Pharmaceutical Antitrust

Pharmaceutical Antitrust
in 31 jurisdictions worldwide
2014
Contributing editor: Marleen Van Kerckhove
Published by
Getting the Deal Through
in association with:
Anderson Mōri & Tomotsune
Arzinger
AZB & Partners
Bech-Bruun
bnt attorneys-at-law
Caiado Guerreiro & Associados, RL
Calavros & Partners Law Firm
CMS, Russia
ELİG, Attorneys-at-Law
Fasken Martineau
Fortak & Karasiński Legal Advisors LLP
Hammarström Puhakka Partners, Attorneys Ltd
Hogan Lovells
Intuity
Kim & Chang
King & Wood Mallesons
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Martínez Lage, Allendesalazar & Brokelmann
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Reich-Rohrwig Hainz
Souza, Cescon, Barrieu & Flesch Advogados
Tadmor & Co Attorneys at Law
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Torys LLP
CONTENTS
Pharmaceutical Antitrust 2014
Contributing editor:
Marleen Van Kerckhove
Arnold & Porter LLP
Getting the Deal Through is delighted to
publish the fully revised and updated
seventh edition of Pharmaceutical Antitrust,
a volume in our series of annual reports,
which provide international analysis in
key areas of law and policy for corporate
counsel, cross-border legal practitioners and
business people.
Following the format adopted throughout
the series, the same key questions are
answered by leading practitioners in each
of the 31 jurisdictions featured. New
jurisdictions this year include Israel, Poland
and Spain.
Every effort has been made to ensure that
matters of concern to readers are covered.
However, specific legal advice should always
be sought from experienced local advisers.
Getting the Deal Through publications are
updated annually in print. Please ensure
you are always referring to the latest print
edition or to the online version at www.
GettingTheDealThrough.com.
Getting the Deal Through gratefully
acknowledges the efforts of all the
contributors to this volume, who were
chosen for their recognised expertise.
Getting the Deal Through would also like to
extend special thanks to contributing editor
Marleen Van Kerckhove at Arnold & Porter
LLP for her continued assistance with this
volume.
Belarus3
France56
Alexander Liessem
bnt attorneys-at-law
Christophe Hénin and Anne Servoir
Intuity
Brazil8
Germany65
Fabíola Carolina Lisboa Cammarota de
Abreu, Joyce Midori Honda and
Luciano Inácio de Souza
Souza, Cescon, Barrieu & Flesch Advogados
Maxim Kleine and Daniel Dohrn
Oppenhoff & Partner
Bulgaria15
Dessislava Fessenko
Pavlov and Partners Law Firm in cooperation
with CMS Reich-Rohrwig Hainz
Canada19
R Jay Holsten and Dany H Assaf
Torys LLP
Greece73
Despina Samara
Calavros & Partners Law Firm
India79
Samir R Gandhi, Kamya Rajagopal and
Karan Vir Khosla
AZB & Partners
Israel84
China25
Susan Ning and Zhifeng Chai
King & Wood Mallesons
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Tadmor & Co Attorneys at Law
Italy90
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Mark Gall
Bech-Bruun
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di Castelnuovo
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Associato
Japan97
Estonia37
Aet Bergmann
bnt attorneys-at-law
Yusuke Nakano and Junya Kubota
Anderson Mōri & Tomotsune
Korea103
European Union
42
Maxim Kleine, Daniel Dohrn and Julian
Grosse
Oppenhoff & Partner
Finland50
Hwa Soo Chung and Kyungsun Kyle Choi
Kim & Chang
Latvia109
Theis Klauberg and Renaˉrs Gasu
ˉ ns
bnt attorneys-at-law
Klaus Nyblin and Tuomas Saraste
Hammarström Puhakka Partners, Attorneys
Ltd
Getting the Deal Through
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April 2014
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CONTENTS
Lithuania115
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2
Ukraine172
United States
Switzerland159
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and Maritza Quintero
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Souza, Cescon, Barrieu & Flesch Advogados
Brazil
Fabíola Carolina Lisboa Cammarota de Abreu, Joyce Midori Honda and
Luciano Inácio de Souza
Souza, Cescon, Barrieu & Flesch Advogados
Pharmaceutical regulatory law
1 Which legislation sets out the regulatory framework for the
marketing, authorisation and pricing of pharmaceutical products,
including generic drugs?
All companies acting in the pharmaceutical sector are under the
supervision of the National Health Surveillance Agency (ANVISA).
