This presentation by Italy was made during a workshop on “Recent Challenges in Competition and IP in Pharmaceutical Markets” held by the OECD in Paris on 26 February 2019. More papers and presentations on the topic can be found out at oe.cd/2tD

1. “Market-facing anticompetitive
practices with an IP element: case
study by Italy”
OECD Workshop on “Recent Challenges in Competition and IP in
Pharmaceutical Markets”
Paris, 26 February 2019
11
Andrea Minuto Rizzo
Italian Competition Authority
The views expressed are personal and do not necessarily reflect those of the AGCM

2. Overview of AGCM’s interventions (i)
• Main supply side specificities:
• Regulation: pervasive market access and price regulation because of public health considerations and of
role played by National Health Systems (NHS)
• R&D: competition and IPRs are complementary to promote innovation, but different instruments;
antitrust enforcement should not be perceived as a threat to the patent system or to innovative activity
• AGCM’s interventions:
• AGCM particularly active in the pharma sector because of (i) the importance of the sector, (ii) access
to healthcare and medicines, (iii) impact on public expenditure
• Case by case extreme care in finding the right balance between static and dynamic competition
• Market-facing anticompetitive practices where IP rights are a relevant consideration, even if they are
not explicitly directed at manipulating the IP system:
• Roche/Novartis (I760/2014)
• Glaxo (A363/2006), Merck (A364/2007)

3. Overview of AGCM’s interventions (ii)
Anticompetitive abuses of IP
and regulatory mechanisms
Market-facing anticompetitive
practices with an IP element
Exclusionary abuses Pfizer (A431/2012) Glaxo (A363/2006)
Merck (A364/2007)
Exploitative abuses Aspen (A480/2016)
Illegal agreements Roche/Novartis (I760/2014)
Advocacy
Opinion on Supplementary
Protection Certificates
(AS239/2002)

4. 4
Roche Novartis (I760/2014)
• concerns directly regulation (off label uses), while IPRs only in the
background
• horizontal illegal market sharing agreement as separate from the
(lawful) licences

5. Overview of the case
• AGCM (I760/2014) fined Roche (90,5 million €) and Novartis (92 million €) for having violated
art. 101 of the TFEU through a market sharing agreement restrictive of competition in the
Italian market of pharmaceutical products for severe ophthalmic diseases (Age-related
Macular Degeneration, «AMD»)
• AMD is the main cause of blindness in developed countries; 1 million people under AMD
risk in Italy
• The First Instance regional administrative Court (TAR Lazio/2014) upheld the AGCM decision
entirely
• The second instance appeal is still pending; a preliminary ruling to the ECJ has been asked by
the Italian Highest Administrative Court (Consiglio di Stato)
• In January 2018 the European Court of Justice (ECJ/2018) delivered its preliminary ruling

6. The facts of the case (i)
Avastin - ROCHE
• Marketed based on a 1999 licensing
agreement with Genentech
• Registered use: treatment of some forms
of metastatic cancer
• Off label use: treatment of the AMD
• Market entry: 2004 (US), 2005 (EU)
• Cost: 15/80 €, reimbursed by the Italian
NHS since 2007 (also) for off label
ophthalmic use
Lucentis - NOVARTIS
• Marketed based on a 2003 licensing
agreement with Genentech
• Registered use: treatment of AMD
• Market entry: 2006 (US), 2007 (EU)
• Cost: 1,700€, lowered to 900€ since
2013, covered by NHS since 2008
Both drugs developed and patented, from related active substances, by Genentech (owned by Roche), and
marketed worldwide, outside the US, by Roche (Avastin) and Novartis (Lucentis):

7. Relevant market
Drugs for eye
deseases
The facts of the case (ii)
Off label
15/80 €
On label
initially 1,700 € then 900 €
License agreements

