On July 15, 2019, the Council of State rejected an appeal filed by F. Hoffmann-La Roche LTD and Roche S.p.A. (“Roche”), as well as Novartis Farma S.p.A. and Novartis AG (“Novartis”; jointly, the “Parties”) against a judgment issued in 2014 by the Regional Administrative Tribunal for Latium (the “TAR Lazio”).[1] As a consequence, the 2014 decision by which the ICA fined the Parties approximately €180 million overall for a violation of Article 101 TFEU (the “Decision”)[2] became final. According to the Decision, the Parties colluded with a view to creating an artificial differentiation between two medicinal products that were equivalent for the treatment of eye diseases, in order to increase sales of the more expensive one.
Factual background
Avastin and Lucentis are drugs developed by Genentech, a company belonging to the Roche group. Genentech licensed the commercial exploitation of Avastin and Lucentis to Novartis and Roche, respectively.
In 2005, the Italian Medicines Agency (“AIFA”) authorized the marketing of Avastin for the treatment of tumors. Shortly thereafter, in 2007, AIFA authorized Lucentis for the treatment of eye diseases. In the timeframe in which Lucentis was waiting to be put on the market, some physicians noticed that Avastin could also be used off-license for the treatment of age-related macular degeneration and other eye diseases, although it was authorized only in oncology. Since Avastin was less expensive than Lucentis, it started to be widely used as an off-label medicine for the treatment of eye diseases, although Genentech and Roche (as market authorization holders) never sought Avastin’s registration for ophthalmologic use.
The Decision declared the Parties liable for putting in place an anticompetitive strategy aimed at artificially differentiating between the two drugs, with a view to reducing the use of Avastin in ophthalmology and increasing the use of Lucentis, thus significantly raising the costs borne by the Italian health service. This objective was inter alia pursued, in the ICA’s view, through the dissemination of information designed to create doubts over the safety of the use of Avastin for the treatment of eye diseases, despite the lack of scientific evidence supporting such doubts. Accordingly, the ICA found that the Parties’ conduct amounted to a market-sharing agreement constituting a by-object restriction of Article 101 TFEU, and imposed on each of the Parties a fine of approximately €90 million.
The Judgment
The Council of State fully rejected the Parties’ appeals against the TAR Lazio’s ruling, which had already entirely upheld the Decision.
Some aspects of the Judgment are particularly notable.
(i) The preliminary reference to the CJEU
The Judgment heavily relies on the guidance provided in January 2018 by the Court of Justice of the European Union (“CJEU”) in the interpretative judgment it delivered following a preliminary reference by the Council of State in December 2015.[3]
In response to the preliminary questions raised by the Council of State, the CJEU ruled as follows: (i) both a medicinal product authorized for the treatment of a specific disease and a medicinal product used off-label for the treatment of the same disease, may be considered as forming part of the same relevant market, when there exists a concrete relationship of substitutability between the authorized and unauthorized drugs; (ii) an arrangement put in place between the parties to a licensing agreement for the exploitation of a medicinal product, which, in order to reduce competitive pressure on the use of that product for the treatment of given diseases, is designed to restrict the conduct of third parties promoting the use of another medicine for the treatment of those diseases, does not fall outside the application of Article 101 TFEU on the ground that the arrangement is ancillary to the license agreement; and (iii) an agreement between companies marketing two competing drugs, which is intended to provide misleading information on the negative side effects of the use of one of them for the off-label treatment of a disease, with a view to reducing the competitive pressure resulting from such use on the other medicine, constitutes a restriction of competition by object that cannot be exempt pursuant to Article 101(3) TFEU.
(ii) The relevant market definition
According to the Parties, the ICA had wrongly defined the relevant market on the ground that the regulatory framework did not provide for substitutability between off-label medicines and medicines that are authorized for a specific use.
The Judgment rejected this argument. In the Council of State’s view, insofar as sector regulation did not forbid the off-label use of Avastin, nor its repackaging for such off-label use, the ICA was right in defining the relevant product market as comprising both drugs typically used for the treatment of eye diseases following a specific marketing authorization and drugs used off-label to treat the same diseases.
(iii) The relationship between the anticompetitive arrangement and the licensing agreement
Regarding the possible significance of a licensing agreement in excluding the existence of collusion between the Parties in violation of Article 101 TFEU, the Judgment upheld the conclusion that in the case at hand the arrangement between the Parties was not ancillary to their licensing agreement.
The Council of State relied in particular on the fact that (as also observed by the CJEU) the disputed restrictive agreement, which included the dissemination of misleading information on the negative side effects of Avastin in case of its off-label use, was not aimed at restricting the Parties’ commercial autonomy with respect to Lucentis (which was the product forming the object of the licensing agreement), but rather the conduct of third parties (in particular healthcare professionals) with a view to reducing the prescription of Avastin in ophthalmology, in order to maximize the economic return on the sales of Lucentis. Accordingly, the agreement between the Parties could not be considered as ancillary and objectively necessary for the implementation of the licensing agreement.
(iv) The dissemination of allegedly misleading information
Finally, the Council of State dismissed the Parties’ arguments that the ICA had erred in finding that they had colluded in order “to manipulate the public’s risk perception” of the off-label use of Lucentis, as well as to “artificially” differentiate between two medicinal products which, in the ICA’s view, were in fact equivalent (and, as such, substitutable) from the point of view of safety and effectiveness in the treatment of eye diseases.
In this respect, the Judgment held that the ICA had based its findings on several pieces of evidence. Accordingly, it was for the Parties to provide alternative lawful explanations for their conduct. In the case at hand, the Council of State held that the Parties had not been able to do so.
In particular, the Judgment dismissed the Parties’ arguments that Novartis had an interest in defending Lucentis’s sales, whereas Roche had an interest in hindering the off-label use of Avastin in order to limit its own potential liability, as well as possible damage to Avastin’s reputation. According to the Judgment, the fact that two competing pharmaceutical companies agreed to disseminate information specifically concerning a medicine marketed by only one of them was an indication that such dissemination pursued objectives other than Roche’s compliance with pharmacovigilance obligations and its wish to avoid product liability. The Council of State held that such conduct amounted to a by-object restriction of competition law, aimed at unlawfully partitioning the relevant market.
[1] Council of State, judgment No. 4990/2019 (the “Judgment”).
[2] ICA decision of February 27, 2014, No. 24823, Case I760, Roche-Novartis/Farmaci Avastin e Lucentis.
[3] F. Hoffmann-La Roche and Others, C-179/16, EU:C:2018:25.