The main legislation that sets out the regulatory framework for the
market includes:
• Law 5,991/1973, which provides for the sanitary control of
drugs, medicines, pharmaceutical inputs and related products;
• Law 6,360/1976, which controls the register of pharmaceutical
products and issuance of operating licences and permits;
• Decree 79,094/1977, which regulates Law 6,360/1976 subjects
the regulation of medicines, pharmaceutical inputs, drug-related
products and others to the National Health Surveillance System;
• Law 9,782/1999, which establishes ANVISA;
• Law 9,787/1999, which disciplines generic drugs;
• Law 6,437/1977, which configures violations to the federal sanitary legislation (ie, persons or companies that operate without
regulatory permits; restrain inspection of regulatory authorities,
etc), and it also establishes general penalities (ie, warning, seizure
of product, etc);
• Law 10,742/2003, which establishes the Drug Market
Regulation Chamber (CMED); and
• several Resolutions of ANVISA, including RDC 17/2010 (good
manufacturing practices); RDC 25/2007 (outsourcing of production steps, quality-control and storage of medicines); RDC
66/2007 (Certificate of Best Practices); and RDC 96/2008 (marketing, advertising and promotion of medicines).
Finally, CMED, from time to time, issues specific resolutions to
inform the market regarding new medicine prices and the adjustment coefficient used for the applicable increase, based on billing
information periodically provided by pharmaceutical companies.
2 Which bodies are entrusted with enforcing these regulatory rules?
ANVISA, under the authority of the Ministry of Health, is the primary authority for enforcing regulatory rules. It coordinates the
National Health Surveillance System and its main role is to protect
and promote the population’s health by ensuring the sanitary safety
of health products and services. ANVISA is responsible for medicines registration proceedings, issuance of licences and permits and
also for establishing regulations applying to the sector.
ANVISA also monitors drug prices and gives technical support
for the definition of drug prices. One of the agency’s divisions is the
Executive Secretariat of the CMED, an interministerial body composed of representatives of the State Office and the Ministries of
Health, Finance, Justice, Development, Industry and Foreign Trade.
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CMED is responsible for medicine market regulation and for establishing criteria for definition and adjusting of medicines prices.
3 Which aspects of this legislation are most directly relevant to the
application of competition law to the pharmaceutical sector?
ANVISA and the Administrative Council for Economic Defence
(CADE) have different and independent roles. While ANVISA aims
to ensure the medical safety of health products and services, CADE
is responsible for preserving competition between the players in the
market. Although the sector is under the jurisdiction of a technical
body, this does not exempt it from compliance with the antitrust
rules. Indeed, there is a coexistence of both legal frameworks in
Brazil.
In 2013 CADE and ANVISA executed a cooperation agreement
according to which the agencies agreed to cooperate with each other
exchanging documents and information, sharing technical reports,
studies and research material, holding meetings and seminars and
jointly working on the promotion of activities and projects.
Competition legislation and regulation
4 Which legislation sets out competition law?
The legislation that sets out competition law in Brazil is Federal Law
12,529/2011 (the Competition Law), effective since 29 May 2012.
The Competition Law structured the Brazilian Competition System
(SBDC), providing prevention and repression of violations against
the economic order, and introduced the pre-merger notification system in Brazil.
5 Are there guidelines on the application of competition law that are
directly relevant to the pharmaceutical sector?
In Brazil, there are no specific guidelines that are directly relevant to
the pharmaceutical sector. However, there are two important resolutions established by CADE that apply to all sectors of the economy:
first, Resolution 2/2012, which regulates the pre-merger notification
of transactions that are reportable according to Law 12,529/2011
and provides the fast-track analysis of merger filings (on 19 February
2014, CADE issued a public consultation to inform the general public and receive comments about the proposed changes in Resolution
2/2012, which establishes, among other things, the inclusion of an
eligible case for the fast-track procedure), among other relevant matters for the merger control system in Brazil; and second, Resolution
3/2012, which establishes a list of fields of business activities for
the purpose of the application of fines set forth in article 37 of Law
12,529/2011 and other measures.
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6 Which authorities investigate and decide on pharmaceutical
mergers and the anti-competitive effect of conduct or agreements
in the pharmaceutical sector?
The Competition Law merged the roles of investigating anti-competitive conduct and deciding on mergers and conduct into one single enforcement agency, that is, CADE. Currently, the new CADE is
composed of:
• the General Superintendency (GS), responsible for the investigation of all anti-competitive conduct and for rendering clearance
decisions, on a preliminary basis, on merger filings in all economic sectors, including in the pharmaceutical sector; and
• the Administrative Tribunal, which is a decision-making body
composed of one chairman and six commissioners, duly
appointed by the president of the republic and responsible for:
• judging administrative proceedings relating to anti-competitive conduct;
• reviewing the merger filings cleared by the General
Superintendency in case of third parties’ appeal or at the
Tribunal’s request; and
•judging oppositions submitted by the General
Superintendency with respect to merger filings; and
• the Department of Economic Studies, responsible for providing
economic opinions and studies.