8. The facts of the case (iii)
• In 2007 Avastin (Roche), while being authorized for tumorous diseases, was used off label for the
treatment of AMD
• In 2008, Avastin was substituted with Lucentis, with an increase of the related costs for the Italian NHS
• On the basis of a complex legislative framework (originally aimed at keeping under control the growing
expenses related to off label uses of drugs), the Italian NHS is allowed to provide off label uses only
under certain conditions, i.e. the non-existence of a medicine already registered for the same
treatments
• consequently, the Italian Medicines Agency (AIFA) forbade the off label use of Avastin
• a doctor who prescribes the off label drug instead of the existing on label one bears the liability for
diseases arising from the off label use
• A public debate arose on the legitimacy of both the existing legislative framework and the business
conducts of Roche and Novartis, as public expenses were growing because of the higher cost of Lucentis
• The Italian Government even adopted a temporary provision for keeping the off label uses of Avastin
accessible; this provision, however, was eventually canceled by the Parliament while converting the
Decree into Law

9. The conducts (i)
• Based on their separate licensing agreements with Genentech, Roche and Novartis expected to sell the
two products on two different markets, both taking economic advantages from the sales of Lucentis
• Roche was collecting royalties from the sales of Lucentis
• Novartis was gaining directly from Lucentis’ sales and, indirectly, through a relevant shareholding
(around 33%) in Roche
• However, despite the described restrictive Italian legal framework, the ophtalmic off label uses of
Avastin continued and this drug remained a competitor of Lucentis
• The licensing agreements did not protect Lucentis from sales of Avastin related to off label uses
• In order to avoid competition, Roche and Novartis colluded to keep Avastin out of the ophthalmic sector
to protect Lucentis sales
• This strategy was realized through an artificial product differentiation: to exclude, or at least downsize,
the ophtalmic use of Avastin so to shift purchases to Lucentis
• Coordinated efforts to differentiate products went beyond the legitimate contents of a
licensor/licensee cooperation

10. The conducts (ii)
Sales in value
Source: AGCM’s Roche/Novartis decision, Figure 3, Par. 186.

11. The conducts (iii)
• Roche
• Request for modification to European Medicines Agency (EMA) of the Summary of Product
Characteristics (SPC) aimed at obtaining an extra-wording warning against ophthalmic use of
Avastin
• EMA did not amend the SPC in respect of its adverse reactions but issued “special warnings
and precautions for use”
• Moreover, the EMA refused to allow the dissemination of a formal warning to the medical
community and even modified the Lucentis’s SPC in order to make it clear that systematic
health risks are common to all this category of drugs
• Roche maintained - in the proceedings - that it was bound to communicate to the medicines
authorities the risks of off label uses detected by its own pharmacovigilance activities
• the AGCM, on the contrary, considered such conduct as part of the illicit collusion, based
upon a distorted use of legitimate prerogatives and aimed at artificially differentiating Avastin
from Lucentis on the basis of safety issues
• Warning letters to ophthalmological professionals against the use of Avastin in order to persuade
them not to prescribe it

12. The conducts (iv)
• Novartis
• Systematically informed about Roche’s activities vis-à-vis EMA
• Strategic plan to produce and disseminate evidences related to a major risk of Avastin: Internal
document’s referred to “generating and communicating Avastin safety concerns”
• Roche and Novartis
• Roche and Novartis acted in concert to debase the result of independent comparative research
showing the equivalence of the two drugs
• email exchange that occurred between the CEOs of the Italian branches of Roche and
Novartis that explicitly refers to “the activities of differentiation of the two products”, linked
to the modification of the SPC of Avastin
• Joint program for managing media and political-institutional issues on the topic:
• the whole strategy was aimed at hindering the possible authorization of Avastin off
label use, as many organizations and politicians were reconsidering the issue (e.g.
temporary governmental approval of the off label ophthalmic use of Avastin)

13. The restriction of competition
• The agreement between Roche and Novartis had as its object the restriction of competition, aiming at
preventing the use of a cheaper product
• Despite in by-object cases ascertaining the effects of anticompetitive conducts is not essential to the
final decision, as they are not used as a constitutive element of the infringement, the potential or actual
effects could be evaluated and eventually estimated to be used as an element in setting fines
• the fact that the collusion had significant effects was considered in order to justify the percentage
of fines
• As for the quantification of the effects:
• it hindered access to treatment for many patients (according to the Italian Ophthalmic Society the
extra-costs due to the product switch impeded the NHS to provide cures to 100,000 patients)
• at least 45 million euros of extra-costs (in 2012 only) for the NHS (public hospitals)
• increased future costs might possibly exceed € 600 million per year

