EU LAW and Lifesciences

EU Law and
Life Sciences
Peter BOGAERT
Damien GERADIN
Editors
Robin BLANEY
Jennifer BOUDET
Miranda COLE
Michael CLANCY
Sarah FOREST
Laurie-Anne GRELIER
Christos MALAMATARIS
John RUPP
Jennifer SAPERSTEIN
Henriette (Jetty) TIELEMANS
Nicoleta TUOMINEN
Kristof VAN QUATHEM
John WILEUR
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EU LAW AND LIFE SCIENCES
Editors
Peter Bogaert
Damien Geradin
© Institute of Competition Law, 2014
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Copyright © 2014 by Institute of Competition Law

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First Printing, 2014

ISBN 978-1-939007-421
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EU law and life sciences / editors, Peter Bogaert, Damien

Geradin.
pages cm
Includes bibliographical references and index.
LCCN 2013956306
ISBN 9781939007421
ISBN 9781939007445
1. Life sciences--Law and legislation--European

Economic Community countries. I. Bogaert, Peter.
II. Geradin, Damien.
KJE6172.E9 2014 349.24

QBI13-600305
Cover and book design by Yves Buliard, www.ybgraphic.fr
PREFACE
Everyone with an interest in the life sciences sector must have at least a basic knowledge of the
European Union legal and regulatory system. The EU is the single largest market for medicines and
authorities in the member states still play a major role in regulating pharmaceuticals and medical
devices, many of the most important issues are now decided at the EU level, by the European Medi-
cines Agency, the European Commission, Parliament and Council, the courts of the European Union
and other EU institutions.
This book provides a detailed description of the principles of EU law, regulation and policy that most
directly affect the pharmaceutical and medical device sectors. It describes systems for control of
market entry; periods of regulatory and patent protection; regulation of advertising and promotion;
-
tion, parallel trade, life cycle management and pricing and merger control; protection of personal data;
which combines experts in all relevant areas of law and regulation in major jurisdictions around the
world.
suggestions for additional topics that might be covered in future editions.
Richard Kingham
Covington & Burling LLP
III
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IV EU Law and LifE SciEncES

CONTRIBUTORS
Robin Blaney
Jennifer Boudet
Miranda Cole
Michael Clancy
Sarah Forest
Laurie-Anne Grelier
Christos Malamataris
John Rupp
Jennifer Saperstein
Henriette (Jetty) Tielemans
Nicoleta Tuominen
Kristof Van Quathem
John Wileur
EU Law and LifE SciEncES V

TABLE OF CONTENTS
1 OVERVIEW OF THE REGULATORY CATEGORIES

AND REGIMES FOR LIFE SCIENCES PRODUCTS 5
A. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. HISTORICAL OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
C. KEY ASPECTS OF THE MAIN EU REGULATORY REGIMES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
D. PRODUCTS FOR ANIMAL USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
E. BORDERLINE DETERMINATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
F. GEOGRAPHICAL SCOPE OF THE EU RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
2 THE MARKETING AUTHORISATION FOR MEDICINAL

PRODUCTS AND THE REGULATORY OBLIGATIONS
OF COMPANIES 25
A. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
B. MARKETING AUTHORISATION PROCEDURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
C. TYPES OF MARKETING AUTHORISATION APPLICATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
D. OTHER AUTHORISATION PROCEDURES AND EXEMPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
E. OBLIGATIONS OF THE MARKETING AUTHORISATION HOLDER. . . . . . . . . . . . . . . . . . . . . . . . . . 42
3 THE PROTECTION OF MEDICINAL PRODUCTS 47

A. PATENT PROTECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
B. REGULATORY EXCLUSIVITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
4 ADVERTISING AND INFORMATION – EU RULES GOVERNING

MEDICINAL PRODUCTS AND MEDICAL DEVICES 63
A. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
B. MEDICINAL PRODUCTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
C. MEDICAL DEVICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
D. TRANSPARENCY RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
EU Law and LifE SciEncES 1

5 PHARMACOVIGILANCE 85
A. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
B. KEY REGULATORY AUTHORITIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
C. PHARMACOVIGILANCE QUALITY SYSTEM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
D. EXPEDITED REPORTING REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
E. PERIODIC REPORTING REQUIREMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
F. RISK MANAGEMENT PLAN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
G. POST-AUTHORISATION SAFETY STUDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
H. OTHER SOURCES OF REPORTING OBLIGATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
I. OTHER CONSIDERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
J. ENFORCEMENT AND PENALTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
6 MARKET DEFINITIONS IN THE LIFE SCIENCES SECTOR 107

A. INTRODUCTION: BASIC CONCEPTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
B. HUMAN PHARMACEUTICALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
C. OTHER PRODUCT GROUPS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115
D. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119
7 PARALLEL TRADE OF LIFE SCIENCE PRODUCTS 121

A. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121
B. KEY STAKEHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
C. APPLICABLE LAWS AND CASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124
D. APPLICATION OF THE LAWS AND CASES TO SPECIFIC STRATEGIES . . . . . . . . . . . . . . . . . . . . . 136
8 LIFE-CYCLE MANAGEMENT STRATEGIES

AND EU COMPETITION LAW 139
A. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139
B. PHARMACEUTICAL SECTOR INQUIRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140
C. REGULATORY ABUSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142
D. PATENT SETTLEMENTS BETWEEN ORIGINATORS AND GENERIC COMPANIES . . . . . . . . . . . 156
E. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
2 EU Law and LifE SciEncES

9 PRICING OF PHARMACEUTICAL PRODUCTS
AND COMPETITION LAW 161
A. ABUSIVE PRICING PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
B. EXCLUSIONARY PRICING PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162
C. EXPLOITATIVE PRICING PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184
D. DISCRIMINATORY PRICING PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188
E. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
10 EU MERGER CONTROL IN THE LIFE SCIENCES SECTOR 193

A. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193
B. PROCEDURAL RULES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206
E. REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 209
F. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 213
11 DATA PROTECTION IN THE LIFE SCIENCES INDUSTRY 215

A. EU DATA PROTECTION LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
B. DATA PROTECTION IN THE PHARMACEUTICAL SECTOR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222
C. DATA PROTECTION LAW IN THE PHARMACEUTICAL SECTOR IN PRACTICE . . . . . . . . . . . . . 226
12 BRIBERY RELATED RISK AND MITIGATION MEASURES

FOR LIFE SCIENCES COMPANIES 235
A. OVERVIEW OF BRIBERY ACT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237
B. OVERVIEW OF THE FCPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240
C. RECENT EUROPEAN LIFE SCIENCES ANTI-CORRUPTION ENFORCEMENT ACTIONS . . . . . . 245
D. RISK AREAS AND ANTI-CORRUPTION CONTROLS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252
E. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258

1
OVERVIEW OF THE REGULATORY CATEGORIES
AND REGIMES FOR LIFE SCIENCES PRODUCTS
A. INTRODUCTION 1.0 c) Marketing authorisation 1.31
B. HISTORICAL OVERVIEW 1.03 e) Pharmaceutical operators 1.41

1. Gradual development 2. Medical devices 1.49
over several decades 1.06
3. Cosmetic products 1.52
2. Importance of national
rules and procedures 1.12 4. Foodstuffs 1.55
5. Biocidal products 1.58
C. KEY ASPECTS OF THE MAIN
EU REGULATORY REGIMES 1.18 D. PRODUCTS FOR ANIMAL USE 1.60
1. Medicinal products 1.21 E. BORDERLINE DETERMINATIONS 1.64
a) Regulatory authorities 1.26
F. GEOGRAPHICAL SCOPE
OF THE EU RULES 1.69
A. INTRODUCTION
1.01 The European Union (‘EU’) has gradually developed regulatory regimes for most life sci-
ences products. The different regimes constitute a fairly comprehensive set of rules that
captures the bulk of health and consumer products used in (or on) the body. This chapter
provides an overview of the most important categories of products, in particular those for
-
tion B) and describes the key aspects of the main regimes (Section C). It then provides an
outline of the EU rules1 on products intended for animal use (Section D), but these products
are not further discussed in this book.2 It also discusses the main principles of borderline
determinations (Section E). Finally, this chapter describes the geographical scope of the
EU rules, in particular under the European Economic Area (‘EEA’) agreement and other
bilateral cooperation agreements (Section F).
1 This chapter generally refers to ‘European Union’, ‘EU’ or ‘Union’ rules. This is done for reasons of simplic-
ity and clarity. The relevant rules were technically adopted as rules of the European Economic Community
(‘EEC’) until November 1993, and then as European Community (‘EC’) rules until December 2009. Occasionally,
they were also adopted as Euratom rules.
otherwise.

OVERVIEW OF THE REGULATORY CATEGORIES AND REGIMES FOR LIFE SCIENCES PRODUCTS
1.02 -
ry requirements for placing the product on the market (for instance, pre-market approval
for medicines, CE-marking for medical devices,3 or self-assessment for cosmetics), it may
instance, health claims for foods, as opposed to medical devices), and it has important impli-
cations for regulatory exclusivity rights (in particular the data and marketing protection for
medicines).4
in areas that are not (or not fully) regulated by EU law, such as restrictions on advertising
(especially for medical devices) or VAT rates.
B. HISTORICAL OVERVIEW
1.03 EU life sciences product rules have been developed gradually, starting in the early 1960s,
and have over time developed into an almost comprehensive regime. These rules also
evolved from a mere harmonisation of national rules to a full set of rules and procedures
taken at the EU level.
1.04 To a great extent, the rules are based on the powers of the EU to regulate products to guaran-
tee their free movement between Member States (in particular, the so-called ‘single market
legislation’). That legislation has, however, always included the protection of public health
as a key objective. As a general rule, the protection of health is recognised as being more
5
Since December 2009, the EU has
express public health powers to regulate the quality and safety of medicinal products and
medical devices.6 More and more, the EU rules also take the form of Regulations, which are
directly applicable throughout the EU, as opposed to Directives, which need implementa-
tion or ‘transposition’ in national law to become binding on companies and private persons.
1.05 Notwithstanding the expanding scope and increasingly detailed nature of the EU rules re-
lated to life sciences products, important areas remain subject to national provisions. Many
regulatory issues are also subject to a combination of EU and national rules or procedures.
3 The CE-marking indicates that the medical device has been subject to a conformity assessment and meets
device prior to its placing on the market.

4 See Chapter 3 on the protection of medicinal products.
5 The Court of First Instance, for instance, held in the Anorectics case that there is a “general principle, iden-
considerations”. See joined Cases T-74/00, T-76/00, T-83/00 to T-85/00, T-132/00, T-137/00 and T-141/00
Artegodan GmbH and Others v Commission [2002] ECR II-04945, para 173.
6 Article 168(4) TFEU. Prior to 2009, the EU already had powers to regulate the quality and safety of blood
and other human materials such as organs, and to adopt veterinary and phytosanitary measures.

1. Gradual development over several decades

1.06 7
life sciences rules were adopted in the 1960s. They initially only imposed
broad requirements for certain products, such as the need for a marketing authorisation for
medicines (mainly in response to the thalidomide scandal8
such as the list of permitted colorants for use in foods.9
1.07 Over the years, various other product categories became subject to EU rules. As of 1976,
Directive 76/768 on cosmetic products10
and other tobacco products was also adopted in 1989.11 Between 1990 and 1998, three Di-
rectives on medical devices were adopted to regulate active implantable medical devices,12
general medical devices13 and in vitro diagnostic medical devices.14 Another 1998 Directive
introduced regulation of biocidal products.15
1.08 At the same time, the legislation relating to certain types of products became much more
detailed and gradually provided a more complete regime. For instance, the EU rules on
medicines initially excluded non-branded generic medicines, radiopharmaceuticals, immu-
rules were adopted for these products. The rules on marketing authorisations and regulatory
controls for medicines became much more detailed and aspects such as advertising, whole-
7 As stated in the introduction, for the sake of simplicity, reference is made to EU rules even if the rules were
historically EEC or EC rules.
8 Thalidomide was used in the late 1950s and early 1960s in Germany against nausea and morning sickness in
pregnant women. It led to the birth of thousands of children with limbs malformation. The thalidomide
scandal led to the development of the regulatory regime for the approval and monitoring of medicinal
products.
9 Council Directive of 23 October 1962 on the approximation of the rules of the Member States concerning
the colouring matters authorised for use in foodstuffs intended for human consumption, OJ 1962 P115, pp.
2645-2654. This was followed by rules on preservatives.
10 Council Directive 76/768/EEC of 27 July 1976 on the approximation of the laws of the Member States relat-
ing to cosmetic products, OJ 1976 L262, pp. 169-200. The Directive has been replaced by Regulation (EC)
No 1223/2009 (see below).
11 Council Directive 89/622/EEC of 13 November 1989 on the approximation of the laws, regulations and
administrative provisions of the Member States concerning the labelling of tobacco products, OJ 1989 L359,
pp. 1-4. This Directive was replaced by Directive 2001/37/EC of the European Parliament and of the Council
of 5 June 2001 on the approximation of the laws, regulations and administrative provisions of the Member
States concerning the manufacture, presentation and sale of tobacco products, OJ 2001 L194, pp. 26-35.
12 Council Directive 90/385/EEC of 20 June 1990 on the approximation of the laws of the Member States relat-
ing to active implantable medical devices, OJ 1990 L189, pp. 17-36.
13 Council Directive 93/42/EEC of 14 June 1993 concerning medical devices, OJ 1993 L169, pp. 1-43.
14 Directive 98/79/EC of the European Parliament and of the Council of 27 October 1998 on in vitro diagnostic
medical devices, OJ 1998 L331, pp. 1-37.
15 Directive 98/8/EC of the European Parliament and of the Council of 16 February 1998 concerning the placing
of biocidal products on the market, OJ 1998 L123, pp. 1-63. This Directive has been replaced by Regulation
(EU) No 528/2012 (see below).

EU marketing authorisation procedures were applicable from 1995 under the coordination
of the European Medicines Agency (‘EMA’), and led to European Commission decisions.
Regulations on clinical trials,16 orphan medicines,17 paediatric requirements and rewards,18
and advanced therapies,19 such as gene and cell therapies and tissue engineered products,
supplement the general regime. Since 1992, the rules also provide for an extension of the
20,21
1.09 -
ings, labelling, advertising principles, contaminants, and general principles for good manu-
organisms (‘GMO’) or GMO-derived foods, novel foods, dietary products, food supple-
ments and nutrition and health claims. The General Food Law Regulation (EC) 178/2002
also lays down general EU food law principles and establishes the European Food Safety
Authority (‘EFSA’).22
1.10 The Cosmetics Directive provided a comprehensive regime for the composition and label-
regulated only at a later stage, such as the use of hormones or lidocaine as ingredients. In
2003, the EU adopted strict restrictions on animal testing. The Directive has been replaced
16 Directive 2001/20/EC of the European Parliament and of the Council of 4 April 2001 on the approximation
of the laws, regulations and administrative provisions of the Member States relating to the implementation of
good clinical practice in the conduct of clinical trials on medicinal products for human use. OJ 2001 L121,
pp. 34-44. In July 2012, the European Commission proposed a new Clinical Trials Regulation, replacing the
existing Directive.
17 Regulation (EC) No 141/2000 of the European Parliament and of the Council of 16 December 1999 on or-
phan medicinal products, OJ 2000 L18, pp. 1-5.
18 Regulation (EC) No 1901/2006 of the European Parliament and of the Council of 12 December 2006 on
medicinal products for paediatric use and amending Regulation (EEC) No 1768/92, Directive 2001/20/EC,
Directive 2001/83/EC and Regulation (EC) No 726/2004, OJ 2006 L378, pp. 1-19.
19 Regulation (EC) No 1394/2007 of the European Parliament and of the Council of 13 November 2007 on ad-
vanced therapy medicinal products and amending Directive 2001/83/EC and Regulation (EC) No 726/2004,
OJ 2007 L324, pp. 121-137.
20 Council Regulation (EEC) No 1768/92 of 18 June 1992 concerning the creation of a supplementary protec-
(EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the supplemen-
21 For an overview of the early history of the EU rules on medicines, see P. Deboyser, “Le marché unique des
produits pharmaceutiques” (1991) Revue du Marché Unique Européen, p. 101.
22 Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying
down the general principles and requirements of food law, establishing the European Food Safety Authority
and laying down procedures in matters of food safety, OJ 2002 L31, p. 1, as amended. For an overview of
the early history of EU rules on foods, see Lister C, Regulation of Food Products by the European Com-
munity (Butterworth, 1992) Chapter 2, p. 7. For a more recent history see Costato, l. and Albisinni, F.,
European Food Law (CEDAM, 2012) Chapter II and Defares, K. and Hazeveld, N., “Chronicle European
Food Law 2010-2012”, EFFL, 2013, pp. 168-175. For a more general historical overview, see 50 Years of
Food Safety in the European Union, European Commission 2007, available at http://ec.europa.eu/food/food/
docs/50years_foodsafety_en.pdf.

by a Regulation,23 which also envisages further implementation rules, such as good manu-
facturing practices (‘GMP’) standards and common rules for product claims.
1.11 replaces 24
the 1998 Biocides Directive. In September 2012, the European Commission published
proposals for two new Regulations overhauling the medical devices rules and replacing the
three Directives. And in December 2012, the Commission proposed a new Tobacco Direc-
tive aimed at a more detailed and stricter EU regime.
2. Importance of national rules and procedures

1.12 Notwithstanding the widely expanded scope and detail of the EU rules on life sciences
products, the national (and sometimes regional) rules of the Member States remain very
important for different reasons.
1.13 . For medicines,

for instance, pricing and reimbursement are subject to national rules and also to regional
principles or procedures in certain Member States. This is in line with the principle under
Article 168 of the Treaty on the Functioning of the EU that the management of health sys-
tems remains a national responsibility.25 Only limited EU principles apply under the basic
provisions on free movement of goods and the so-called Transparency Directive.26 Rules
on retail distribution and, in particular, pharmacy monopoly provisions also remain almost
exclusively national.
1.14 The same limitations on the scope of the EU rules apply to medical devices. Furthermore,
advertising, manufacturing, wholesale distribution and prescription status of medical devic-
es currently remain mainly subject to national rules.
1.15 Second, most EU regulatory rules are enforced by the Member States in accordance with
their own systems and traditions. This is particularly important in the area of advertis-
ing and marketing practices, where the role of administrative enforcement, litigation and
self-regulatory enforcement mechanisms differs widely among Member States.
23 Regulation (EC) No 1223/2009 of the European Parliament and of the Council of 30 November 2009 on
cosmetic products, OJ 2009 L342, pp. 59-209.
24 Regulation (EU) No 528/2012 of the European Parliament and of the Council of 22 May 2012 concerning the
making available on the market and use of biocidal products, OJ 2012 L167, pp. 1-123.
25 In particular Article 168(7), which states: “Union action shall respect the responsibilities of the Member
medical care. The responsibilities of the Member States shall include the management of health services and
medical care and the allocation of the resources assigned to them”.
26 Council Directive 89/105/EEC of 21 December 1988 relating to the transparency of measures regulating the
pricing of medicinal products for human use and their inclusion in the scope of national health insurance
systems, OJ 1989 L40, p. 8. In March 2012, the European Commission published a proposal for a new
Directive, intended to strengthen the existing Directive and to update it in light of current procedures and
techniques, such as health technology assessment and demand control measures. It is unclear whether this
proposal will result in a new Directive.

