03 December 2015

European Commission releases sixth report on patent settlements in the pharmaceuticals sector

The European Commission (the Commission) has published its sixth monitoring report on patent settlements in the pharmaceuticals sector. The report relates to the 76 patent settlements concluded between originator and generic manufacturers in 2014, i.e. disputes that are settled on commercial terms or litigation where no final adjudication is handed down.

It is noted that while settlements provide originator and generic manufacturers with a degree of mutual comfort, they may face scrutiny from a competition law perspective. Of particular interest are "settlements that may lead to a delay of generic entry in return for a value transfer (e.g. a payment) by the originator company to the generic company" to the detriment of European consumers. Other examples of potentially problematic agreements include settlements that contain exclusionary wording – e.g. in terms of geography, time and/or product – beyond the scope of the patent and settlements reached where the patent holder knows that the product in question does not meet the patentability criteria.

The report explains that the total of 76 patent settlements engaged in by pharmaceutical companies in 2014 is far below the amounts observed in 2012 (183) and 2013 (146) and that this represents a return to the levels seen when the Commission’s monitoring exercise began in 2009-2010. However, this is still higher than the annual average of 24 patent settlements undertaken during the period between 2000 and 2008 when the Commission performed its inquiry of the sector.

The Commission claims that concerns that its scrutiny of the sector may result in companies litigating each patent dispute, rather than pursuing a commercial settlement, have proved to be unfounded. Indeed, 88% of the settlements undertaken in 2014 fall into the categories that raise no prima facie competition law concerns.

The Commission indicates that it may decide to continue its monitoring of patent settlements to examine further the development of the trends set out in its report.

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