14. A few considerations…
• The case should not be viewed as a continuation of Astrazeneca and Ratiopharm/Pfizer, as the conducts
involved are not regulatory gaming strategies, but “usual” art. 101 conducts, with no involvement of
the sectorial agencies
• the amendments of Avastin’s SPC represented only one pin of the whole collusion, and the
changes adopted by the EMA eventually differed from the ones originally proposed
• It raises more complex questions, regarding the intersection of competition law and human rights, as the
right to access to drugs
• in regards to product differentiation, if the legitimacy of such commercial practices may be generally
accepted, within the pharmaceutical sector things could be considered differently, due to the
possible collision with the fundamental human rights to life and physical/mental integrity
• It also concerns the intervention of competition law into an highly regulated sector
• far from taking any scientific stance on such issues, AGCM’s decision by no means endorsed off label
uses or proposed to extend them beyond what is already experienced within the medical community
• quite the contrary, the AGCM limited itself to consider what happened in regard to Avastin and the
efforts to obstruct its off label ophthalmic applications

15. ECJ’s preliminary ruling (i)
• The First Instance regional administrative Court (TAR Lazio/2014) upheld the AGCM decision
entirely
• The second instance appeal is still pending, while a preliminary ruling to the ECJ has been
asked by the Italian Highest Administrative Court (Consiglio di Stato), which covered:
• market definition in the context of authorized and non-authorized drugs
• the possible classification of the conduct in question as an ancillary restriction to the
license agreement
• whether such conduct, if proved, could amount to a restriction of competition by object

16. ECJ’s preliminary ruling (ii)
Relevant market
• drugs manufactured or sold unlawfully should not be regarded as part of the same relevant market as
lawfully authorized products
• drugs can be used off label only under strict conditions and it is for regulatory bodies, not competition
authorities, to verify compliance with EU law of the conditions under which a drug such Avastin is
prescribed by doctors, on the demand side, and repackaged, on the supply side, with a view to its off
label use
• ECJ notes that there is nothing in the case file to suggest that, at the time of AGCM’s intervention,
such verification had been carried out to establish the illegality of the conditions under which
Avastin was used off label
• products which are lawfully used off label can be found to be in the same relevant market as lawfully
authorized products, if both products are regarded as therapeutically substitutable
• for the treatment of eye diseases, there is a specific relationship of substitutability between
Lucentis and Avastin when used off label

17. ECJ’s preliminary ruling (iii)
Arrangement to disseminate information is not ancillary to the licensing agreement
• The arrangement between Roche and Novartis to disseminate evidence of adverse reactions of Avastin’s
off label use does not fall outside Art. 101 (1) TFEU on the ground that the arrangement is ancillary to the
licensing agreement because the arrangement to disseminate jointly information:
• was not designed to restrict the commercial autonomy of either party to the licence agreement,
but rather to influence the conduct of third parties such as regulatory authorities and medical
practitioners in order to limit the use of Avastin in favor of Lucentis
• which is unfavorable to the non-licensed product could not be considered to be ancillary to the
licensing arrangement and objectively necessary for its implementation
• was agreed upon several years after the license agreement was concluded and not in the
agreement itself or upon its conclusion
• …It therefore falls within the scope of EU rules on competition as a separate agreement to the licensing
agreement
• the licensing agreement itself was considered at least neutral, in competition terms, by the
ECJ: “Furthermore, (…) the file submitted to the Court contains no information that is capable
of casting doubt on the favorable, or at least neutral, nature in terms of competition, of the
licence agreement concluded between Genentech and Novartis” (par. 73)

18. ECJ’s preliminary ruling (iv)
The dissemination of misleading information can amount to a “by object” restriction
• An arrangement put in place between two undertakings marketing two competing products which, in a
context of scientific uncertainty, consists in the dissemination to the EMA, healthcare professionals and
the general public, of misleading information relating to adverse reactions resulting from the off label
use of one of those products with a view to reducing the competitive pressure it exerts on the other
product, may constitute a restriction of competition ‘by object’
• the ECJ also emphasized that the responsibility for reporting risks associated with the off label use
of a product lies solely with the MA holder
• the involvement of another party may constitute evidence that the information is not being
circulated for legitimate pharmacovigilance purposes
• The ECJ explains that the information must be considered to be misleading (which is a matter for the
national Courts to determine) if its purpose is
• first, to confuse the EMA and the Commission
• secondly, to emphasize, in a context of scientific uncertainty, the public perception of the risks
associated with the off label use of Avastin