1.16 Third, all private litigation and litigation against national authorities fall within the jurisdic-
tion of the national courts and are subject to national rules of procedure -
cant differences in terms of legal standing and duration of litigation among Member States.
Certain Member States, such as Germany, also restrict the types of arguments that can be
invoked to challenge decisions of the authorities,27 even though this arguably infringes EU
law principles, such as the need for effective enforcement of the EU legislation.28
1.17 Finally, certain product categories remain subject to national rules. In particular, this applies
to general consumer products that are not covered by one of the EU product categories.29
Examples include standard female hygiene products, baby diapers, aesthetic devices such
as wigs and non-corrective eye lenses,30 veterinary medical devices, and animal cosmetics.
also frequently subject to national rules. Examples include electronic cigarettes, herbal
cigarettes31 and so-called ‘party poppers’.32
C. KEY ASPECTS OF THE MAIN

EU REGULATORY REGIMES
1.18 The various EU regulatory regimes for life sciences products are based on different princi-
ples, ranging from pre-market approval (for medicines, biocides and certain foods), essential
requirements combined with harmonised standards and conformity assessment procedures
(for medical devices) and detailed rules on composition (for cosmetics and food additives).
1.19 In addition, general EU legislation can directly apply to the products in question or have
27 In Germany, a plaintiff in judicial review proceedings can only invoke subjective public rights (subjektive
öffentliche Rechte
28 The Court of Justice is expected to rule on the question of the standing of an innovative company to chal-
lenge the marketing authorisation of a generic product, and possibly also on what arguments the plaintiff can
invoke in such litigation. See Case C-104/13
, pending.
29 As a rule, the products are still subject to the EU General Product Safety Directive (Directive 2001/95/EC of
the European Parliament and of the Council of 3 December 2001 on general product safety, OJ 2002 L11, p.
4, as amended) which imposes basic safety requirements, post-marketing surveillance obligations and certain
safety procedures. The Directive allows for the adoption of standards for certain categories of products.
players.
30 The Commission proposal for a new Medical Devices Regulation envisages regulating non-corrective lenses
and certain other aesthetic devices under the medical devices rules.
31 The Commission proposal for a new Tobacco Products Directive, published in December 2012, brings elec-
tronic cigarettes with a certain nicotine concentrations under the medicines rules and imposes health warn-
ings and claims restrictions for herbal cigarettes.
32 ‘Party poppers’ are recreational chemical preparations. See, for instance, AJ Davies and others, ‘Adverse
ophthalmic reaction in poppers users: case series of ‘poppers maculopathy’’ (2012) Eye, pp. 1-8.

laid down in the REACH Regulation 1907/2006.33 The Regulation applies to chemicals in
from the widest exemption but REACH still has an impact on the pharmaceutical industry.
1.20 The following sections provide an overview of the main product categories in the life sci-
ences area.
1. Medicinal products
1.21 The pillars of the EU pharmaceutical regime are Directive 2001/83/EC on medicines for
human use (often also referred to as the ‘Human Use Directive’) and Regulation (EC) No
726/2004.
1.22 Directive 2001/8334 lays down basic principles that apply to all medicines for human use.35
-
ing authorisation requirement and describes the data needed and the procedure to be fol-
-
procedures to review approved products and, where needed, to vary, suspend or withdraw
-
tent authorities and the possibility to impose sanctions in case of infringement of regulatory
obligations.
1.23 Regulation 726/200436 replaces Regulation 2309/93 and regulates the European Medicines
Agency (‘EMA’) and the procedure for granting marketing authorisations for biotechnology
products (such as recombinant proteins), orphan medicines, and certain other important
medicines. The procedure is called the ‘centralised procedure’ because it results in one deci-
sion on the marketing authorisation adopted by the European Commission and based on the
33 Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006 con-
cerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (‘REACH’), establishing a
European Chemicals Agency, amending Directive 1999/45/EC and repealing Council Regulation (EEC) No
793/93 and Commission Regulation (EC) No 1488/94 as well as Council Directive 76/769/EEC and Com-
mission Directives 91/155/EEC, 93/67/EEC, 93/105/EC and 2000/21/EC, OJ 2006 L396, pp. 1-853.
34 Directive 2001/83/EC of the European Parliament and of the Council of 6 November 2001 on the Community
code relating to medicinal products for human use, OJ 2001 L311, p. 67, as amended. The Directive was
code relating to veterinary medicinal products, OJ 2001 L311, pp. 1-66, lays down general principles for vet-
to the veterinary sector, such as maximum residue limits (‘MRLs’) for medicines used in food producing
animals.
36 Regulation (EC) No 726/2004 of the European Parliament and of the Council of 31 March 2004 laying down
Community procedures for the authorisation and supervision of medicinal products for human and veterinary
use and establishing a European Medicines Agency, OJ 2004 L136, pp. 1-33.

States and is also implemented in national decisions in the three additional EEA countries
(Liechtenstein, Norway and Iceland).37
1.24 Several other Directives and Regulations supplement these basic provisions. In addition,
many detailed rules are laid down in the Notice to Applicants issued by the European Com-
by the EMA, in particular the Committee for Medicinal Products for Human Use (‘CHMP’).
1.25 The following sections provide a summary of the key elements of the EU regulatory re-
gime for pharmaceuticals. Chapters 2, 3, 4 and 5 provide further details on the marketing
authorisation procedures and related exclusivity rights, information and advertising, and
pharmacovigilance.
a) Regulatory authorities
1.26
the EU pharmaceutical rules (and their implementation in national law) and the supervision
of the market and business operators.
1.27 At the EU level, the EMA38 and the European Commission are the principal authorities. The
EMA is an EU agency with its own legal personality, based in London. It comprises a per-
manent administration (with about 700 staff members)39
that consist of members appointed by the 28 EU Member States and the three additional
EEA countries, and sometimes representatives of patient organisations and other members.
The committees are:
1. Committee for Medicinal Products for Human Use (‘CHMP’)
2. Pharmacovigilance Risk Assessment Committee (‘PRAC’)
3. Committee for Medicinal Products for Veterinary Use (‘CVMP’)
4. Committee for Orphan Medicinal Products (‘COMP’)
5. Committee on Herbal Medicinal Products (‘HMPC’)
6. Paediatric Committee (‘PDCO’)
7. Committee for Advanced Therapies (‘CAT’).
1.28 The European Commission is the executive body of the EU. It is responsible for making
legislative proposals, supervises the correct implementation of EU law, issues guidance
such as the Notice to Applicants, takes decisions on marketing authorisations under the
centralised procedure and under EU referral procedures, and generally supervises the op-
infringement of certain regulatory obligations by marketing authorisation holders.
37 See also below, Section F.

38 Until 2004, the Agency was called the European Agency for the Evaluation of Medicinal Products. The acro-
nym ‘EMEA’ was used until 2009.
39 Including contract agents and national experts. See the annual report of the EMA for 2012.

b)
1.29
a) Any substance or combination of substances presented as having properties for treat-
b) Any substance or combination of substances which may be used in or administered to

human beings either with a view to restoring, correcting or modifying physiological
functions by exerting a pharmacological, immunological or metabolic action, or to
making a medical diagnosis.
1.30
It was amended once, in 2004, to clarify the scope and to facilitate borderline determinations
(see below, Section E). It contains two parts: a presentation criterion, based on the claims
administration criterion, based on the function and impact of the product when used on or
in the body.
c) Marketing authorisation
1.31 The cornerstone of the EU pharmaceutical regime is the need to obtain a marketing authori-
sation before the product can be placed on the market. The marketing authorisation decision
characteristics (‘SmPC’) for the medicine. The SmPC provides key information for prescrib-
ers, including the approved indication, instructions for use, contra-indications, warnings, and
core pharmacokinetic and pharmacodynamic information. The terms of the SmPC are also
relevant for the claims and information that can be included in promotional materials.
1.32
clinical trials, named patient sales and compassionate use programs, but the exceptions must
normally be interpreted strictly.40
1.33 A more detailed discussion of the marketing authorisation procedure is provided in Chapter 2.
d)
1.34
1.35
abridged applications following the expiration of the regulatory exclusivity of the reference
product.41
40 See, for instance, the CJEU in C-185/10 Commission v Poland [2012], nyr, para 31-32.
41 See Chapters 2 and 3 on the marketing authorisation procedures and the protection of medicinal products.

1.36 42
rules with regard to the quality information needed to obtain a marketing authorisation.
-
cines or biosimilars) that require more data than normally necessary for generic medicines.43
1.37 44
– can only ob-
tain a marketing authorisation under the centralised procedure. All biotechnology products
are also biological medicines.
1.38 Traditional herbal medicines – as described in Article 16(a) of Directive 2001/83 – can
-
and combinations thereof for use in traditional herbal medicinal products, based on EMA
recommendations.
1.39 45
– that meet cer-
-
authorisation rules for other homeopathic products in accordance with the principles and
characteristics of homeopathy as practised in their country.
42 Annex I, Part I, 3.2.1.1 states: “A biological medicinal product is a product, the active substance of which is a
biological substance. A biological substance is a substance that is produced by or extracted from a biological
source and that needs for its characterisation and the determination of its quality a combination of physi-
co-chemical-biological testing, together with the production process and its control”.
43 See Chapter 2 on the marketing authorisation procedures.
44 “Medicinal products developed by means of one of the following biotechnological processes:
- Recombinant DNA technology,
- Controlled expression of genes coding for biologically active proteins in prokaryotes and eukaryotes in-
cluding transformed mammalian cells,
- Hybridoma and monoclonal antibody methods”.
See also the Commission communication on the Community marketing authorisation procedures for medic-
inal products, OJ 1998 C229/4.
45 “Any medicinal product prepared from substances called homeopathic stocks in accordance with a homeo-
pathic manufacturing procedure described by the European Pharmacopoeia or, in the absence thereof, by
contain a number of principles”.

1.40 46
– are typically
medicines intended for serious rare diseases. Designation as an orphan medicine must
be applied for by the company developing the product, and is granted by the European
Commission on the basis of an opinion by the Committee for Orphan Medicinal Products
under the centralised procedure. The most important incentive is a market exclusivity of ten
years that prevents the acceptance of a marketing authorisation application and the grant of
such authorisation for a similar medicinal product for the same indication.47
e) Pharmaceutical operators
1.41 Under the EU pharmaceutical rules, undertakings operating in the pharmaceutical sector fall
into distinct categories.
1.42 The marketing authorisation holder is the natural or legal person assuming the main reg-
ulatory obligations for the medicine. He must be established in the EU or the EEA and
-
rangements). Obligations include updating the marketing authorisation whenever needed,
submitting relevant information to the regulators, compliance with the pharmacovigilance
turnover of the marketing authorisation.
1.43 The manufacturer of a medicine is the person who is engaged in “total and partial man-
ufacture”, including “the various processes of dividing up, packaging or presentation”.48
He must be authorised by the competent authorities of the country of manufacture, have
batch releasing. Manufacturers must comply with the detailed good manufacturing princi-
ples.
1.44 A person importing medicines from outside the EU or EEA must also have a manufacturing
authorisation.49 With some of these countries, the EU has entered into a mutual recognition
agreement that, for instance, does not require a new batch release for the products. This
does not, however, waive the need for a manufacturing authorisation.
46 Regulation (EC) No 141/2000 of the European Parliament and of the Council of 16 December 1999 on orphan
“intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition
it is intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious
and chronic condition in the Community and that without incentives it is unlikely that the marketing of the
provided “that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in
question that has been authorised in the Community or, if such method exists, that the medicinal product will

48 Article 40(2) of Directive 2001/83/EC.
49 Article 40(3) of Directive 2001/83/EC.

1.45 A wholesale distributor50 must also be authorised51 by the national competent authorities and
must have adequate facilities and staff. He must comply with good distribution practices. A
manufacturing or import authorisation includes the right to engage in wholesale activities.
Brokers52 of medicines must be registered with the national authorities.
1.46 Directive 2001/83 imposes various obligations on manufacturers, importers, wholesale dis-
tributors and brokers to ensure the quality and traceability of medicines, and to some extent,
the availability of the products on the national market.
1.47 Parallel importers (importing medicines from one Member State into another) require a
manufacturing authorisation when they change the labelling or the packaging of the product,
which is often needed to comply with national language labelling requirements or practical
needs for certain pack sizes. In the exceptional case that no changes are made to the packag-
ing and labelling, the parallel importer will only need a wholesale distributor authorisation.
1.48 Retail pharmacists and other persons entitled to dispense medicines are regulated by nation-
al law. Many Member States operate a strict pharmacy monopoly for dispensing but others
allow certain medicines to be distributed via other channels.
2. Medical devices
1.49 Medical devices are subject to a much simpler regime. Directive 90/385 regulates active
implantable medical devices,53 -
tive 98/79 regulates in vitro 54
and Directive 93/42
regulates all other medical devices.55 The three Directives are based on a system of con-
formity assessment and CE-marking of devices that are placed on the market. All devices
must meet essential requirements that are laid down in an Annex to each Directive and that
are further implemented in harmonised standards published by the European Commission.
Observance of these standards provides evidence of compliance with the corresponding
essential requirements, but the standards are not binding and manufacturers can demonstrate
compliance through other means as well. For IVDs, the Commission can also issue binding
50 -
ing, supplying or exporting medicinal products, apart from supplying medicinal products to the public. Such
activities are carried out with manufacturers or their depositories, importers, other wholesale distributors or
with pharmacists and persons authorised or entitled to supply medicinal products to the public in the Member
State concerned”.
51 Article 77 of Directive 2001/83/EC.
52 -
dicinal products, except for wholesale distribution, that do not include physical handling and that consist of
negotiating independently and on behalf of another legal or natural person”.
53 Council Directive 90/385/EEC of 20 June 1990 on the approximation of the laws of the Member States relat-
ing to active implantable medical devices, OJ 1990 L189, pp. 17-36.
54 Directive 98/79/EC of the European Parliament and of the Council of 27 October 1998 on in vitro diagnostic
medical devices, OJ 1998 L331, pp. 1-37.
55 Council Directive 93/42/EEC of 14 June 1993 concerning medical devices, OJ 1993 L169, pp. 1-43.

1.50 For certain devices, the manufacturer can conduct the conformity assessment on his own,
through self-assessment. This is the case for non-sterile low risk medical devices without
measuring functions. It is also the case for many IVDs, including technically sophisticated
and sensitive tests.56 For other devices, the manufacturer must rely on an independent no-
the device.
1.51 In September 2012, the European Commission proposed two new Regulations, one on IVDs
and one on all other medical devices. The proposed new Regulations are still based on the
essential aspects of the conformity assessment procedures, but envisage stricter and more
detailed rules. The proposals also include a so-called scrutiny procedure for higher risk de-
vices, allowing a Medical Device Coordination Group of experts of the national authorities
is considering a more formal marketing authorisation procedure for high risk devices.
3. Cosmetic products
1.52 Cosmetic products are in principle subject to fully harmonised rules, laid down in Regu-
lation 1223/2009,57 which fully applies since 11 July 2013. The Regulation is a recast of
the earlier Cosmetics Directive 76/768, but adds new responsibilities for manufacturers,
, for instance with regard to
market surveillance. It further envisages the adoption of common criteria for the use of
claims related to cosmetic products.
1.53 The primary requirement under the Regulation is that all cosmetic products must be safe
when used under normal or reasonably foreseeable conditions of use. The person responsi-
ble for the product must ensure that a product safety assessment
contains more detailed provisions on these requirements than the previous Directive.
1.54 With regard to ingredients, the Regulation contains a list of banned ingredients (Annex II),
Annex III), and closed positive lists of colorants (other than hair dyes – Annex IV), preser-
(which was initially adopted in 2003 and became fully applicable in March 2013)58 and the
labelling of allergens contained in cosmetic ingredients are regulatory issues of particular
concern.
56 This is a consequence of the lack of updating of the IVD Directive 98/77. The proposed new IVD Regulation
seeks to impose stricter requirements.
57 Regulation (EC) No 1223/2009 of the European Parliament and of the Council of 30 November 2009 on
cosmetic products, OJ 2009 L342, pp. 59-209.
58 See the Commission Communication of 11 March 2013 on the animal testing and marketing ban and on the

4. Foodstuffs
1.55 Regulation 178/2002 lays down the general principles and requirements of food and feed
law and establishes the European Food Safety Authority (‘EFSA’).59 It includes a safety
requirement, traceability obligations and withdrawal and recall procedures (linked to an
hygiene (including procedures based on hazard analysis and critical control point or HAC-
60 61 62
-
63 64
59 Regulation (EC) No 178/2002 of the European Parliament and of the Council of 28 January 2002 laying
down the general principles and requirements of food law, establishing the European Food Safety Authority
and laying down procedures in matters of food safety, OJ 2002 L31, pp. 1-24.
60 Regulation (EC) No 852/2004 of the European Parliament and of the Council of 29 April 2004 on the hygiene
human consumption, OJ 2004 L139, pp. 206-320.

61 Regulation (EC) No 396/2005 of the European Parliament and of the Council of 23 February 2005 on max-
imum residue levels of pesticides in or on food and feed of plant and animal origin and amending Council
Directive 91/414/EEC, OJ 2005 L70, pp. 1-16.
62 Council Directive 90/496/EEC of 24 September 1990 on nutrition labelling for foodstuffs, OJ 1990 L276,
pp. 40-44 and Directive 2000/13/EC of the European Parliament and of the Council of 20 March 2000 on
the approximation of the laws of the Member States relating to the labelling, presentation and advertising of
foodstuffs, OJ 2000 L109, pp. 29-42. As of 13 December 2014, these Directives will be replaced by a new
Regulation: Regulation (EU) No 1169/2011 of the European Parliament and of the Council of 25 October
2011 on the provision of food information to consumers, amending Regulations (EC) No 1924/2006 and (EC)
No 1925/2006 of the European Parliament and of the Council, and repealing Commission Directive 87/250/
EEC, Council Directive 90/496/EEC, Commission Directive 1999/10/EC, Directive 2000/13/EC of the Eu-
ropean Parliament and of the Council, Commission Directives 2002/67/EC and 2008/5/EC and Commission
Regulation (EC) No 608/2004, OJ 2011 L304, pp. 18-63.
63 Regulation (EC) No 1332/2008 of the European Parliament and of the Council of 16 December 2008 on food
enzymes and amending Council Directive 83/417/EEC, Council Regulation (EC) No 1493/1999, Directive
Regulation (EC) No 1333/2008 of the European Parliament and of the Council of 16 December 2008 on food
use in and on foods and amending Council Regulation (EEC) No 1601/91, Regulations (EC) No 2232/96 and
(EC) No 110/2008 and Directive 2000/13/EC, OJ 2008 L354, pp. 34-50.
64 Regulation (EC) No 1925/2006 of the European Parliament and of the Council of 20 December 2006 on the
addition of vitamins and minerals and of certain other substances to foods, OJ 2006 L404, pp. 26-38.

65
food intended for infants and young children, food for special medical
66
and food contact materials.67
1.56
are derived from GMOs68 and for novel foods (i.e., most foods or food ingredients that were
69
1.57 The Nutrition and Health Claims Regulation 1924/200670 establishes conditions for the use
of nutrition and health claims for foods. Only nutrition claims that are included in an Annex
to the Regulation are permissible and all health claims must be approved either as part of a
list of general health claims or on the basis of individual applications. The establishment
for certain types of foods, especially those containing herbal ingredients. The validity of
71
5. Biocidal products
1.58 As from September 2013, biocidal products are governed by Regulation 528/2012.72 They
are products that (i) are intended to destroy, deter, render harmless, prevent the action of, or
otherwise exert a controlling effect on, any harmful organism by any means other than mere
physical or mechanical action and (ii) are not medicinal products, medical devices, food or
feed additives, pesticides, etc. and are also not regulated by food hygiene provisions. Bio-
cidal products must contain active ingredients that are approved at the EU level and each
-
anism seeks to ensure harmonisation of national approvals throughout the EU and EEA,
65 Directive 2002/46/EC of the European Parliament and of the Council of 10 June 2002 on the approximation
of the laws of the Member States relating to food supplements, OJ 2002 L183, pp. 51-57.
66 Regulation (EU) No 609/2013 of the European Parliament and of the Council of 12 June 2013 on food
intended for infants and young children, food for special medical purposes, and total diet replacement for
weight control and repealing Council Directive 92/52/EEC, Commission Directives 96/8/EC, 1999/21/EC,
2006/125/EC and 2006/141/EC, Directive 2009/39/EC of the European Parliament and of the Council and
Commission Regulations (EC) No 41/2009 and (EC) No 953/2009, OJ 2013 L181, pp. 35-56. The Regula-
tion replaces Directive 2009/39 on foods for particular nutritional use (‘parnuts’ or dietary foods), which had
a broader scope and also covered sports foods, foods for diabetics, etc. It will enter into full effect in 2016.
67 Regulation (EC) No 1935/2004 of the European Parliament and of the Council of 27 October 2004 on mate-
rials and articles intended to come into contact with food and repealing Directives 80/590/EEC and 89/109/
EEC, OJ 2004 L338, pp. 4-17.
68 Regulation (EC) No 1829/2003 of the European Parliament and of the Council of 22 September 2003 on
69 Regulation (EC) No 258/97 of the European Parliament and of the Council of 27 January 1997 concerning
novel foods and novel food ingredients, OJ 1997 L43, pp. 1-6.
nutrition and health claims made on foods, OJ 2006 L404, pp. 9-25.
71 See mainly Case T-296/12 pending, and
Case T-334/12 Plantavis and NEM v Commission and EFSA, pending.
72 Regulation (EU) No 528/2012 of the European Parliament and of the Council of 22 May 2012 concerning the
making available on the market and use of biocidal products, OJ 2012 L167, pp. 1-123.

based on mutual recognition of assessments. The Regulation requires data sharing among
companies so as to reduce the number of animal tests and sets the conditions for determin-
ing when no new data are required (data waiving). The evaluations are coordinated by the
European Chemicals Agency (‘ECHA’).
1.59 , i.e., any substance, mixture or article which

has been treated with, or intentionally incorporates, one or more biocidal products. Treated
articles may only contain biocidal substances that are approved by the EU and may also be
subject to labelling and other disclosure requirements. This also applies to articles imported
from third countries.
D. PRODUCTS FOR ANIMAL USE

1.60 Products for animal use are less regulated at the EU level. Detailed provisions apply to
veterinary medicines (mainly Directive 2001/82 and Regulation 726/2004) and the level of
harmonisation is very similar to that for human medicines. The rules also take into account
more detail is provided as to which medicines can be used when there is no approved prod-
uct for the indication in question, and a prolonged data exclusivity exists for veterinary
limits for medicines used in food producing animals.73
1.61 Similarly, the EU rules on feedingstuffs -

ture of the sector. Regulation 767/2009 on the placing on the market and use of feed74
characteristics of the EU feed regime includes, for instance, a much broader concept of
substances that are used to improve the food production or the characteristics of the food
produced by or derived from the animal, and also include certain antibiotics (coccidiostats
and histomonostats). The rules on feeds for particular nutritional (parnut) uses are also quite
detailed (Commission Directive 2008/3875). To some extent, they follow the structure of the
foods (for cats and dogs) and their special needs (e.g., weight reduction), but several apply
e.g., reduction of the risk of ketosis), pigs (e.g., reduction of stress
reactions), poultry (e.g., compensation for malabsorption) and horses (e.g., compensation
1.62 The rules on biocides are the same for products for human, animal or other use.
73 Regulation (EC) No 470/2009 of the European Parliament and of the Council of 6 May 2009 laying down
Community procedures for the establishment of residue limits of pharmacologically active substances in
foodstuffs of animal origin, OJ 2009 L152, pp. 11-22.
74 Regulation (EC) No 767/2009 of the European Parliament and of the Council of 13 July 2009 on the placing
on the market and use of feed, OJ 2009 L229, pp. 1-28.
75 Commission Directive 2008/38/EC of 5 March 2008 establishing a list of intended uses of animal feeding
stuffs for particular nutritional purposes, OJ 2008 L62, pp. 9-22.

