases. 

Once studies have shown that a new medicine is effective and safe, the company applies 
for a marketing authorisation (‘MA’) to the regulatory agency. This could be either the 
European Medicines Agency (EMA) or a national authority. 

The  development  cycles  for  innovative  drugs  are  usually  risky  and  lengthy,  and  entail 
high  development  costs28.  Moreover,  only  a  small  minority  of  candidate  molecules 
survive the development stage and finally make it to the market.  

28   Recent estimates suggest that the costs of bringing a medicine from the lab to the market are between 
EUR 0.5  billion  and  EUR  2.2  billion  (converted  from  USD).  Copenhagen  Economics,  Study  on  the 
economic  impact  of  supplementary  protection  certificates,  pharmaceutical  incentives  and  rewards  in 
Europe,  Final  Report,  May  2018,  available  at:  https://ec.europa.eu/health/sites/health/files/human-
use/docs/pharmaceuticals_incentives_study_en.pdf.  

19 

 
 
                                                 
In pre-launch phases – both pre-clinical and clinical – developing new medicines may be 
a source of competitive pressure for existing medicines as well as for other medicines in 
development. Once on the market, new medicines strive to secure prescriptions by either 
diverting demand from other medicines or by growing the market demand itself. At this 
stage,  competitive  pressure  comes  primarily  from  other  similar  medicines.  When  the 
original medicine is  close to  losing  exclusivity  (e.g. loss of patent protection), pressure 
from  generic  versions  of  the  same  medicine  starts  to  build  up.  Upon  generic  entry,  the 
originator  may  typically  lose  significant  sales  volumes  and  average  market  prices  drop 
dramatically.  

Developing new medicines – competition on innovation 

The pharmaceutical industry is one of the most R&D-intensive industries in the EU and 
worldwide29.  Innovation  is  driven  by  the  demand  for  new,  more  effective  and/or  safer 
treatments  for  patients,  the  life-cycles  of  medicines,  and  the  threat  of  competition, 
especially  generic  competition  after  loss  of  exclusivity.30  As  patients  are  gradually 
switched  to  newer  alternative  treatments,  or  cheaper  generic  versions,  the  originator 
companies cannot indefinitely appropriate profits from past innovative products but need 
to  invest  in  new  innovative  products  so  that  they  are  not  outcompeted  by  rival 
innovation. The continued process of investment in R&D, to which competition makes a 
vital contribution, therefore leads to the discovery of new or improved medicines to the 
benefit of both patients and society as a whole.  

Market exclusivity for new medicines is limited in time 

Given  the  high  development  costs  and  the  fact  that,  once  a  new  medicine  has  been 
developed,  it  is  relatively  easy  for  rivals  to  copy  it,  legislation  grants  originator 
companies  various  exclusivity  mechanisms  that  are  designed  to  provide  them  with 
incentives  to  invest  in  new  R&D  projects.  A  common  feature  of  these  exclusivities  is 
however that they are limited in time, and thus allow the entry of generic medicines at the 
end of the exclusivity. 

The  substance  (active  ingredient)  in  an  originator  medicine  may  be  patented  and  such 
patents  are  often  referred  to  as  ‘compound’  or  ‘primary’  patents.  If  this  is  the  case,  no 
competitor  can  sell  a  medicine  containing  the  same  active  ingredient  which  is  patent 
protected.  Patent  protection  can  be  extended  by  supplementary  protection  certificates 
(SPCs) which have been created to compensate for the period of exclusivity lost by the 
manufacturer  due  to  the  long  periods  needed  to  obtain  MA  for  the  patented  medicine. 
There can also be other protection instruments granting exclusivity (see Box 4 below).  

While  the  medicine  is  on  the  market,  manufacturers  usually  continue  to  improve  its 
manufacturing process,  pharmaceutical form, and/or composition (different salts, esters, 
crystalline forms etc). These improvements may result from patentable innovations. Such 
patents,  often  called  ‘secondary  patents’,  may  make  it  more  difficult  for  generics  to 
quickly  enter  the  market  even  if  the  active  ingredient  is  no  longer  patented  and  can  be 
used to produce their generic medicines. 

29   In  2017,  the  spend  on  new  R&D  equalled  13.7 %  of  sales  in  pharmaceuticals  and  24 %  in 
biotechnology  (European  Commission,  Industrial  Research  and  Innovation,  The  2017  EU  Industrial 
R&D Investment Scoreboard, table S2). 

30   On exclusivities see Box 4 and the following Section. 

20 

 
                                                 
Box  4:  Patents  and  other  exclusivities  provide  a  period  of  protection  against  generic 
products 

Patents  provide  the  innovator  (originator)  with  an  exclusive  civil  right  to  the  commercial 
exploitation  of  the  invention  for  up  to  20  years  from  the  patent  application.  A  manufacturer 
usually applies for the patent very early in the development process to prevent another researcher 
applying for a patent for the same invention or publishing it. This means that the 20 year patent 
protection period starts long before the drug enters the market. SPCs can then extend the period 
of patent protection by up to 5 years. 

Originator  medicines  can benefit  from  other  exclusivities,  notably  market  and  data  exclusivity. 
The  originator  medicine enjoys  8  years  of  exclusivity  over  the  data  on pre-clinical  and clinical 
studies submitted  to obtain  the MA.  During  this  data  exclusivity  period,  companies  –  typically 
generic producers – cannot apply for an MA for the same medicine by way of an abridged MA 
procedure, which relies in part on the data submitted for the originator medicine.  

Market exclusivity means that generic medicines cannot enter the market and compete with the 
originator  medicine  until  10  years  have  passed  from  the  date  of  the  MA  to  the  originator 
medicine.  Orphan  medicines  (i.e.  medicines  developed  for  rare  diseases)  also  benefit  from  a 
period of 10 years of market exclusivity in which no similar medicine to treat the same disease 
(whether generic or originator) can be marketed. When medicines used by adults are adapted to 
meet  the  medical  needs  of  children,  this  may  also  be  rewarded  by  an  additional  period  of 
exclusivity (SPC, data or market exclusivity). 

Loss of protection and generic competition 

The  limitation  in  time  of  all  protection  instruments  is  fundamental  for  dynamic 
competition,  as  it  balances  the  incentives  to  innovate  from  market  exclusivity  and  the 
subsequent threat of generic competition with increased access to cheaper medicines after 
loss of exclusivity. Competitive pressure from generics may be significantly different and 
stronger  than  pressure  from  other  originator  medicines.  Unlike  competition  between 
medicines  based  on  different  molecules,  a  generic  medicine  contains  the  same  active 
ingredient,  is  marketed  in  the  same  dosages,  and  treats  the  same  indications  as  the 
originator  medicine,  and  thus  competition  is  between  homogeneous  products.  Most 
Member  States  have  regulatory  mechanisms  to  encourage  the  prescription  and/or 
dispensing of generic medicines instead of the more expensive originator medicine.  

Once  a  generic  medicine  enters  the  market,  these  mechanisms  lead  to  stronger  price 
competition  from  generics  and  to  important  shifts  in  volumes  of  product  sold  from  the 
originator to the generic, potentially even threatening the entire patient population of the 
originator.  As  a  result,  the  entry  of  cheaper  generics  tends  to  slash  the  sales  of  the 
originator medicine and average prices, and is a key driver of cost savings for healthcare 
systems and of greater access to medicines for patients. 

While the competitive dynamics between original biological medicines and biosimilars is 
similar to that between originator medicines and generic medicines, biological products 
have a number of distinctive features. 

Box 5: Biological medicines and biosimilars 

Biological  medicines contain  active  substances  from  a  biological  source such as  living  cells  or 
organisms  (human,  animals  and  microorganisms  such  as  bacteria  or  yeast).  Cutting-edge 
technology  is  often  used  to  produce  them.  Compared  to  chemically  synthesised  medicines, 
biological medicines are usually much more difficult to produce. 

Most  biological  medicines  in  current  clinical  use  contain  active  substances  made  of  proteins. 
These  can  differ  in  size  and  structural  complexity,  from  simple  proteins  like  insulin  or  growth 

21 

 
hormone to more complex ones such as coagulation factors or monoclonal antibodies. Biological 
medicines offer treatment options for patients with chronic and often disabling conditions such as 
diabetes, autoimmune diseases and cancers. 

A  biosimilar  is  a  biological  medicine  highly  similar  to  another  already  approved  biological 
medicine  (the  reference  medicine).  Unlike  the  molecules  of  classical  medicines,  which  are 
smaller  and  chemically  synthesised,  the  much  more  complex  biosimilars  are  extracted  or 
synthesised from biological sources in conditions that do not allow the reference product to be 
fully  replicated  (due  to  different  cell  cultures,  secret  process  know-how  etc.).  Biosimilars  are 
therefore  not  exact  copies  of  reference  medicines  and  do  not  meet  the  conditions  to  qualify  as 
generic medicines. 

Biological drugs are among the most expensive therapies, and their uptake is steadily increasing. 
In turn, as patent protection for some major biologicals is coming to an end, increased uptake of 
biosimilar  medicines  is  expected  to  generate  cost  savings  for  national  healthcare  systems. 
However,  for  various  reasons  –  such  as  inferior  degree  of  substitution  compared  to  generics  – 
these cost savings seem more difficult to achieve via traditional competition mechanisms31. 

Due to the inherent differences in all biological medicines, there is also room for differentiation 
strategies  and  non-price  competition  between  distinct  biosimilars  of  the  same  molecule.  This 
complexity also leads to higher barriers to entry for biosimilars compared to classical generics. 

In  addition  to  stimulating  price  competition,  generic  and  biosimilar  entry  also  helps  to 
foster  innovation.  First,  after  protection  expires,  the  knowledge  behind  the  innovation 
(and  disclosed  in  patent  applications  and  MA  files)  can  be  freely  used  by  other 
innovators  to  develop  similar  or  unrelated  new  products.  Second,  the  entry  of  cheaper 
generic  or  biosimilar  products  disrupts  the  innovators’  ability  to  benefit  from  high 
revenues  owing  to  market  exclusivity  and  will  therefore  encourage  the  originator 
company to continue investing in R&D for pipeline products in order to secure its future 
revenue  streams.  Generic/biosimilar  competition  therefore  not  only  results  in  lower 
prices  for  older  medicines,  but  also  acts  as  a  disciplining  force  that  compels  originator 
companies to continue to innovate. 

Companies  may  occasionally  attempt  to  misuse  the  regulatory  system  which  grants 
patent or exclusivity protection to gain additional protection time. In addition to judicial 
and regulatory control, competition authorities are called upon to ensure that incentives 
to innovate are not distorted and that healthcare systems are not worse off as a result of 
companies  unduly  extending  their  market  exclusivity.  Finally,  transparency  concerning 
patents  and  other  exclusivities  protecting  a  medicine  can  play  an  important  role  in 
facilitating competitive and viable entry by generics or biosimilars. 