19. 19
Advocacy (AS239/2002)
Opinion on Supplementary Protection Certificates

20. SPCs: AGCM’s advocacy
• Supplementary protection certificates (SPC) are a type of patent extension beyond the usual duration of
a patent introduced to allow to recover, after a patent has been obtained, for the time lost before the
conclusion of process of authorization to commercialization
• Originally (1991), Italian legislation was more favorable to pharmaceutical companies than the European
one (1992), granting a longer maximum extension of SPCs
• New legislation (2002) established a progressive reduction of that difference while, in parallel, third
parties (e.g., chemical companies) were allowed to start a procedure for the grant of voluntary licences,
in exchange for a remuneration, valid only for exports in countries where there were no IPRs (e.g.,
patents expired)
• In that context, AGCM intervened through its advocacy powers (Opinion AS239/2002) observing that:
- a reduction in the pace of the alignment with European regulation of SPC’s durations could
represent a sensible obstacle to the possibility to develop on a large scale generics in Italy, not
justifiable from an economic point of view for reasons linked to recoup costly investments in R&D,
as those investments where probably already recouped
- obstacles to development of the national chemical industry still persist as licences are only
voluntary and not mandatory

21. 21
Glaxo (A363/2006) and Merck (A364/2007)
• Concerns directly IPRs
• Refusal to grant a license by dominant players (in a specific regulatory
framework where R&D would not be damaged)

22. SPCs: AGCM’s enforcement (i)
• AGCM has also intervened using its enforcement powers: the two procedures opened in 2005 by AGCM
towards Glaxo (2006) and Merck (2007) concerned precisely conducts where these companies took
advantage of the specific Italian regulatory framework in relation to SPCs; more specifically:
• benefiting from regulation that did not impose to SPCs holders an obligation to provide a licence
(for export) to requesting parties, but established a procedure for the grant of a voluntary licence
• both companies refused to grant licences, on the SPCs related to some active substances they
produced, to chemical companies that intended to produce them in Italy in order to successively
sell them to generics producers active in other Member States where the patent protection expired
• Theory of harm (in Glaxo):
• Dominant company have a special responsibility and cannot refuse, without objective justifications,
to third parties access to essential inputs to operate in a market (Oscar Bronner)
• Refusal to grant a licence for the production of active ingredients in Italy for the export in countries
without IPR is an abuse of dominance (AGCM’s intervention was even forseen by legislation)
• …as it hinders the production of an essential input (the active substance considered) to allow to
generics producers, potential competitors of Glaxo, to access markets without IPRs (no trade off
with the need to recoup investments in R&D)

23. SPCs: AGCM’s enforcement (ii)
Glaxo (A363/2006)
• The original refusal to grant a licence to the Italian chemical company FIS for the manufacturing (and
export) of Sumatriptan Succinate, an active ingredient used in the production of migraine medicines, to
countries in Europe where there were no patent/SPC rights, amounted to an abuse of dominance
• Glaxo successively granted to FIS, not only the license to Sumatriptan Succinate, but also technological
know-how concerning the production process
Merck (A364/2007)
• AGCM adopted as interim measure a compulsory license, against an adequate remuneration, to
manufacture the active ingredient Imipenem Cilastatina used for broad spectrum antibiotics
• ICA accepted commitments in relation to the other active ingredient Finasteride - used to treat
hypertrophy of the prostate, cancer of the prostate, and male baldness – whose licence was granted for
free
• In both cases the active ingredient could be produced in Italy to be exported in other Member
States where there were no IPRs

24. Conclusion
• Even in relation to market-facing anticompetitive practices, where conducts are not explicitly
directed at manipulating the IP system, IP rights and/or regulation can still be a relevant
consideration, for example in relation to:
• market definition, a proper balance between IP, regulation and competition can be
found focusing also on product’s uses, without downsizing the relevance of regulation -
ECJ (2018) on Roche/Novartis (I760/2014)
• licences that can be granted by dominant players under certain conditions including
when it does not impact the recoupment of costly investments in R&D (e.g., active
ingredients can be exported to be used by generics producers in countries where there
are no longer IPRs) - Glaxo (A363/2006)/Merck (A364/2007)