1.63 There is no EU regime for veterinary cosmetics nor for veterinary medical devices.76 How-
ever, under the general EU rules on product safety, the principles of the EU Cosmetics Reg-
ulation or the medical devices Directives can sometimes be applied by analogy.
E. BORDERLINE DETERMINATIONS
1.64 This section addresses borderline determinations for the above mentioned categories in-
under EU law and when harmonisation of the rules was also less detailed.77 Traditionally,
borderline determinations were made mainly at the national level. This often happened in
the context of litigation, such as criminal proceedings brought by pharmacy associations to
defend the pharmacy monopoly on retail distribution of medicines in France or competitive
litigation under the UWG in Germany. Gradually, national authorities also started making
borderline decisions.
1.65 There is now a clear trend towards a more harmonised and EU-wide approach to borderline
First, the case law of the Court of Justice of the EU (‘CJEU’) on borderline issues has
other product categories,78 -

macological, metabolic or immunological means under the administration criterion of the
76 There was a Directive 84/539/EEC on electro-medical equipment used in veterinary medicine but it was
repealed in 2008 because it was considered obsolete. On the other hand, there have been suggestions for
some basic EU rules for veterinary medical devices especially in light of the technical developments (see the
CVMP analysis of the functioning of current veterinary legislation and proposals for its evolution and com-
ments on the Commission consultation on Better regulation for Veterinary Pharmaceuticals, 15 July 2010,
EMA/CVMP/463298/2010).
77 See also the Court of Justice in Case C-290/90 Commission v. Germany [1992] ECR I-03317, para. 16 (“At
time being and, doubtless, so long as harmonisation of the measures necessary to ensure the protection of
78 Article 2(2) of Directive 2001/83 provides: “In cases of doubt, where, taking into account all its characteris-
covered by other Community legislation the provisions of this Directive shall apply”. This principle was
already expressed by the Court of Justice in the context of borderline determinations between medicines and
cosmetics in Case C-112/89 Upjohn v Farzoo [1991] ECR I-01703 as well as foodstuffs in Case C-219/91
Ter Voort, [1992] ECR I-05485. In Case C-88/07 Commission v Spain [2009] ECR I-01353, the Court held

79
It has also provided guidance on the need for a medical purpose of
a medical device80 81
1.66 Second, the European Commission and national authorities have developed guidance on
concrete cases.82
1.67
-
munological or metabolic properties to the extent they can be established in the present
83
The Court then also
same or very similar products.84
1.68 Further harmonisation is envisaged by providing the European Commission with the power
to make borderline decisions. This is already possible under the Biocides Regulation. The
2012 proposal for a new Medical Devices Regulation contains the same power for medi-
cal devices and cosmetics (the latter through an amendment of the Cosmetics Regulation).
There are, however, concerns about the detailed assessment required for high quality border-
line determinations and the availability of effective legal remedies in case of disagreement.
F. GEOGRAPHICAL SCOPE OF THE EU RULES

1.69 The EU currently comprises 28 Member States. The European Economic Community
(‘EEC’) initially started in 1957 with six founding Member States. Over the years, other
countries joined the European Economic Community, later the European Community and
79 See in particular Case C-27/08 BIOS Naturprodukte GmbH v Saarland [2009] ECR I-03785, Case C-140/07
Hecht-Pharma GmbH v Vertreterin des Bundesinteresses beim Bundesverwaltungsgericht [2009] ECR
I-00041, Case C-88/07 Commission v Spain [2009] I-01353, Case C-319/05 Commission v Germany [2007]
ECR I-09811, joint Cases C-211/03 and C-299, 316-318/03 HLH Warenbetrieb Orthica v Germany [2005]
ECR I-05141, and Case C-308/11 Chemische Fabrik Kreussler & Co. GmbH v Sunstar Deutschland GmbH,
nyp.
80 See Case C-219/11 -
, nyp.
81 See Case C-420/10 Söll GmbH v Tetra GmbH, nyp.
82
Medical Devices, which is regularly updated.
83 See Case C-308/11 Chemische Fabrik Kreussler & Co. GmbH v Sunstar Deutschland GmbH, nyp, para 34
and Case C-27/08 BIOS Naturprodukte v Saarland [2009] ECR I-03785, para 18.
84 For instance in Case C-88/07 Commission v Spain [2009] I-01353, para 60 and the references quoted in the
context of foods v. medicines. See also the opinion of the Advocate General in Case C-109/12 Laboratoires
Lyocentre, nyp, on the distinction between medical devices and medicines.

now the European Union. Croatia is the most recent Member State, and joined the EU on
1 July 2013.
1.70 All legislation is

85
and each linguistic version has equal legal value. This can
1.71 In 1994 the agreement on the European Economic Area (‘EEA’) became effective.86 Under
this arrangement, three additional countries (Iceland, Liechtenstein and Norway)87 also fol-
low EU legislation in the areas covered by the agreement, which include most legislation
that is directly relevant to the life sciences industry. Annexes to the agreement can provide
countries. For instance, Commission decisions granting marketing authorisations under the
centralised procedure are not directly valid in these countries but are implemented through
national decisions. The inclusion in the annexes to the EEA agreement can also result in
delays, such as for obtaining additional patent extensions under the paediatrics regime.88
1.72 -
mon regulatory approach (for instance, on GMP and batch release for medicines, and con-
formity assessment for medical devices). This is in particular the case with Switzerland and
Australia.
1.73 In addition, a Customs Union Agreement between the EU and Turkey also envisages the
application of some EU legislation in Turkey.
85
German, Greek, Hungarian, Irish, Italian, Latvian, Lithuanian, Maltese, Polish, Portuguese, Romanian, Slo-
vak, Slovene, Spanish and Swedish.
86 Agreement on the European Economic Area, OJ 1994 L1, p. 3.
87 Initially, Switzerland was a member as well but this was not supported in a referendum. The fact that Swit-
zerland is not a member of the EEA can create regulatory problems for corporate structures that include Swiss
companies also for operations within the EU and EEA.

2
THE MARKETING AUTHORISATION FOR
MEDICINAL PRODUCTS AND THE REGULATORY
OBLIGATIONS OF COMPANIES
A. INTRODUCTION 2.0 9. Applications under exceptional

circumstances 2.50
B. MARKETING AUTHORISATION
10.Conditional marketing authorisations 2.52
PROCEDURES 2.04
1. Centralised procedure 2.04 D. OTHER AUTHORISATION
a) Mandatory and optional scope PROCEDURES AND EXEMPTIONS 2.55
of the centralised procedure 2.05 1. Registration procedure for homeopathic
b) Approval process under medicinal products 2.56
the centralised procedure 2.11
2. Registration procedure for traditional
2. Mutual recognition herbal medicinal products 2.58
and decentralised procedure 2.19
3. Exceptional marketing authorisation
a) Scope of the decentralised and mutual
under Article 126(a) of Directive 2001/83 2.61
recognition procedures 2.20
b) Approval process under the decentralised
4. Temporary marketing authorisation
and mutual recognition procedures 2.23 under Article 5(2) of Directive 2001/83 2.62
3. National procedure 2.31 5. Compassionate use programmes 2.63
6. Named patient use 2.65
C. TYPES OF MARKETING
7. Hospital compounding 2.66
AUTHORISATION APPLICATIONS 2.32
1. Full application 2.36 E. OBLIGATIONS OF THE MARKETING
2. Generic or abridged application 2.38 AUTHORISATION HOLDER 2.67
3. Hybrid application 2.42 1. Manufacturing and batch release 2.69
4. Biosimilar application 2.44 2. Pharmacovigilance 2.70
5. Bibliographical application
for well-established medicinal use 2.45 4. Distributor issues 2.75
6. Fixed combinations applications 2.47 5. Other obligations 2.78
7. Informed consent applications 2.48 6. Penalties 2.80
8. Mixed application - Annex I 2.49

THE MARKETING AUTHORISATION FOR MEDICINAL PRODUCTS
AND THE REGULATORY OBLIGATIONS OF COMPANIES
A. INTRODUCTION
2.01 As a general rule, medicinal products can only be placed on the EU market following the
granting of a valid marketing authorisation by the competent authorities of a Member State
or the EU.1 There are three routes for approval of a new medicinal product on the market in the EU:
1. The centralised procedure, handled at the EU level and leading to the granting of a
2
2. The mutual recognition and decentralised procedures, handled nationally with the in-
volvement of several Member States, and leading to the granting of national marketing
3. The national procedure, handled by the competent authority of one Member State and
leading to the granting of a marketing authorisation in that Member State only.
2.02 Whichever marketing authorisation procedure is used, the company seeking the authorisa-
tion will need to submit an application to the competent authority. There are different types
of application and the supporting data required varies. Aside from these traditional routes
needs or the particular nature of certain products.
2.03 This chapter describes the different marketing authorisation procedures and types of mar-
keting authorisation application. It also discusses non-standard authorisation procedures,
including the ability to place products on the market without a marketing authorisation in
certain circumstances. Finally, this chapter summarises the key post-marketing obligations
applicable to marketing authorisation holders in the EU.
B. MARKETING AUTHORISATION PROCEDURES
1. Centralised procedure
2.04 The centralised procedure is primarily regulated by Regulation 726/2004.3 Extensive guid-
ance on this procedure can also be found under Chapter 4 of Volume 2A of the European
Commission’s Notice to Applicants.
1 Article 6 of Directive 2001/83 OJ 2001 L311/67, and Article 3 of Regulation 726/2004 OJ 2004 L136/1.
2 By virtue of the European Economic Area Agreement, European Economic Area (‘EEA’) Member States,
Norway, Iceland and Liechtenstein, have implemented the EU’s pharmaceutical regime and references to the
EU in this chapter can therefore often be read to encompass the entire EEA. In particular, Norway, Iceland
and Liechtenstein are involved in the centralised procedure and marketing authorisations granted by the
European Commission are also valid in these countries (either directly or through the adoption of a national
marketing authorisation).
use and establishing a European Medicines Agency, OJ 2004 L136/1.

2.05 Certain products may only be approved at the EU level through the centralised procedure.4
This is the so-called ‘mandatory’ scope of the centralised procedure. It includes certain
5 6 7
new ac-
tive substances for the treatment of AIDS, cancer, neurodegenerative disorder, diabetes,
-
cines primarily intended as growth or yields’ enhancers.8
2.06 Other types of medicines may be approved either through the centralised procedure or at the
Member State level, at the choice of the applicant. This is the so-called ‘optional scope’ of
the centralised procedure, which covers:9
1. Medicines containing a ‘new active substance’ which was not authorised as a medicinal
10
and
2.
for which the granting of marketing authorisation through the centralised procedure is
in the interests of patients or animal health at the EU level.
4 Guidance on the mandatory scope of the centralised procedure is provided on the EMA website, Chapter 4
(Centralised Procedure) of Volume 2A of the Notice to Applicants and the EMA Guideline of 13 December
(ref. EMEA/CHMP/121944/2007).
hybridoma and monoclonal antibody methods.
of 13 November 2007 on advanced therapy medicinal products, OJ 2007 L324/121.

7 As designated under Regulation (EC) No 141/2000 of the European Parliament of the Council of 16 Decem-
ber 1999 on orphan medicinal products, OJ 2000 L18/1.
8 Article 3(1) and Annex of Regulation 726/2004.
9 Article 3(2) of Regulation 726/2004.
10 On the notion of ‘new active substance’ generally, see also Chapter 3 on the protection of medicinal products.

2.07
combines a temporal criterion – the threshold date being the entry into force of Regulation
726/2004, i.e., 20 November 2005 – and a ‘novelty’ requirement for the active substance.
In particular, the following are considered new active substances:11
1. A chemical, biological or radiopharmaceutical substance not previously authorised as
2. An isomer, mixture of isomers, a complex or derivative or salt of a chemical substance

previously authorised as a medicinal product in the European Union but differing in prop-
-
3. A biological substance previously authorised as a medicinal product in the European
4. A radiopharmaceutical substance which is a radionuclide, or a ligand not previously

authorised as a medicinal product in the European Union, or the coupling mechanism
to link the molecule and the radionuclide has not been authorised previously the Euro-
pean Union.
2.08 The second category of products eligible for the optional scope of the centralised procedure
includes medicines that provide a completely new alternative to treat, prevent or diagnose
a disease (e.g.,
e.g., development using
application thereof – or on new technology (e.g., new delivery system) – or the application
-
ests at the EU level, i.e., e.g., prod-
ucts related to a pandemic disease or an emergency situation), allow access to medicines,
or provide another type of contribution to patient care in the EU. Access to the centralised
the use of this single procedure.12 This also opens the way to the centralised approval for
non-prescription medicines or generic versions of nationally approved medicines.13
2.09 In order to maintain coherence and unity of the EU Single Market, where the marketing
authorisation holder of a product approved under the optional scope of the centralised pro-
cedure wishes to market another product with the same active substance, the centralised
procedure should be used. Similarly, duplicate, informed consent and generic14 applications
of any substance approved through the centralised procedure have automatic access to the
11 Annex I to Chapter 1 (Marketing Authorisation) of Volume 2A of the Notice to Applicants.

12 Recital 9 to Regulation 726/2004.
13 Chapter 4 (Centralised procedure) of Volume 2A of the Notice to Applicants, April 2006, Section 1.4.

centralised procedure.15 Applications for certain medicinal products for paediatric use are
also eligible for the centralised procedure under the Paediatric Regulation.16
2.10 Products that do not fall under the mandatory scope of the centralised procedure may (if
they qualify for the optional scope) or must (if they do not qualify at all for the centralised
procedure) be approved at the Member State level, through the national, decentralised or
mutual recognition procedures.
b) Approval process under the centralised procedure
2.11 The approval process under the centralised procedure is primarily handled by the European
Medicines Agency (‘EMA’) and its committees, and the pharmaceutical units of the Euro-
pean Commission. The EMA comprises seven committees, the most important of which
for approval purposes is the Committee for Medicinal Products for Human Use (‘CHMP’).
The centralised procedure leads to the granting of a single marketing authorisation by the
European Commission that is valid in the entire EU.
2.12
-
pects of the development of their medicine.17 While not binding, compliance or deviation
with the advice provided must be discussed by the applicant in its application, and by the
CHMP in its opinion. Applicants may also discuss any procedural or regulatory issues with
the services of the EMA during so-called ‘pre-submission’ meetings. These are conducted
following the submission of a ‘Pre-submission Meeting Request form’ at least seven months
before submission, and including the details regarding the intended marketing authorisation
application (e.g.,
2.13 Applicants must notify the EMA of their intention to submit an application (between 18
and 7 months prior to submission) and justify why the product should qualify for the eligi-
bility for the centralised procedure, citing the relevant provisions of Regulation 726/2004.
whether the relevant product is eligible or not for the centralised procedure. If eligible, a
rapporteur and, as appropriate, a co-rapporteur are designated amongst the members of the
CHMP. They are primarily responsible for the evaluation of the dossier and the preparation
of an assessment report. A ‘product team’, headed by the ‘product team leader’, is also set
up within the EMA for each application and is responsible for the procedural aspects of the
application.
15 Chapter 4 (Centralised procedure) of Volume 2A of the Notice to Applicants, April 2006, Section 1.4.
Directive 2001/83 and Regulation (EC) No 726/2004, OJ 2006 L378/1. See in particular Articles 28, 29 and
31.
17 Article 57(1)(n) of Regulation 726/2004.

2.14 The marketing authorisation application dossier must be submitted to the EMA for review,
format,18 in
which quality and manufacturing, pre-clinical and clinical trial sections are accompanied
by associated summary reports. Detailed guidance is provided in Volume 2B of the Notice
to Applicants relating to the ‘Presentation and format of the dossier - Common Technical
Document’. The type and scope of data to be provided by the applicant depend on the type
of marketing authorisation submitted (e.g., full, abridged, mixed applications etc.).19
2.15
complete and complies with the EU-CTD format – and payment of the required fees by
the applicant,20 the application is assessed by the CHMP. The evaluation process normally
questions by the CHMP.21 The (co-)rapporteurs are primarily responsible for considering
-
ulation 726/2004 for granting a marketing authorisation. Additional information can be
requested from the applicant during the procedure, and oral (or written) explanations can
take place before the CHMP. At the end of the procedure, the CHMP adopts a formal opin-
ion – by consensus or, if not possible, by absolute majority22
the product in the therapeutic indication sought, on the product information (i.e., summary
attached to the authorisation.
2.16 If the opinion is negative, the applicant is immediately informed by the CHMP and may,
within 15 days, submit a request for ‘re-examination’ of the CHMP opinion.23 New (co-)
rapporteurs are nominated and the dossier is re-assessed by the CHMP. The initial assess-
ment report of the CHMP is amended according to the re-examination outcome.
2.17 If the opinion is positive, a number of documents are attached to the opinion (including a
draft summary of the product characteristics (‘SmPC’), conditions or restrictions regarding
24
and the opinion is forwarded to the European Commission. The Commission must pre-
pare a draft marketing authorisation decision within 15 days and submit it to the Standing
Committee on Medicinal Products for Human Use – a body composed of Member States’
representatives – which may deliver an opinion on the draft marketing authorisation.25 In
18 This is based on the Common Technical Document (M4) agreed on by the International Conference on Har-
monisation of Technical Requirements for Registration of Pharmaceuticals for Human Use.
19 See Section C below for further details on this point.
20 See in particular Council Regulation (EC) No 297/95 of 10 February 1995 on fees payable to the European
Agency for the Evaluation of Medicinal Products, OJ 1995 L35/1, as amended.
22 The Norwegian and Icelandic CHMP members take part to the vote but their vote does not count for the
calculation of the majority.
23 Articles 9(2) and 9(3) of Regulation 726/2004.
25 Article 10 of Regulation 726/2004.

in each EU language to the EMA for a linguistic review by the Member States. Aside from
the language, these documents should be identical in all respects, except that any national
-
ed to the Standing Committee to consider as part of its review of the draft decision. The
and there have been occasions when the Standing Committee has rejected a CHMP recom-
mendation to approve a product, typically on legal grounds. Following this procedure, the
European Commission adopts a decision granting (or rejecting) the marketing authorisation,
-
information, together with the product information. This reference document is called the
European Public Assessment Report (‘EPAR’).26
2.18 The Commission decision granting the marketing authorisation is valid throughout the EU27
for a period of 5 years,28 after which it may be renewed on the basis of a re-evaluation of the
29
2. Mutual recognition and decentralised procedure

2.19 The mutual recognition and decentralised procedures are primarily governed by Chapter 4
of Directive 2001/83/EC.30 Extensive guidance on these procedures can also be found in
Chapter 2 of Volume 2A of the Notice to Applicants.
a) Scope of the decentralised and mutual recognition procedures
2.20 The mutual recognition and decentralised procedures are intended for products to be mar-
keted in more than one Member State and lead to the granting of national marketing authori-
sations by the competent authorities of each Member State concerned. The procedures are
based on the assessment of the product by the competent authorities of one Member State,
and the recognition by the other Member States of this assessment.
2.21 The decentralised and mutual recognition procedures cannot be used for products falling
under the compulsory scope of the centralised procedure, products for which applications

27 Through the European Economic Area (‘EEA’) Agreement, Norway, Iceland and Liechtenstein are parties
to the centralised procedure. However, Commission decisions granting marketing authorisations need to be
transposed into legally binding acts in Norway and Iceland, which grant national marketing authorisations
within 30 days of the Commission decision. Commission decisions are directly applicable in Liechtenstein.
28 Except in cases of conditional marketing authorisations, authorisations under exceptional circumstances, or
authorisations which are not followed by the actual marketing of the product within three years. See Article
14(4), (5), (6) of Regulation 726/2004.
code relating to medicinal products for human use, OJ 2001 L311/67.

withdrawn or rejected and new data have been submitted), homeopathic products, certain
traditional herbal medicinal products and products falling under the transitional arrange-
ments for newly acceding countries.
2.22 The decentralised procedure is to be used when the product has not yet received a marketing
authorisation in any Member State. The mutual recognition procedure is based on the sub-
sequent recognition in other Member States of a marketing authorisation granted by a Mem-
ber State. Both procedures are governed by Articles 28 through 39 of Directive 2001/83.
b) Approval process under the decentralised and mutual recognition procedures
2.23 The decentralised and mutual recognition procedures are primarily handled by the national
competent authorities. One Member State takes the lead for the assessment of the marketing
authorisation application and is known as the ‘Reference Member State’ (‘RMS’). The oth-
er Member States involved in the procedure and where a marketing authorisation is sought
are referred to as the ‘Concerned Member States’ (‘CMS’). They must normally endorse
the assessment performed by the RMS. In the Synthon case, the Court of Justice of the EU
highlighted that the discretion of the CMS is very limited and that they must rely on the
assessment by the RMS, unless there is risk to public health.31 In case of disagreement relat-
ing to potential serious risk to public health, the questions are referred to the ‘Coordination
group for mutual recognition and decentralised procedure for human medicinal products’
(CMD(h)),32 which is a body composed of representatives of the Member States and for
which the EMA provides the secretariat. Ultimately, any disagreement remaining between
the Member States is settled at the European level, through the referral procedures handled
by the EMA and the European Commission.
2.24
harmonised through the decentralised and mutual recognition procedures – must be present-
ed in a so-called ‘blue box’.33
i) Mutual recognition procedure

2.25 The mutual recognition procedure must be used to obtain marketing authorisations in sev-
eral Member States when the particular medicinal product has already been authorised in a
Member State. The Member State which granted the original authorisation for the product
acts as the RMS.
2.26 The marketing authorisation holder of a product may request one or several Member States
(the CMS) to recognise the marketing authorisation that has previously been granted by the
RMS. To that end, it must request the RMS to prepare or update the assessment report and
34
31 Case C-452/06 Synthon BV v Licensing Authority of the Department of Health [2008] ECR I-07681, para 41.
32 Article 27 of Directive 2001/83. Information about matters referred to the CMDh is available at http://www.
hma.eu/26.html.
33 For more information on this point, please refer to the CMDh guideline on ‘Blue-Box requirements’ of July
2013 (doc. ref. CMDh/258/2012/Rev.2).
34 Article 28(2) of Directive 2001/83.

