Biologics and biosimilars: competition law tipped to shape market

The impact that competition law can have on pharmaceutical companies was highlighted earlier this week in a new report published by the European Commission (46-page / 708KB PDF). That report charted the impact that the enforcement of competition law by the Commission and national competition authorities in the EU had on the price of medicines and access to innovative new treatments between 2009 and 2017.

The experts at Pinsent Masons, the law firm behind Out-Law.com, said the report also pointed to the likelihood of continued competition law scrutiny in the pharmaceuticals sector in the coming years, and pointed to the growth of the market for biologics and rival biosimilars as a potential area where competition law could shape commercial strategy.

Biologics contain active substances derived from biological sources, such as human cells, and are among the most expensive therapies available. Big pharmaceutical companies that have developed biologics to treat disease face losing their dominant position in the market as rival businesses work to develop highly similar alternatives. These 'biosimilars' are designed to compete with originators' products.

Pharma giants can take legitimate steps to preserve their business but some activities they might consider entering into which are permitted under intellectual property and regulatory law may fall foul of competition rules. The issue is particularly acute in the market for biologics due to the impending 'patent cliff'.

Patent law expert David Lancaster of Pinsent Masons said: "The Commission’s report specifically addresses the potential for anti-competitive practices in the context of biological medicines. As patent protection for major biologicals comes to an end, the prospect of biosimilar competition increases the pressure on innovator companies to find ways to extend patent protection. In this context, the Commission’s report acknowledges the potential for misuse of the patent system and highlights the importance of transparency concerning patents in facilitating competitive and viable entry by biosimilars."

"Although the boundary between legitimate use and misuse of the patent system is undefined, the report is a clear reminder that the Commission will continue to closely scrutinise patenting practice in this area," Lancaster said.

Life sciences specialist Helen Cline of Pinsent Masons said the Commission's report "demonstrates that the application of competition law to the pharmaceutical industry is fast-evolving along with an increasingly complex set of legal rules that need to be adhered to"

"Biologics have already come under the scrutiny of competition authorities and competition issues should be given careful consideration as part of any life cycle management strategy," Cline said.

"Biosimilars introduce competition for commonly used biologics following loss of patent protection and market exclusivity. However, biosimilars are not exactly the same as the reference product and face higher barriers to entry in the form of increased regulatory requirements, compared to conventional generics. As biosimilars are not exact copies, and as the Commission report recognises, there is some room for product differentiation and non-price competition between competing products of the same molecule. Whether highlighting differences, a complicated issue, could amount to an abuse is likely to be very fact specific. However, if any evidence emerged during an investigation of a planned strategy more aligned to market protection than to genuine safety concerns there could be competition law consequences," she said.

According to the Commission's report, competition authorities in Europe have adopted 29 antitrust decisions against pharmaceutical companies since 2009 and investigated more than 100 other cases. In 13% of those investigations, the authorities looked into alleged barriers to generic or biosimilar entry, it said.

Between 2009 and 2017 the Commission also reviewed more than 80 proposed mergers in the pharmaceutical sector and identified competition concerns in 19 of those cases. In those 19 cases, the mergers were allowed to go ahead only after the companies involved "offered to address concerns and modify the transaction".

In one case, involving the merger of Pfizer and Hospira, the deal was only cleared after the Commission obtained commitments from the companies that they would find a new operator to take forward pipeline biosimilar projects.

The Commission said its report showed that while "competition law enforcement can be very effective" in addressing anti-competitive agreements, abuses by dominant firms, and mergers, there are limits to what it can achieve on its own to "meet the societal challenge of ensuring sustainable access to affordable and innovative medicines".

Competition law expert Alan Davis of Pinsent Masons said: "The Commission’s report shows that competition law scrutiny of the pharmaceutical sector remains a 'high priority' for competition authorities across Europe and is unlikely to recede."

"The Commission and national competition authorities have, over the last 10 years, developed a much deeper understanding of the sector and how it operates, and have used a full range of antitrust and merger control powers to target competition law problems. National authorities, including the UK's Competition and Markets Authority, are strongly incentivised to intervene in these markets given the perceived cost to national healthcare systems arising from anti-competitive behaviour."