25. 2. Enforcement of competition law
Thank you
andrea.minutorizzo@agcm.it

26. “Anticompetitive abuses of IP and
Regulatory Mechanisms”
OECD Workshop on “Recent Challenges in Competition and IP in
Pharmaceutical Markets”
Paris, 26 February 2019
11
Andrea Minuto Rizzo
Italian Competition Authority
The views expressed are personal and do not necessarily reflect those of the AGCM

27. 2
Pfizer Ratiopharm (A431/2012)

28. The facts of the case (i)
• Pharmacia was the owner of the patent on latanoprost (for the treatment of glaucoma, a widespread
eye disease), whose request was originally filed on 1989
• European Patent Office (EPO) granted it in 1994, with an expiration date set in September 2009
• Pharmacia filed SPC applications in several European countries, consequently obtaining a patent
protection extension until July 2011
• However, an SPC was not requested in Italy, where the patent protection remained guaranteed
only until 2009
• In 2002, while being acquired by Pfizer, Pharmacia filed a divisional patent that was finally granted by
EPO on January 2009, just before the expiration of the patent on latanoprost
• Pfizer, then, leveraged its divisional patent for filing a translation of the patent in Italy and requesting a
SPC
• The Italian Patent and Trademark Office (UIBM) granted such certificate on June 2009, shifting the
expiration date of Xalatan patent protection to July 2011
• As a consequence, the patent duration in Italy was realigned with that already secured by the
company at EU level

29. The facts of the case (ii)
• Meanwhile, at the end of 2007, Ratiopharm requested a market authorisation (MA) for the generic
version of Xalatan in order to be prepared to launch its product in Italy in 2009, right after the original
expiration date of the patent on latanoprost
• When the divisional patent and the Italian SPC were granted, these activities were basically freezed,
because of the lack of legal clarity around the effective patent’s expiration date
• Furthermore, Pfizer embarked on a cease and desist formal initiative inviting Ratiopharm to refrain
from marketing the generic version of Xalatan before July 2011, also pressuring the Italian regulatory
body in an attempt to dissuade it from granting the MAs to generics products
• Ratiopharm countersued Pfizer before the EPO and the Italian Courts
• EPO revoked the divisional patent in 2010
• Pfizer appealed the decision before the Board of Appeal of the EPO
• Board of Appeal of EPO overturned the annulment of the divisional patent and definitively declared
the divisional patent valid in May 2012

30. The proceedings
• Following Ratiopharm complaint, the AGCM opened the proceedings and in early 2012 imposed a
sanction of 10,6 mln Euros on Pfizer for an exclusionary abuse of dominant position
• Pfizer’s patenting conduct violated Article 102 even if it was IP-compliant and did not involve any
misleading behaviour by the dominant company akin to that considered in the AstraZeneca case
• AGCM’s decision actually focuses on the effects of Pfizer's conduct, finding that the application for
the divisional patent was only the means through which the company managed to obtain a SPC in
Italy to delay generics’ entry
• The divisional patent - whose purpose is not to grant a longer term of protection than the
original patent - was used to extend the duration of Xalatan’s patent protection in Italy
• Pfizer’s exclusionary conduct also involved patent-related litigation before civil and administrative
Courts and actions aimed at preventing the Italian competent regulatory body from granting generic
companies MAs
• AGCM’s decision has been annulled in the first instance but then confirmed in the second instance by
the administrative judges

31. AGCM’s assessment
• The obstruction of generics’ entry as a means to preserve profits was the real aim behind
Pfizer’s patent filing activity
• Timing: 13 years between the request of the parent patent and the divisional patent
• No Innovative activity: the inventive activity was already protected by the parent patent
(the divisional patent protected a dosage with which the drug was marketed from the
very beginning)
• Geographical scope: the divisional patent was translated into a national patent only in
Italy
• Pfizer gained almost two years more of patent protection
• The delay of generics’ entry impeded the Italian NHS to save 14 millions Euros

32. The First Instance Administrative Court’s view
• The First Instance Administrative Court (TAR Lazio/2012) quashed AGCM’s decision,
maintaining that Pfizer’s conduct was legitimate as it merely acted to protect its own
commercial interests
• strategic patenting alone is not sufficient to substantiate an antitrust violation
• in order to prove the infringement it is necessary to prove exclusionary intent on the
basis of additional elements that allow to ‘colour’ with the taint of illegitimacy
behaviours otherwise perfectly lawful according to other branches of law
• AGCM had failed to prove the existence of such additional elements
• No illegitimacy of Pfizer’s conduct could be derived from its patent filing activity which
was legitimate under patent law.