The dossier submitted in all the relevant Member States must be identical.35 Upon receipt
of the product documentation from the RMS, each CMS has 90 days to inform the RMS of
its agreement with the content of those documents.36 If a CMS disagrees for reasons related
to potential serious risks to public health and the disagreement could not be settled between
the Member States during the 90-day period, the disagreement is referred to the CMDh.37 If
the CMDh fails to resolve the disagreement within 60 days, the issue is referred to the EMA
under the so-called ‘referral procedures’.38 Once agreement has been reached, the RMS re-
cords the agreement, closes the procedure and informs the applicant, after which each CMS
must adopt a marketing authorisation decision in accordance with the approved assessment
39
2.27 The mutual recognition procedure can also be triggered by a Member State when it receives
a marketing authorisation application for a product that has already been approved in an-
other Member State, with the same applicant or marketing authorisation holder.40 Products
are considered to be the same for that purpose if they are identical or their differences have
no therapeutic implication.41 Marketing authorisation holders and applicants are considered
to be the same if they belong to the same group of companies or to related companies (e.g.,
through a licensing agreement).42
ii) Decentralised procedure

2.28 The decentralised procedure is used to obtain marketing authorisations in several Member
States when the medicinal product at stake has not yet been approved in any Member State.
The procedure is very similar to the mutual procedure and can also be trigged by an appli-
cant or by a Member State.
2.29 The procedure is triggered by an applicant through the submission of an application based
on an identical dossier in all the relevant Member States, with designation of a RMS.43 The
RMS has 120 days from the application to prepare a draft assessment report, SmPC, label-

38 Articles 32 to 34 of Directive 2001/83. For further details, please refer to Chapter 3 (Community Referral
Procedures) of Volume 2A of the Notices to Applicants.
39 Article 28(4) and (5) of Directive 2001/83.
40 According to Article 18 of Directive 2001/83, a Member State must reject an application related to a product
authorised in another Member State, unless it has been submitted in accordance with the mutual recognition
procedure.
41 In particular, a medicinal product is the same if it has the same qualitative and quantitative composition in
active substance and the same pharmaceutical form, and that they have no difference in terms of safety and
to Applicants.
42 See Section 2.8 of Chapter 1 (Marketing Authorisation) and Section 3.2.1 of Chapter 2 (Mutual Recognition)
of Volume 2A of the Notice to Applicants. See also Commission Communication 98/C 229/03 on the Com-
munity marketing authorisation procedures for medicinal products.

44
after which these documents are formally communicated to the
CMS which have 90 days to approve them.45 In the meantime, the CMS communicate their
comments on the draft product documentation and assessment report and try to reach an
agreement with the RMS. In case a disagreement related to potential serious risk to public
health cannot be settled between the Member States directly, the disagreement is referred to
the CMDh, and, if the matter still cannot be resolved, to the EMA through the ‘referral pro-
cedures’.46 The competent authorities of the relevant Member States must adopt a national
decision granting the marketing authorisation within 30 days from the acknowledgement of
the agreement to the assessment report and product documentation.
2.30 The decentralised procedure can also be triggered by a Member State when it is informed
that another marketing authorisation application has been submitted for the same product
and by the same marketing authorisation holder in another Member State.47 In such case, the
Member State must remind the applicant that the decentralised procedure applies.
3. National procedure
2.31
limited to medicines that are not intended to be approved in more than one Member State
and that do not fall under the compulsory scope of the centralised procedure. The procedure
is dealt with by the competent authority of the Member State concerned and leads to the
granting of a marketing authorisation in that Member State only. There is however a possi-
bility of harmonisation of the SmPC of products approved at the national level through the
referral procedure instituted by Article 30(2) of Directive 2001/83.
C. TYPES OF MARKETING AUTHORISATION

APPLICATIONS
2.32 to demonstrate the quality, safety
and effectiveness of the product. The format for the marketing authorisation application
form and the underlying dossier generally is consistent for all medicinal products. Dossiers
-
mon Technical Document (‘CTD’) format, in which quality and manufacturing, pre-clinical

46 Article 29 of Directive 2001/83. See also Chapter 3 (Community Referral Procedures) of Volume 2A of the
Notices to Applicants. These referral procedures ultimately result in a binding decision from the European
Commission.
47 Article 17(2) of Directive 2001/83. For the assessment whether the medicinal product and the marketing
authorisation holder are the same, the principles explained above under sub-section a (mutual recognition
procedure) apply.

and clinical trial sections are accompanied by associated summary reports.48 Detailed guid-
ance is provided in Volume 2B of the Notice to Applicants relating to the ‘Presentation and
format of the dossier - Common Technical Document’. A marketing authorisation applica-
:
1.
2.
3. Module 3 containing the documentation relating to the quality aspects, in particular the chem-
ical,
4.
5. Module 5 containing the clinical study reports.
2.33
2.34 The type of application determines the extent of data that must be submitted for approval,
but may also have indirect consequences, for instance on data exclusivity.49
2.35 -
cations and the required data.
1. Full application
2.36 ‘Full’ or ‘stand-alone’ applications are based on Article 8(3) of Directive 2001/83 and re-
quire the submission of a complete independent dossier. In particular, the dossier must
contain full results of:
1.
2.
3. Clinical trials.
2.37 Applications can always be submitted through this route, except during the period of market
exclusivity of similar orphan medicinal products approved in the same indication.50
2. Generic or abridged application

2.38 ‘Generic’ or ‘abridged’ applications are based on Article 10 of Directive 2001/83. They may
omit the results of pre-clinical tests and clinical trials and refer instead to the data of a ‘refer-
ence product’. Data showing bioequivalence to the reference product are therefore required.
48 This is based on the Common Technical Document (M4) agreed on by the International Conference on Har-
monisation of Technical Requirements for Registration of Pharmaceuticals for Human Use.
49 Please refer to Chapter 3 on the protection of medicinal products.
50 For further details, please refer to Chapter 3 on the protection of medicinal products.

2.39 Only products that have been authorised in accordance with the provisions of Article 8
of Directive 2001/83/EC may be used as reference products.51 This means that products
consent application may be used as reference products, since they all contain, or are deemed
to contain, the pre-clinical and clinical data required under Article 8(3)(i). Reference can-
product authorised on the basis of a bibliographic application (in which the pre-clinical and
been referred to the CJEU for a preliminary ruling.52 To qualify as a reference product, the
marketing authorisation must have been granted in accordance with the applicable EU leg-
islation.53 It is however irrelevant whether the marketing authorisation has been withdrawn
or not.54 It is also irrelevant if the reference product was authorised in a different Member
55
2.40 Abridged applications are only possible provided that (i) the regulatory data exclusivity
protection has expired for the reference product,56 and that (ii) the product for which an ap-
i.e., “a me-
dicinal product which has the same qualitative and quantitative composition in active sub-
stances and the same pharmaceutical form as the reference medicinal product, and whose
bioequivalence with the reference medicinal product has been demonstrated by appropriate
bioavailability studies”.57
2.41 -
it expires. This is because no formal determination is made by the competent authorities

on data exclusivity of new medicines, and because of the concept of ‘global marketing au-
thorisation’. According to this principle, any subsequent development of a medicine – i.e.,
additional strengths, pharmaceutical forms, administration routes, presentations, variations
and extensions – is deemed to be part of the same marketing authorisation for data exclusiv-
ity purposes.58 On the second condition, issues arise in determining whether a product is to
be considered the same as the reference medicinal product. This is because the legislation
presumes that certain chemical forms – i.e., different salts, esters, ethers, isomers, mixtures
of isomers, complexes or derivatives of an active substance – are to be considered the same
51
Section 5.3.1.1 of Chapter 1 of Volume 2A of the Notice to Applicants.
52 See Case C-104/13 , pending.
53 See the case of the EU Court of Justice in the galantamine case (C-527/07 Generics (UK) [2009] ECR
I-05259).
54 Article 10(1) of Directive 2001/83 indeed only requires that the “reference medicinal product is or has been
authorised…”. This is in line with the ruling of the EU Court of Justice in case C-223/01
GEA Farmaceutisk Fabrik [2003] ECR I-11809.
55 This is the concept of ‘European reference product’. See Article 10(1), 3d subparagraph of Directive 2001/83.
56 On this point, please refer to Chapter 3 on protection of medicinal products.
57 Article 10(2)(b) of Directive 2001/83. See also Section 5.3. of Chapter 1 (Marketing Authorisation) of Vol-
ume 2A of the Notice to Applicants.
58 Article 6 of Directive 2001/83.

-
plex’ or a ‘derivative’ of an active substance. However, guidelines have been published to
clarify this notion of ‘new active substance’59 and the EMA has undertaken to expressly
mention whether active substances are to be considered ‘new’.
3. Hybrid application
2.42 ‘Hybrid’ applications are based on Article 10(3) of Directive 2001/83 and are somewhere
between full and abridged applications. This type of application can be used by ‘generic’
-
uct, i.e., where there are differences in active substances, therapeutic indications, strength,
pharmaceutical form or route of administration, in relation to the reference medicinal prod-
uct, or where bioequivalence cannot be demonstrated through standard bioavailability studies.
2.43 In this case, applicants must submit ‘bridging data’, i.e., additional pre-clinical or clinical
data demonstrating that the differences with the reference product do not affect the product’s
relative safety and effectiveness inappropriately.60 Hybrid applications thus rely in part on
the pre-clinical and clinical data of the reference product, and in part on new data.
4. Biosimilar application
2.44 Biosimilar applications are based on Article 10(4) of Directive 2001/83. Biosimilars are
biological medicines similar to already approved biological substances, but that do not meet
-
ing process. In such cases, adequate pre-clinical and clinical data must be submitted. The
rules on biosimilars take into consideration the particular sensitivity of biological substanc-
es to changes – in particular in the raw material and manufacturing – and focus therefore
less on the characterisation of substances themselves from a chemical perspective and more
on control of the manufacturing and quality control processes to produce substances or mix-
tures of comparable quality, safety and effectiveness.
5. Bibliographical application for well-established medicinal use

2.45 Bibliographical applications are based on Article 10(a) Directive 2001/83. These appli-
literature if the product has been in ‘well-established medicinal use’ in the EU with an ac-
2.46 It is not always clear what constitutes a ‘well established’ use under Article 10(a) of the
59 See in particular Chapter 1 (Marketing Authorisation) of Volume 2A of the Notice to Applicants and the EMA
(enantiomer), a complex, a derivative, or a different salt or ester as new active substance in relation to the
relevant reference active substance (ref. EMA/651649/2010).
60 Guidance on the additional studies required under the hybrid application is provided in Annex II to Chapter
1 (Marketing Authorisation) of Volume 2A of the Notice to Applicants.

Directive. It must be systematic and documented but not necessarily based on an authorised
medicinal product. However, clinical trials, compassionate use or named-patient sales are
typically not enough to document such use.61 Well-established use must also be demon-
strated in the therapeutic indication sought, so that this route cannot be used to approve a
medicine in a new indication. Use in a new Member State prior to its accession to the EU
can be taken into consideration.
6. Fixed combinations applications

2.47 -
rective 2001/83. These products consist of substances – within a single pharmaceutical
form – that have previously been approved in the composition of authorised medicinal prod-
ucts. According to the provision, the applicant does not need to submit full preclinical and
clinical data for each individual active substance but only for the overall combination.62
7. Informed consent applications

2.48 Under Article 10(c) of Directive 2001/83, marketing authorisation holders may consent to
for the original product. The applicant is therefore exempted from submitting such data,
but consent must have been obtained for all three modules containing the pharmaceutical,
preclinical and clinical data. The applicant may not refer to the pre-clinical and clinical data
of the original product and submit its own pharmaceutical quality data. Informed consent
applications are typically used for co-marketing reasons.
8. Mixed application - Annex I

2.49
for which non-clinical and clinical data are in part based on bibliographic references, and
in part on the applicant’s own studies. These applications are considered ‘full’ applications
9. Applications under exceptional circumstances

2.50 Article 22 of Directive 2001/83 provides competent authorities with the possibility to autho-
legal basis can be used by applicants that are unable (and never expect to be able) to provide
61 The prevalence of the disease should however be taken into consideration when demonstrating ‘well-estab-
lished use’. See the recent Orphacol cases (T-12/12 and T-301/12 Laboratoires CTRS v Commission, nyr) on
this issue.
62
substances composing it. This point is however being challenged by Teva before the General Court in a case
relating to the medicinal product Abacavir/Lamivudine (case T-547/12, pending).

1. The intended indications are so rare that comprehensive evidence cannot reasonably be
2. -
3. Medical ethics prevents collecting such information.
2.51
10. Conditional marketing authorisations

2.52
-
ed that the product:
1.
2.
3. Is a designated orphan medicine.
2.53 To obtain conditional approval, 63 the applicant must demonstrate that:

1.
2.
3. Full clinical data can likely be provided in the future.
2.54 -
ligations, including in terms of clinical trials, pharmacovigilance and labelling, and to an
annual reassessment and renewal. Conditional marketing authorisations are valid only for
one year, but are renewable provided that the product continues to meet the criteria for con-
ditional marketing authorisations. The authorisation is not intended to remain conditional
grant a traditional marketing authorisation for the medicine.
D. OTHER AUTHORISATION PROCEDURES

AND EXEMPTIONS
2.55 Aside from the above ‘traditional’ routes of access to the pharmaceutical market, the phar-
-
ing authorisations or even derogations from the requirement to have a marketing authori-
63 Article 14(7) of Regulation 726/2004 and Commission Regulation 507/2006 OJ 2006 L92/6.

procedure is foreseen based on limited data while for others, medicines under development
are made available.
1. Registration procedure for homeopathic medicinal products

2.56 Homeopathic medicinal products are ‘prepared from substances called homeopathic stocks
in accordance with a homeopathic manufacturing procedure’ described by the European or
national Pharmacopoeias. They may contain a number of principles.64
2.57 Homeopathic medicines that are administered orally or externally, that do not claim any
therapeutic indication (the descriptions of diseases or conditions for which the medicine is
-
-
sier demonstrating, in particular, pharmaceutical quality and batch-to-batch homogeneity.65
Other types of homeopathic medicines must be approved in accordance with the regular
marketing authorisation procedures described above. The referral procedures however do
not apply for homeopathic medicines.66
2. Registration procedure for traditional herbal medicinal products

2.58 A herbal product is only considered ‘traditional’ if the applicant can produce bibliographical
or expert evidence that the medicinal product in question, or a corresponding product, has
been in medicinal use throughout a period of at least 30 years, 15 of which must normally
-
teria, including in terms of indication, mode of administration – oral, external or inhalation
– and available data.67 Herbal medicines that do not meet these conditions must be approved
through the ordinary approval procedures described above.
2.59
trials, provided that there is documented evidence of the medicinal use during the required
in terms of manufacturing and quality of ‘ordinary’ medicinal products also apply to tradi-
tional herbal medicines.
2.60 A Committee on Herbal Medicinal Products (‘HMPC’) has been set up within the EMA,
which is competent for a number of tasks related to traditional herbal medicines, including

65 Articles 13 to 16 of Directive 2001/83.
66 Article 39 of Directive 2001/83.
67 Article 16(a) of Directive 2001/83.

the establishment of a list of herbal substances used in traditional herbal medicines and
Union herbal monographs.68
3. Exceptional marketing authorisation under Article 126(a)

of Directive 2001/83
2.61
States to authorise, for public health reasons, the marketing of a medicine that is approved in
another Member State in their own jurisdiction. The procedure is intended to increase avail-
ability of medicines in smaller markets. It is quite exceptional in the sense that the initiative
to approve the medicine originates from a Member State and not from a pharmaceutical
company. A list of medicines approved under this procedure is available on the European
Commission’s Community register. So far, this procedure has been used mainly by Cyprus.
4. Temporary marketing authorisation under Article 5(2)

of Directive 2001/83
2.62 Member States are also allowed to temporarily authorise the distribution of unauthorised
toxins, chemical agents or nuclear radiation that could cause harm.69 This provision is
intended to enable Member States to react promptly to pandemic or bioterrorist situations.
5. Compassionate use programmes

2.63 Compassionate use programmes are intended to make available new medicines under de-
velopment to groups of patients, when they suffer from chronic, seriously debilitating or
life-threatening diseases, and they cannot be treated satisfactorily with authorised medi-
cines.70 Access to compassionate use can be granted for medicines eligible for the cen-
tralised procedure (under the mandatory or the optional scope) but is within the competence
of the Member States.
2.64 Member States must notify their intention to make a medicine available for compassion-
ate use to the EMA. The CHMP is then entitled to adopt an opinion on the conditions for
compassionate use, including the conditions for distribution, use and the patients targeted.
These opinions are not binding. The list of CHMP opinions on compassionate use is avail-
able on the EMA website.
68 Article 16(h) of Directive 2001/83. These lists and monographs are available on the website of the European
Medicines Agency.
70 Article 83 of Regulation 726/2004. See also EMA ‘Guideline on compassionate use of medicinal products,
pursuant to Article 83 of Regulation (EC) No 726/2004’ of 19 July 2007 (ref. EMEA/27170/2006).

6. Named patient use

2.65 In order to answer to patients’ unmet needs, Member States are permitted to make available
medicinal products that are not authorised according to the pharmaceutical legislation in
un-
professional and for use by an individual patient under his direct personal responsibility.71
This is different from compassionate use programmes which are intended to make a medi-
cine available to a group of patients suffering from a very serious disease. Recent case law
and is not applicable if another medicinal product containing the same active substance in
the same dosage and same form is already authorised and available on the national market.72
7. Pharmacy and hospital compounding

2.66 Medicinal product prepared in a pharmacy in accordance with a medical prescription for
an individual patient are excluded from the scope of the pharmaceutical legislation.73 They
may therefore be supplied without going through the formal marketing authorisation procedure.
E. OBLIGATIONS OF THE MARKETING

AUTHORISATION HOLDER
2.67 The marketing authorisation holder (‘MAH’) is the key actor in the marketing of medicinal
products in Europe. The MAH must be established in the EU.74 The MAH is ultimately
several obligations by virtue of its status. While the associated legal responsibility and lia-
bility cannot be delegated, the MAH can delegate the performance of related tasks to third
parties, provided that this delegation is appropriately documented in writing.75
2.68

72 Case C-185/10, Commission v Poland, nyr.
75 As a general rule, European regulators accept delegation to an EU representative provided that appropriate
to communicate on behalf of the applicant or MAH. A substantial European presence is not required.

1. Manufacturing and batch release

2.69 All manufacturing arrangements related to medicines must be subject to a ‘technical agree-
ment.’76 This is meant to guarantee that manufacturing or import operations comply with
-
tions set out in the marketing authorisation. These contracts must cover ‘any technical
responsibilities of each party, in particular the observance of good manufacturing practice

(‘GMP’) by the manufacturer, the scope of the manufacturing and analytical operations,
undertakes his responsibilities.
2. Pharmacovigilance
2.70 In addition to imposing safety recording and reporting obligations, the EU pharmaceutical
person for pharmacovigilance (‘QPPV’), who is responsible for the establishment and main-
tenance of a pharmacovigilance system and for the submission of reports to the relevant
authorities.77
2.71 For further details regarding the pharmacovigilance framework, please refer to Chapter 5.
2.72 The MAH remains responsible for all advertising and promotion of its product throughout
the relevant jurisdictions. Since other companies will advertise or promote on the MAH’s
behalf, it must put in place agreements to ensure they comply with local advertising rules
and that the MAH is able to exert an appropriate level of oversight and control over their
activities.
2.73 -
ical information on its medicinal products, predominantly to healthcare professionals, but
also to regulators and patients.78
role in advertising, or at least in the development of the company’s materials.
2.74
please refer to Chapter 4.
76 See Volume 4 of the Notice to Applicants related to the Good Manufacturing Practice Guidelines, and, in
particular, Chapter 7 relating to Contract Manufacture and Analysis.
77 The pharmacovigilance requirements are extensively described under Title IX of Directive 2001/83 and in
the EMA Good Pharmacovigilance practice (‘GVP’) guidelines.

