Accessibility of expensive medicines and medical devices in the spotlight

Expensive medicines are on the agenda in both the Netherlands and Europe. Competition law is often relied on to solve problems in that area. In 2020, the European Court of Justice (ECJ) clarified in its Generics judgment the room that the cartel prohibition and the prohibition on abuse of a dominant position give pharmaceutical companies to protect their market exclusivity. The Netherlands Authority for Consumers & Markets (ACM) was offered commitments by anti-rheumatic medicine manufacturer AbbVie. The Dutch Healthcare Authority was able to create room for magistral preparations of medicines as an alternative to expensive medicines. But it does not stop there: various challenges in the field of medical devices are also facing us now and in the coming years. Dutch citizens are experiencing continuous problems regarding the supply and repair of medical devices. All in all, the accessibility of medicines and medical devices is high on the agenda.

Medicines: pay for delay and the cartel prohibition

Pharmaceutical companies are using a range of strategies to maintain and extend the market exclusivity of medicines. One of those strategies is known as the pay-for-delay agreement, in which an originator (the manufacturer of a new medicine) and a generic (the manufacturer of a generic medicine) agree that the generic medicine will not (yet) be placed on the market, in exchange for the payment of a fee by the originator to the generic. That fee is sometimes paid in the context of patent infringement proceedings, instituted by the originator against the generic that is attempting to enter the market.

Judgments issued by the General Court in the Lundbeck (2013) and Servier (2018) cases have already demonstrated that pay-for-delay agreements may be in breach of the cartel prohibition set out in Article 101 TFEU and in Article 6 of the Dutch Competition Act. On the other hand, not all agreements between originators and generics are anti-competitive. In 2020, the ECJ explained in its Generics judgment the criteria for determining whether settlement agreements in patent disputes between originators and generics come under the cartel prohibition. The ECJ found that, in determining whether a pay-for-delay agreement comes under Article 101 TFEU, it must be assessed whether a generic has real and concrete possibilities of entering the relevant market. If an agreement does indeed come under the cartel prohibition, two cumulative requirements must be met, according to the ECJ, to determine whether that agreement is in breach of the cartel prohibition. The ECJ assumes that a settlement agreement between an originator and a generic serves to restrict competition if:

  • the only plausible justification or reason for the value transfer by the originator to the generic is that the generic is being paid not to compete with the originator; and
  • the settlement agreement has no proven pro-competitive effects (that give rise to a reasonable doubt that it causes a sufficient degree of harm to competition).

If the settlement agreement does have proven pro-competitive effects, it is doubtful whether the settlement agreement in and of itself causes a sufficient degree of harm to competition (and therefore constitutes a restriction by object). In those cases it must be assessed whether the settlement agreement has an appreciable anti-competitive effect. The counterfactual is relevant in that analysis.

Medicines: pay for delay now also abuse of dominant position

It has been known for some time already that pay for delay agreements may be in breach of the cartel prohibition. The ECJ has now also explained in the Generics judgment the circumstances in which holders of pharmaceutical patents abuse a dominant position by entering into pay-for-delay agreements, as set out in Article 102 TFEU. The ECJ found in the Generics judgment that:

  • it is again relevant whether generics have real and concrete possibilities (authorisation, licence or stocks) of entering the relevant market (which may consist of medically suitable alternatives). If real and concrete possibilities of entering the market exist, a patent holder will be less likely to be able to act independently and will therefore be less likely to have a dominant position as set out in Article 102 TFEU that may be abused; and
  • the strategy of an originator with a process patent for an active ingredient that is in the public domain to enter into settlement agreements with the effect of temporarily keeping potential competitors (with generic alternatives) outside the market may be an infringement of Article 102 TFEU.

It therefore follows from the Generics judgment that settlement agreements between originators and generics may give rise to competition law problems. The line in the Generics judgment addressed above will most likely be followed when the ECJ later this year handles the appeal cases instituted by Lundbeck and Servier. With reference to the ECJ’s assessment criteria in the Generics judgment, Advocate-General Kokott advised the ECJ in any event to uphold the Lundbeck judgment (2013) issued by the General Court. More information on the Generics judgment can be found in our extensive blog. An investigation by the European Commission has furthermore been pending since 2011 into the settlement agreements between Teva and Cephalon in respect of a patent dispute regarding the Modafinil medicine. Because Teva and Cephalon were notified in 2017 already of objections of the European Commission, a formal decision is expected to be issued in this case in the near future.

Excessive medicine prices

Feelings about expensive medicines are also still running high. ACM has made its voice heard on that issue:

  • ACM has updated its 2016 Guidelines on the Collective Procurement of Prescription Drugs. In its 2020 Guidelines, ACM provides both hospitals and healthcare insurers with practical tools on how to deal with the competition rules that apply during the (collective) procurement of medicines.
  • ACM reported that anti-rheumatic medicine manufacturer AbbVie as a former patent owner sought to make it harder for biosimilar manufacturers to enter the market. The reason for that finding was that AbbVie gave hospitals a large discount if existing patients continued to use anti-rheumatic drug Humira (and therefore did not switch to a biosimilar). As a result, switching to a biosimilar was financially very unfavourable for hospitals and therefore in fact not an option, according to ACM: hospitals would then have to pay a much higher price for patients who were unable or unwilling to switch to a biosimilar for various reasons and who wished to continue to use Humira. AbbVie promised ACM, among other things, that it would no longer force hospitals by means of discount systems to (almost) exclusively purchase Humira.
  • ACM recently extended its investigation into orphan drug CDCA manufactured by Leadiant. The investigation centres on the question whether Leadiant abused its dominant position by charging an excessive price for the medicine that is used to treat CTX, a rare metabolic disease. Leadiant charges approximately €153,000 per patient per year for that medicine.