Besides CADE, the SBDC is composed of the Secretariat for
Economic Monitoring of the Ministry of Finance (SEAE), which is
responsible for promoting competition among government agencies
(including ANVISA), to express opinions of general interest to the
economic order, to develop studies for different sectors of public
policies, and to propose the revision of laws and regulations that
may affect competition in all sectors of the Brazilian economy.
7 What remedies can competition authorities impose for
anti-competitive conduct or agreements by pharmaceutical
companies?
CADE shall analyse the conduct of the object of an administrative
proceeding and may apply penalties on companies, legal entities
and/or individuals, including administrators that are involved in violations of the economic order. CADE may impose pecuniary and
non-pecuniary penalties such as (i) in case of legal entities, a fine
ranging from 0.1 to 20 per cent over the gross sales of the company,
group or conglomerate in the field of the business activity in which
the violation occurred; or (ii) in the case of individuals or public
or private legal entities, which do not perform business activity,
where it is not possible to use the gross sales criterion, the fine will
be between 50,000 and 2 billion reais; and (iii) if the administrator
is directly or indirectly responsible for the violation, when negligence
or wilful misconduct is proven, a fine of between 1 and 20 per cent
of that applied to the company referred in item (i) or the legal entity
referred in item (ii).
According to CADE’s rules, in case of recurrences the fines shall
be doubled. Non-pecuniary penalties may also be applied without
affecting existing or subsequent penalties. For example, CADE may
oblige the company to publish the decision in newspapers, may prohibit a company: (i) from bidding for public service concessions for
a term of not less than five years; (ii) from making payments by
instalments of federal taxes and impose a prohibition on receiving
fiscal incentives or public subsidies. Also, CADE may demand the
spin-off of the company, transfer of corporate control, sale of assets
or partial interruption of activities and any other action required to
eliminate the harmful effects to the economic order.
Based on CADE’s precedents, two examples of cartel cases can
illustrate the fines already imposed by CADE on pharmaceutical
companies:
• in 2007, in Administrative Proceeding No. 08012,004599/199918, companies were condemned for the practice of cartel
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activities in the vitamins market with a total fine due of over 15
million reais; and
• in 2005, in Administrative Proceeding No. 08012,009088/199948 concerning the relevant market of manufacturing of drugs in
the Brazilian territory, CADE found against 20 companies for
establishing unlawful agreements between themselves that consisted of fixing conditions for sales and distribution of drugs in
the market; creating market barriers to new entrants; and refusing to sell goods within the standard payment methods in order
to boycott generics not manufactured by the laboratories in
collusion.
In the second instance, CADE applied a fine of 1 per cent of the gross
revenue of the companies involved and a penalty of 2 per cent of
the gross revenue of the leading company. Also, CADE obliged the
companies to publish the decision in the newspapers, fixed a daily
fine for each day of non-compliance following the decision to order
the cessation of anti-competitive activities and CADE’s commissioners also recommended the creation of compliance programmes to
all companies.
8 Can private parties obtain competition-related remedies if they
suffer harm from anti-competitive conduct or agreements by
pharmaceutical companies? What form would such remedies
typically take and how can they be obtained?
Private parties may report the harmful effects of anti-competitive
conduct or agreements by pharmaceutical companies. However, it
is important to note that article 135 of CADE’s Resolution 1/2012
determines that the commencement of any type of administrative
proceedings established by the Competition Law to investigate private matters without public interest is not permitted. For this reason,
in case a private party wishes to obtain a specific remedy against
pharmaceutical companies for a private matter that does not affect
the public interest (ie, competition as a whole and consumer welfare), it would need to seek such remedies before the judiciary. Such
provision derives from the goals of the Competition Law, which protects competition and consumer welfare instead of private parties,
although they can indirectly benefit from CADE’s decisions.
Most CADE investigations that have resulted in a finding of
anti-competitive behaviour were ex officio investigations. It is possible that CADE received anonymous tip-offs from third parties, but
this has not been disclosed in public records.
9 May the antitrust authority conduct sector-wide inquiries? If so,
have such inquiries ever been conducted into the pharmaceutical
sector and, if so, what was the main outcome?
According to the Competition Law, SEAE is the agency in charge of
competition advocacy activities. SEAE may, by its own initiative or
at the request of CADE or other authorities, develop studies evaluating the competitive situation of specific sectors of the national economic activity, and prepare industry studies that serve as input for
the participation of the Ministry of Finance in the creation of sectorial public policies in the forums in which this Ministry has a seat.