4. Distributor issues
2.75 To the extent that local distributors perform local safety reporting tasks on behalf of the
MAH under the pharmacovigilance framework, this needs to be documented through de-
tailed agreements.
2.76
MAH, these tasks should be formally delegated by contract, which should allow the MAH
to exercise an appropriate level of oversight and control over the distributors.
2.77 In the absence of such obligations, distributors need to maintain batch and distribution re-
cords only to the extent required under national wholesale distribution rules79 and good
distribution practices (‘GDP’),80 or under the terms of their wholesale distributor’s authori-
sations.81
5. Other obligations
2.78 Other obligations that a MAH or applicant may delegate include:
1.
designate a person to communicate on its behalf during the application procedure. Simi-
2. Maintenance of the marketing authorisation, including record-keeping, compliance with

the authorisation’s terms and conditions, submission of renewal applications and pay-
3. -
4. Informing the competent authorities of any action to suspend or withdraw a medicinal
5. Informing authorities of any prohibition or restriction on use imposed by the authorities

of another Member State where the medicinal product has been marketed.
2.79 Depending on the circumstances, it is conceivable that one or more third parties or distrib-
utors may provide such regulatory support services. If this occurs, the MAH should docu-
ment the delegation appropriately.
6. Penalties
2.80 Article 111(8) of Directive 2001/83/EC and Article 84(1) of Regulation (EC) No 726/2004
require Member States to subject MAHs, who fail to discharge their obligations, to “effec-
80 See the Commission Guidelines on Good Distribution Practice of Medicinal Products for Human Use
(ref. 94/C 63/03).

tive, proportionate and dissuasive penalties”. The precise nature and extent of these penal-
ties varies from country to country.
2.81 Additionally, for centrally approved products, the European Commission can take action
-
implications, where it has an EU dimension dimension by taking place or having its effects
in more than one member state, or where interests of the EU are involved obligations.82
preceding business year. If the infringement is on-going, the European Commission may
preceding business year, until the infringement ceases. Non-cooperation with the European
holder’s EU turnover in the preceding business year.
82 -
ment of certain obligations in connection with marketing authorisations granted under Regulation (EC) No
726/2004 of the European Parliament and of the Council, OJ 2007 L155/10.

3
THE PROTECTION OF MEDICINAL PRODUCTS
A. PATENT PROTECTION 3.03 2. ‘New’ regime - Marketing

1. EU patent regime authorisation applications
a) General considerations 3.04 after October/November 2005 3.21
b) Scope of the patent 3.06 a) Global marketing authorisation
c) Absence of patent linkage and new active substance 3.21
and exhaustion of patent rights 3.10 b) Regulatory exclusivity periods 3.34
2. 3.12 3. Exceptional regimes of exclusivity 3.37
a) New indication of well-established
B. REGULATORY EXCLUSIVITY 3.16
substances 3.38
1. ‘Old’ regime - Marketing authorisation
applications prior to October/November
2005 3.18 c) Orphan market exclusivity 3.45
d) Paediatric rewards 3.55
3.01
offered by patents, which guarantee a monopoly limited in time to the patent holders in
also been established to compensate the inability, for pharmaceutical companies, to exploit
their patents commercially during the approval period of new medicines (Section A). The
-
of time (Section B). In both cases, exclusivity is provided to pharmaceutical companies

to reward innovation, and in exchange for the disclosure of the data relating to the new
medicinal product.
3.02 Following the expiration of patent protection and regulatory exclusivity, the principal (and
in many cases only) differentiation between two medicinal products with the same active
ingredient is the brand and associated trademarks. Most EU countries mandate, encourage
or allow generic prescription and/or generic substitution, so patients’ brand loyalty will have
A. PATENT PROTECTION
3.03 Intellectual property law protects different types of rights, including patent, trademarks,
copyrights, trade secrets, and designs, all of which may be relevant to the pharmaceutical
sector. We will however focus on the patent protection regime in Europe, which rewards

innovation and confers a period of exclusivity on a novel product, process or medical use,
in exchange for the public disclosure of the invention. The patent regime for medicines
is complex and this section is only intended to provide a high-level overview of the key
aspects and issues.1
1. EU patent regime
a) General considerations
3.04 Patents are rights granted to inventors in exchange for the disclosure of their inventions.
-
turing, distributing or using medicinal products in certain indications protected by the pat-
ent. It is irrelevant for that purpose whether a third party could develop the same technology
2
3.05 While Europe is slowly moving towards a EU-wide patent regime, many aspects remain cur-
rently national. A EU Regulation has recently been adopted in view of the creation of a unitary
patent protection,3
under the provision of the European Patent Convention, with effect in the participating Member
States.4 The date of application of this new regime is still unknown.5 In the meantime, patents
may be granted at the national level, or under the European Patent Convention,6 which leads to
the granting of multiple independent national patents through a single harmonised procedure.
b) Scope of the patent
3.06 As a general rule, any invention which is new (i.e., not part of the ‘state of the art’ or not
already disclosed publicly), involves an inventive step (i.e., not obvious to a person skilled
in the art) and is susceptible of industrial application is patentable.7
restrictions exist in the pharmaceutical sector, which have been implemented by the EU
1 For further details, see, e.g., D. Bucknell, , Oxford

Pharmaceuticals biotechnology and the law
Medical Patent Law – The challenges of Medical treatment, Edward Elgar Publishing, 2011.
2 This differs from the data and marketing exclusivity regime under the pharmaceutical legislation, which only
prevents the reference to the originator’s data during a certain period of time.
3 Regulation (EU) No 1257/2012 of the European Parliament and of the Council of 17 December 2012 imple-
menting enhanced cooperation in the area of the creation of unitary patent protection, OJ 2012 L361/1.
4 Italy and Spain are not part of the enhanced cooperation in the area of the creation of unitary patent protection.
5 As per Article 18(2) of Regulation 1257/2012 on the creation of unitary patent protection, the new regime
6 The European Patent Convention includes 38 parties, including all EU Member States. The European Patent
Convention (or Convention on the Grant of European Patents) was signed on 5 October 1973 and regularly
amended since then. The most recent version is the 14th edition of 2010.
7 Article 52 to 57 of the European Patent Convention.

Directive on biotechnological inventions.8

using biological material or microbiological processes that are patentable.
3.07 There are four main categories of patent claims in the pharmaceutical sector:
1. Product claims, which provide protection over physical entities themselves (e.g., an
2. Process claims, which provide protection over activities or actions (e.g., manufacturing
3. Product-by-process claims, which protect physical entities by the way they are manufac-
tured (e.g., 9
4. Medical use claims, which protect previously unknown medical uses of known sub-
stances (e.g.,
3.08 Patents entitle their holders to prevent any third party from making, using, selling, offering
for sale or importing the patented invention. There are however a number of exceptions,
among which are experimental use, including the so-called ‘Bolar’ exemption (enabling a
generic marketing authorisation applicant to run the necessary trials for approval),10 private
and non-commercial use, etc. Patent holders may also exploit their patent, by, for instance,
selling, licensing or assigning them.
3.09
application.11 An extension of up to 5 years can be granted for medicinal products under the
patents typically requires the payment of renewal fees.
c) Absence of patent linkage and exhaustion of patent rights
3.10 There is in principle no more ‘patent linkage’ in the EU, i.e., no link between the regulatory
approval of a medicine and existing patent protection. The EU pharmaceutical framework
allows for the development, application and registration of medicines irrespective of any
patent status.12 The European Commission has taken actions against Member States with
8 Directive 98/44/EC of the European Parliament and of the Council of 6 July 1998 on the legal protection
of biotechnological inventions, OJ 1998 L213/13, as amended. See also Article 53 of the European Patent
Convention.
its structure or full composition is unknown.

10 Article 10(6) of Directive 2001/83 of the European Parliament and of the Council of 6 November 2001 on the
Community code relating to medicinal products for human use, OJ 2001 L311/67 (‘Directive 2001/83’).
11 Article 63(1) of the European Patent Convention.
12 See Article 10(6) of Directive 2001/83, which enables a generic marketing authorisation applicant to run
the necessary trials for approval irrespective of any patent protection. See also Article 126 of Directive
2001/83 and Article 81 of Regulation 726/2004, which both provide that marketing authorisations may only
be refused on the grounds set respectively in the Directive and the Regulation (on this principle, see the in-
terpretation of the EU Court of Justice in case C-83/92 Pierrel SpA and Ministero della Sanita [1993] ECR
I-06419). The existence of patent rights is no such ground, so that it cannot be relied on to refuse the granting
of a marketing authorisation.

patent linkage, in particular as it delays the entry of generic medicines on the market.13
3.11 Patent rights are also exhausted once a patented product is placed on the market in the EU
on the market by the patent holder or with his consent.14
2.
3.12 Aside from the ordinary 20-year term of patents, an additional period of patent protection
can be granted to medicinal products,15
(‘SPC’). It is intended to compensate for the loss of ‘effective’ patent protection resulting
the early stage of development of new molecules, and therefore several years prior to the
authorisation of the resulting medicine, only after which the company may commercially
exploit its invention. SPCs are intended to bridge that gap by offering up to an additional 5
years (and possibly 6 months) of patent protection for the product.16
3.13
1. 17
2.
3.
4. 18
13 In January 2012, for instance, the European Commission has issued a formal request to Italy to comply with
the European legislation concerning the authorisation procedures of generic medicinal products. At stake was
an Italian law preventing generic applicant to submit a marketing authorisation prior to the penultimate year
of the patent period of the reference product. See the press release of the European Commission of 26 January
2012: ‘Pharmaceuticals: Commission calls on Italy to comply with EU rules on marketing authorisation of
generic drugs’.
14 See in particular case C-187/80 [1981] ECR
Merck & Co v Europharm of Worthing [1996] ECR I-06285.
For more details on parallel import, refer to Chapter 7.
15 Additional patent protection can also be granted to plant protection products under Regulation (EC) No
1610/96 of the European Parliament and of the Council of 23 July 1996 concerning the creation of a supple-
16 Regulation (EC) No 469/2009 of the European Parliament and of the Council of 6 May 2009 concerning the
paediatric medicines, see also Regulation (EC) No 1901/2006 of the European Parliament and of the Council
of 12 December 2006 on medicinal products for paediatric use and amending Regulation (EEC) No 1768/92,
Directive 2001/20/EC, Directive 2001/83/EC and Regulation (EC) No 726/2004, OJ 2006 L 378/1 (‘Regula-
tion 1901/2006 on Paediatric Medicines’).
17
application of a product, and which is designated by its holder for the purpose of the procedure for grant of a
18 Article 3 of the SPC Regulation.

In practice, many issues arise in the interpretation of each of these conditions (in particular,
19
3.14 The SPC is limited to the scope of the patent combined with that of the marketing authori-
sation. The SPC thus confers to the patent holder the same rights (and obligations) as the
initial patent, but only to the extent that the product is covered by a marketing authorisation
and for the authorised therapeutic indications.20
3.15
21
The SPC then takes effect at
The maximum
22
duration of the SPC is usually limited to 5 years. In addition, the SPC may qualify for an-
other 6 months extension if studies have been performed in the paediatric population.23 The
maximum period of SPC protection is thus 5 years and 6 months (in addition to the initial
20 years of patent protection).
B. REGULATORY EXCLUSIVITY
3.16
of innovative companies in developing new medicinal products and in generating the ex-
tensive body of data required to obtain a marketing authorisation (in particular, pre-clinical
and clinical data). Unlike for patents, regulatory exclusivity does not prevent competitors
from manufacturing or approving the same medicine or molecule, but only protects against
independent from the product’s patent position, i.e., there is no so-called ‘patent linkage’.
19 See, e.g. on the concept of ‘product’: case C-392/97 Farmitalia Carlo Erba Srl [1999] ECR I-05553, case
C-258/99 BASF AG v Bureau voor de Industriële Eigendom [2001] ECR I-03643, case C-431/04 Massa-
chusetts Institute of Technology [2006] ECR I-04089, case C-202/05 Yissum Research and Development
Hässle AB v Ratiopharm GmbH [2003] ECR I-14781, case

C-31/03
C-252/03 Novartis & Millennium
case C-110/95
Marks [1997] ECR I-03251. See also case C-181/95 Biogen Inc. v Smithkline Beecham Biologicals SA
[1997] ECR I-00357.
20 Articles 4 and 5 of the SPC Regulation.
21 Article 7 of the SPC Regulation.
22
therefore not qualify for a SPC.
23 See the requirements under Article 36 of Regulation 1901/2006 on Paediatric Medicines. The reward is also
granted if the paediatric studies do not lead to an authorisation in the paediatric indication.

3.17 -
ing the old regime and periods of protection (Section B.1), which are relevant to marketing
will examine situations where a special period or type of exclusivity is granted (Section
B.3). This mainly concerns orphan medicines and medicines developed in the paediatric
population or in a new indication.
1. ‘Old’ regime - marketing authorisation applications

prior to October/November 2005
3.18 The ‘old’ regime of data exclusivity applies to medicinal products for which a marketing
authorisation application was submitted in the EU24 prior to 20 November 2005 (for cen-
tralised approvals)25 or to 30 October 2005 (for approvals under the national, decentralised
or mutual recognition procedures).26
3.19 Under the ‘old’ regime, the periods of data exclusivity are respectively of:
1. 10 years for medicinal products approved under the centralised procedure (or the for-
27
2. 10 years for national authorisations granted by Belgium, Germany, France, Italy, the
3. 6 years for national authorisations granted by Austria, Denmark, Finland, Ireland, Por-
tugal, Spain, Greece, Poland, Czech Republic, Hungary, Lithuania, Latvia, Slovenia,
Slovakia, Malta, Estonia, Cyprus, Bulgaria, Romania, Norway, Liechtenstein and Ice-
land.28
3.20 These periods are periods of ‘data exclusivity’. This means that no abridged application29
Norway, Iceland and Liechtenstein, have implemented the EU’s pharmaceutical regime and references to the
EU in this chapter can therefore often be read to encompass the entire EEA.
26 Article 2 of Directive 2004/27 of the European Parliament and of the Council of 31 March 2004 amend-
ing Directive 2001/83/EC on the Community code relating to medicinal products for human use, OJ 2004
L13/34.
27 The ‘concertation’ procedure is a predecessor of the ‘centralised’ procedure. It required an opinion from the
‘CPMP’ (former CHMP) for the approval of high-technology medicinal products (see Article 2(5) of Direc-
tive 87/22/EEC of 22 December 1986 on the approximation of national measures relating to the placing on
the market of high-technology medicinal products, particularly those derived from biotechnology, OJ 1987
L15/38).
28 Some of these countries with a six-year period of data exclusivity further limited the data exclusivity period
by providing that it would not extend beyond the duration of any applicable patent protection.
29 On the notion of ‘abridged’ application, see Chapter 2 on the marketing authorisation procedures.

exclusivity.30 Because of the different periods of protection, generics could enter the market
Unlike in the new regime, some degree of patent linkage was accepted, because Member
States that adopted a 6-year period of exclusivity could provide that the exclusivity prote-
tion would not apply beyond the expiry of the patents protecting the product. There was
also no provision enabling generic applicants to run the necessary trials for approval during
the patent protection period of medicines (the ‘Bolar’ provision).
2. ‘New’ regime - marketing authorisation applications

after October/November 2005
a) Global marketing authorisation and new active substance
3.21 The 2004 overhaul of the pharmaceutical legislation31 was the opportunity to review in
depth the regulatory exclusivity regime, in particular by implementing part of the case law,
-
ify the regime.
3.22 Among those concepts that are key to the existence of regulatory exclusivity are those of
‘global marketing authorisation’ and ‘ new active substance’.
Global marketing authorisation

3.23 -
ducing the necessary data (in particular, pre-clinical and clinical data) for the approval of
innovative products. Therefore, it primarily applies to medicines that have been approved
through a full application.32
period of exclusivity, in particular when they are considered to be a ‘development’ or a
‘variant’ of an existing medicine.
3.24 According to Article 6 of Directive 2001/83 on the Community code relating to medicinal
products for human use (‘Directive 2001/83’), “any additional strengths, pharmaceutical
forms, administration routes, presentations, as well as any variations and extensions” of an
30 This is, however, undermined by the recent ruling of the Higher Administrative Court of Münster of 4 July
2013 in the Clopidogrel case (OVG Münster, Urteil vom 04.07.2013 - 13 A 2801/10, BeckRS 2013, 53818).
during the period of exclusivity, provided that the approval is granted after the expiry of this period. The
Court based its view on the decision of the EU Court of Justice of 20 December 2010 in case C-385/08 Com-
mission v Poland [2010] ECR I-00178. While this ruling is based on the ‘old’ regime, it is suggested that it
would also apply under the new rules.
31
Council of 31 March 2004, OJ 2004 L136/34.
32 Or through an application assimilated to a full application, such as a mixed application (see Chapter 2 above
about marketing authorisation procedures).

initial marketing authorisation must be considered as part of the “same global marketing
authorisation” as the initial authorisation for data and marketing exclusivity purposes.33
3.25 This means that the developments listed above do not give rise to a new self-standing pe-
riod of exclusivity but rather follow the data and marketing exclusivity status of the initial
approval. This principle applies whenever the new product belongs to the same applicant
or marketing authorisation holder as the previously approved product,34 i.e., to a compa-
ny belonging to the same company group or with which it has concluded tacit or explicit
agreements concerning the marketing of the products (e.g., through licences).35 It does not
matter, however, that the development was authorised through a separate procedure and
under a different name.36 The concept of ‘global marketing authorisation’ is applied by the
competent authorities also to substances that have been approved prior to its introduction in
the pharmaceutical legislation in 2004.
New active substance

3.26 The concept of a ‘new active substance’ is also key to determining whether a product ben-
product is protected by data and marketing exclusivity, and if so, from which date. Regula-
tory protection arises by law, provided that the legal requirements are met. Since mid-2011,
however, the European Medicines Agency (‘EMA’) has undertaken to provide some clarity
for products reviewed under the centralised procedure by assessing if they contain ‘a new
active substance’ (‘NAS’).37
substance and belonging to the same marketing authorisation holder.38 Since mid-2011 the
CHMP normally includes a statement on the NAS status in its formal opinion on the mar-
keting authorisation application, at least when the NAS status is claimed by the applicant.
33 This provision is intended to implement the case-law of the EU Court of Justice on the data exclusivity
status of substances that constitute a ‘development’ or a ‘variant’ of a previously approved substances. See
in particular the case C-368/96 Generics UK [1998] ECR I-07967, case C-223/01 -
iddelstyrelsen [2003] ECR I-11809, case C-106/01 Novartis [2004] ECR I-04403, case C-36/03 Approved
Prescription Services [2004] ECR I-11583 and C-74/03 SmithKline Beecham [2005] ECR I-00595.
34 Section 2.3 of Chapter 1 (Marketing Authorisation) of Volume 2A of the Notice to Applicants. For instance,
with ICN concerning ribavirin (which had been approved nationally in 1988 under the name Virazole).
35 See Section 2.8. of Chapter 1 (Marketing Authorisation) of Volume 2A of the Notice to Applicants and the
Commission communication on the Community marketing authorisation procedures for medicinal products
(98/C 229/03).
36 See the ruling of the EU Court of Justice in case C-106/01 Novartis Pharmaceuticals [2004] ECR I-04403.
This is however being challenged in two cases concerning a marketing authorisation granted for a new indi-
cation (cases T-472/12 and T-67/13 pending).
37 This followed the Sepracor cases (T-275/09 [2011] ECR II-00213 and C-477/11, nyr), concerning the with-
drawal by Sepracor of its marketing authorisation application for eszopiclone after that the EMA (CHMP)
and the European Commission refused to regard eszopiclone as a NAS.
38 Section 2.3. Chapter 1 (Marketing Authorisation) of Volume 2a of the Notice to Applicants.

the Commission decision granting the marketing authorisation.39
3.27
it does not, it will not be protected, except, in principle, (i) when there is no link between
the marketing authorisation holder of the new substance and the holder of the previous
approval(s) for the same or similar active substance and (ii) the marketing authorisation for
this new product is obtained on the basis of a full dossier.40 If a product does not contain
a NAS and belongs to the same marketing authorisation holder as the previously approved
marketing exclusivity period of the newly approved product is therefore identical to that
3.28 Under Directive 2001/83, new molecules qualify as NAS unless they are caught by the pre-
sumption contained in Article 10(2)(b):
The different salts, esters, ethers, isomers, mixtures of isomers, complexes or de-
rivatives of an active substance shall be considered to be the same active substance,
3.29 This provision contains two parts:
1.
existing active substance. If it does not, the new substance is a NAS.
2. If it does, it must be assessed whether the existing and the new active substances differ
i) If they do, the new substance is a NAS.

ii) If they do not, the new substance is not a NAS. If the existing and the new substance
belong to the same or related companies, the new substance will normally fall under
the global marketing authorisation of the existing substance, which will impact on its
regulatory exclusivity status.
3.30
2012.41
is through head-to-head comparison between the ‘reference active substance’ and its variant
(
39 When NAS status is denied, experience shows that the Commission decision remains silent on this point. In
three cases where the NAS status was denied (Vepacel, Hexyon, Hexacima), the CHMP conclusion was not
40 This is however uncertain, in particular in light of Article 10(5) of Directive 2001/83 which provides only for
a non-cumulative period of one year of data exclusivity for well-established substance developed in a new
indication.
41
complex, a derivative, or a different salt or ester as new active substance in relation to the relevant reference
active substance of 18 October 2012 (EMA/651649/2010).