The  Commission  is  currently  carrying  out  an  evaluation  of  the  incentives  systems  for 
pharmaceuticals in the EU and has in this context also commissioned an external study 
analysing  the  impact  of  pharmaceutical  incentives  on  innovation,  availability  and 
accessibility  of  medicinal  products,  which  is  now  concluded  and  published.32.  This 
follows,  amongst  others,  the  already  mentioned  Council’s  Conclusions33.  The  objective 

31   European Commission  Directorate-General  for Economic and Financial  Affairs and Economic Policy 
Committee  (Ageing  Working  Group),  Joint  Report  on  Health  Care  and  Long-Term  Care  Systems  & 
Fiscal Sustainability, Volume 1, Institutional Papers 37.  October 2016. Brussels, page. 139, available 
at: https://ec.europa.eu/info/sites/info/files/file_import/ip037_vol1_en_2.pdf. 

32   Study  by  Copenhagen  Economics,  available  at:  https://ec.europa.eu/health/sites/health/files/human-

use/docs/pharmaceuticals_incentives_study_en.pdf. 

33   See footnote 1. 

22 

 
                                                 
of  the  evaluation  is  to  assess  whether  the  existing  systems  strike  the  right  balance 
between  the  incentives  provided  to  originators,  the  interest  in  continued  investment  in 
R&D and the interest to render medicines more available and accessible. 

3.2.2. Pricing  and  reimbursement  rules  strongly  impact  competition  between 

medicines  

In  most  Member  States,  the  manufacturers  must  undergo  pricing  and  reimbursement 
procedures  before  marketing  prescription  medicines.  Pricing  and  reimbursement  rules 
and  policies  remain  an  exclusive  competence  of  Member  States.  Regulation,  public 
procurement  and  related  negotiations  influence  the  price  of  a  medicine.  This  goes  both 
for originator and generic medicines. 

Member  States  have  opted  for  different  pricing  schemes  that  are  typically  based  on 
negotiations between healthcare bodies of the Member States and manufacturers. These 
in turn may be coupled with (i) references to the price of the medicine in other Member 
States; (ii) considering the additional benefit brought about by the medicine as assessed 
following a ‘health technology assessment’ (‘HTA’); or (iii) a combination of the above. 
Even  where  initial  prices  are  not  subject  to  specific  mechanisms,  medicines  will  in 
general only be reimbursed up to a certain amount. 

To  tap  into  the  potential  for  cost  savings,  most  Member  States  introduce  measures  to 
encourage  price  competition  between  equivalent  medicines.  For  instance,  dispensing 
cheaper  generic  or  biosimilar  products  can  be  stimulated  by  rules  that  require  generic 
prescriptions  by physicians (prescribing a molecule rather than a specific  brand) and/or 
by authorising pharmacists to dispense the cheapest (generic) version of the medicine. In 
genericised  markets,  health  insurers  may  also  organise  tenders  to  select  the  cheapest 
supplier for a given medicine. 

The  regulator  can  facilitate  price  competition  between  therapeutically  substitutable 
medicines,  for  example  by  only  reimbursing  the  costs  of  the  cheapest  product  in  a 
therapeutic class (i.e., groups of medicines which have different active ingredients but are 
used  to  treat  the  same  condition),  and  spark  a  higher  degree  of  economic  substitution. 
Such  measures  may  profoundly  transform  the  nature  and  intensity  of  competition  for 
alternative medicines, as suppliers are no longer protected from price-driven competition. 

23 

 
 
4.  COMPETITION PROMOTES ACCESS TO AFFORDABLE MEDICINES 

Competition  law  enforcement  activities  that  contribute  to  continuous  efforts  to  deliver 
affordable medicines to European patients and healthcare systems include, in particular, 
activities  against  practices  that  hinder  or  delay  the  entry  of  generic  medicines  and  the 
resulting  price  competition  (Section  4.1),  and  against  excessively  high  prices  of 
medicines  when  they  amount  to  an  abuse  of  dominant  position  by  a  pharmaceutical 
company (‘unfair’ prices) (Section 4.2). In addition, the European competition authorities 
have  also  addressed  a  number  of  other  anti-competitive  practices  (e.g.  bid  rigging  in 
hospital  tenders, market  sharing between pharmacies, restrictions of parallel  trade, etc.) 
that either directly or indirectly lead to higher prices of medicines (Section 4.3). Finally, 
the  Commission’s  merger  control  in  the  pharmaceutical  sector  has  concentrated  on 
facilitating  and  protecting  market  entry  of  generic  and  biosimilar  medicines,  especially 
through remedies (Section 4.4). 

4.1.  Antitrust  enforcement  supports  swift  market  entry  of  cheaper  generic 

medicines 

Effective  generic  competition  typically  represents  one,  if  not  the  main,  source  of  price 
competition  on  pharmaceutical  markets  and  drives  prices  down  significantly.  For 
example,  a  recent  study  prepared  for  the  Commission34  found  that  prices  of  innovator 
medicinal products drop by 40 % on average in the period after the generic products enter 
the market. It also showed that when generic medicinal products enter the market, their 
price  is  on  average  50 %  lower  than  the  initial  price  of  the  corresponding  originator 
product. 

Examples from the Commission’s enforcement practice show that price reductions can be 
even  more  drastic  in  the  case  of  blockbuster  medicines.  For  instance,  in  the  Lundbeck 
case  the  Commission  found  that  prices  of  generic  citalopram  dropped  on  average  by 
90 %  in  the  United  Kingdom  compared  to  Lundbeck’s  previous  price  level  within  13 
months  of  the  generic  products  entering  the  market  on  a  wide  scale.35  Availability  of 
cheaper  generic  medicines  directly  translates  into  significant  savings  for  patients  and 
national healthcare systems.  

Therefore,  on  the  one  hand  generic  entry  brings  benefits  to  patients  and  national 
healthcare systems while on the other it significantly reduces the originator companies’ 
profits from their no longer patent protected product. To mitigate the impact of generic 
entry, originator companies often devise and implement a variety of strategies to extend 
the  commercial  life  of  their  innovative  medicines  (e.g.  patent  filing  strategies,  patent 
disputes  and  oppositions,  settlement  agreements,  interventions  before  competent 
authorities and life cycle strategies for follow-on products). While these practices are not 
as such illegitimate, in specific cases they attract the scrutiny of competition authorities36. 

4.1.1. Pay-for-delay agreements 

Pay-for-delay  agreements  encompass  a  variety  of  arrangements  between  originator  and 
generic  companies,  whereby  the  generic  company  agrees  to  restrict  or  delay  its 

34   Copenhagen Economics, study quoted in footnote 28. 
35   Commission Decision of 19 June 2013 in case COMP/AT.39226 – Lundbeck, paragraph 726. 
36   European Commission's Report on the pharmaceutical sector inquiry of 8 July 2009, pages 195-196. 

24 

 
                                                 
independent  entry  onto  the  market  in  exchange  for  benefits  transferred  from  the 
originator.  In  other  words,  the  originator  company  pays  its  competitor,  the  generic 
company, to stay out of the market for a shorter or longer period of time. 

A pay-for-delay agreement may be advantageous for both the originator, who reaps extra 
profits  from  extended  market  exclusivity,  and  the  generic  company,  who  can  receive  a 
windfall  profit  from  the  originator.  If  the  profit  that  the  originator  hands  over  to  the 
generic  company  is  significantly  lower  than  the  loss  in  originator  profits  in  the  case  of 
independent  entry,  then  the  originator  can  afford  to  pay  off  one  or  several  generic 
companies  to  prevent  their  entry.  A  generic  company  may  also  find  a  pay-for-delay 
agreement  attractive  since  it  can  make  significant  earnings  without  even  entering  the 
market, by sharing part of the originator’s profits from exclusivity. 

These  two  players  (originator  and  generic  would-be  entrant)  benefit  at  the  expense  of 
healthcare  systems  and  tax  payers.  Patients  and  healthcare  systems  suffer  as  result  of 
pay-for-delay  agreements  as  they  forego  the  savings  that  would  result  from  the  timely 
independent  generic entry  and  which instead provide extra profit for the  originator and 
generic  companies.  Taking  into  account  the  scale  of  price  reductions  brought  about  by 
generic entry, even short delays can have a significantly negative impact on competition. 

Since pay-for-delay agreements involve coordination between competing companies they 
fall  under  Article 101  TFEU  (and  equivalent  provisions  in  national  competition  laws). 
The anti-competitive nature of pay-for-delay agreements does not depend on the form in 
which  they  are  concluded.  Such  arrangements  are  often  entered  into  in  the  context  of 
patent disputes between originator and generic companies37. However, they can also take 
the form of any other commercial arrangement. An example for this is the Fentanyl case 
where  Johnson  &  Johnson  and  Novartis  (through  their  Dutch  subsidiaries)  agreed  on 
delaying – against payment – market entry of the generic pain-killer fentanyl by entering 
into a co-promotion agreement38. 

Box 6: The Fentanyl case 

Johnson  &  Johnson  developed  fentanyl,  a  potent  painkiller  used  especially  for  cancer  patients, 
and have commercialised it in different formats including a patch. In 2005, Johnson & Johnson’s 
patents on the fentanyl patch expired in the Netherlands and Novartis’ subsidiary Sandoz was on 
the verge of launching its generic fentanyl patch.  

However,  in  July  2005,  instead  of  launching  its  generic  product,  Sandoz  concluded  a  ‘co-
promotion  agreement’  with  a  subsidiary  of  Johnson  &  Johnson.  The  agreement  provided  that 
Sandoz  would  not  be  allowed  to  enter  the  Dutch  market  in  return  for  monthly  payments 
calculated to exceed the profits that Sandoz expected to obtain from selling its generic product. 
The agreement was terminated in December 2006 when another generic entered the market. 

Contemporaneous internal documents found by the Commission showed that Sandoz decided to 
abstain from entering the market in exchange for ‘a part of [the] cake’, that is for a part of the 
originator’s exclusivity profits shielded from generic competition. Instead of competing, the two 
rivals agreed to cooperate aiming ‘not to have a depot generic on the market and in that way to 
keep the high current price’. 

37   The Commission’s annual monitoring exercises of patent settlements in the pharmaceutical sector have 
shown that most of the settlements (around 90 %) fall into categories that at first view do not raise the 
need  for  competition  law  scrutiny.  Companies,  in  most  cases,  are  able  to  settle  their  disputes  in  a 
manner that is typically considered unproblematic from a competition law perspective (see also Section 
2.3). 

