The Commission’s ‘killer’ pharma campaign: reason to complain?

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The European Commission is on the prowl in the pharma sector. Recent cases on alleged disparagement and pipeline drugs-killings show that it is not afraid to show its teeth and, ultimately, bite. 

The Vifor case, the Zoetis case and the recently published Pharma Policy Brief confirm the Commission’s heightened focus on protecting innovation competition in the pharmaceutical sector. 

Pharmaceutical companies should therefore tread lightly when terminating acquired pipeline products. If such conduct is not caught under the merger notification thresholds or scooped up by the Commission’s ‘killer acquisition’ merger referral mechanism, the European Commission can still launch an antitrust investigation to determine whether the termination blocked the entry of competing, innovative pharmaceutical products. Moreover, pharmaceutical companies had better think twice before bad-mouthing competitor products. Before you know it, you are launching a rectification campaign after your competitors complain.

Pharmaceutical companies have been facing strong antitrust scrutiny from the European Commission over recent years. Yet again, the European Commission has confirmed its sharpened focus on the pharmaceutical sector, particularly with respect to innovation competition. The European Commission’s recent Vifor case, Zoetis case and Pharma Policy Brief illustrate that pharmaceutical companies should beware of practices that could impede the market entry of competing, innovative pharmaceutical products. In particular, the recent developments concentrate around abusive practices related to the disparagement and termination of competing innovative products. The latter is also relevant in the merger control context. The European Commission’s hunt for fair pharma therefore seems far from over. 

Disparagement (Vifor case)

Following the Teva case, the Vifor case marks the European Commission’s second-ever disparagement investigation. In its preliminary assessment of 18 April 2024, the European Commission stated that Vifor Pharma may have pursued a misleading communication campaign regarding the safety of its competitor’s intravenous iron treatment product. Because Vifor Pharma likely has a dominant position on the intravenous iron treatment market, this may have unduly hindered the competitor’s uptake in the EEA, according to the European Commission. 

To address the European Commission’s concerns, Vifor Pharma has offered commitments for which the European Commission is currently seeking feedback from the market. In short, these commitments consist of a rectification campaign, refrainment from external communications about the competing product’s safety for the upcoming ten years, and the implementation of a number of other measures and safeguards to ensure compliance.

Disparagement cases like the Vifor case are still rare in Europe (with the exception of France). However, the European Commission is likely not yet finished with exploring the disparagement route. Pharmaceutical companies are advised not to bad-mouth competitors seeking to enter the market.

Killing innovation (Zoetis case and the Pharma Policy Brief)

On 26 March 2024, the European Commission opened an investigation into abusive market practices by animal health company Zoetis. The investigation centred on the termination of the development of a chronic pain relief product for dogs by Zoetis. Zoetis acquired this product as a late-stage pipeline product in 2017. The pipeline product was going to be commercialised by a third party. 

At the time of the acquisition, Zoetis was also developing its own chronic pain relief product for dogs, named Librela, which is currently being commercialised. The acquired pipeline product would compete with Librela. According to the European Commission, in these circumstances the termination of the development of the pipeline product and the refusal to transfer it to the third party for commercialisation may have constituted exclusionary behaviour.

Although the European Commission’s investigation is based on antitrust grounds, the facts of this case could also have been reviewed under the merger control rules as a typical ‘killer acquisition’: an acquisition where an incumbent buys a potential rival that is still in its nascent stage, with the aim of terminating the business after acquisition. 

The Pharma Policy Brief makes it clear that the European Commission will focus more and more on innovation competition in its assessment of pharmaceutical mergers. At the same time, more and more mergers are likely to be scrutinised by the European Commission: the revival of the upward referral mechanism of Article 22 of the EU Merger Regulation is aimed at catching ‘killer acquisitions’ failing to meet the EU and national merger thresholds (see our October 2022 newsletter). 

However, this revival came too late to apply to an acquisition that took place in 2017. The European Commission therefore launched an investigation under the antitrust rules instead. And maybe just as well, since the upward referral mechanism is currently on shaky grounds: Advocate General Emiliou has advised the European Court of Justice to rule against upholding this option.

Even so, the European Commission’s investigation shows it is determined to find ways to scrutinise anti-competitive acquisitions that escaped merger review. A clear warning sign for pharmaceutical companies not to engage in behaviour that would have been considered problematic if it had been known to the European Commission in its merger control assessment.