-
mines whether a substance is to be considered a NAS. Filing a full application is therefore
42
3.31 The above scheme can be summarised as follows:
Table - New active substance and data exclusivity:
3.32
distinguish the nature of the substances at stake, i.e., chemical, biological, or radiopharma-
ceutical substances:43
A new chemical, biological or radiopharmaceutical active substance includes:
- A chemical, biological or radiopharmaceutical substance not previously authorised
- An isomer, mixture of isomers, a complex or derivative or salt of a chemical sub-

stance previously authorised as a medicinal product in the European Union but
- A biological substance previously authorised as a medicinal product in the Euro-

pean Union, but differing in molecular structure, nature of the source material or
- A radiopharmaceutical substance which is a radionuclide, or a ligand not previous-

ly authorised as a medicinal product in the European Union, or the coupling mech-
42 Novartis
(case C-106/01 Novartis Pharmaceuticals [2004] ECR I-04403, para 62 of the judgement, paras 58-59 of the
AG Opinion).
43 Annex I of Chapter 1 (Marketing Authorisation) of Volume 2A of the Notice to Applicants.

anism to link the molecule and the radionuclide has not been authorised previously
in the European Union.
3.33
molecules that need to be compared (i.e.,
differences’ to be demonstrated (in particular, when comparing substances intended for dif-
the same etc.
b) Regulatory exclusivity periods
3.34 The new regulatory exclusivity periods apply to medicinal products for which an applica-
tion was submitted after 20 November 2005 (for centralised approvals)44 or 30 October 2005
(for national approvals).45 Substances which – based on the considerations under Section
followed by 2 years of ‘marketing exclusivity’, possible followed by an additional year of

‘marketing exclusivity’ in case of new therapeutic indication (the ‘8+2+1’ rule). The peri-
ods of regulatory exclusivity are now harmonised throughout the EU, and are irrespective
of the application procedure used.
3.35
generic or biosimilar products may not be placed on the market for another 2 years. This
is the period of ‘marketing exclusivity’ or ‘market protection’. If, during the initial 8 years
of data exclusivity, the marketing authorisation holder obtains an authorisation for a new
protection is extended by one additional year. 46

up to 11 years of market protection against generic and biosimilar competition.47
3.36 The period of regulatory exclusivity is independent from the patent life of the product.
There is no ‘patent linkage’.48 The pharmaceutical legislation expressly provides that the

45 Article 2 of Directive 2004/27 of the European Parliament and of the Council of 31 March 2004 amend-
ing Directive 2001/83/EC on the Community code relating to medicinal products for human use, OJ 2004
L136/34.
46
marketing authorisation holder obtains an authorisation for one or more new therapeutic indications which,
comparison with existing therapies” of November 2007.

47 Article 10(a) of Directive 2001/83 and 14(11) of Regulation 726/2004.
48 See above under Section A.1(c).

conduct of studies and trials in view of a marketing authorisation application does not in-
fringe patent rights.49
3. Exceptional regimes of exclusivity

3.37 Aside from the general regime of regulatory exclusivity, additional periods or different
types of exclusivity may be granted to reward new developments of existing products, or
developments that are particularly costly. This is the case for the additional year of ex-
clusivity granted in case of new studies leading to the approval of a new indication or to a
orphan and paediatric indications.
a) New indication of well-established substances
3.38 According to Article 10(5) of Directive 2001/83, a non-cumulative period of one year of
data exclusivity is granted for new indications of well-established substances, provided that
3.39 -
ies” can be found in the European Commission “Guidance on a new therapeutic indication
for a well-established substance” of November 2007.50 A new indication includes, for in-
stance, a new target disease, a different stage of severity, a new target population, a new
-
to the new indication, rather than the quantity, that is primordial.
3.40 -
latory exclusivity regime, i.e.,
after 20 November 2005 (for centralised approvals) or 30 October 2005 (for national ap-
provals).51 This year is ‘non-cumulative’ with other periods of protection, and the Notice to
Applicants explains that this means that the protection refers solely to the data relating to the
new indication. In practice, the protection offered by this additional year of exclusivity in
the new indication is weak. Since the exclusivity is limited to the data supporting the new
applicants could then seek authorisation in the new indication by submitting bridging data
(e.g., through a hybrid application) or the product could be prescribed off-label in the new
indication.
3.41 This regime under Article 10(5) differs from the additional year of exclusivity for a new
-
cause the additional year of exclusivity under the general exclusivity regime applies to all
data in the marketing authorisation dossier, not just the data for the new indication. How-

50 See also Section 6.3. of Chapter 1 (Marketing Authorisation) of Volume 2A of the Notice to Applicants.
51 See above, Section B.2(b).

authorisation.
3.42 It is logical that the provision of Article 10(5) covers only marketing authorisation holders
applying for a new indication of their own well-established medicinal product and that if an
unrelated applicant should submit a full dossier in accordance with Article 8(3), the full 8+2
years of exclusivity should apply.
3.43
medicine (i.e., prescription only to non-prescription or OTC) is authorised on the basis of
one year of data exclusivity regarding the data supporting this change. This period of one
period, which can be granted at any time after expiry of the initial protection period and
(e.g., additional year for new indication of well-established product).
3.44 -
product for human use” of January 2006.52

this case is irrespective of the interpretation of this notion under Article 10(5) of Directive
2001/83 (exclusivity for new indication of well-established medicines). Trials are con-
strength or posology, a new route of administration, a new pharmaceutical form, a new indi-
cation (in particular one not previously authorised for an OTC medicine) or subpopulation.
c) Orphan market exclusivity
3.45
to compensate the special development efforts of innovative companies in smaller medic-
inal markets. Two Regulations cover the different aspects of the orphan medicines’ legal
regime, i.e., Regulation 141/2000 on orphan medicinal products and Commission Regula-
of ‘similar medicinal product’ and ‘clinical superiority’.53
3.46 An orphan medicinal product is a product intended for the diagnosis, prevention or treat-
necessary investment without incentives. An orphan designation can be granted only if
52 See also Section 6.4. of Chapter 1 (Marketing Authorisation) of Volume 2A of the Notice to Applicants.
53 Regulation (EC) no 141/2000 of the European Parliament and of the Council of 16 December 1999 on orphan
medicinal products, OJ 2000 L18/1 (‘Regulation 141/200 on Orphan Medicines’) and Regulation 847/200 of
27 April 2000 laying down the provisions for implementation of the criteria for designation of a medicinal
-
ical superiority’, OJ 2000 L103/5 (‘Regulation 847/2000 on Orphan Medicines’).

there is no satisfactory method of diagnosis, prevention or treatment of the condition autho-

54
3.47
10 years of ‘market exclusivity’ during which regulators cannot accept applications for, nor
approve, similar medicinal products in the same indication. The protection is thus broader
than this offered under the general regime, as the orphan exclusivity prevents any applica-
tion for a similar medicine during a period of 10 years, including applications from compet-
itors who can generate their own data in support of the protected indication.
3.48 A ‘similar medicinal product’ is a product:55

1.
2. Containing a similar active substance, i.e., an identical active substance or an active
substance with the same principal molecular structural features, and which acts via
the same mechanism of action. Substances share the same mechanism of action when
they have the same pharmacological target (e.g., a receptor, enzyme, carrier etc.) and
the same pharmacodynamic effect (i.e., the action of the active substance on the body).
The mode of administration, pharmacokinetic properties, potency and tissue distribu-
tion of the target are however irrelevant.
3.49 In practice, it may prove very challenging to anticipate whether medicinal products will
be considered the same under the orphan regime. The same issues as for the ‘new active
substance’ determination may arise.
3.50 There are two exceptions, and one possible extension to the 10-year period of market exclu-
sivity for orphan medicines:
•
in case paediatric studies have been conducted in accordance with a paediatric investiga-
tion plan. The maximum period of market exclusivity is thus of 12 years.56
• Second, the 10-year period may be reduced to 6 years if it appears, at the end of the 5th
year of market exclusivity, that the conditions to be considered as an orphan medicine
are no longer met.57
• Third, a marketing authorisation can also be granted to a similar medicinal product in the
same indication, at any time during the 10-year market exclusivity period, if one of the
following conditions is met:58
54 Article 3 of Regulation 141/200 on Orphan Medicines and Article 2 of Regulation 847/200 on Orphan Med-
icines. See also the EMA Recommendation on elements required to support the medical plausibility and the
Final).
55 Articles 3(2) and 3(3) of Commission Regulation (EC) No 847/2000 on Orphan Medicines.
56 Article 37 of Regulation 1901/2006 on Paediatric Medicines.
57 Article 8(2) of Regulation 141/2000 on Orphan Medicines.
58 Article 8(3) of Regulation (EC) No 141/2000 on Orphan Medicines.

1. The marketing authorisation holder of the initial orphan medicine consents to the ap-
2. The marketing authorisation holder of the initial orphan medicine is unable to supply
3. The new product is safer, more effective or otherwise clinically superior to the initial
orphan medicine.
3.51 Further guidance on the key notions pertaining to orphan market exclusivity, and, in partic-
ular, the notion of ‘similarity’ of and of ‘clinical superiority’ can be found in the two Euro-
pean Commission Communications on the application of Regulation 141/2000 on Orphan
Medicine.59
d) Paediatric rewards
3.52
development of products in the paediatric population.60 If a product is approved on the
basis of a dossier that includes paediatric clinical trial data generated in accordance with an
exclusivity:
1.
orphan market exclusivity (i.e., a total of 12 years of exclusivity).61
2. If the product is not an orphan medicine and is eligible for a supplementary protection
62
the patent term will be extended by six months. This additional period of
patent protection is called a ‘SPC extension’ and applies irrespective of whether the
paediatric studies lead to the authorisation in the paediatric indication. The reward is
however only granted if the product is authorised in all the Member States. It cannot
63
Similarly, the SPC extension does not apply if the appli-
-
2001/83.64
3.
from a full period of data and marketing exclusivity (i.e., 8+2+1 year possibly)65 on its
marketing authorisation relating to the paediatric indication (known as a ‘paediatric
59 Communication from the Commission on Regulation (EC) No 141/2000 of the European Parliament and of
the Council on orphan medicinal products, 29 July 2003 (ref. 2003/C 178/02).
Guideline on aspects of the application of Article 8(1) and (3) of Regulation (EC) No 141/2000: Assessing
-
Directive 2001/83/EC and Regulation (EC) No 726/2004, OJ 2006 L378/1.
62 See above, Section A.2.

use marketing authorisation’ or ‘PUMA’).66 In practice, the value of such regulatory
product in the non-paediatric indication, provided that its period of exclusivity has
expired, and the generic or biosimilar product could then be prescribed off-label in the
paediatric indication.
66 Article 30(3) of Regulation 1901/2006 on Paediatric Medicines.

4
ADVERTISING AND INFORMATION – EU RULES
GOVERNING MEDICINAL PRODUCTS AND
MEDICAL DEVICES
A. INTRODUCTION 4.03 5. Advertising to the public 4.57

a) Printed advertisements (Article 89) 4.58
B. MEDICINAL PRODUCTS 4.08
b) Legal prohibitions (Article 90) 4.60
1. Applicable EU rules 4.08
6. Advertising to HCPs 4.62
a) Articles 86 to 100 of Directive 2001/83 4.08
a) Printed advertisements (Article 91 and 92) 4.64
b) Codes of conduct 4.10
b) Sales representatives (Article 93) 4.67
2. Toward greater harmonisation 4.15 c) Incentives (Article 94 and 95) 4.71
a) Role of National Law 4.15 d) Samples (Article 96) 4.81
b) Principles of free movement of goods 4.17
7. Websites 4.83
c) Gintec 4.22
8. Responsibilities and sanctions 4.87
3. Advertising and information 4.25
a) Advertising and information 4.26
b) Co-promotion (Article 98(3)) 4.91
4. General rules 4.46 c) Controls and sanctions (Article 97) 4.92
a) Authorised medicinal products
(Article 87(1)) 4.46 C. MEDICAL DEVICES 4.102
b) Basic requirements (Article 87(2) and (3)) 4.48
c) Impact of prescription status (Article 88) 4.51 D. TRANSPARENCY RULES 4.106
d) Media 4.54 1. Sunshine rules at EU level 4.107
2. Sunshine rules at national level 4.109
3. Patient associations 4.111
4.01 This chapter provides an overview of the EU rules on advertising and promotion as they
-
late activities in these two sectors. General EU rules on business practices are not discussed
here except for a brief overview of the principles governing comparative claims.
4.02 National laws and practices also play a major role in this context, but they fall outside the
scope of this book. Some examples are, however, provided.

ADVERTISING AND INFORMATION – EU RULES GOVERNING MEDICINAL
PRODUCTS AND MEDICAL DEVICES
A. INTRODUCTION
4.03 Advertising of medicines has been regulated at the EU level since the adoption of Directive
92/28/EEC.1 The goal of this Directive was to reduce the differences between the laws of
4.04 The operative provisions of Directive 92/28/EEC are now incorporated in Directive 2001/83,
and the rules were amended in 2004. The rules regulate advertising of medicines in general,
as well as advertising to the general public and to HCPs. A key issue is how to distinguish
between advertising and information, and whether the latter should also be regulated. Di-
rective 2001/83 contains some principles on how to distinguish between the two activities
and, following the 2004 revision, called for further review and possible legislation. On that
unlikely to be successful (see below).
4.05 Although regulated at the EU level, for a long time advertising of medicinal products was
de facto primarily governed by national law. The EU rules are quite general, and Mem-
ber States assume considerable freedom to transpose them in domestic law, and to rely on
self-regulatory systems. More recently, however, decisions by the Court of Justice of the
EU (‘CJEU’) indicate that the EU rules require complete harmonisation on many issues
except where Directive 2001/83 expressly allows Member States to adopt diverging or ad-
ditional rules.
4.06
only very discrete points are regulated by the EU medical devices rules. National rules and
devices. The interactions between the industry and HCPs are, however, often based on the
same general principles.
4.07 We conclude the chapter with a short overview of the transparency rules for pharmaceutical
companies. Such rules typically require companies to disclose certain information about
-
posed by law, but are often provided in industry codes of conduct. For the moment there is
1 Council Directive 92/28/EEC of 31 March 1992 on the advertising of medicinal products for human use OJ
1992 L113/13.

B. MEDICINAL PRODUCTS
1. Applicable EU rules
a) Articles 86 to 100 of Directive 2001/83
4.08 Advertising of medicinal products is currently governed by Titles VIII (Article 86 to 88)
and VIIIa (Article 88bis to 100) of Directive 2001/83. These provisions apply to medicinal
products authorised at the national or the EU level.
4.09 The rules do not regulate advertising of pharmaceutical companies in general or their com-
mercial activities. Such advertisements are allowed, subject to national provisions. The
medicinal products.
b) Codes of conduct
4.10 Several codes of conduct have been adopted by professional associations, both at the inter-
national and at the EU level. Article 97(5) of Directive 2001/83 encourages self-regulation,
provided that it is carried out in parallel, and not in lieu of, controls and sanctions by public
authorities. Codes of conduct can be an effective means to impose balanced and regularly
updated rules for all players.
4.11 At the international level, the International Federation of Pharmaceutical Manufacturers

and Associations (‘IFPMA’) has adopted a Code of Practice designed to ensure the ethical
promotion of medicines globally. This code establishes a system of enforcement and is
mandatory for companies which are IFPMA members.
4.12 In the EU, the European Federation of Pharmaceutical Industries and Associations (‘EF-
PIA’) has adopted the Code on the Promotion of Prescription-only Medicines to, and Inter-
actions with, Healthcare Professionals (the ‘EFPIA Code’) (last revised in June 2011). The
EFPIA Code only concerns the innovative pharmaceutical industry. In November 2012,
the European Generic Medicines Association adopted its own list of Guiding Principles
Promoting Good Governance in the Pharmaceutical Sector (the ‘EGA Principles’), which
include guidance on advertising of generic medicinal products, but these are much less de-
tailed than the EFPIA Code.
4.13 The EFPIA Code is very important because the 33 national industry associations that are
members of EFPIA are expected to implement it into the national codes of conduct, and, in
addition, the 40 member pharmaceutical companies are directly bound by its rules. 2 The
EFPIA Code applies not only to the companies that are members of EFPIA, but also to their
subsidiaries and any natural or legal person acting on their behalf (consultants, advertising
agencies, etc.).
2 The national industry associations that are members of EFPIA cover not only EU or EEA member states, but
also other European jurisdictions, such as Switzerland and Turkey.

4.14 EFPIA has also adopted a Code of Practice on relationships between the pharmaceutical
industry and patient organisations (the ‘EFPIA Patient Organizations Code’) (last revised in
June 2011). This code is meant to ensure that the contacts between these groups take place
in an ethical, independent and transparent manner. It regulates the funding of patient or-
ganisations, events and hospitality, as well as agreements and services, among other things.
2. Toward greater harmonisation

a) Role of national law
4.15 Articles 86 to 100 of Directive 2001/83 have been transposed into national law by Member
is permissible and what is not are of major importance. The EU rules are rather general and
their implementation has led to differing national laws, codes and practices. This results in
an imperfectly harmonised regime. It also makes the question of what national rules apply
to activities that have links with more than one Member State very important.
4.16 There is, however, growing harmonisation through the case law of the Court of Justice of the
EU based, to a very small degree, on the general principle of free movement of goods, and
mainly on the provisions of Directive 2001/83. The challenge is that these principles lack
the sophistication and detail required to provide a robust and effective, but also balanced
and ‘up to date’ regulatory regime.
b) Principles of free movement of goods
4.17 The principle of free movement of goods is enshrined in Article 34 of the Treaty on the
Functioning of the European Union (‘TFEU’)3, which prohibits quantitative restrictions and
by the protection of certain interests, such as public health, provided that such measures do
not constitute a means of arbitrary discrimination or a disguised restriction on trade between
Member States.
4.18 The case law of the CJEU on free movement of goods is largely devoted to the interpretation
of Articles 34 and 36 TFEU. Barriers to trade resulting from differences between national
laws are acceptable only to the extent that they: (i) are not discriminatory, in law or in fact,
and (iii) are proportionate to the objective pursued, which cannot be achieved by less re-
strictive measures.
4.19 In the Keck-Mithouard case4, the CJEU nuanced its previous decisions by distinguishing
between “rules that lay down requirements to be met by such goods” and “provisions re-
stricting or prohibiting certain selling arrangements”. The Court considered that the second
category of the measures falls outside the scope of Article 34 TFEU if they apply without
distinction to all operators actively involved on the national territory, and if they affect
in the same manner, in law and in fact, the marketing of domestic products and imported
3 The old Articles 28 and 30 of the EC Treaty.