Since the Competition Law came into effect (29 May 2012), SEAE
has not published any inquiries in the pharmaceutical sector.
The only documents prepared by the authorities are not sectorwide inquiries but rather academic papers. In 2008, SEAE prepared
a paper about innovation in the Brazilian pharmaceutical market
that concluded that Brazil needs a more efficient regulatory framework to allow innovation to grow in this market and, in 2001,
SEAE prepared a paper about government policy and regulation
of the pharmaceutical market, which discusses public expenditure
on pharmaceutical products, price formation and the impacts of the
Generics Law.
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Souza, Cescon, Barrieu & Flesch Advogados
ANVISA may also be required to assist SEAE in providing information for the inquiries established by the Competition Law.
10 Is the regulatory body for the pharmaceutical sector responsible
for sector-specific regulation of competition distinct from the
general competition rules?
As detailed above, ANVISA and CADE have different and independent roles. While ANVISA aims to ensure the medical safety of health
products and services, CADE is responsible for preserving competition between the players in the market.
In practical terms, ANVISA tends to cooperate with CADE in
many situations due to its technical skills in such matters. In such
context, when performing investigations on anti-competitive practices or reviewing a merger between pharmaceutical companies,
CADE tends to ask for the cooperation of ANVISA to, for example,
define the relevant market.
One should also mention investigations performed by CADE
to assess whether certain price increases or discounts implemented
by pharmaceutical companies were violating the Competition Law.
As a rule, in this type of discussion, CADE will verify whether the
companies were following CMED pricing rules in order to agree to
a possible unjustified price increase. This was the case in Preliminary
Investigation 08012,011596/2007-21, in which ANVISA was
requested to provide technical information on the product under
investigation. Resolutions issued by CMED are particularly relevant
to the application of competition law to the pharmaceutical sector.
Considering the relevance of such, CADE and ANVISA are discussing the implementation of a technical cooperation agreement in
2013 to share information, helping each authority to keep track of
its rules and their responsibilities and further impact over the market.
11 Can antitrust concerns be addressed with industrial-policy type
arguments, such as strengthening the local or regional research
and development activities?
Although industrial-policy type arguments can be taken into
account, they are not the main element in CADE’s decisions. In its
review of mergers, CADE follows a guideline which splits the analysis into five steps:
• relevant market definition (under the Brazilian law, it is the
authorities’ duty to define the relevant market involved in a
given transaction);
• determination of the market share and exercise of market
power;
• examination of the probability of market power exercise;
• efficiencies; and
• evaluation of the merger’s effect on economic efficiency.
One example of merger that considered industrial-policy type arguments in the pharmaceutical sector was the creation of two pharmaceutical companies to produce biotechnological drugs through
a joint venture between Brazilian laboratories (Merger Filing
08012,006121/2012-80 and Merger Filing 08012,002467/201217). Although CADE highlighted the importance of the transaction
due to Brazil’s complete lack of local production in this field and
total reliance on imported products, this fact did not prevent CADE
from imposing restrictions through a negotiated agreement that will
basically monitor the activities of these joint ventures.
12 To what extent do non-government groups play a role in the
application of competition rules to the pharmaceutical sector?
As explained in question 8, any party can denounce anti-competitive behaviour if there is public interest supporting the allegations.
However, there is no evidence of non-governmental groups playing a
role in the application of antitrust rules in the pharmaceutical sector.
10
According to CADE’s precedents, there have been administrative
proceedings brought by trade associations and by members of the
House of Representatives and the Federal Senate. For instance, in
2006, the Preliminary Investigation 08012,008890/2006-47 was
brought before CADE by a trade association of the north-east of
Brazil against a local pharmacist and its partners, accused of practising predatory pricing and unfair competition in the region. CADE
concluded that there had not been violations against the economic
order. Following the same understanding, in the Administrative
Proceeding 08012,001045/2000-82, members of the National
Congress requested an investigation against a pharmaceutical company for abuse of dominant position and price control. CADE did
not go further with the investigations based on the argument that
the antitrust agency shall not interfere in market prices, but only
analyse anti-competitive effects, if any.
Review of mergers
13 To what extent are the sector-specific features of the
pharmaceutical industry taken into account when mergers
between two pharmaceutical companies are being reviewed?
CADE has analysed several mergers between pharmaceutical companies, the most important of which were the following: Merger
Filing 08012,003189/2009-10 – Medley/Sanofi Aventis, Merger
Filing 08012,002252/2009-92 – Merck & Co/Schering-Plough and
Merger Filing 08012,000751/2010-15 – Novartis/Alcon. These
three mergers have been approved with conditions and after the
negotiation of a performance commitment with CADE.