38   Commission Decision of 10 December 2013 in case COMP/AT.39685 – Fentanyl.  

25 

 
                                                 
The agreement delayed the entry of a cheaper generic medicine for seventeen months and kept 
prices for fentanyl in the Netherlands artificially high – to the detriment of patients and the Dutch 
healthcare system. The Commission concluded that the object of this agreement was to restrict 
competition contrary to Article 101 TFEU and imposed fines of EUR 10.8 million on Johnson & 
Johnson and EUR 5.5 million on Novartis. The parties did not appeal the Commission’s decision. 

to  be  anti-competitive 

Pay-for-delay  agreements  were  found 
in  various  other 
circumstances.  In  the  Lundbeck  decision  of  2013  the  Commission  imposed  a  fine  of 
EUR 93.8  million  on  Danish  pharmaceutical  company  Lundbeck,  as  well  as  fines 
totalling  EUR 52.2  million  on  four  producers  of  generic  medicines,  for  entering  into 
agreements  that  delayed  the  market  entry  of  generic  citalopram.  This  blockbuster 
antidepressant  medicine  was  Lundbeck’s  bestselling  product  at  the  time.  Under  these 
agreements the generic companies committed not to compete with  Lundbeck, who paid 
significant  sums  of  money  to  generic  companies,  purchased  generics’  stock  of  generic 
medicine solely to destroy it, and offered guaranteed profits in a distribution agreement. 
Internal documents refer to a ‘club’ being formed and ‘a pile of $$$’ to be shared among 
the  participants.  In  the  judgment  upholding  the  Commission’s  decision,  the  General 
Court  confirmed  that  pay-for-delay  agreements  are  akin  to  market  sharing,  which 
constitutes a serious infringement of Article 101 (restriction by object)39. The judgment 
of the General Court is on appeal to the Court of Justice. 

In  addition  to  infringing  Article 101  TFEU,  pay-for-delay  agreements  can  also  infringe 
Article 102 TFEU. This may be the case when the originator holds a dominant position 
and the agreements are part of a strategy to delay generic entry. In 2014, the Commission 
imposed  fines  totalling  EUR 427.7  million  on  the  French  pharmaceutical  company 
Servier  and  five  producers  of  generic  medicines  (Niche/Unichem,  Matrix/Mylan,  Teva, 
Krka  and  Lupin)  for  concluding  a  series  of  deals  aimed  to  protect  Servier’s  bestselling 
blood  pressure  medicine,  perindopril,  from  price  competition  by  generics  in  the  EU40. 
Servier paid  several  tens of millions of euros to the generics amounting to  ‘buy [them] 
out’  from  the  perindopril  market.  Servier’s  strategy  of  delaying  generic  entry  included 
acquiring  a  competing  technology  and  consecutively  concluding  the  patent  settlement 
agreements.  On  12  December  2018,  the  General  Court  confirmed  the  Commission's 
findings  under  Article  101  (with  the  exception  of  the  Krka  agreement)  but  rejected  the 
Commission's market definition and consequently annulled the conclusion that Servier's 
conduct  also  infringed  Article  102  TFEU.41  As  a  consequence,  the  Court  reduced  the 
total  fines  to  EUR 315  million.  The  judgments  can  be  appealed  by  the  parties  and  the 
Commission. 

Similarly,  in  the  Paroxetine  decision  of  February  201642,  the  United  Kingdom  NCA 
found,  among  other  things,  that  GlaxoSmithKline  abused  its  dominant  position  by 
entering  into  pay-for-delay  agreements  with  generic  competitors.  The  NCA  found  that 
GlaxoSmithKline,  through  payments  and  other  benefits,  induced  three  potential 
competitors  (IVAX, Generics (UK) and  Alpharma) to  delay their potential  independent 
entry into the paroxetine market in the United Kingdom. GSK’s agreement with Generics 

39   Judgment of the General Court of 8 September 2016, H. Lundbeck A/S and Lundbeck Ltd v European 

Commission, T-472/13, paragraph 401. 

40   Commission Decision of 9 July 2014 in case COMP/AT.39612 – Servier. 
41   Judgment of the General Court of 12 December 2018,  Servier SAS, Servier Laboratories Limited  and 

Les Laboratoires Servier v European Commission, T-691/14. 

42   Decision of the Competition and Markets Authority of 12 February 2016.  

26 

 
                                                 
(UK) was also found to infringe Article 101 TFEU, with the Alpharma agreement found 
to  infringe  the  UK  equivalent  of  Article 101  TFEU.  The  NCA  imposed  fines  totalling 
GBP 44.99  million  (approximately  EUR 56.3  million)43  on  the  companies  involved  in 
these infringements. All  of these findings  are on appeal before the Competition Appeal 
Tribunal, which has referred questions for a preliminary ruling to the Court of Justice44. 

4.1.2. Other practices hindering market entry of generic medicines 

In  addition  to  the  pay-for-delay  cases  described  above,  the  European  competition 
authorities also detected and pursued a number of other anti-competitive practices carried 
out  by  originator  companies  designed  to  prevent  or  delay  generic  entry.  All  of  these 
practices  prevented  price  reductions  from  generic  entry  and  therefore  directly  harmed 
patients and healthcare systems. 

Misuse of the regulatory framework 

The seminal judgments of the General Court (in 2010) and the Court of Justice (in 2012) 
in  AstraZeneca45  established  that  misleading  public  authorities  and  misusing  the 
regulatory procedures as a part of a commercial strategy to launch a follow-on product, 
can in certain circumstances constitute an abuse of a dominant position. 

These judgments largely upheld the Commission’s finding that AstraZeneca had abused 
its dominant market position by blocking or delaying market access for generic versions 
of  Losec, a medicine used to  treat  gastrointestinal  conditions46. The Commission  found 
that  AstraZeneca  made  misleading  representations  to  the  patent  offices  to  extend  the 
period  of  patent  protection  for  Losec.  In  addition,  AstraZeneca  misused  rules  and 
procedures  applied  by  the  national  medicines  agencies  by  selectively  deregistering  the 
MAs for Losec capsules. At the time, generic and parallel imported products could only 
be  marketed  in  a  given  Member  State  if  the  MA  for  the  originator  product  was  still  in 
force. The strategic deregistration by AstraZeneca of its MA for Losec therefore made it 
impossible for generic competitors and parallel importers to compete with AstraZeneca. 
The Commission fined AstraZeneca EUR 60 million (the General Court annulled part of 
the Commission’s decision in respect of the second abuse, resulting in a lowering of the 
fine from EUR 60 million to EUR 52.5 million). 

Similarly,  in  April  2011  the  United  Kingdom  NCA  found  that  Reckitt  Benckiser  had 
abused  its  dominant  position  by  withdrawing  and  delisting  National  Health  Service 
(NHS) presentation packs of Gaviscon Original Liquid47. 

43   All  EUR  counter  values  in  this  report  are  calculated  against  the  European  Central  Bank  average 

exchange rate in the year of the NCA's decision. 

44   C-307/18,  Generics  (UK)  Ltd.,  GlaxoSmithKline  Plc,  Xellia  Pharmaceuticals  APS,  Alpharma  LLC, 

Actavis UK Ltd. and Merck KGaA vs. Competition and Markets Authority. 

45   Judgment of the General Court of 1 July 2010, AstraZeneca AB and AstraZeneca plc v Commission, T-
321/05. Judgment of the Court of Justice of 6 December 2012, AstraZeneca AB and AstraZeneca plc v 
European Commission, C‑457/10 P. 

46   Commission Decision of 15 June 2005 in case COMP/AT.37507 – Generics/AstraZeneca. 
47   Decision of the Office of Fair Trading of 12 April 2011.  

27 

 
                                                 
Box 7: The Gaviscon case 

Gaviscon  products  are  alginate-based  compounds  that  are  used  to  treat  acid  reflux  (heartburn), 
gastro-oesophageal reflux disease (GORD) and dyspepsia. 

The United Kingdom NCA found that Reckitt Benckiser withdrew Gaviscon Original Liquid to 
limit  pharmacy  choice  and  hinder  competition  from  suppliers  of  generic  medicines.  The 
withdrawal was made after the patent for Gaviscon Original Liquid expired but before the generic 
name for the product was published. Without a generic name, the prescribing doctors could not 
prescribe  the  same  medicine  by  using  its  generic  name  and  the  pharmacies  were  not  able  to 
substitute the original product with its cheaper generic versions. 

In internal documents Reckitt Benckiser identified that their ‘objective [was] … to delay for as 
long  as  possible,  the  introduction  of  a  generic  name’.  Following  the  withdrawal,  most 
prescriptions were issued for Gaviscon Advance Liquid which was another version of the product 
still patent protected, and therefore without generic substitutes.  

The  NCA  found  that  the  withdrawal  was  likely  to  restrict  the  development  of  full  generic 
competition  and  fined  the  company  GBP 10.2  million  (approximately  EUR  11.8  million).  The 
fine  was  the  subject  of  an  earlier  agreement  under  which  the  company  admitted  its  conduct 
infringed the United Kingdom and EU competition law and agreed to cooperate with the NCA. 

In addition, in January 2011 the Italian NCA fined Pfizer EUR 10.7 million for adopting 
a complex legal strategy of filing for and obtaining intellectual property rights (divisional 
patents, SPCs and paediatric extension). The NCA found that this strategy aimed to delay 
entry  of  generic  medicines48.  Pfizer  challenged  the  NCA’s  decision  and  the  appellate 
proceedings were ultimately closed with the final judgment of the Italian State Council49, 
which upheld the NCA’s decision. 

Disparagement and other practices curbing demand for generics 

Another  type  of  practice  affecting  generic  competition  is  the  strategy  used  by  some 
dominant companies to disparage (denigrate) the generic entrant to hinder the uptake of 
cheaper generics. 

The  Court  of  Justice  recently  provided  guidance  on  which  type  of  dissemination  of 
information  to  the  authorities,  healthcare  professionals  and  the  general  public  raises 
concerns  under  the  EU  competition  rules.  The  Court  clarified  that  companies  must  not 
disseminate,  in  a  context  of  scientific  uncertainty,  misleading  information  relating  to 
adverse reactions resulting from the off-label use of one product with a view to reducing 
the competitive pressure it exerts on another product50. 

The  French  NCA  adopted  a  series  of  decisions  against  companies  engaged  in 
disparagement  practices,  i.e.  producing  and  disseminating  incomplete  and  misleading 
information  (vis-à-vis  doctors,  authorities  and  the  general  public)  which  could  prevent 
competing products from entering or expanding.  

48   Decision of the Autorità Garante della Concorrenza e del Mercato of 11 January 2011.  
49   Judgment of the Consiglio di Stato of 12 February 2014.  
50   Judgment of the Court of Justice of 23 January 2018, F. Hoffmann-La Roche Ltd and Others v Autorità 
Garante della Concorrenza e del Mercato, C‑179/16. For more details on the F. Hoffmann-La Roche 
case of the Italian NCA, see Section 4.3.1.  