A case in the United Kingdom has shown that cases regarding excessive medicine prices are not always easily settled. In 2016, the Competition and Markets Authority (CMA) imposed a record fine on pharmaceutical companies Pfizer and Flynn. The fines amounted to GBP 84.2 million and GBP 5.2 million, respectively, for charging excessive prices for an epilepsy medicine. In March 2020, the CMA was reprimanded by the Court of Appeal. According to the Court of Appeal, the CMA had incorrectly applied the test adopted in the United-Brands case to determine whether a price is excessive. The case has now been referred back to the CMA. The CMA itself refers to the judgment as “a good result”, incidentally. Menzis was more successful: it won a civil action against AstraZeneca. Menzis argued that AstraZeneca had charged an excessive price for the quetiapine medicine, sold under the Seroquel brand name. The Court of The Hague ruled in October 2020 that the British-Swedish pharmaceutical company is liable for damages to Menzis on that ground.

Magistral preparation of expensive medicines

To circumvent the high prices charged by pharmaceutical companies, hospitals are switching to magistral preparation in some cases. The Amsterdam UMC, for instance, is preparing the CDCA medicine on a small scale. The Dutch Trade and Industry Appeals Tribunal (CBb) recently ruled that pharmacists may claim magistral preparations of medicines from healthcare insurers, also if an equivalent registered medicine is already available on the market. It thereby ruled in favour of the Dutch Healthcare Authority (NZa). Before 31 December 2018, pharmacists could not yet claim magistral preparations if an equivalent registered alternative existed. When the NZa wished to change the regulations, a number of parties, including the trade organisation for pharmaceutical companies, filed an objection. The CBb’s ruling appears to have fulfilled a political wish to replace expensive medicines with lower-priced magistral preparations. Former minister Bruins, for instance, had already threatened to publicly pillory pharmaceutical companies that could not explain why they charged high prices. But politics has its work cut out too. An NZa-investigation has shown that the affordability of medicines is under pressure. The Dutch Court of Audit has reported that the government must negotiate medicine prices more aggressively with pharmaceutical companies, because expenditure on specialist medical care may barely increase until 2022 and expensive medicines are a significant cost item in the budget.

Medical devices and duty of care

These past few years increasing attention has been paid to bottlenecks in the quality and accessibility of medical devices. Those bottlenecks are likely to increase as a result of the ageing population. This applies both to medical devices under the Zorgverzekeringswet (Healthcare Insurance Act) and the Wet maatschappelijke ondersteuning (Social Support Act). Insured are often faced with several regulations regarding their entitlement to and the reimbursement of medical devices (such as the Healthcare Insurance Act, the Social Support Act or the Work and Income (Capacity for Work) Act). They are therefore required to contact several service points (municipalities, healthcare insurers or the employee insurance agency), which leads to lack of clarity. The chronically sick must regularly complete several application processes in which a medical indication must each time be established. Former Minister Bruins promised last year to tackle the problems together with the Minister of Health, Welfare and Sport, by means of better client support, easing of the tax and premium burden, and an “exploration of a more logical and workable organisation of the medical devices compensation rules”; see our earlier blog. Partly in response to a broadcast of the Kassa television programme on misconduct in the application for, supply of and maintenance of medical devices (#RegelHet), the Ministry of Health, Welfare and Sport set up a national action team in late 2019. A set of standards and a Medical Devices Action Plan were drawn up under that action team’s management. The Action Plan was signed by municipalities and suppliers of medical devices, among others. Research agency Nivel was meanwhile investigating the availability of medical devices in the Netherlands compared with other countries. The investigation showed that access to medical devices is organised both nationally (healthcare insurer) and locally (municipalities) only in the Netherlands. In response to that report, the Minister for Medical Care and Sport promised to return later in 2020 to the possibility of setting up one single service point for medical devices.

In 2019 already, the NZa reported (p. 32 of the Medical Devices Monitor 2019) that the duty of care of healthcare insurers, set out in Article 11 of the Healthcare Insurance Act, centres on the adequate availability of suitable medical devices. That requires a tailored approach, according to the NZa. The NZa recently published a clarification of the duty of care of healthcare insurers, in which it elaborated what exactly it expected of healthcare insurers when the accessibility and continuity of healthcare is under pressure. That may be of help to them in extraordinary situations, such as the Corona outbreak, but also in the event of imminent insolvency of a healthcare provider or if the waiting times for certain types of care structurally increase. We previously wrote this blog and this blog about the NZa’s role in enforcing the duty of care.

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