Brussels’ Teva probe reveals dark side of patent protections
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
In March, the European Commission said it would probe whether an Israeli drugmaker used patents to stave off competition. And for the pharmaceuticals industry — which is so dependent on intellectual property protection to drive innovation — its findings may represent a line in the sand.
In its investigation, Brussels will assess whether Teva “abusively blocked or delayed” market competition for Copaxone, its blockbuster multiple sclerosis drug, by strategically filing and withdrawing “divisional” patents.
These patents are assertions that the original patent can be divided, as it covers more than one underlying invention. As such, they potentially enable drug creators to prolong the market exclusivity of products beyond the expiry of their original patents by filing new claims, which in effect extend their monopoly and block generic manufacturers.
In the case of Teva’s Copaxone, the patent on the underlying medication, glatiramer acetate, expired in 2015. Ordinarily, that would have allowed generic manufacturers to start offering cheaper versions. But the Israeli group filed and then withdrew a series of divisional patents — and Brussels is now asking whether their only commercial purpose was to block new market entrants — which would breach EU competition rules.
The commission declined to comment further. Teva did not respond to requests for comment.
The inquiry marks the first time Brussels has investigated the alleged misuse of patent procedures as anti-competitive behaviour. If such behaviour is found, the commission can issue hefty fines. It recently penalised Nomura, UBS and UniCredit a total of €371m ($450m) for their role in a bond trading cartel.
However, Duncan Matthews, director of the UK-based Queen Mary Intellectual Property Research Institute, says drugmakers should not be surprised by the probe.
“As far back as 2009, the commission was saying it was aware of such behaviour,” he says. Then, in 2012, US drugmaker Pfizer was found guilty of similar tactics with Xalatan, a glaucoma treatment, by the Italian competition watchdog. “Anybody who was worried about competition in the pharmaceutical sector had been given plenty of advance warning that this type of use of patents could be problematic,” Matthews says.
Divisional patent applications are legal and an important tool to protect innovation for long enough to profit from years of expensive R&D, he acknowledges. But he adds that Brussels seems to be looking for “evidence of repeated misuse of divisional applications that falls foul of competition rules”.
“[The Teva] case emphasises the direct link between competition law and patent filing strategies,” says Matthews. “Pharmaceutical companies need to take seriously the prospect that the [commission] may instigate an inquiry into such practices.”
Olga Gurgula, a patent law lecturer at Brunel University London, says the line between the lawful use of strategic patenting and where it becomes an antitrust concern is unclear.
“Patents provide drugmakers with a monopoly for a certain period of time — and that’s a good thing, because otherwise they would not spend the time and money to develop cures,” says Gurgula. “Yet this need for funding innovation must be balanced with the public’s right to affordable medicine, and the timely introduction of generics into the market helps create that balance.”
Too often, Gurgula says, companies strategically stock up on secondary patents around a single medicine, even if they have no intention of using them to advance research or bring new products to market. “Their sole intention with this practice is to stifle competition, and this in turn can both inflate prices and subdue innovation, because there is no incentive for other companies to enter the market,” she says.
A related practice is to file divisional patent applications which, once submitted, have a life of their own. “This is done to increase uncertainty for competitors, because they don’t know whether they can enter the market,” Gurgula says.
While the parent application may be ultimately unsuccessful or even withdrawn, “the remaining divisionals may still pose a risk for potential generic manufacturers”, she notes. “This practice allows effectively to extend originators’ monopoly.”
More stories from this report
Gurgula says it is not the job of patent offices to judge whether an application is inherently good or bad, only whether it is novel, inventive and has commercial use.
She adds: “That’s why competition law is so important, because while the patent system has its own goals and standards, even if the practices of a company are lawful under patent rules, they might restrict competition in a way that is anti-competitive.”
However, probes can be lengthy. A Brussels investigation into Aspen’s pricing for six cancer treatments was resolved in February after four years, with the South African drugmaker forced to cut its prices.
Brussels says there is no legal deadline on antitrust investigations, and their duration depends on the complexity of the case and how forcefully companies defend the allegations.