28 

 
                                                 
In the Plavix decision51 from May 2013, the French NCA considered that Sanofi-Aventis 
had  abused  its  dominant  position  on  the  French  market  for  clopidogrel  (the  active 
ingredient  of  its  leading  drug  Plavix,  used  to  prevent  cardiac  diseases).  Sanofi-Aventis 
had  a  comprehensive  communication  strategy  aimed  at  misleading  physicians  and 
pharmacists  into  stopping  the  mechanisms  of  generic  substitution.  The  company's 
disparagement strategy promoted its products (both Plavix as the originator medicine and 
Clopidogrel Winthrop – Sanofi’s own generic version of Plavix) and limited the market 
entry of competing  generic medicines.  In particular, the NCA found that  Sanofi’s sales 
representatives misled doctors and pharmacists about the quality and safety of competing 
generics, and tried to dissuade them from substituting generic versions of Plavix except 
with Sanofi’s own generic – Clopidogrel Winthrop. The French NCA imposed a fine of 
EUR 40.6 million on Sanofi. The NCA’s decision was confirmed by the Paris Court of 
Appeal52 and the Supreme Court53. 

Much like pay-for-delay agreements, disparagement practices  are often only a  part of a 
broader strategy aimed at hindering  generic competition. In December 2013 the French 
NCA  fined  the  company  Schering-Plough  EUR 15.3  million  for  having  abusively 
hindered  the  entry  of  generic  versions  of  buprenorphine  (an  opioid  used  for  treating 
addiction  and  sold  by  Schering-Plough  as  Subutex)54.  This  consisted  of  (i)  awarding 
dispensing  chemists  commercial  advantages  (particularly  discounts)  inducing  brand 
loyalty,  and  (ii)  disparaging  the  generic  competitors.  For  example,  Schering-Plough 
organised  seminars  and 
teams  and 
pharmaceutical  representatives  so  that  they  could  spread  alarmist  messages  among 
doctors and pharmacists on the risks of prescribing or issuing Arrow Generique’s generic 
product. This was despite Schering-Plough not having any specific medical studies at its 
disposal  which  could  have  justified  its  arguments.  The  NCA  also  imposed  a  fine  on 
Schering-Plough’s  parent  company,  Merck  &  Co  (EUR 414,000),  for  entering  into  an 
agreement  aimed  at  implementing  the  abusive  strategy  with  its  supplier  Reckitt 
Benckiser,  which  in  turn  was  fined  EUR  318,000).  The  French  NCA’s  decision  was 
confirmed by the Paris Court of Appeal55 and the Supreme Court56. 

telephone  meetings  and  briefed 

its  sales 

Another example of enforcement against disparagement practices is the  Durogesic case 
which was also decided upon by the French NCA.57 

Box 8: The French Durogesic Case 

Following  a  complaint  by  the  company  Ratiopharm  France  (Teva  Santé),  the  French  NCA 
adopted a decision imposing a fine of EUR 25 million on Janssen-Cilag and its parent company 
Johnson & Johnson for delaying the arrival to the market of a generic version of Durogesic and 
then  blocking  the  market  growth  of  this  generic  medicinal  product.  Durogesic  is  a  powerful 
opioid  analgesic,  with  the active  ingredient fentanyl58.  Janssen-Cilag  was  deemed  to have  been 
involved in two anti-competitive practices: 

51   Decision of the Autorité de la concurrence of 14 May 2013.  
52   Judgment of the Cour d’appel de Paris of 18 December 2014. 
53   Judgment of the Cour de cassation of 18 October 2016. 
54   Decision of the Autorité de la concurrence of 18 December 2013. 
55   Judgment of the Cour d’Appel de Paris of 26 March 2015. 
56   Judgment of the Cour de Cassation of 11 January 2017. 
57   Decision of the Autorité de la concurrence of 20 December 2017. 
58   For a different case concerning fentanyl, see also Box 6. 

29 

 
                                                 
  Repeated unjustified approaches to the French agency for medical safety of health products, 
aiming  to  convince  the  authority  to  refuse  to  grant,  at  national  level,  generic  status  to 
competing medicinal products, even if this status was already obtained at EU level, and  

  A major campaign disparaging the generic versions of Durogesic among office- and hospital-
based  healthcare  professionals  (doctors,  pharmacists).  Janssen-Cilag  used  misleading 
language to create doubts concerning the effectiveness and safety of these generic medicinal 
products. This involved sending out numerous newsletters to medical practitioners, making 
statements  in  the  press  as  well  as  Janssen-Cilag  training  a  specialist  team  of  300  sales 
representatives  called  ‘commandos’.  They  were  told  to  emphasise  that  generic  alternatives 
have neither the same composition, nor the same quantity of the active ingredient fentanyl as 
its Durogesic patch, and could entail risks of adverse effects or recurrence of pain for certain 
patients. 

These practices delayed the market entry of generic medicines by several months and discredited 
the  generic  versions  of  Durogesic.  The  strategy  implemented  by  Janssen-Cilag  had  large-scale 
effects  targeting  all  the  healthcare  professionals  likely  to  prescribe  or  dispense  Durogesic.  The 
NCA’s decision is currently under review by the Paris Court of Appeal. 

Finally, the demand for  generic products can also be unduly  restricted by  other market 
participants  fighting  to  preserve  their  particular  interests.  In  March  2009  the  Spanish 
NCA intervened against several associations of pharmacists over their recommendations 
against  Laboratorios  Davur’s  generic  products59.  Following  the  introduction  and 
marketing of cheaper generic products by Laboratorios Davur, the associations instituted 
a  collective  boycott  of  its  products  by  the  pharmacists.  One  pharmacist  even  openly 
explained  to  Laboratorios  Davur  that  ‘[Laboratorios  Davur’s]  commercial  strategy  of 
low prices produces or can produce important economic damages to me, given that, as a 
pharmacist I work with a percentage of  the final sale prices’ and that ‘in the future no 
other  product  of  Laboratorios  Davur  will  enter  in  [the  pharmacist’s]  pharmacy’ 
(original in Spanish). The decision imposed a total of fines amounting to EUR 1 million 
on several  of the associations. The decision was  appealed and upheld  by  the courts  for 
three of the four associations fined, but the amount of the fines was reduced60. 

4.2.  Enforcement against dominant firms  charging unfairly high prices (excessive 

prices) 

Unfair pricing conduct concerns in essence the abuse of a dominant position by imposing 
excessive prices on patients and healthcare systems. 

4.2.1. The prohibition of unfair pricing by dominant firms and its limits 

Exploitative  conduct  by  way  of  unfair  pricing  (sometimes  referred  to  as  ‘excessive 
pricing’) is prohibited under EU competition rules (Article 102(a) TFEU). The Court of 
Justice has laid out a set of conditions under which a dominant company’ prices can be 
found  as  unfair,  and  thus  in  breach  of  Article 102  TFEU  which  prohibits  abuses  of  a 
dominant position61. 

59   Decision of the Comisión Nacional de los Mercados y la Competencia of 24 March 2009. 
60   Decision of the Audiencia Nacional of 18 January 2011. 
61   Case 27/76 - United Brands v Commission, judgment of the Court of Justice of 14 February 1978; and 

Case 177/16 – AKAA/LAA, judgment of the Court of Justice of 14 September 2017. 

30 

 
                                                 
In  investigating  potentially  unfair  prices,  competition  authorities  carefully  balance  the 
need to reward dynamic efficiency and innovation against the harm such prices inflict on 
consumers  and  society.  Moreover,  they  consider  whether  prices  and  profits  may  result 
from excellence, risk taking and innovation and whether prices can be kept in check by 
market forces, namely the threat of new entry or expansion attracted by high prices. 

That  said,  competition  authorities  have  not  hesitated  to  intervene  where  necessary  to 
ensure  effective  competition.  Recent  investigations  in  the  EU  show  that  a  heightened 
degree  of  vigilance  under  competition  law  is  merited  regarding  pricing  practices  in  the 
pharmaceutical sector. 

4.2.2. Examples of cases concerning unfair prices 

European competition authorities have been pursuing a number of unfair pricing cases in 
the pharmaceutical industry concerning off-patent medicines. 

Box 9: The Italian Aspen case 

In  September  2016,  the  Italian  NCA  imposed  a  EUR 5.2  million  fine  on  the  pharmaceutical 
company  Aspen  for  abusing  its  dominant  position  by  setting  unfair  prices  for  important 
medicines  in  Italy62.  These  off-patent  medicines  included  Leukeran,  Alkeran,  Purinethol  and 
Tioguanine,  which  were  used  to  treat  cancer.  They  had  been  included  in  a  wider  package  of 
pharmaceutical  products,  for  which  Aspen  purchased  the  marketing  rights  from  the  originator 
GlaxoSmithKline in 2009. The NCA found that Aspen abused its dominant position in Italy by 
imposing  price  increases  of  between  300 %  and  1,500 %  and  by  applying  particularly 
aggressive tactics towards the Italian Medicines Agency in negotiating these prices. Aspen even 
threatened to ‘initiate supply termination’, i.e. withdraw the drugs if the Agency did not accept 
the  requested  higher  prices.  Following  the  acceptance  of  price  increases,  Aspen’s  consultant 
concluded:  ‘I  wouldn’t  [have]  expected  to  conclude  the  negotiation  so  favourably,  but  I 
remember  when you told me  in  Rome  that  everywhere  at  the  beginning  it  seems  it  was kind  of 
‘mission impossible’ and then the prices increase where always authorised …Let’s celebrate!’. 

The NCA also ordered Aspen to put in place measures aimed at, among other things, setting new 
fair  prices  for  the  medicines  concerned.  Following  the  NCA’s  order  and  after  protracted 
negotiations,  Aspen  reached  an  agreement  on  pricing  with  the  Italian  Medicines  Agency. 
On 13 June 2018 the NCA determined that Aspen was compliant with its order and estimated that 
the concluded agreement would save the Italian National Health Service EUR 8 million annually. 
The  NCA  decision  was  upheld  by  the  Administrative  Regional  Court63.  An  appeal  against  this 
judgment is pending before the Italian State Council. 

In  May  2017,  the  Commission  also  opened  a  formal  investigation  into  concerns  that 
Aspen  Pharma  may  have  engaged  in  unfair  pricing  concerning  cancer  medicines 
mentioned above in the rest of the EEA (except Italy).64 

In  December  2016,  the  United  Kingdom  NCA  found  that  Pfizer  and  Flynn  had  each 
abused  their  respective  dominant  position  by  imposing  unfair  prices  for  phenytoin 
sodium  capsules  (an  epilepsy  medicine)  manufactured  by  Pfizer  in  the  United 
Kingdom65. In an internal document, Pfizer explained at the time: ‘We need to work out 

62   Decision of the Autorità Garante della Concorrenza e del Mercato of 29 September 2016.  
63   Judgment of the Tribunale Amministrativo Regionale per il Lazio of 26 July 2017.  
64   See http://europa.eu/rapid/press-release_IP-17-1323_en.htm.  
65   Decision of the Competition and Markets Authority of 7 December 2016.  