Sector-specific features of the pharmaceutical industry have been
taken into account in all the decisions that made in-depth evaluation
of the market. In particular, CADE considered that:
• pharmaceutical products can be classified as prescribed and
non-prescribed (or over the counter), which divides consumers
into two types: doctors and patients or final users;
• another important classification is whether the drug is protected
by patents or not, since patented drugs require more investments
in research and development, obtainment of the patent and registries and publicity and marketing of products;
• in addition to that, several governmental actions have been
taken in order to enhance competition in this sector, the most
important of which is Law 9,787/99 (the Generics Law), which
caused a significant change in the price of medicines;
• finally, this sector has specific entry barriers, such as access to a
distribution network, portfolio effects, brand loyalty, technologies and specialised manpower and regulatory barriers.
Moreover, certain regulations by ANVISA and the World Health
Organization may also be evaluated when defining the products
that comprise the relevant market of a given transaction. For more
details on how the authorities define the relevant market, see question 14 below.
14 How are product markets and geographic markets typically
defined in the pharmaceutical sector?
According to CADE’s guidelines, a relevant market has two fundamental dimensions: product and geographic. The product market
describes the good or service while the geographic market describes
the location in which the products or services are offered.
The definition that has been consistently adopted by CADE is the
anatomical classification developed by the European Pharmaceutical
Marketing Research Association and adjusted by the World Health
Organization, which created the anatomical therapeutic chemical
(ATC) system. The ATC system includes the following levels:
• anatomic group – ATC1;
• therapeutic group – ATC2;
• pharmacological group – ATC3;
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• chemical group – ATC4; and
• chemical substance – ATC5.
CADE has already expressed concerns about the ATC system: in
certain cases, the same therapeutic group includes products that
have different applications and no possibility of substitution with
each other. On the other hand, the same therapeutic group may fail
to include products that are important substitutes for the product
under analysis.
In Merck & Co/Schering-Plough, CADE used both ATC4 classification and a segregation of one ATC4 classification to define the
relevant market. The relevant market was defined as: therapeutic
subclass C10C0; therapeutic subclass A04A1; therapeutic subclass
L01D0; therapeutic subclass N06A9; and medication made with
ezetimibe (part of C10A9), since the therapeutic subclass C10A9,
in which this medication is included, also includes products that are
not substitutes for the product under analysis. As for the geographic
market, following all previous precedents of CADE, the market was
considered the national territory. CADE considered the following
concentration problematic: in the market of medication made with
ezetimibe, the market share of the merged companies was 83.63 per
cent considering the therapeutic subclass C10A9 as a whole (if the
assessment was made considering only the relevant part of C10A9,
the concentration would be 100 per cent) and in the market of the
therapeutic subclass C10C0, the market share of the merged companies was 100 per cent. The transaction was approved with the execution of a performance commitment on 20 October 2010, according
to which a third party would first be the exclusive distributor of
two products (C10A9 and C10C0) and then be licensed to manufacture them in case it decides to make the appropriate registries
with ANVISA.
In the Sanofi/Medley, CADE defined the relevant markets
according to the ATC4 classification of the products sold in the
Brazilian market by the parties. Out of 15 different relevant markets, only two were considered problematic: therapeutic subclass
A03F0, which resulted in market share concentration of 52.77 per
cent (with C2 superior to 82 per cent); and B01C2, which resulted
in market share concentration of 60.94 per cent (with C2 superior
to 84 per cent). Following the guidelines for merger review (see
question 11), CADE concluded that there were high entry barriers,
increase of portfolio effect, reduction of rivalry and high possibility
of unilateral and coordinated exercise of market power. The transaction was approved on 19 May 2010 with the execution of a performance commitment according to which the parties had to sell
products similar to Digedrat and Peridal (A03F0) in order to reduce
their market share to 36 per cent and to sell a product similar to
Lopigrel (B01C2) to allow the entry of a new competitor in the market. Only buyers with market share lower than 15 per cent would
be considered.
Under the Competition Law, CADE continues to assess the
ATC system in the relevant market definition. Although in most
cases CADE considered the relevant market based on the ATC3 or
ATC4 classification, there is one merger filing (Merger Filling No.
08700.000670/2013-73, Applicants Astrazeneca Farmaceuticals LP
and Bristol – Myers Squib Company) in which CADE looked at
the second level of the ATC to encompass all medicines for diabetes treatment. This is because only at a broader level (ATC2) were
overlaps found.
15 In what circumstances will a product and geographical overlap
between two merging parties be considered problematic?