4 Joined cases C-267/91 and C-268/91, Keck and Mithouard [1993] ECR I-06097.

products. By contrast, previous case law (Dassonville5, De Peijper6 and Cassis de Dijon7)
weight, composition, presentation, labelling, packaging and any other characteristic of the
product. The selling arrangements cover the sale prices, the restrictions on advertising, as
well as the time and place of sales (when, where, by whom and at what price may the prod-
ucts be sold?). The impact of the principle of free movement of goods on advertising rules
is thus very limited.
4.20 There are, however, some instances where the principle can apply to medicines advertis-
ing rules. For instance, German law allows pharmacists to import medicines that are not
approved in Germany in limited quantities and under individual control, but prohibits the
advertising of those medicinal products. 8 In Ortscheit9, the CJEU noted that this regula-
tion applied only to imported products and thus was discriminatory, but considered that
i.e., to preserve the uniqueness of
the individual orders of unauthorised medicinal products in Germany. Many years later,
in Ludwigs-Apotheke10
that the rules of Directive 2001/83 (including the ban on advertising non-authorised medi-
cines) cannot apply, because named patient sales are excluded for the scope of the Directive
2001/83.11 The Court then held that a prohibition on distributing price lists to pharmacists
was not proportionate as the lists did not contain any substantial information on the charac-
teristics and effects of the medicinal products. A prohibition on outright advertising of the
products in question would, on the other hand, be valid.
4.21 In Doc Morris12, the CJEU ruled on the prohibition of mail order medicinal products sold
exclusively in pharmacies, and the ban of advertising of medicine sales by mail. In this
case, the orders had been placed online from Germany to the Dutch Doc Morris Internet
pharmacy. The CJEU distinguished between products that are not approved in the import-
ing country and those that are approved. The importation of unapproved medicinal products
may be prohibited but only if necessary to effectively protect human health. In this regard,
to prevent incorrect use of medicines or the risks of labelling in another language. In other
words, over-the-counter medicines that are authorised in a Member State may be purchased
through the Internet from a pharmacy in another Member State, and imported. Doc Morris
also related to advertising: the CJEU ruled that Member States may prohibit the advertising
of mail order of medicines through pharmacies but only for prescription products.
5 Case C-8/74, Procureur du Roi v Benoît and Gustave Dassonville [1974] ECR 00837.
6 Case C-104/75, De Peijper [1976] ECR 00613.
7 Case C-120/78, Rewe v Bundesmonopolverwaltung für Branntwein [1979] ECR 00649.
8 For more information, refer to Section D.6 of Chapter 2.
9 Case C-320/93, Lucien Ortscheit GmbH v Eurim-Pharm Arzneimittel GmbH, [1994] ECR I-05243.
10 Case C-143/06,
[2007] ECR I-09623.
11 See Article 5(1) of Directive 2001/83 of the European Parliament and of the Council of 6 November 2001 on
the Community code relating to medicinal products for human use OJ 2001 L311/67.
12 Case C-322/01, [2003] ECR
I-14887.

c) Gintec
4.22 The CJEU’s decision in Gintec13 is a milestone in the harmonisation of the advertising rules
for medicinal products.14 This case concerned a dispute between a German association
opposing unfair competition and Gintec – a distributor of non-prescription medicines. Ac-
cording to the association, Gintec was infringing the German Act on Advertising of Medical
Products (Heilmittelwerbegesetz - HWG), which prohibited certain forms of advertising,
i.e., through consumer surveys or prize draws – prohibitions not imposed at the EU level.
The CJEU ruled that Directive 2001/83 effects a full harmonisation of the rules on adver-
tising, except where the Directive expressly allows Member States to adopt diverging or
additional rules. Member States must thus not adopt prohibitions or restrictions other than
those provided by the Directive, except where expressly allowed by Directive 2001/83.
4.23 Directive 2001/83 expressly allows Member States to derogate from or supplement the EU
rules in the following cases: prohibiting advertising for reimbursable medicinal products
adding the sale price and conditions for reimbursement by social security in advertising to
96(2)). It should be noted that Article 87(3) lists vague general criteria that all advertise-
de facto latitude to interpret these
criteria, at least until the CJEU provides clear guidance on how the rules must be applied.
4.24 The Gintec ruling should in principle lead to legislative changes in most if not all Member
States, as national laws differ, sometimes to a very large extent, from Directive 2001/83.
For example, in France, Article R.5122-4-12 of the Public Health Code (Code de la Santé
Publique) prohibits the use of claims of recovery. This absolute and unconditional prohibi-
tion seems to contradict Article 90(j) of Directive 2001/83. In Germany, prohibitions and
restrictions imposed by the HWG exceed those established by Directive 2001/83. In addi-
tion, the German courts often apply a strict interpretation, assimilating, for example, refer-
with the Directive. The real harmonisation will, however, remain a very long term process.
3. Advertising and information

4.25 Advertising of medicinal products is strictly regulated, while information on those products
is permitted. In this context, the distinction between the two is essential.
13 Case C-374/05, . [2007] ECR I-09517.

14 The full harmonisation principle is vested in Article 114 of the Treaty on the Functioning of the EU, which
provides that the European Parliament and the Council shall “adopt the measures for the approximation of the
provisions laid down by law, regulation or administrative action in Member States which have as their object
the establishment and functioning of the internal market”.

a) Advertising and information
4.26 -
mation, canvassing activity or inducement designed to promote the prescription, supply,
sale or consumption of medicinal products”. sensu
stricto
undertaken, organised or sponsored by or on behalf of a pharmaceutical company in order
to promote the prescription, supply, sale, administration, recommendation or use of a me-
dicinal product. This chapter mainly uses the term ‘advertising’ in a broader sense to also
cover all product-related promotional activities.
4.27
to the advertising of medicines, it constitutes a special rule as regards Directive 84/450
concerning misleading advertising15 (replaced in 2007 by Directive 2006/114),16 over which
it prevails ( ).17 It follows that in the pharmaceutical sec-
tor an autonomous concept of advertising applies and, for instance, a communication that
does not take place in a commercial or industrial setting can nevertheless be considered an
advertisement.
4.28 The term ‘designed to’ (in French ‘qui vise à’, in German ‘zur -
vertising indicates that the intent of the author is crucial to determine the nature of the com-
on the positive characteristics of a medicinal product usually implies a promotional intent.
ii) The author of the Communication

4.29 The author of the communication is usually connected to the marketing authorisation holder
or a company that manufactures or distributes the medicinal product, but he can also be
independent. Does this independence lead to an exemption from the advertising rules? The
CJEU answered negatively in the Damgaard case.18 The CJEU ruled that (i) the dissemi-
nation by a third party of information on a medicinal product, including its therapeutic or
prophylactic properties, may be regarded as advertising even if the third party acted on his
own initiative and is completely independent, de jure and de facto, from the manufacturer or
seller of the product, and (ii) it is for the national court to determine whether that dissemi-
nation constitutes advertising. In this regard, the status of the communication’s author and,
in particular, his relationship with the company that produces or distributes the product, are
factors that must be assessed together with other circumstances, such as the nature of the
activity and the content of the message. The Court also noted that it is up to national author-
ities to ensure the right balance between (i) the objectives of protecting public health and
the rational use of medicinal products and (ii) the right to freedom of expression (protected
15 Council Directive 84/450/EEC of 10 September 1984 relating to the approximation of the laws, regulations
and administrative provisions of the Member States concerning misleading advertising OJ 1984 L250/17.
16 Directive 2006/114/EC of the European Parliament and of the Council of 12 December 2006 concerning
misleading and comparative advertising OJ 2006 L376/21.
17 See Case C-374/05, [2007] ECR I-09517,
para 31.
18 Case C-421/07, Damgaard [2009] ECR I-02629.

protection reserved for journalists.
4.30 In the ABPI case19 -

aging doctors to favour the prescription of certain medicines, infringed Directive 2001/83.
In this context, the Court referred to the Damgaard case acknowledging that dissemination
by an independent third party may also be regarded as advertising. However, it made it clear
that this cannot apply to public health authorities responsible for ensuring the application of
20
Since
-
ing or commercial aim, they cannot be regarded as commercial promotion of medicines.
Unlike dissemination of information by an independent third party, they pose no risk of
harming public health. The Court did, however, apply the principle of Directive 89/105 on
transparency of measures regulating the prices of medicinal products for human use and
their inclusion in the scope of national health insurance systems (pricing and reimburse-
ment rules).21 It stressed that pharmaceutical companies must still be able to verify that
criteria, and that there is no discrimination between national medicines and those from other
Member States.
iii) Information is not advertising

4.31 Directive 2001/83 sets out certain examples of what constitutes advertising (e.g., delivering
samples, medical visits, etc.). On the other hand, Article 86(2) expressly excludes certain
activities from the scope of the advertising rules, namely: (i) the labelling and package
-
formative announcements and reference material, for example relating to pack changes, ad-
verse-reaction warnings as part of general drug precautions, trade catalogues, and price lists,
or human diseases, provided that there is no reference, even indirect, to medicinal products.
4.32 The EFPIA Code adds to this list general, non-promotional information on pharmaceutical
-
latory developments affecting the company and its products). It also includes the addresses
(URLs) of websites funded by pharmaceutical companies which are indicated on the pack-
aging of medicinal products, subject to certain restrictions.
4.33
unclear. For the moment, national rules, case law and practices are decisive.
19 Case C-62/09, Association of the British Pharmaceutical Industry v Medicines and Healthcare Products
Regulatory Agency [2010] ECR I-03603.
20 Case C-62/09, Association of the British Pharmaceutical Industry v Medicines and Healthcare Products
Regulatory Agency [2010] ECR I-03603, paras 31-34.
21 Council Directive 89/105/EEC of 21 December 1988 relating to the transparency of measures regulating
the prices of medicinal products for human use and their inclusion in the scope of national health insurance
systems OJ 1989 L40/8.

4.34 ‘Advertising’ is broadly interpreted by Member States, leaving little room for the dissem-
ination of information by pharmaceutical companies. Certain countries, however, such as
the Netherlands, apply more nuanced self-regulatory guidelines. In practice, information
supplied to patients by pharmaceutical companies occurs mainly through the summary of
-
ulated by Directive 2001/83, and through disease awareness campaigns, which must be
informative and non-promotional.
4.35 Attempts were made to change the above-mentioned situation, especially in light of the
of the legislation added Article 88(a) to Directive 2001/83, calling for the Commission to
present a report to the European Parliament on current practice with regard to information
provision, particularly on the Internet, and to put forward “proposals setting out an informa-
tion strategy to ensure good-quality, objective, reliable and non-promotional information on
medicinal products and other treatments and shall address the question of the information
source’s liability”.
iv) The Initiative ‘Information to Patients’ and the legislative proposals

4.36 On 20 December 2007, the Commission submitted to the Parliament and the Council the
report envisioned by Article 88(a) of Directive 2001/83. The report focused on the mecha-
nisms and information technologies, on the needs of patients and the role of different stake-
holders in the EU and the Member States. It concluded that there is a divergence in the
national rules on information to patients regarding prescription-only medicinal products,
which creates an inequality in access to information. The report noted the need for more
information and the increasing role of the Internet as a source of information, while em-
phasizing the variability in the quality of information provided by the media in particular.
4.37 Following the report, the Commission moved to propose legislative changes to ensure high
quality information, to identify communication channels, and to provide acceptable control
measures and adequate enforcement. In December 2008, the Commission presented two
legislative proposals to the Parliament and the Council as part of its so-called Pharmaceu-
tical Package: a proposal amending Directive 2001/83 and a proposal to amend Regulation
726/2004 (collectively, the Proposal on ‘Information to Patients’). The proposals were in-
tended to remove the disparities between national provisions and ensure the proper func-
tioning of the internal market while safeguarding a high level of protection of public health.
4.38 The proposals concerned information on prescription-only medicines provided by market-

ing authorisation holders to the general public. Marketing authorisation holders would be
allowed to disseminate such information directly to the general public, as long as the ap-
plicable requirements and conditions are respected. Information – and thus not advertising
i.e.,
prices, and factual, informative announcements, as well as medicine-related information on
of the condition to be prevented or treated.
4.39 The proposals also envisaged harmonised conditions on the content of information that
information would have to be objective and unbiased, take into account the general needs

and expectations of patients, and be up-to-date and based on evidence. It would also have to
be reliable, factually correct and not misleading, as well as understandable, clearly state its
-
tent, the information would have to include, among other things, a statement that the med-
icine is available on prescription only, and that the information is only intended to support,
not replace, the relationship between the patient and the healthcare professional. It would
also have to make it clear that it is disseminated by the marketing authorisation holder, and
provide his contact details. The information would not be allowed to include comparisons
or elements forbidden in advertising.
4.40 -
mation in order to exclude unsolicited means of communication. These authorised channels
would be health-related publications, internet websites on medicines, and written answers
to requests for information. Dissemination via radio or television would be explicitly pro-
hibited.
4.41 The proposals also introduced an obligation for Member States to establish a monitoring
system to ensure compliance with the applicable provisions, and enforcement in case of
non-compliance. Such a system would have to be based on control of information prior to
dissemination, unless the content had already been approved by competent authorities, or
unless an equivalent level of adequate monitoring is ensured.
4.42
through the Internet (see below, Section 7).
4.43 Following the input of the European Parliament, on 11 October 2011 the Commission ad-
opted amended versions of the proposals, which included a revision of the pharmacovigi-
lance rules. The proposals were then amended again, following Commissioner Dalli’s an-
nouncement of the split of the amended proposals into two parts (i.e., separating the part on
pharmacovigilance). The latest amended proposals on information to patients were adopted
by the Commission on 10 February 2012.
4.44
2001/83 covers not only direct activities of the marketing authorisation holder, but also
activities performed “indirectly through a third party acting on behalf of the marketing au-
thorisation holder”.22 Moreover, the amended proposals make a distinction between infor-
mation that must be made available by the marketing authorisation holder, and the informa-
tion that may be made available by him. The former includes the SmPC, the labelling and
use, among other things. The authorised channels for making information available are also
amended in that distribution through health-related publications, newspapers and magazines
is not allowed, except upon request by a patient or via an HCP. The amended proposals also
modify the requirements regarding quality criteria and statements.
4.45 The fact that the latest proposal has not progressed in the past 18 months strongly suggests
that the Commission and Parliament remain at an impasse and that there is no prospect of
adoption of the proposal in the near future.
22 Article 1 of the Amended Proposal to amend Directive 2001/83.

4. General rules
a) Authorised medicinal products (Article 87(1))
4.46 Advertising an unauthorised medicinal product is prohibited, regardless of the status of

the product and irrespective of the prescription and whether the advertising is aimed at the
general public or at HCPs. Similarly, pharmaceutical companies may not advertise a med-
icine outside the authorised therapeutic indications (so-called ‘off-label promotion’), even
4.47 The EFPIA Code authorises off-label advertising at international events or advertising of a
medicinal product that is not yet approved in the country where the event takes place if such
advertising is accompanied by (i) a statement indicating the countries in which the product
is authorised and stating that it is not in the country where the event takes place and (ii) if
applicable, a statement explaining that the authorisation conditions vary from country to
country. In the same vein, the Austrian law allows advertising to HCPs of medicines not
foreign.
b) Basic requirements (Article 87(2) and (3))
4.48 Advertisements of medicinal products must meet certain general criteria: they must comply
-
4.49 Based on the Gintec23 ruling of the CJEU, Member States may only impose additional re-
quirements beyond those laid down in Directive 2001/83 if expressly allowed in the Direc-
(subject of course, ultimately, to review by the CJEU).
4.50 Several Member States (e.g., the UK) have imposed an additional general requirement that
advertising or promotional activities sponsored by a pharmaceutical company must clearly
indicate that they are so sponsored.
c) Impact of prescription status (Article 88)
4.51 As a general rule, advertising of prescription-only medicinal products may be directed only
to HCPs, whereas advertising of over-the-counter medicinal products may be intended for
both HCPs and the general public.
4.52 Advertising to the general public is prohibited for prescription-only medicinal products and
medicinal products containing psychotropic or narcotic substances, except in cases of vacci-
nation campaigns approved by the competent authority. The Proposal on Information to Pa-
tients planned to extend this exception to other campaigns conducted in the public interest.
Notwithstanding the clear prohibition currently in Article 88 of Directive 2001/83, some
Member States allow certain advertisements to the general public for prescription-only me-
23 See Section A.3 above.

dicinal products. In France, for example, promotion to the public of both prescription drugs
and reimbursed non-prescription drugs intended to reduce tobacco addiction is allowed.
4.53 Member States may also prohibit the advertising of medicines that are reimbursed through
the social security system, whether or not those medicines are prescription-only, but that
option is not always used.
d) Media
4.54 Directive 2001/83 does not address the means that pharmaceutical companies may use
to promote their medicinal products. However, the use of certain media is prohibited or
restricted by other directives. For example, the EU data privacy Directive 95/46 states
that e-mail advertising is permissible only when the recipient has previously agreed to re-
ceive such communications, possibly on the basis of an ‘opt-out’ arrangement.24 Directive
2010/13 prohibits the advertising of prescription-only medicinal products on television.25 It
also prohibits the sponsorship of audiovisual media services or programs by pharmaceutical
companies for promoting their activities.
4.55 -
stance, it is generally forbidden to advertise medicinal products in aircrafts or boats through
signs, telephone, text messages, fax, software, etc. In France, the Medicines Agency
(Agence nationale de sécurité du médicament et des produits de santé - ‘ANSM’) published
and updated a recommendation on media allowed to advertise to the public. Greeting cards,
CDs, cups, bookmarks or mats, for example, are not deemed appropriate.
4.56 Also, the EFPIA Code regulates the means by which advertisements are made. Subject to
contrary national provisions, the use of faxes, e-mails, automated calling systems, text mes-
sages or other electronic communications is prohibited unless prior consent of the recipient
is obtained.
5. Advertising to the public

4.57 As noted above (under Section 4(c)), the general rule is that non-prescription medicines may
be advertised to the general public whereas prescription-only medicines may not.
a) Printed advertisements (Article 89)
4.58 Article 89 of Directive 2001/83 sets out what information must be included in advertise-
ments to the general public. Any advertisement to the general public must (i) be designed so
24 Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of
individuals with regard to the processing of personal data and on the free movement of such data OJ 1995
L281/31.
25 Directive 2010/13/EU of the European Parliament and of the Council of 10 March 2010 on the coordination
of certain provisions laid down by law, regulation or administrative action in Member States concerning the
provision of audiovisual media services OJ 2010 L95/1.

national non-proprietary name if the medicinal product contains only one active substance),
the information necessary for the correct use of the medicinal product, and an express, leg-
4.59 Member States may allow the mere mention of the name, the international non-proprietary
name or brand of the medicinal product in advertisements, when such communications are
intended solely as a reminder.
b) Legal prohibitions (Article 90)
4.60 Article 90 of Directive 2001/83 lists the elements that are expressly prohibited in advertise-
ments to the general public. Such advertising must not contain any material which:
1. Gives the impression that a medical consultation or surgical operation is unnecessary,
2. Suggests that the effects of the medicine are guaranteed, without side effects, greater
3. Suggests that the health of the subject can be enhanced by the use of the medicinal
4. Suggests that the health of the subject could be affected in the event of non-use of the
5.
6. Refers to a recommendation by scientists, health professionals or other persons who
7.
8.
9. Could, by a description or detailed representation of a case history, lead to erroneous
10.
11. Uses – in improper, alarming or misleading terms – pictorial representations of changes
in the human body caused by disease or injury or the action of a medicinal product in
the human body or parts of it.
4.61 In Gintec, the CJEU noted that the term ‘claims of recovery’ (Article 90(j)) covers any
claim that use of the medicinal product will lead to “the restoration to health of the person
suffering from an illness or from particular health problems”. However, it does not cover
“references to the reinforcement of a person’s well-being” where there is no reference to
illness”.26 The Court also linked this to Article 90(c), stressing that claims suggesting that
the health or general well-being of the subject can be enhanced by the use of the medicinal
product are prohibited.
26 Case C-374/05, . [2007] ECR I-09517,

paras 43-44.

6. Advertising to HCPs
4.62 Directive 2001/83 expressly authorises several types of advertising to HCPs: printed adver-
tisements, visits by sales representatives, gifts, hospitality and free samples.
4.63
”. It is left to national law
to determine which professionals are deemed HCPs. Doctors, dentists and pharmacists are
obviously included, but what about, for example, nurses (covered in France, Germany or the
Netherlands) or medical students? Under the EFPIA Code, doctors, dentists, pharmacists,
nurses and anyone who may prescribe, purchase, supply or administer medicinal products in
the context of their professional activities is considered a ‘healthcare professional’.
a) Printed advertisements (Article 91 and 92)
4.64 Any advertisement of a medicinal product to HCPs must contain the essential information
This minimum information must be included in any document relating to a medicinal prod-
uct, which must also specify the date on which it was established or revised. Member States
may also require that the advertisement indicates the sale price of the various presentations
and the conditions of reimbursement through the social security system.
4.65
to enable the recipient to determine the therapeutic value of the medicinal product. Quo-
4.66 The EFPIA Code contains additional restrictions. It prohibits the use of the term ‘safety’
without further precision, limits the use of the word ‘new’ to a period of one year, and pro-
hibits the claim that the product does not have side effects, toxicity or risks of addiction or
dependency. However, it expressly permits comparisons between medicines, provided that
they are based on relevant and comparable aspects of products and they are not misleading
or disparaging.
b) Sales representatives (Article 93)
4.67 -
edge to provide accurate and complete information about the medicines they are presenting.
Directive 2001/83 does not contain greater detail about the training required from sales
4.68 Documents submitted by sales representatives to HCPs must comply with the restrictions
imposed by Article 87 (general rules) and Articles 91 and 92 (rules for printed advertise-
ments) of Directive 2001/83. During each visit, sales representatives are required to have
at hand or provide the healthcare professional with the SmPC and, if applicable, the infor-
mation about prices and reimbursement conditions for each medicinal product they present.
4.69 The EFPIA Code also requires that sales representatives ensure that the frequency, timing
and duration of visits do not cause inconveniences to the visited HCPs. The same restric-
tions are contained in the French Charter of medical visits (‘Charte de la visite médicale’).

4.70 The prohibition on advertising of an unauthorised medicinal product means that a sales
representative must not refer to ongoing research for a new medicinal product or a new
on on-going developments asked by an HCP, provided that his answer does not constitute
advertising under Article 86(2).
c) Incentives (Article 94 and 95)
4.71 In general, HCPs must not solicit or accept from pharmaceutical companies – and the latter
the cases strictly regulated in Directive 2001/83. This ban, meant to eliminate incentives to
prescribe or dispense a particular pharmaceutical company’s medicinal products, does not
cover national trade practices relating to prices, margins and discounts.
(Article 94(1))
4.72
unless of negligible value and related to the practice of medicine or pharmacy. What con-
stitutes ‘negligible value’ varies from Member State to Member State and can range from
a few euros to 50 euros. Some Member States do not set limits for certain types of gifts
(usually educational objects), the nature of which varies.
ii) Hospitality (Article 94(2) and 95)

4.73 EU law allows pharmaceutical companies to provide hospitality to HCPs who are attending
be strictly limited to the main purpose of the event and must not be extended to persons
other than HCPs. These conditions are generally interpreted as requiring pharmaceutical
companies to cover only the transportation, hotel, and meals and the registration fees. They
must not bear other costs (e.g., cultural or sports activities), even if they occur within or in
connection with the event.
4.74 The EFPIA Code states that hospitality must be reasonable, i.e., it must not exceed the
amount that the HCPs would normally be willing to pay for themselves. First class tickets
or meals in well-known restaurants are generally not acceptable.
4.75 Some Member States have introduced a system of prior approval or control to ensure that
semi-public (Belgium) or private (France) body. National rules can also restrict hospitality
iii) Other incentives

4.76 Interactions between pharmaceutical companies on the one hand, and HCPs and the general
public, on the other, are not limited to those envisaged by Directive 2001/83. They also
arise in activities such as the sponsorship of an association of HCPs, the training of HCPs,
and funding of clinical trials conducted by hospitals. The most common interaction is prob-
ably the payment for services provided by the HCP.