31 

 
                                                 
how we can position this as ‘no change’ with patients & physicians; and at the same time 
‘change’  with  DH  [UK  Department  of  Health]  and  payers  without  being  accused  of 
hypocrisy  by  pursuing  a  trust  agenda,  yet  taking  the  opportunity  to  fleece  the  NHS 
[National Health Service] in [a] time of funding crisis.’ 

In 2012, Pfizer and Flynn had entered into agreements under which Pfizer transferred its 
marketing authorisations for phenytoin sodium (sold under the brand name Epanutin) to 
Flynn, but continued to manufacture and supply the product to Flynn for distribution in 
the  United  Kingdom.  However,  the  supply  prices  to  Flynn  were  between  780%  and 
1,600 %  higher  than  what  Pfizer  had  previously  charged  distributors.  Following  the 
transfer,  Flynn  genericised  Epanutin  (it  started  selling  the  medicine  under  its  generic 
name phenytoin sodium, without the brand name) take advantage of a loophole in the law 
at  the  time  which  did  not  subject  generic  medicines  to  any  price  limits  (contrary  to 
branded medicines). Flynn hiked up prices to distributors by up to 2,600 %, compared to 
previous  price  levels  when  the  medicine  was  sold  branded.  The  NCA  fined  Pfizer 
GBP 84.2  million  (EUR 103  million)  and  Flynn  GBP 5.16  million  (EUR 6.32  million). 
On 7 June 2018, the United Kingdom Competition Appeal Tribunal issued its judgment, 
in which it upheld several findings of the CMA (i.e. the narrow market definition and that 
Pfizer  and  Flynn  each  held  dominant  positions).  It,  however,  found  that  the  CMA 
conclusions  on  abuse  of  dominance  were  in  error  ultimately  deciding  to  remit  the  case 
back  to  the  NCA  for  further  consideration.  The  NCA  has  sought  permission  to  appeal 
against the Competition Appeal Tribunal’s judgment. 

By  the  decision  from  January  201866,  the  Danish  NCA  found  that  CD  Pharma  (a 
pharmaceutical  distributor)  abused  its  dominant  position  in  Denmark  by  charging 
Amgros  (a  wholesale  buyer  for  public  hospitals)  unfair  prices  for  Syntocinon.  This 
medicine  contains  the  active  ingredient  oxytocin,  which  is  given  to  pregnant  women 
during childbirth. From April 2014 until October 2014 CD Pharma increased the price of 
Syntocinon  by  2,000 %  from  DKK 45  (EUR 6)  to  DKK 945  (EUR 127).  The  NCA 
established that the difference between the costs actually incurred and the price charged 
by CD Pharma was excessive. In addition, the NCA compared CD Pharma’s price with 
the  economic  value  of  Syntocinon,  historical  prices  for  Syntocinon,  prices  charged  by 
CD Pharma’s competitors and the prices charged outside Denmark. As a result, the NCA 
found that prices  for Syntocinon were unfair and, therefore,  CD Pharma had abused its 
dominant  position.  On  29  November  201867,  the  Danish  Competition  Appeal  Tribunal 
upheld the decision made by the Danish NCA. 

4.3.  Other anti-competitive practices capable of inflating prices 

As  well  as  practices  delaying  generic  entry  and  imposing  unfair  prices  for  medicines, 
European  competition  authorities  intervened  against  various  other  anti-competitive 
practices that inflate prices of medicines, or keep them inflated. Some of these practices 
are  specific  to  the  pharmaceutical  sector  and  driven  by  its  economic  and  regulatory 
features,  while  others  are  known  from  other  sectors  as  well,  but  can  nonetheless  have 
strong effects on prices of medicines.  

In  some  instances,  companies  have  artificially  reduced  the  competitive  pressures  that 
normally  restrain  their  pricing  power.  The  practices  concerned  range  from  cartel  or 

66   Decision of the Konkurrence- og Forbrugerstyrelsen of 31 January 2018.  
67   Judgment of the Konkurrenceankenævnet of 29 November 2018.  

32 

 
                                                 
cartel-like  infringements  of  competition  law  (e.g.  bid  rigging,  price  fixing  and  market 
sharing), to abuses of a dominant position, and restrictions in relations between suppliers 
and  their  customers.  What  these  practices,  illustrated  by  examples  below,  have  in 
common is that they have a direct impact on the prices of medicines paid by European 
patients and healthcare systems. 

4.3.1. Coordination as a means to achieve higher prices 

Collusion  in  tenders,  price  fixing  and  other  types  of  coordination  between  competitors 
belong  to  the  well  known,  and  at  the  same  time  most  reprehensible,  violations  of 
competition law.  

In 2014 the Italian NCA found that Hoffmann-La Roche and Novartis had entered into an 
anti-competitive agreement aiming to discourage and limit off-label use of Hoffmann-La 
Roche’s  oncology  medicine  –  Avastin  for  treatment  of  the  Age-related  Macular 
Degeneration  (AMD).  AMD  is  the  main  cause  of  age-related  blindness  in  developed 
countries.  Avastin  (authorised  for  the  treatment  of  tumorous  diseases)  and  Lucentis 
(authorised for the treatment of eye diseases) are medicines developed by Genentech, a 
company  which  belongs  to  the  Hoffmann-La  Roche  group.  Genentech  entrusted  the 
commercial  exploitation  of  Lucentis  to  the  Novartis  group  by  way  of  a  licensing 
agreement,  whereas  Hoffmann-La  Roche  markets  Avastin  for  cancer  treatments. 
Nonetheless, the active ingredient in both medicines being similar (though developed in 
different  ways),  Avastin  was  frequently  used  off-label  to  treat  eye  diseases  instead  of 
Lucentis because of its significantly lower price. 

The  NCA  established  that  Novartis  and  Hoffmann-La  Roche  had  put  in  place  an 
arrangement  designed  to  artificially  differentiate  Avastin  from  Lucentis  whereas, 
according  to  the  NCA,  Avastin  and  Lucentis  are  equivalent  in  all  respects  for  the 
treatment  of  eye  diseases.  The  arrangement  was  intended  to  disseminate  information 
raising  concerns  about  the  safety  of  Avastin  used  in  ophthalmology  to  shift  demand 
towards  the  more  expensive  Lucentis.  An  internal  Novartis  presentation  explained: 
‘Leverage  safety  data  and  regulator’s  statements  against  unlicensed  intraocular  use  of 
bevacizumab for wet AMD to avoid off-label erosion’. According to the NCA, this illicit 
collusion was capable of hindering access to treatment for many patients and caused the 
Italian healthcare system additional expenses estimated at EUR 45 million in 2012 alone. 
The  fine  imposed  on  Hoffmann-La  Roche  amounted  to  EUR 90.6  million  and  the  fine 
imposed on Novartis amounted to EUR 92 million.68  

In  the  second-instance  appeal  procedure  against  the  NCA’s  decision,  the  Italian  State 
Council  sent  a  preliminary  reference  to  the  Court  of  Justice  of  the  European  Union  on 
several  questions  concerning  the  interpretation  of  Article 101  TFEU.  In  its  answers  the 
Court of Justice clarified, among other things, that (i) in principle, a medicine used off-
label  for  the  same  therapeutic  indications  as  another  product  used  on-label  can  be 
included  in  the  same  product  market  and  that  (ii)  communication  of  misleading 
information  regarding  the  safety  of  an  off-label  medicine  to  the  authorities,  medical 
professionals and general public may constitute a restriction of competition by object69. 

68   Decision of the Autorità Garante della Concorrenza e del Mercato of 27 February 2014. 
69   Judgment of the Court of Justice of 23 January 2018, F. Hoffmann-La Roche Ltd and Others v Autorità 

Garante della Concorrenza e del Mercato, C‑179/16. 

33 

 
                                                 
In another case, the Spanish NCA established that an agreement between an association 
of pharmacists in Castilla-La Mancha and the region’s health service amounted to market 
sharing,  as  it  introduced  a  rotation  between  pharmacies  for  the  supply  of  medicines  to 
healthcare centres.70 The Court of Appeal  71 and the Supreme Court72 upheld the NCA's 
decision in its entirety. 

Other  examples  of  interventions  against  collusive  behaviour  include  decisions  by  the 
Hungarian NCA in 2015 (bid rigging in hospital tenders)73, the Slovenian NCA in 2013 
(bid  rigging,  price  fixing  between  wholesalers  and  distributors,  market  sharing  and 
exchange  of  information  related  to  prices  and  sale)74,  the  Danish  NCA  in  2014 
(coordination  between  wholesalers  of  fees  and  other  trading  conditions)75,  and  the 
German  NCA  in  2017  (exchange  of  sensitive  information  between  wholesalers  via  a 
common IT system)76. In 2015 the Italian NCA adopted a commitment decision requiring 
Novartis and Italfarmaco to adjust their market behaviour and make amendments to their 
co-marketing  agreement77.  The  binding  commitments  alleviated  the  NCA’s  concerns 
regarding the exchange of sensitive information and cooperation in tendering in regional 
public procurements.  

In a commitment decision in 2011, the Lithuanian NCA addressed possible vertical price 
coordination in agreements between manufacturers and wholesalers78. These agreements 
included  a  provision  requiring  that  the  wholesalers  and  manufacturers  coordinate  retail 
prices  of  medicines,  thus  possibly  resulting  in  prices  of  medicines  being  raised  for  the 
patients. The accepted commitments provided for such provisions to be deleted. 

4.3.2. Making it more difficult for rivals to compete  

A  series  of  decisions  by  European  competition  authorities  sanctioned  conduct  aimed  at 
excluding  competitors  or  limiting  their  ability  to  compete,  typically  by  shutting  out 
pharmaceutical suppliers’ access to either customers or production inputs, thus affecting 
their long-term ability to sell cheaper medicines. 

For example, in  2013, the Cypriot NCA found that the distributor Phadisco and Wyeth 
Hellas  (subsequently  acquired  by  Pfizer  Hellas)  abused  their  dominant  position  on  the 
market  for  pneumococcal  vaccine  by  offering  discounts  to  doctors  and  pharmacists, 
which hindered competition by their rivals79. 

In 2015, the Italian NCA accepted commitments from ICE – Industria Chimica Emiliana 
related  to  the  supply  of  cholic  acid  (used  to  produce  a  drug  for  liver  diseases)80.  The 

70   Decision of the Comisión Nacional de los Mercados y la Competencia of 14 April 2009.  
71   Decision of the Audiencia Nacional of 6 June 2012.  
72   Decision of the Tribunal Supremo of 9 March 2015.  
73   Decision of the Gazdasági Versenyhivatal of 14 September 2015.  
74   Decision of the Javna agencija Republike Slovenije za varstvo konkurence of 14 October 2013.  
75   Decision of the Konkurrence- og Forbrugerstyrelsen of 24 November 2014.  
76  Decision of the Bundeskartellamt of 27 April 2017. 
77   Decision of the Autorità Garante della Concorrenza e del Mercato of 4 June 2015.  
78   Decision of the Konkurencijos tarybą of 21 July 2011. 
79   Decision of the Επιτροπή Προστασίας Tού Ανταγωνισμού of 12 April 2013.  
80  Decision of the Autorità Garante della Concorrenza e del Mercato of 15 July 2015.  