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the parties after the transaction is possible. In relation to geographic
overlap, in Brazil, CADE classifies the geographic market as national
due to health-sector regulations that demand heavy costs and procedures for imported drugs in Brazil and requirements that all drugs
sold in Brazil be registered with the Ministry of Health, including
those from Mercosur, pursuant to article 12 of Law 6,320/76.
16 When is an overlap with respect to products that are being
developed likely to be problematic?
CADE tends to include products that are being developed (‘pipeline
products) in the antitrust analysis, trying to assess the potential market share of each party with respect to such specific pipeline product
and remaining competitors. An overlap may, for example, be considered problematic if, after the completion of the transaction, the
merged entity is likely to slow down or terminate the development
of the product, and the authority may require the merged entity to
sign an agreement committing itself to keep the development of a
given pipeline product.
One should note that certain pharmaceutical companies have
been creating joint ventures to develop new products in Brazil (that
in theory should not compete with the product each of these companies offers in the market). Those transactions have been submitted to
CADE’s review and although not creating an overlap, the authority
is demonstrating its concern with the likelihood of coordination by
the shareholders of such JVs when developing the new products to
be offered to the market.
17 Which remedies will typically be required to resolve any issues
that have been identified?
CADE shall determine the applicable restrictions in order to mitigate occasional negative effects of the act of economic concentration over the affected relevant markets, including the sale of assets,
spin-offs, and compulsory licensing of intellectual property rights
(trademarks, patents, etc).
CADE has traditionally sought to solve the antitrust implications raised by a deal through remedies, rather than by applying a
full block decision, especially under a pre-merger regime. Structural
and behavioural commitments have been adopted over the past, tailored to the characteristics of the affected markets. CADE usually
favours structural remedies over behavioural ones, creating permanent conditions for competition, rather than determining behavioural conditions that have to be monitored over time.
For examples of structural remedies in the pharmaceutical sector, see question 14.
18 Would the acquisition of one or more patents or licences be
subject to merger reporting requirements? If so, when would that
be the case?
Yes. Article 90 of the Competition Law sets forth a list of reportable
transactions that should be submitted to CADE’s approval, if they
meet certain turnover thresholds. This list includes the acquisition of
tangible or intangible assets (patents or licences).
As per the submission thresholds, the Law has only established
revenue criteria, according to which a reportable transaction must
involve one party that meets the 750 million reais threshold and
another that meets the 75 million reais threshold. Both thresholds
refer to gross revenues or volume of business in Brazil of the groups
involved in the transaction in the year preceding it.
A product and geographic overlap between two merging parties
can be considered problematic in certain cases, especially when the
subclasses under the ATC classification (explained in question 14)
do not have products that could be classified as substitutes and the
antitrust analysis concludes that the exercise of market power by
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Souza, Cescon, Barrieu & Flesch Advogados
Anti-competitive agreements
19 What is the general framework for assessing whether an
agreement or practice can be considered anti-competitive?
According to the Competition Law, regardless of malicious intent,
an agreement or practice (conduct) in any way intended to, or otherwise capable of, producing any of the following effects shall be
deemed to be a violation of the economic order, even if such effects
are not achieved:
• to limit, restrain or in any way damage open competition or free
enterprise;
• to control a relevant market of products and/or services;
• to increase profits on an arbitrary basis; or
• to abuse a dominant position.
Paragraph 3, in its turn, describes 19 types of anti-competitive conduct that violate the economic order, to the extent they achieve or are
capable of achieving any of the effects listed above. Please note such
list is merely illustrative, meaning therefore that the Competition
Law does not provide for per se violations of the economic order.
As a result, agreements and practices shall be analysed on a case-bycase analysis.
To mention but a few examples, the most relevant practices are
the following:
• to agree to, or join in manipulating or adjusting with competitors the prices of goods or services; the production or sale of a
restricted amount of goods or the provision of a limited number,
volume or frequency of services; the division of parts or segments of market of goods or services by means of the distribution of customers, suppliers, regions or time periods; prices,
conditions, privileges or refusal to participate in public bidding;
• to promote, obtain or influence the adoption of uniform or
agreed business practices among competitors;
• to limit or prevent the access of new companies to the market;
and
• to create difficulties for the establishment, operation or development of a competitor company or supplier, acquirer or financier
of goods or services.
20 Describe the nature and main ramifications of any cartel
investigations in the pharmaceutical sector.
See question 7 for two examples of cartel cases in the pharmaceutical sector where CADE found against the business operators.
One should note that proceedings to investigate anti-competitive
practices are, as a general rule, confidential. Therefore, there may
exist other ongoing investigations not yet disclosed by the antitrust
authorities.