33. The Supreme Administrative Court’s view
• The Supreme Administrative Court (Consiglio di Stato/2014) confirmed AGCM’s decision
• The legitimacy of the divisional patent under patent law is irrelevant
• The Court maintained that the issue was not Pfizer’s faculty, granted through the patent regulatory
framework, to request a divisional patent, but Pfizer’s use of such an authorization in the specific
circumstances at stake
• as a result, the case did not impinge upon whether the conduct was contrary to patent law,
but on the anticompetitive effect of a series of acts, which were legitimate under patent law
• it is the altered use of the pattern of formal law, even following short of a breach in the formal
sense, aimed at achieving different goals than those indicated by the legislator that can
constitute an abuse of dominant position
• Abuse of dominant position is a specific category of the abuse of right, whose costitutive elements are:
• the existence of a right
• the possibility that the right may be exercised in various manners
• the fact that the concrete exercise, despite being formally compliant with the rule by which the
right is provided for, is not coherent with the aim for which it was granted
• the fact that the exercice of the right causes an imbalance between the benefit for the right-holder
and the cost for the other party

34. Competition vs IPRs: where to draw a line?
• AGCM’s intervention attracted substantial international attention and not few criticisms for the stance
taken in establishing that even obtaining a legitimate patent can amount to anticompetitive behavior
• When obtaining a perfectly legitimate patent can amount to an antitrust infringement?
• the question can be answered only through an effects-based approach that considers the specific
circumstances of the case and requires a careful consideration of the effects of the conduct
• a positive answer might actually be found in a limited subset of cases characterized by very specific
circumstances
• antitrust intervention should be limited to cases in which the (mis)use of the patent system clearly
does not contribute to consumer/social welfare because it does not legitimately promote
innovation but it only illegally restricts competition

35. 10
Aspen (A480/2014)

36. The conduct (i)
• In September 2016, ICA fined Aspen for abuse of dominant position for excessive prices
concerning some essential off-patent drugs
• The case involved a group of anti-cancer drugs (“Cosmos package”) acquired in 2009 from
GlaxoSmithKline by Aspen which, through aggressive negotiations with the regulator,
obtained in 2014 sharp price increases

37. The conduct (ii)
• Two classes of drugs: “Class A” (essential drugs, negotiation with the regulator, totally
reimbursed by NHS), “Class C” (companies free to set prices, drugs on charge of patients).
• The price of “Class A” drugs is defined through a negotiation process, without imposing
on the company a given price level
• The revision of a price previously approved by the regulator in the “Class A” is admitted
under condition of the companies proving a documented change in production costs
• In the absence of an agreement with the pharmaceutical company, the drugs would
automatically moved in the “Class C”
• Aspen submitted a request for reclassification from “Class A” to “Class C” that the regulator
rejected considering the drugs are essential for patients
• As prices dated back to the ‘50s/’60s, the regulator accepted prices increases submitted by
Aspen
• In AGCM’s view, the outcome of the negotiation was influenced by the threat of leaving the
Italian market if the regulator had not accepted the prices increases
• during the negotiations, a shortage of the drugs in question was observed in the Italian
distribution system, despite the absence of any production problems, making the threat
credible

38. Conclusion
• Even when considering anticompetitive abuses of IPR and/or regulatory mechanisms,
enforcement of antitrust law in areas related to IPRs should not be perceived as a threat to
the patent system or to innovative activity; intervention are, indeed, limited to:
• those specific cases in which IPR-driven life cycle management strategies can hamper
the otherwise healthy relationship between competition and innovation - Pfizer
Ratiopharm (A431/2012)
• the need to complement the regulator’s action, in markets characterized by an
incomplete regulation, especially when the regulator displays a weaker bargaining
power towards regulated companies - Aspen (A480/2014)

39. 2. Enforcement of competition law
Thank you
andrea.minutorizzo@agcm.it