34 

 
                                                 
NCA  suspected  that  ICE  was  abusing  its  dominant  position  by  using  exclusionary 
practices including creating obstructions in the supply of bovine bile (the raw substance 
necessary  to  produce  cholic  acid),  thus  preventing  competitors  from  effectively 
competing  for  the  benefit  of  patients  and  the  Italian  healthcare  system.  In  order  to 
eliminate these concerns, ICE committed to supplying the market with certain quantities 
of bovine bile, at prices that allowed other manufacturers to compete. 

In  2011,  the  Romanian  NCA  adopted  three  decisions  against  a  number  of  companies 
found to  be restricting parallel  trade in  medicines, thus making it more difficult  for the 
distributors from one country (Romania) to compete on the markets in other countries81. 
The  mechanisms  used  by  the  investigated  companies  included  contract  clauses  (i) 
prohibiting  or  limiting  export  of  medicines,  (ii)  enabling  distributors’  compliance  with 
the export prohibition to be monitored and (iii) penalising violations of the prohibition. 
The  aggregate  fines  imposed  by  the  Romanian  NCA  in  the  three  cases  amounted  to 
RON 59.4  million  (approximately  EUR 12.75  million).  Several  other  NCAs  (e.g.  the 
Spanish and the Greek) have also tackled various issues related to restrictions of parallel 
trade. 

4.4.  Merger control and affordable medicines 

Competition law enforcement against abuses of dominant  position and anti-competitive 
coordination  is  complemented  by  the  review  of  mergers  that  could  result  in  market 
structures that free companies from competitive constraints and may thus result in higher 
prices for medicines. 

4.4.1. How do mergers affect the pricing of medicines? 

Mergers  of  pharmaceutical  companies  can  create  or  increase  the  market  power  of  the 
merged  entity  by  eliminating  competitive  pressure  between  the  merging  parties  and 
reducing competitive pressure in the market. The greater the market power arising from a 
merger,  the  more  likely  it  is  that  it  results  in  higher  prices  and  harm  to  patients  and 
healthcare systems. 

A  key  objective  of  merger  control  in  the  pharmaceutical  sector  is  to  ensure  that  the 
changes in the market structure due to a merger do not result in higher prices. This leads 
to  scrutiny  irrespective  of  whether  a  merger  concerns  originator,  generic  or  biosimilar 
competition.  For example, a merger between an originator and a  generic  company may 
significantly  impede  price  competition  between  the  originator’s  products  and  their 
cheaper generic versions. Generics are normally full substitutes of the originator product 
and competition takes place mostly on price82. 

The negative price  effects  of mergers  can be significant.  Reduced  competitive pressure 
may enable the merged company to raise its own prices (directly or by reducing rebates, 
discounts,  by  renegotiating  increased  prices  with  national  healthcare  authorities,  by 

81   Decisions of the Consiliul Concurentei of 28 October 2011 and Decision of the Consiliul Concurentei 

of 27 December 2011. 

82   The Commission refers to the homogeneous nature of generic in a number of decisions, for example in 

M.6613 - WATSON/ACTAVIS. 

35 

 
                                                 
withholding  the  launch  of  a  cheaper  generic  etc.),  but  can  also  lead  to  an  increase  of 
prices in the market as a whole83.  

4.4.2. How does merger control prevent price increases from mergers? 

EU merger control rules mandate the Commission to intervene where the merger is likely 
to adversely affect competition. An illustrative example is the Teva/Allergan case, where 
the acquisition of Allergan by Teva, the global number one generic company, threatened 
to largely eliminate competition from its closest rival, in a number of markets. 

Box 10: The Teva/Allergan case 

In  March  2016  the  Commission  found  that  the  merger  would  soften  price  competition  in  a 
number of markets and cleared the acquisition of the generic business of Allergan Generics by 
Teva Pharmaceutical Industries only after Teva committed to divest relevant parts of the acquired 
business to independent buyers. 

Before  the  transaction,  Teva  was  already  the  largest  global  generic  manufacturer  and  Allergan 
was the fourth largest generics manufacturer worldwide. The transaction concerned hundreds of 
generic medicines marketed and in development, and was unprecedented in the pharmaceutical 
sector  both  in  its  size  and  the  number  of  markets  where  the  companies’  generic  products 
competed.  

The  Commission’s  market  investigation  revealed  that  there  was  direct  competition  on  prices 
between  all  versions  of  a  given  off-patent  molecule  (including  generics  and  the  off-patent 
originator product) and that for a number of products, competition would have been curbed by 
the  merger.  Therefore,  the  Commission  identified  potential  competition  concerns  for  a  large 
number of medicines all over the EU.  

Also,  looking  at  the  overall  market  position  of  the  parties  that  supply  generic  medicines  at 
national level, the Commission concluded that in  some Member States, the parties were among 
the largest generic players as well as each other’s closest competitors. Therefore, the Commission 
assessed the possible impact of the merger on prices not only for specific products but also at the 
level of the parties’ whole portfolio of generic medicines.  

For example, in the United Kingdom, where prices of generics are set freely, Teva and Allergan 
were  the  only  generic  players  capable  of  selling  their  portfolio  of  medicines  directly  (without 
intermediaries) to pharmacies through loyalty schemes. All the other players had to go through 
wholesalers.  Because  of  this  specific  market  feature, the  Commission  concluded  that Teva  and 
Allergan exerted a unique pricing competitive pressure on each other in their relationships with 
pharmacies.  This  competitive  pressure  would  have  been  eliminated  by  the  merger  and  the 
elimination of pricing competition would have had a knock-on effect on prices to consumers. 

To  address  the  Commission’s  concerns,  including  the  risk  of  price  increases,  the  companies 
offered remedies. Specifically, they committed to selling the bulk of Allergan Generics’ generics 
business in Ireland and the United Kingdom including a  manufacturing plant and the full sales 
organisation, to a suitable independent buyer. 

The Commission’s role in a merger approved with commitments (conditional clearance) 
does  not  end  with  its  decision.  The  Commission  remains  active  to  ensure  that  the 
remedies  are properly implemented in  practice.  In particular, the Commission,  with  the 
help of monitoring trustees, vets the process of selecting a suitable buyer for the divested 
business and ensures that the viability and competitiveness of the entire divested business 
is  not  compromised until  its transfer to  the buyer. Also,  once the  divested business  has 
been  sold  to  the  purchaser,  the  Commission  may  continue  to  monitor  transitional 

83   These are the so-called ‘non-coordinated or unilateral effects’ on price.  

36 

 
                                                 
agreements  up  until  the  business  becomes  fully  independent  of  the  merged  entity  (i.e. 
transfer  of  the  marketing  authorisations,  production  transfer  to  the  buyer’s  own 
manufacturing plant etc.). 

Although  one  of  the  largest  mergers  on  record  in  the  pharmaceutical  sector,  the 
Teva/Allergan  is  only  one  of  several  transactions  where,  thanks  to  the  Commission’s 
investigation,  concerns  over  possible  price  increases  were  identified  and  addressed 
through  proposed  divestitures  to  prevent  concentration  that  could  lead  to  adverse  price 
effects.  The  Commission  intervened  in  mergers  between  originator  and  generic 
(e.g.  Sanofi/Zentiva,  Teva/Cephalon),  between  generic  companies 
companies 
(Teva/Ratiopharm,  Teva/Barr,  Mylan/Abbott  EPD-DM),  and  between  originators 
(GSK/Novartis regarding human vaccines). 

4.4.3. Merger control also helps to preserve price pressure from biosimilars 

Preserving price  competition  is  not  only the focal  point  in the Commission’s review of 
mergers involving synthetic medicines but also in review of mergers involving biological 
medicines84.  Biological  medicines  are  among  the  most  expensive  therapies  and  their 
uptake is steadily increasing, with global annual sales worth billions of euros. With every 
additional  biosimilar  entry  price  competition  is  strengthened  and  prices  are  further 
reduced.  Therefore,  competition  from  biosimilars  can  generate  large  savings  in  our 
healthcare  systems,  while  enabling  more  patients  to  benefit  from  cheaper  biological 
therapies.  The  Commission’s  intervention  in  Pfizer’s  acquisition  of  Hospira  clearly 
highlights this point. 

Box 11: The Pfizer/Hospira case 

In  2015,  the  Commission  cleared  Pfizer’s  acquisition  of  Hospira  subject  to  receiving  remedies 
which ensured that price competition between biosimilars was not compromised, as the proposed 
merger  would  have  brought  two  competing  infliximab  biosimilars  under  Pfizer’s  ownership 
(Hospira’s Inflectra and Pfizer’s pipeline biosimilar)85. 

Infliximab  is  an  anti-tumour  necrosis  factor  agent  used  to  treat  autoimmune  diseases  (such  as 
rheumatoid arthritis). Its original version, Remicade, was developed by Johnson & Johnson and 
marketed  by  Merck  Sharp  &  Dohme  in  Europe.  Before  the  merger,  only  one  infliximab 
biosimilar had been launched and was co-marketed independently by Celltrion (which developed 
the biosimilar and marketed it as ‘Remsima’) and by Hospira (brand name ‘Inflectra’).  

Hospira’s  Inflectra  and  Celltrion’s  Remsima  were  the  same  medicine  and,  as  a  result,  were 
known to doctors and purchasers to be perfectly interchangeable. Consequently, they competed 
on price only. However, due to the resistance to switching stable patients that receive Remicade 
treatment  to  the  biosimilar  copies,  infliximab  biosimilars  were  only  a  limited  source  of 
competitive pressure to the original medicine Remicade. 

The transaction would have brought Hospira’s Inflectra into Pfizer’s product portfolio in addition 
to  Pfizer’s  own  pipeline  infliximab,  yet  to  be  put  on  the  market.  This  was  likely  to  reduce 
incentives for Pfizer’s to compete under two alternative scenarios. Under the first scenario, Pfizer 
would delay or discontinue the development of its own biosimilar drug and focus on the acquired 
Hospira’s  product.  Apart  from  the  impact  on  innovation86,  this  would  soften  future  price 
competition between biosimilars, as new entrants have to price aggressively to gain market share 
from established suppliers. Under the second scenario, Pfizer would prioritise the development of 

84   See Box 5. 
85   Commission Decision in case M.7559 Pfizer/Hospira. 
86   Effects on innovation are discussed in more detail in Chapter 5. 