21 To what extent are technology licensing agreements considered
anti-competitive?
As noted in question 19, the Competition Law does not provide for
per se violations of the economic order. As a result, agreements and
practices shall be analysed case by case, under the rule of reason. In
this sense, in case a technology licensing agreement is able to achieve
or is capable of achieving any of the effects listed in article 36 (caput)
of the Competition Law, then a violation could occur.
It is interesting to note one of the exemplificative conducts
described by section 3, XIX, of the mentioned article: ‘to abusively
exercise or exploit intellectual or industrial property rights, technology or trademark’. On the one hand, technology licensing agreements can be considered beneficial to competition, as they may help
to improve economic efficiencies, promote innovation and lead to
the dissemination of technologies; on the other, the law brings the
concern that IP rights and technology agreements may lead to possible anti-competitive conduct.
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Although not in the pharmaceutical sector, CADE has recently
analysed a technology licensing agreement submitted as a merger
filing by Monsanto and Bayer, excluding certain provisions of the
agreement that could grant the former a certain level of control
over the latter. Therefore, such decision demonstrates that technology licensing agreements may raise concerns depending on the
specific restrictive provisions they may contain. Furthermore, on
19 February 2014, CADE issued a Public Consultation (Consulta
Publica) to inform the general public and to receive comments about
the proposed draft of a new resolution establishing the criteria for
the submission of associative agreements as merger filings.
22 To what extent are co-promotion and co-marketing agreements
considered anti-competitive?
Under the rule of reason, co-promotion and co-marketing agreements can generate efficiency gains, for example through economies of scale or by allowing market entry, meaning that they often
enhance competition. They are likely to be seen by CADE as horizontal cooperation agreements and, for this reason, depending on
certain revenue criteria of the companies signing such agreements,
they may need to be submitted to CADE’s approval as merger filings.
In this regard, Merger Filing 08012,011338/2010-40 is relevant,
involving a co-promotion and co-marketing between two pharmaceutical companies, which was submitted to CADE’s analysis in
2010. CADE’s Board decided not to acknowledge such merger filing,
as it understood the agreements were not able to affect competition,
even potentially, because they did not contain restrictive provisions,
such as exclusivity and non-compete clauses.
23 What other forms of agreement with a competitor are likely
to be an issue? Can these issues be resolved by appropriate
confidentiality provisions?
The Competition Law does not seek to prohibit any type of agreement. In fact, it is concerned with the possible negative effects that
may arise of a given agreement. Anti-competitive issues are more
likely to occur if the parties have significant market power. Under
such context, all types of cooperation/associative agreements may
raise antitrust concerns depending on their specificities and parties
involved and for this reason, and depending on certain revenue criteria of parties involved, they may need to be submitted for CADE’s
approval, as merger filings, to avoid future risks.
Confidentiality provisions may help in those cases in which the
agreement, although not enhancing the share of a given product or
market, facilitates the exchange of commercially sensitive information among competitors, such as prices, customers and production
costs. In this sense, any provision restricting the flow of information
(ie, Chinese walls) may reduce antitrust risks.
24 Which aspects of vertical agreements are most likely to raise
antitrust concerns?
According to the applicable legislation, vertical agreements should
be analysed under the rule of reason. The following are common
examples of vertical restraints:
• resale price maintenance: agreements at different levels of the
distribution structure on the price at which a customer will resell
the goods or services supplied;
• customer and territorial restraints: supplier or upstream manufacturer of a product prohibiting a distributor from selling outside an assigned territory or particular category of customers;
• exclusive provisions: provisions requiring the purchase of products or services from one supplier for a period of time exclusively, leading to a market foreclosure; and
• tying arrangements: an agreement by a party to sell one product
(the tying product), but only on the condition that the buyer also
purchases a different (or tied) product.
Getting the Deal Through – Pharmaceutical Antitrust 2014
© Law Business Research Ltd 2014
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Update and trends
Although the Competition Law established objective thresholds for
the submission of merger filings, there is legal uncertainty about
transactions involving commercial agreements. This is because
although the Law sets forth that joint ventures, consortiums and
associative agreements are reportable transactions (provided that the
turnover thresholds are met), there are doubts concerning the extent
to which distribution and supply agreements or technology licence
Precedents also indicate that vertical agreements are usually submitted to CADE’s approval as merger filings, in an effort to avoid future
antitrust concerns. As an example one should note Merger Filing
08012,000412/2011-83, referring to an exclusive distribution agreement between two companies, in which CADE decided to approve
the transaction only if the non-compete provisions were amended to
comply with CADE’s precedents.
25 To what extent can the settlement of a patent dispute expose the
parties concerned to liability for an antitrust violation?