37 

 
                                                 
its own biosimilar and repatriate Hospira’s product to Celltrion, removing existing intense price 
competition between Hospira’ Inflectra and Celltrion’s Remsima, which had led to the significant 
price decrease compared to the original product, Remicade. 

To prevent such effects and ensure that a sufficient number of biosimilars would enter the market 
and exert price pressure on the expensive reference biological product, the companies proposed 
that Pfizer’s infliximab pipeline development be divested to a suitable buyer. This was accepted 
by  the  Commission.  In  February  2016,  Novartis  announced  that  it  had  acquired  the  divestment 
business. 

38 

 
 
 
5.  COMPETITION DRIVES INNOVATION AND INCREASES THE CHOICE OF MEDICINES 

As  described  in  Section  3.2.1,  innovation  is  of  key  importance  in  the  pharmaceutical 
sector  with  the  most  prominent  healthcare  benefits  flowing  from  R&D  into  novel 
treatments. This R&D may lead to new medicines for previously untreated conditions or 
to  medicines which may treat  given conditions  more effectively and/or  with  fewer side 
effects. It can also lead to the discovery that an existing medicine  can be used for other 
conditions for which it has not previously been prescribed. 

In  addition,  innovation  may  also  reduce  the  cost  of  treatments,  for  example,  by 
developing  production  processes  that  make  it  viable  for  cheaper  medicines  to  be 
commercially produced. Innovation may also create new, more efficient technologies that 
lead to higher quality medicines being produced. Therefore, while innovation remains a 
particularly  significant  competitive  force  in  pharmaceutical  markets,  the  companies 
active  in  these  markets  may  use  various  practices  to  ease  the  pressure  of  having  to 
constantly  innovate  (e.g.  defensive  patenting  which  aims  to  interfere  with  a  competing 
R&D project). Such practices may in specific circumstances be anti-competitive and be 
particularly harmful for patients and national healthcare systems. 

5.1.  Antitrust enforcement fosters innovation and choice 

This  Section  5.1  describes  how  enforcement  contributes  to  improving  patients’  choice 
and  access  to  innovative  medicines  by  intervening  where  companies,  unilaterally  or 
jointly, relax competitive pressures that force them to innovate further or prevent others 
from  innovating,  Section  5.2  then  explains  how  the  Commission,  under merger  control 
rules,  may  prevent  mergers  that  are  likely  to  reduce  or  harm  innovation,  and,  in  its 
assessment, take into account possible positive effects of mergers on innovation87.  

5.1.1. Enforcement  against  practices  preventing  innovation  or  limiting  patient 

choice 

Market  participants  do  not  always  welcome  innovation.  It  can  disrupt  or  even  entirely 
undermine  their  markets.  There  might  not  be  much  they  can  do  to  stop  innovation  by 
competitors. However, they can make it hard for innovative products to reach consumers. 
Antitrust enforcement can help ensure that companies do not abuse their power or enter 
into arrangements that hold back innovation.  

For  example,  in  2011  the  Commission  was  able  to  close  an  antitrust  investigation  into 
allegations that the German pharmaceutical company Boehringer Ingelheim had filed for 
unmeritorious  patents  regarding  new  treatments  for  chronic  obstructive  pulmonary 
disease  (COPD).  The  Commission’s  investigation  concerned  Boehringer’s  alleged 
misuse  of  the  patent  system  in  relation  to  combinations  of  three  broad  categories  of 
active substances  treating COPD with  a new active substance that had been discovered 
by  the  Spanish  pharmaceutical  company  Almirall.  Almirall  had  raised  concerns  that 
Boehringer’s patent applications would have the potential to block or considerably delay 
the market entry of Almirall’s competing medicines. 

In  2011 
the 
Commission’s  concerns  by  removing  the  alleged  blocking  positions  and,  as  a  result, 

the  companies  concluded  a  settlement  agreement 

that  addressed 

87   The  Commission  has  commissioned  a  study  to  analyse  the  impacts  of  mergers  and  acquisitions  on 

innovation in the pharmaceutical sector. Publication of the results is due in 2019. 

39 

 
                                                 
removed the obstacles to the launch of competing products by Almirall (complainant in 
the case), so that the Commission no longer had to pursue the case. 

Also,  as  recognised  by  the  General  Court  in  AstraZeneca,  restrictions  of  generic  entry 
reduce  the  incentives  for  pharmaceutical  companies  to  engage  in  innovation,  since 
generic  entry  serves  to  effectively  enforce  the  end  to  their  market  exclusivity.  In  this 
context,  enforcement  activities  focused  on  removing  obstacles  to  generic  entry  directly 
contribute to innovation in the pharmaceutical sector. 

Where an incumbent company can rely on exclusivity for its legacy product longer than 
it  is  entitled  to  under  the  applicable  legal  regime,  this  can  affect  its  incentives  to  take 
risks to innovate. 

In  the  Servier  case  mentioned  above88,  Servier  engaged  in  a  strategy  to  delay  generic 
entry for its blockbuster medicine perindopril (Coversyl), mainly by removing a number 
of  competitors  that  were  close  to  launching  a  generic  version  of  perindopril.  Generic 
delay  not  only  allowed  Servier  extra  time  to  reap  large  profits  from  Coversyl  (which 
Servier  dubbed  as  its  ‘dairy  cow  product’),  but  also  to  switch  its  patient  base  to  the 
follow-on product Bio-Coversyl, which had no clinical advantages over the old product. 
When a secondary patent,  which was the cornerstone of Servier’s anti-generic strategy, 
and  which  Servier  sought  to  protect  with  illegal  pay-for-delay  agreements  and  a 
technology  acquisition,  was ultimately  annulled, Servier  commented: ‘4  years  gained  – 
great  success’,  referring  to  the  time  period  since  the  basic,  compound  patent  for 
perindopril had expired89. 

Antitrust  enforcement  may  also  improve  patient  choice  by  protecting  their  access  to 
available treatments. For example, in April 2012 the Portuguese NCA found that Roche 
Farmacêutica  Química  (‘Roche’)  was  abusing  its  dominant  position  by  offering 
multiproduct  rebates  in  hospital  tenders  and  fined  the  company  EUR 900,00090.  Roche 
made the discounts conditional on tied purchases of other medicines, thus leveraging its 
dominant position for some of the tendered products to exclude competitors of the other 
products.  For  example,  the  discount  scheme  favoured  sales  of  Roche’s  biological 
medicine  NeoRecormon  (epoetin  beta  used  to  treat  anaemia)  to  the  detriment  of  the 
competing product Aranesp(R) marketed by Amgen (complainant in this case). The NCA 
established  that  Roche’s  anti-competitive  rebate  scheme  prevented  competitors  from 
successfully  participating  in  hospital  tenders  and  therefore  impaired  their  ability  and 
incentives to enter the market and expand. This was likely to ultimately affect the choice 
of medicines available to hospital doctors and patients. This decision was not appealed. 

The  decision  of  the  Italian  NCA  in  the  Hoffmann  La  Roche  case  already  mentioned  91 
also  promoted  patient  choice  as  it  safeguarded  their  access  to  Avastin,  (oncological 
medicine) used to treat a specific eye disease (AMD). As recently clarified by the Court 
of Justice, such off-label use of medicines (i.e. use for treatments different from those for 

88   Commission Decision of 9 July 2014 in case No COMP/AT.39612 – Servier. See Section 4.1.1. 
89   Commission  Decision  of  9 July  2014  in  case  No  COMP/AT.39612  –  Servier,  paragraphs  225,  2768, 

and 2984.  

90   Decision of the Autoridade da Concorrência of 12 April 2012.  
91   Decision  of  the  Autorità  Garante  della  Concorrenza  e  del  Mercato  of  27 February  2014.  See  also 

Section 4.3.1. 

40 

 
                                                 
which  it  received  a  marketing  authorisation  under  the  responsibility  of  a  prescribing 
doctor) is not in principle contrary to EU law92.  

5.1.2. Competition rules support procompetitive co-operation on innovation 

Competition  authorities  need  to  be  mindful  not  only  of  the  potentially  negative  effects 
that  a  practice  under  investigation  may  have  on  the  market,  but  also  of  the  possible 
positive  effects  competition  law  enforcement  should  preserve,  and  ideally  improve. 
Numerous  competition  rules  acknowledge  that  companies’  behaviour  may  result  in 
synergies  that  could  further  encourage  innovation  (for  example  from  combining 
complementary assets required to engage in R&D or from technology licensing). These 
rules also help companies to design their co-operation projects so that they comply with 
competition  law  and  avoid  enforcement  from  the  competition  authorities.  For  example, 
the  EU  Block  Exemption  Regulation  on  R&D  agreements93  provides  a  broad  safe 
harbour  from  competition  law  enforcement  for  R&D  agreements  between  competitors 
(provided that certain conditions related to market shares of the companies are met and 
the agreement does not contain certain hard-core restrictions of competition). The block 
exemption regulation is further explained by the accompanying Horizontal Co-operation 
Guidelines.94 

5.2.  Merger control preserves competition on innovation for medicines 

The Commission’s control of pharmaceutical mergers ensures not only that healthy price 
competition is maintained for the benefit of patients and national healthcare systems, but 
also  that  R&D  efforts  to  launch  new  medicines,  or  to  extend  the  therapeutic  use  of 
existing medicines, are not diminished as a result of a merger.  

Several  recent  pharmaceutical  mergers  investigated  by  the  Commission  show  the 
possible impact  of mergers on the incentives  for pharmaceutical  companies to  continue 
developing  parallel  R&D  programmes  after  a  merger.  In  some  of  these  cases,  the 
Commission  required  appropriate  remedies  to  approve  a  proposed  merger  that  would 
have  otherwise  threatened  to  halt  or  hinder  the  development  of  a  promising  new 
medicine. 

5.2.1. How can mergers harm innovation in the pharmaceutical sector? 

Consolidation  in an industry may be pro-competitive if it combines the complementary 
activities  of  the  merging  firms,  and  as  a  result  strengthens  the  ability  and  incentive  to 
bring innovation to the market. 

Conversely,  mergers  may  also  curb  the  scale  or  scope  of  innovation,  and  patients  and 
physicians may have a more limited choice of future innovative treatments. For example, 
this  may  be  the  case  where  one  merging  company's  pipeline  product  would  be  in 
competition  with  another  company's  marketed  product,  and  thus  be  likely  to  capture 

92   Judgment of the Court of Justice of the European Union of 23 January 2018. 
93   Commission Regulation (EU) No 1217/2010 of 14 December 2010 on the application of Article 101(3) 
of  the  Treaty  on  the  Functioning  of  the  European  Union  to  certain  categories  of  research  and 
development agreements (OJ L335, 18.12.2010, p. 36). 

94   Communication from the Commission, Guidelines on the applicability of Article 101 of the Treaty on 
the  Functioning  of  the  European  Union  to  horizontal  co-operation  agreements  (OJ  C11,  14.1.2011, 
p. 1). 

41 

 
                                                 
significant revenues from the other company's competing product. If this is the case, the 
merged company may be inclined to discontinue, delay or redirect the competing pipeline 
project in order to increase the profits of the merged entity. Similarly, merging firms may 
be working on competing R&D programmes, which would divert profitable future sales 
from each other in the absence of the merger. By bringing two competing firms under a 
single ownership, a merger may reduce the incentives to engage in parallel R&D efforts. 

Reducing  competition  on  innovation  means  that  patients  and  healthcare  systems  would 
forego  future  benefits  from  innovative  and  affordable  medicines.  Harmful  effects  may 
include a loss of potentially better treatments, reduced future variety of medicines on the 
market,  delayed  access  to  medicines  needed  for  the  treatment  of  their  conditions,  and 
higher  prices.  When  the  Commission  encounters  such  scenarios,  it  expresses  concerns 
about the transaction to the merging parties, and if there are no suitable remedies, it can 
block the transaction. 

5.2.2. How can merger control preserve conditions for innovation? 

Merger  control  seeks  to  ensure  that  the  transaction  does  not  significantly  impede 
competition, including on innovation95, ultimately leading to higher prices or less choice 
for  patients.  Where  innovation  concerns  are  detected,  the  Commission  can  prohibit  the 
transaction  unless  the  companies  offer  appropriate  remedies  designed  to  preserve  the 
ability and incentives to innovate, and restore effective competition in innovation. Such 
remedies may include a divestment of pipeline products, or underlying R&D capabilities.  

Innovative medicines were the focus of several recent merger investigations, highlighting 
the  Commission’s  efforts  in  preserving  innovation  in  relation  to  originator  chemical 
drugs and biological and biosimilar medicines. In some instances, the Commission acted 
to preserve competition from medicines in the early stages of product development.  

The  Commission  intervenes  where  a  merger  between  two  originator  companies  would 
result  in  less  competition  to  innovate  and  bring  new  or  improved  treatments  onto  the 
market.  A  good  example  is  the  Novartis/GlaxoSmithKline  Oncology  merger  where  the 
Commission was  concerned that the merger would negatively impact  the incentives for 
the acquiring company to continue R&D of life-saving cancer drugs. 

Box 12: The Novartis/GSK Oncology case 

In 2015, the Commission found that the merger threatened the development of certain pipeline 
medicines  for  treating  cancer  but  cleared  it  in  view  of  the  commitment  to  divest  certain 
businesses and thereby exclude them from the merger. 

Through  the  transaction,  Novartis  would,  among  other  things,  have  acquired  two  oncology 
products  from  GSK,  marketed  for  the  treatment  of  skin  cancer,  and  being  researched  for  the 
treatment  of  ovarian  and  other  cancers.  The  two  drugs  competed  directly  with  Novartis’  own 
pipeline development projects, resulting in duplicate clinical programmes. The Commission was 
concerned that Novartis would, for each of the two overlapping products, discontinue one of the 
parallel R&D programmes, as these would have been lengthy and costly. In its assessment, the 
Commission  took  into  account  the  expected  benefits  of  these  two  innovative  drugs  under 
development for patients and the healthcare systems in the treatment of several types of cancers 
for which the drugs were tested. 

95   On  the  possible  impact  of  a  merger  on  innovation,  see  in  particular  Guidelines  on  the  assessment  of 
horizontal  mergers  under  the  Council  Regulation  on  the  control  of  concentrations  between 
undertakings, 2004/C 31/03, paragraph 38. 

42 

 
                                                 
To  restore  the  conditions  needed  for  continued  innovation  concerning  these  pipeline  projects, 
Novartis  offered  remedies:  it  would  return  one  of  the  drugs  to  its  owner  and  licensor  Array 
BioPharma  Inc.  (Array)  and  would  divest  the  other  drug  to  Array.  In  addition,  Novartis 
committed to finding a suitable partner that could cooperate with Array and step into Novartis’ 
shoes to further develop and commercialise the two drugs in the EEA. The Commission approved 
Pierre Fabre as a suitable partner of Array. 

The Commission continues to monitor the implementation of the commitments, as clinical trials 
involving the two drugs divested by Novartis are still ongoing. Recent developments in advanced 
clinical trials have presented encouraging results for each of the two products, which could reach 
the market in the near future. 

Without a remedy, these two drugs would likely have been discontinued. Therefore, it is likely 
that  the  remedy  has  helped  to  preserve  innovation  and  bring  about  more  competition  in  the 
treatment  of  skin  cancer  and  other  tumours.  This  has  resulted  in  a  wider  choice  of  innovative 
treatments and better care for patients. 

In  some  mergers  between  originator  companies96,  the  Commission  sought  to  remove 
competition concerns related to pharmaceutical pipeline products at an advanced stage of 
development. In other cases, competition concerns were also identified where the merger 
would reduce innovation incentives for pipeline products in an earlier development stage, 
such as in the early phases of clinical trials. 

This  was  for  instance  the  case  in  the  Novartis/GSK  Oncology  decision,  where  the 
Commission  identified  innovation  concerns  related  to  pipeline  medicines  both  in  early 
and  in  advanced  development  phases.  This  approach  is  present  also  in  the  Johnson  & 
Johnson/Actelion  case,  where  two  competing  pipeline  medicines  for  insomnia,  both  of 
them  in  the  Phase  II  of  clinical  trials,  raised  competition  concerns  that  had  to  be 
remedied. 

Box 13: The Johnson & Johnson/Actelion case 

In its decision of June 2017, the Commission considered that one of the two parallel projects to 
develop  new  insomnia  medicines  could  be  abandoned  after  the  merger,  but  cleared  the 
acquisition of Actelion by Johnson & Johnson (J&J) thanks to remedies offered by the company. 

While the activities of the two companies were largely complementary, they were independently 
developing innovative medicines to treat insomnia, Actelion on its own and J&J together with its 
partner Minerva. 

Both medicines were based on a novel mechanism of action, called orexin-antagonists, which had 
already  shown  the  potential  for  having  fewer  side  effects  and  a  reduced  risk  of  dependency 
compared  to  existing  insomnia  treatments.  Since  other  competing  pipeline  programmes  were 
scarce, the Commission was concerned that abandoning one of the parallel development projects 
could harm competition on innovation. 

J&J offered remedies to ensure that it would not negatively influence the development of either 
insomnia research  programmes  and  that the  clinical  trials  for  both  products  would  continue.  In 
particular, the remedies consisted of two sets of complementary commitments: 

 

J&J committed not to influence any of the strategic decisions regarding the development of 
Actelion’s  insomnia  pipeline.  To  that  end,  J&J  committed  to  limiting  its  investment  to  a 

96   M.5661  Abbott/Solvay  Pharmaceuticals,  M.5778  Novartis/Alcon,  M.5999  Sanofi-Aventis/Genzyme, 

etc.  

43 

 
                                                 
capped  minority  shareholding  in  the  company  that  will  be  developing  this  pipeline97  and 
further committed not to nominate any board member in this company, and not to receive any 
information about the insomnia pipeline product. 

  Concerning its own pipeline product, J&J granted full control over its global development to 
its  partner  Minerva  and  committed  to  continuing  to  finance  the  project,  ensuring  that  the 
programme will be developed independently. 

The  Commission  concluded  that  these  remedies  were  sufficient  to  eliminate  the  competition 
concerns  and  ensure  that  patients  and  the  healthcare  systems  would  not  be  harmed  by  the 
transaction through a loss of product variety or from reduced future product competition due to 
the merger. On this basis, the Commission cleared the transaction. 

In  the  Pfizer/Hospira  merger  case  mentioned  above98,  the  Commission  was  not  only 
concerned  that  Pfizer’s  acquisition  of  Hospira’s  competing  project  involving  the 
development  of  the  biosimilar  infliximab  would  lead  to  higher  prices,  but  also  that 
eliminating  one  of  the  two  parallel  development  projects  would  be  detrimental  for 
innovation  and  patient  choice.  While  biosimilar  drugs  have  the  same  therapeutic 
mechanism and are  clinically equivalent  to  the original biological  product,  they  are not 
exact copies. Consequently, there is some room for product differentiation and non-price 
competition  between  different  biosimilars  of  the  same  molecule.  Thanks  to  the  remedy 
that involved Pfizer divesting its infliximab project to Novartis, the Commission ensured 
there  would  be  future  innovation  in  biosimilars  and  that  the  important  development 
project would not be removed from the competitive landscape. 

97   As  part  of  the  original  merger  agreement  between  J&J  and  Actelion,  Actelion’s  early  stage  R&D 
programmes,  including  on  its  insomnia  pipeline  drug,  were  to  be  transferred  to  a  newly  created 
company,  in  which  J&J  would  have  a  minority  shareholding  and  to  which  J&J  would  provide 
financing. 
98   See Box 11. 

44 

 
 
                                                 
6.  CONCLUSION  

This  overview  and  the  many  specific  examples  of  competition  cases  investigated  and 
decided  upon  by  European  competition  authorities  since  2009,  show  that  enforcing 
antitrust  and merger control rules significantly  contributes to  ensuring that patients  and 
healthcare  systems  have  access  to  affordable  and  innovative  medicines  and  treatments. 
While the authorities have to prioritise the most important cases, the enforcement cases 
mentioned clearly demonstrate their readiness to take on investigations. 

The  Commission’s  2009  comprehensive  inquiry  into  obstacles  hindering  the  proper 
functioning of competition in the pharmaceuticals sector prepared the ground for a series 
of  enforcement  actions  by  European  competition  authorities.  Since  then,  European 
competition  authorities  not  only  stepped  up  their  enforcement  activity  in  terms  of 
numbers. They also took action, in the interest of patients and healthcare systems, against 
anti-competitive  practices  that,  until  then,  had  not  yet  been  addressed  in  competition 
decisions. These decisions (and subsequent court judgments) provide valuable guidance 
to market participants and deter future infringements.  

European  competition  authorities  are  committed  to  effectively  intervening  against  anti-
competitive  behaviour  by  companies  and  preventing  harmful  mergers.  Despite  its 
significant  contributions  to  improve  competition  in  pricing  and  innovation  by  guidance 
and deterrence through precedents, competition law enforcement remains complementary 
to legislative and regulatory action. 

The past enforcement record provides a solid basis for competition authorities to build on 
and  continue  their  commitment  to  rigorously  enforce  competition  law 
in  the 
pharmaceutical  sector  in  the  future.  Authorities  must  remain  vigilant  and  pro-active  in 
investigating potentially anti-competitive situations, including where new practices used 
by companies or new trends in the industry are concerned, such as the growing relevance 
of  biosimilars.  Ensuring  that  effective  competition  law  enforcement  helps  patients  and 
healthcare  systems  to  access  affordable  and  innovative  medicines  is  a  priority  for  the 
Commission. 

45