To the best of our knowledge, the Brazilian antitrust authorities have
never initiated an investigation based on patent litigation settlement
agreements. However, the parties should be careful when executing such agreements, as they could demonstrate, for example, that
the patent holder was creating difficulties for the establishment of
generic products, and could consequently be liable for an antitrust
violation.
agreements should be submitted to CADE’s review. A resolution
defining the criteria is much expected since these agreements are
being reviewed on a case-by-case basis. In this sense, on 19 February
2014, CADE issued a Public Consultation to inform the general public
and to receive comments about the proposed draft of a new resolution
establishing the criteria for the submission of associative agreements
as merger filings.
even potentially, produce any of the anti-competitive effects listed in
article 36 of the Competition Law.
28 Can a patent holder be dominant simply on account of the patent
that it holds?
Yes. This is possible when there is no substitute product to be used
as an alternative in the relevant market of the product protected by
the patent rights.
29 To what extent can an application for the grant of a patent expose
the patent owner to liability for an antitrust violation?
In principle, an application for the grant of a patent will not by itself
expose the patent owner to liability for antitrust violation. However,
if the patent owner uses a patent in an abusive manner (article 36,
section 3, XIX) and for this reason is able to achieve any of the
effects listed in article 36 (caput) of the Competition Law, then a
violation could occur.
Anti-competitive unilateral conduct
26 In what circumstances is conduct considered to be anticompetitive if carried out by a firm with monopoly or market
power?
Market power is a prerequisite for a finding of an antitrust violation
in Brazil. One should note that the antitrust violation would only
exist if the investigated firm holds a dominant position in the investigated market – which is presumed by the law when a company or
group of companies controls at least 20 per cent of the given market.
27 When is a party likely to be considered dominant or jointly
dominant?
See question 26. One should note, however, that the existence of
market power itself is not considered to be a violation of the economic order per se. In order for this dominant position to be censured by CADE, it must be used in a way that could actually, or
Fabíola Carolina Lisboa Cammarota de Abreu
Joyce Midori Honda
Luciano Inácio de Souza
30 To what extent can the enforcement of a patent expose the patent
owner to liability for an antitrust violation?
In principle, the enforcement of a patent will not by itself expose the
patent owner to liability for antitrust violation for the same reason
explained above (question 29).
31 To what extent can certain life-cycle management strategies
expose the patent owner to liability for an antitrust violation?
In principle, life-cycle management strategies will not by themselves
expose the patent owner to liability for antitrust violation for the
same reason explained above (question 30).
32 Do authorised generics raise issues under the competition law?
This specific situation is not covered by the Competition Law and in
principle it is unlikely that such conduct would violate the antitrust
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© Law Business Research Ltd 2014
BRAZIL
Souza, Cescon, Barrieu & Flesch Advogados
rules. However, studies carried out by the Brazilian antitrust authority in 2007 (Department of Protection and Economic Defence –
Secretariat of Economic Law: ‘Competition Effects of Co-Marketing
Contracts in the Pharmaceutical Market’) found potential antitrust concerns in agreements used for generics authorisation (copromotion and co-marketing agreements), such as facilitating coordination among competitors. To date, CADE has not decided on this
issue.
33 To what extent can the specific features of the pharmaceutical
sector provide an objective justification for conduct that would
otherwise infringe antitrust rules?
The Competition Law applies to all sectors of the Brazilian economy
on an equal basis. There are no specific features of the pharmaceutical sector or any other sector that could provide an objective justification for conduct that infringes antitrust rules. If, after being
analysed under the rule of reason, the conduct is considered harmful
to competition, CADE will rule against an infringer irrespective of
the specificities of the pharmaceutical sector.
As some procedures, such as leniency and preparatory investigations are covered by confidentiality, it is difficult to assess the
increase of antitrust enforcement in any given sector.
To date, there are few cases in the pharmaceutical sector analysed by CADE, the most important of which are described in question 7.
35 Is follow-on litigation a feature of pharmaceutical antitrust
enforcement in your jurisdiction? If so, please briefly explain the
nature and frequency of such litigation.
No. Follow-on litigation is still incipient in Brazil. Even though
CADE has encouraged the use of this tool, we are not aware of any
case of follow-on litigation in the pharmaceutical sector.
34 Has there been an increase in antitrust enforcement in the
pharmaceutical sector in your jurisdiction? If so, please give an
indication of the number of cases opened or pending and their
subject matters.
From the perspective of CADE’s jurisprudence, it is not possible
to infer any increase in antitrust enforcement in the pharmaceutical sector. However, it is important to note that CADE has made a
strong effort to increase antitrust enforcement in Brazil since 2005.
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