4.77 Directive 2001/83 does not expressly regulate the payment of services provided by HCPs
i.e.,
gifts. A gift to a doctor or pharmacist can encourage the prescription or supply of medicinal
products originating from the donor rather than those of its competitors.
4.78 The same cannot be said about a fair remuneration for services actually rendered by a physi-
that are provided as part of a research contract (e.g., a clinical trial) or a service contract
(e.g.,
at a conference, training of other professionals, etc.). The compensation must be reasonable
Furthermore, the provision of services must be documented by a written contract that may
4.79
compensation considered reasonable and proportionate. This criterion is generally inter-
preted as referring to the ‘fair market value’ given the factual circumstances (time spent by
the healthcare professional, nature of services, specialisation, etc.). Sometimes reference
is also made to standard tariffs for physicians. For certain national control mechanisms see
Section B.8(c) below.
4.80 As for hospitality, some Member States have introduced a system of prior approval or con-
d) Samples (Article 96)
4.81
samples of medicinal products containing psychotropic or narcotics, the provision of which
is generally prohibited. EU law does not allow the provision of samples to persons who
are authorised to supply medicinal products (pharmacists) and a fortiori to patients. Article
88(6) expressly prohibits the direct distribution of medicines to the general public for pro-
motional purposes.
4.82 Delivery of samples to physicians is subject to strict conditions: (i) the number of samples
be accompanied by a copy of the SmPC. Member States may impose additional restrictions
on the distribution of medicinal product samples.
7. Websites
4.83
rules on websites at the EU level. Apart from the general advertising rules, websites must
also comply with EU rules on the protection of personal data, electronic commerce and
unfair business practices. Moreover, an annex to the EFPIA Code contains Guidelines for
Internet Websites Available to HCPs, Patients and the Public. These Guidelines impose an

obligation of transparency, requiring each site to clearly indicate certain information such as
the identity and address of the site or its sources of information.
4.84 In theory, disease awareness sites – i.e., sites dedicated to a particular disease – are not con-
sidered advertising, as Article 86(2) of Directive 2001/83 expressly excludes information
on human health or diseases from the scope of advertising, provided that it does not contain
as companies may seek to disseminate promotional information via disease awareness sites.
The EFPIA Guidelines list the information that can be posted on such sites, namely: general
information about the pharmaceutical company and information on the characteristics of
diseases, methods of prevention and screening, treatments and other information to promote
public health. Medicinal products may be mentioned if the discussion is balanced and
accurate.
4.85 Another interesting issue related to the use of the Internet is regulating sites reserved for
HCPs only. As with all advertising, promotional materials on prescription medicines may
not be made accessible to the public. Member States have different approaches here. In
e.g., Sweden), but in general this mea-
or encouraged. Many pharmaceutical companies restrict public access by technical means
physicians by the pharmaceutical company (Portugal, Finland, Denmark) or an independent
4.86 The proposals on Information to Patients27 -

able of information via the Internet. Websites on medicinal products are recognised as a
legitimate channel for provision of information by the marketing authorisation holder. Such
of the Member States where the medicines are authorised. The websites would also have to
marketing authorisation holders would have to register their websites with the competent
national authorities before the websites are available to the general public. The Member
State of registration would be responsible for monitoring the contents of the website. It
would not be permissible for websites to identify the members of the general public that
have visited them, nor trigger active distribution of unsolicited materials. Finally, the web-
sites would have to contain a link to the European medicines web portal.28
8. Responsibilities and sanctions
4.87 Generally speaking, responsibility for the advertising of a medicinal product rests with the
27 See Section B.3(a)(iv).

28 Article 26 of Regulation 726/2004 requires the EMA to set up and maintain a European medicines web-portal
for the dissemination of information on medicinal products authorised in the EU, but this portal is not yet
operational.

marketing authorisation holder. In some Member States, where the rules are worded in a
more general way, this responsibility extends to the advertisements made by third parties
who are independent from the marketing authorisation holder.
4.88
-
trol by the authorities a copy of any advertisement made by the company, together with a
representatives are adequately trained and meet their obligations.
4.89
may be adopted at the national level. In Italy, for example, the national code of conduct
medical practitioner or, where appropriate, a pharmacist.
4.90 The liability of the marketing authorisation holder for the advertising of its medicinal prod-
ucts makes it particularly important - and necessary - to implement supervision and control
measures in case of delegation of advertising and promotional activities to a third party
(e.g., a local distributor).
b) Co-promotion (Article 98(3))
4.91 Member States must not prohibit the co-promotion of a medicinal product by the marketing
authorisation holder and one or more other companies. This rule, after the legislative reform
of March 2004, softened the prohibitions and restrictions in some Member States (e.g., Italy
and Greece).
c) Controls and sanctions (Article 97)
4.92 Public authorities monitor companies’ compliance with the rules relating to advertising.
i) Controls
4.93 Directive 2001/83 does not determine the control measures to be implemented by Member
States. It merely states that if monitoring is based on a system of prior control, it must also
allow the interested persons to bring a legal action.
4.94 A mechanism of prior control is established in some Member States. In France, advertising
is subject to a priori approval of the ANSM, and payments or gifts to HCPs are subject
to prior control of the competent ethics board (such as the national physicians board or
CNOM). In Italy, all advertising, including ‘Health Sites,’ as well as payments and gifts to
-
ments to the general public are subject to control by a self-regulatory body, the Foundation
Code Medicines Advertising ( (CGR)). In Sweden,
the trade association for the Pharmaceutical Industry (LIF) makes a prior review of the ad-
vertising over the Internet. In the UK, the Medicines and healthcare products Regulatory
Agency (‘MHRA’) may require a prior control of advertisements in some cases and, since
November 2005, it systematically reviews the advertisements for new active substances.

4.95
Germany, the Common Position on the Criminal Assessment of the Cooperation between
the Industry, Hospitals and their Employees (Gemeinsamer Standpunkt), requires compa-
nies to obtain a written declaration from the targeted HCP that they want to cooperate with,
that he provided ample information on the arrangement to his employer and obtained their
consent. Similarly, the French Anti-Gift Act ( ), requires companies to
submit a dossier to, and seek the prior opinion of, the French Order of Physicians (CNOM or
29
In Belgium, hospitality involving at least one overnight stay requires the prior approval of
the Ethical Healthplatform (Mdeon).
4.96 Monitoring is also carried out by the pharmaceutical companies themselves, and to a lesser
extent, by professional associations through codes of conduct.
ii) Sanctions
4.97 -
alties for violations of certain provisions of the Regulation. This provision has led to the
30
During the
preparation of this Regulation, the Commission attempted to extend its power to sanction vi-
726/2004, and Article 84(3) does not cover it. As a consequence, Regulation 658/2007 does
not explicitly cover advertising. Rather, it covers “the placing on the market in accordance
in the authorisation for placing on the market”. If this is applied to advertising though, it
most likely lacks legal basis.
4.98 Sanctions for violations of the rules on advertising are therefore determined entirely at the
-
ber States should empower national courts to order the cessation of activities or to prevent
illegal distribution, even in the absence of evidence of actual harm or fault of the advertiser
(Article 97). Member States can also empower the courts to order the publication of a cor-
rective statement. Moreover, Article 118(a) of Directive 2001/83 requires Member States
to lay down the rules on penalties applicable to infringements of the national provisions
adopted pursuant to the Directive and ensure that those penalties are implemented. Such
penalties must not be inferior to penalties applicable to infringements of national law, and
must be effective, proportionate and dissuasive.
4.99 The penalties provided for by Member States under pharmaceutical law are very diverse,
States are more imaginative. France, for example, ties the violation of advertising rules to
the reimbursement status of a product. In addition to these penalties, certain anti-corruption
29
30 -
726/2004 of the European Parliament and of the Council OJ 2007 L155/10.

4.100 The EFPIA Code requires national industry associations to establish procedures and appro-
of the decision, but leaves it to the national associations to determine the most effective
sanctions.
4.101 In practice, self-regulation is the preferred method of resolving disputes regarding adver-
tising in many Member States. If the pharmaceutical company refuses to submit to a code
of conduct or a decision of the self-regulation organ, a professional association or another
pharmaceutical company usually reverts to a public authority.
C. MEDICAL DEVICES
4.102 Advertising and promotion of medical devices is not regulated at the EU level, and Mem-
ber State legislators can set out standards in this area if they wish. 31 Directive 93/42/EEC
concerning medical devices32 only provides that national legislators must not create any
obstacles to displaying devices that are not conform with the requirements of the Directive
at trade fairs, exhibitions, demonstrations or the like, provided that a visible sign clearly
indicates that such devices may not be marketed or put into service before they conform
with the relevant requirements.
4.103 The European medical technology industry association (Eucomed) established some guide-
lines in its Code of Ethical Business Practice of 11 September 2008 (‘Eucomed Code’).
This code sets out rules on interactions of its member companies with HCPs, both indi-
viduals and entities. It has been implemented by national industry associations in codes
containing similar requirements, which vary to some extent in accordance with the national
rules and nationally chosen approach. The rules set out in the Eucomed Code apply when
there are no stricter national provisions in place.
4.104 The Eucomed Code is based on four key principles:

1. The principle of separation provides that interactions between the industry and HCPs
must not be misused and that HCPs must retain their independence in making purchas-
ing and prescribing decisions.
2. The principle of transparency requires that these interactions be transparent and com-
pliant with applicable laws.
3. According to the principle of equivalence, remuneration of legitimate services per-
formed by HCPs must represent a fair market value and be commensurate with the
services provided.
4. Based on the principle of documentation, appropriate documentation, such as written
contracts, receipts, invoices, must be kept as a record of the interactions.
4.105
between HCPs and the industry:
31 For a very succinct overview of the EU medical device rules, see Chapter 1, Section C.2.
32 Council Directive 93/42/EEC of 14 June 1993 concerning medical devices OJ 1993 L169/1.

1. Meetings. Sponsored product trainings or promotional meetings may only be con-

ducted in appropriate venues, the hospitality and travel arrangements must be reason-
information being shared at the meeting. Educational conferences organised by third

parties may also be sponsored by the industry under various forms, such as sponsoring
the attendance of HCPs, purchasing advertisements or booth space, general conference
support, organisation of satellite symposia or provision of grants to institutions – all in
2. Agreements. Consulting agreements with HCPs are allowed , so long as they serve a
-
pensated based on fair market value, and the agreements are in written form, among
other things.
3. Gifts, Donations and Grants. Companies may occasionally provide HCPs with in-
expensive gifts that are modest in value and not in cash form. Donations to charitable
way to past, present or future use of the companies’ products or services. Similar rules
apply to educational grants such as scholarships or research grants. Such support may
not be a reward to favoured customers nor an inducement to recommend, purchase or
prescribe products.
D. TRANSPARENCY RULES
4.106 Interactions between the pharmaceutical industry and HCPs are often necessary and desired.
-
1. Sunshine rules at EU level

4.107 In June 2013, EFPIA published a Code on Disclosure of Transfers of Value from Pharma-
ceutical Companies to Healthcare Professionals and Healthcare Organisations (the ‘EFPIA
Disclosure Code’). The EFPIA Disclosure Code envisages that member companies doc-
ument and disclose direct and indirect payments and transfers of value that they make to
healthcare organisations or HCPs. Covered payments include donations, grants, sponsor-
4.108 The EFPIA Disclosure Code requires disclosure on an annual basis and within 6 months
after the reporting period. Disclosure must be made on a publicly available website or on a
central platform hosted by, for instance, a regulatory authority or a national EFPIA member
association. For certain types of payment the EFPIA Disclosure Code requires an aggregate
disclosure, i.e., of all transfers of value of that type to HCPs or healthcare organisations, and
for others, of all payments made to an individual recipient.

2. Sunshine rules at national level

4.109 Few Member States currently impose legal transparency obligations, but the EFPIA Disclo-
sure Code must be implemented into national codes by 31 December 2013, so changes are
on the way.
4.110
or more (in kind or in cash) provided to various actors in the healthcare sector, and of agree-
ments concluded with those persons. The Dutch industry association CGR adopted a Code
of Conduct for the Disclosure of Financial Relations requiring annual reporting of payments
to HCPs or healthcare institutions, published on the CGR website. Similarly, the UK ABPI
Code of Practice for the Pharmaceutical Industry requires reporting and public disclosure on
the company website of certain payments to HCPs and healthcare associations. The Code of
Conduct from the German industry association FSA obliges members to disclose payments
to healthcare institutions higher than 10.000 EUR per recipient on the company website. In
some countries, such as Italy and Spain, disclosure duties result indirectly from the obliga-
tion to report promotional expenses for tax purposes.
3. Patient associations
4.111 The EFPIA Patient Organisations Code requires companies to publish a list of patient or-
support. This list must include the monetary value or a description of the non-monetary
can be found in national industry codes on interactions with patient organisations.

5
PHARMACOVIGILANCE
A. INTRODUCTION 5.0 F. RISK MANAGEMENT PLAN 5.45

1. Format and contents of RMP 5.45
B. KEY REGULATORY AUTHORITIES
2. Submission of RMP and updates 5.49
1. EU level 5.06
2. National level 5.09 G. POST-AUTHORISATION
SAFETY STUDIES 5.51
C. PHARMACOVIGILANCE
QUALITY SYSTEM 5.10 H. OTHER SOURCES OF REPORTING
OBLIGATIONS 5.56
1. Conditions of the marketing authorisation 5.57
3. Pharmacovigilance audits 5.19 2. Obligations in risk management plans 5.59
3. Requests for information 5.60
D. EXPEDITED REPORTING
REQUIREMENTS 5.20
1. Overview of legal obligations 5.20 I. OTHER CONSIDERATIONS
2. Causality assessment 5.24 1. Data protection 5.62
3. Electronic reporting 5.27 2. Contractual issues and safety
4. Follow-up obligations 5.29 data exchange agreements 5.65
5. Additional reporting requirements 5.32 J. ENFORCEMENT AND PENALTIES
E. PERIODIC REPORTING REQUIREMENTS 1. Pharmacovigilance inspections 5.68
1. Content and format of PSURs 5.37 2. PRAC procedures 5.70
2. Submission schedules 5.40 3. Article 31 referral 5.74
3. Assessment of PSURs 5.4 4. Urgent safety restrictions 5.76
5. Article 116 procedure 5.78
6. Penalties 5.79
A. INTRODUCTION
5.01 The EU has been an active participant in various initiatives intended to harmonise global
drug safety requirements and has helped shape the recommendations on the pharmacovigi-
on Harmonisation of Technical Requirements for Registration of Pharmaceuticals for Hu-

PHARMACOVIGILANCE
man Use (‘ICH’)1 and by the World Health Organisation (‘WHO’) Council for International
Organisations of Medical Sciences (‘CIOMS’).2 Recently, however, the EU has adopted a
more holistic approach, focusing more on global pharmacovigilance systems and overarch-
ing principles of risk managementrather than formal reporting requirements. At the heart
of this approach is an expectation that companies will engage in a continuous assessment of
5.02 Prior to July 2012, the key pharmacovigilance obligations in the EU3 were described in for
Regulation (EC) No 726/20044 for centrally approved products and Directive 2001/83/EC5
for other medicinal products. This legislation was supplemented by guidance from the Eu-
ropean Commission, published as Volume 9A of the Rules Governing Medicinal Products
in the European Union on December 5, 2001. Although purportedly only guidance, Volume
9A had some legal force, because Directive 2001/83/EC and Regulation (EC) No 726/2004
5.03 The EU adopted new pharmacovigilance legislation in December 2010, which introduced
amended Directive 2001/83/EC,6 while Regulation (EU) No 1235/2010 amended Regula-

tion (EC) No 726/2004.7 Further amendments relating to pharmacovigilance were adopted
in 2012 and came into effect in October 2013.8
5.04 Directive 2001/83/EC now sets out the basic reporting requirements for marketing authori-
sation holders (‘MAHs’) for all medicinal products and it is accompanied by Commission
1 ICH was created to develop tripartite harmonisation initiatives relating to the authorisation of pharmaceutical
products in the EU, Japan, and the United States, with input from both regulatory and industry represen-
tatives. The six ICH sponsors are the European Commission, the European Federation of Pharmaceutical
Industries and Associations, the Japanese Ministry of Health and Welfare, the Japanese Pharmaceutical Man-
ufacturers Association, the FDA, and the Pharmaceutical Research and Manufacturers of America.
2 http://www.cioms.ch.
Norway, Iceland and Liechtenstein, have implemented the EU’s pharmaceutical regime, including the rules
relating to pharmacovigilance, and references to the EU in this chapter can therefore often be read to encom-
pass the entire EEA.
use and establishing a European Medicines Agency, OJ 2004 L136/1.
code relating to medicinal products for human use, OJ 2001 L311/67.
6 Directive 2010/84/EU of the European Parliament and of the Council of 15 December 2010 amending, as
regards pharmacovigilance, Directive 2001/83/EC on the Community code relating to medicinal products for
human use, OJ 2010 L348/74.
7 Regulation (EU) No 1235/2010 of the European Parliament and of the Council of 15 December 2010 amend-
ing, as regards pharmacovigilance of medicinal products for human use, Regulation (EC) No 726/2004 lay-
ing down Community procedures for the authorisation and supervision of medicinal products for human
and veterinary use and establishing a European Medicines Agency, and Regulation (EC) No 1394/2007 on
advanced therapy medicinal products, OJ 2010 L348/1.
8 Directive 2012/26/EU of the European Parliament and of the Council of 25 October 2012 amending Directive
2001/83/EC as regards pharmacovigilance, OJ 2012 L299/1.

PHARMACOVIGILANCE
Implementing Regulation (EU) No 520/2012,9 which provides details on operational as-

pects of the new legislation. To supplement the legislation the European Medicines Agency
(‘EMA’) has adopted a guideline on good pharmacovigilance practice in a series of modules
5.05 This chapter describes the pharmacovigilance obligations on MAHs under the new pharma-
covigilance legislation and highlights key differences with the old system. Where relevant,
it describes transitional measures, many of which are expected to remain in place for several
years. The focus is on post-marketing pharmacovigilance obligations and so this chapter
does not discuss the safety reporting obligations applicable to sponsors of clinical trials,
which are imposed by Directive 2001/20/EC10 and associated guidance from the European
Commission, published within Volume 10 of the Rules governing medicinal products in the
European Union.
B. KEY REGULATORY AUTHORITIES
operate at two levels: the EU level and the national level.
1. EU level
5.06 At the EU level, the European Commission is responsible for proposing and promulgating
relevant Community legislation and establishes pharmacovigilance policy. It is the body
responsible for the granting of centralised marketing authorisations and for the adoption of
binding decisions following referrals on safety-related matters.
5.07 The European Medicines Agency -

sources in Member States for the evaluation, supervision and pharmacovigilance of me-
dicinal products. It is responsible for the review of centralised marketing authorisation
applications and for the resolution of matters referred to it from the EU Member States. It
key Committee for Medicinal Products for Human Use (‘CHMP’). The CHMP comprises
representatives of all EEA Member States, who use the resources of their respective nation-
al competent authorities to review applications for marketing authorisation and to resolve
issues referred to them during the decentralised and mutual recognition process or other-
wise through the various referral procedures. The CHMP adopts opinions based on these
assessments and these opinions form the basis of binding European Commission decisions.
9 Commission Implementing Regulation (EU) No 520/2012 of 19 June 2012 on the performance of pharma-
covigilance activities provided for in Regulation (EC) No 726/2004 of the European Parliament and of the
Council and Directive 2001/83/EC of the European Parliament and of the Council, OJ 2012 L159/5.
good clinical practice in the conduct of clinical trials on medicinal products for human use, OJ 2001 L121/34.

PHARMACOVIGILANCE
5.08 The CHMP is assisted by various working parties, which included the Pharmacovigilance
Working Party (‘PhVWP’). The PhVWP was strictly speaking an advisory body, with no
by the Pharmacovigilance Risk Assessment Committee (‘PRAC’), whose powers and pro-
cedures have been formally prescribed in the new legislation. Its main responsibility is to
prepare recommendations on any questions relating to pharmacovigilance activities and
on risk-management systems. The PRAC is also responsible for reviewing periodic safety
update reports (‘PSURs’) and oversight of post-authorisation safety studies (‘PASS’). The
-
ed by the Commission, a healthcare professional representative and a patient organisation
representative.
2. National level
5.09 The national competent authorities in the Member States have the primary responsibility
for monitoring the safety of medicinal products approved either nationally, via the mutual
recognition procedure or via the decentralised procedure. The EU reference member state
is responsible for coordinating safety-related actions among other Member States. The na-
tional competent authorities also conduct pharmacovigilance inspections, either themselves
or on behalf of the EMA.
C. PHARMACOVIGILANCE QUALITY SYSTEM

5.10 The MAH is legally responsible for the safety of products that it places on the market under
its authorisations and for reporting all adverse event information that is required. Article
1. for pharmacovigilance
5.11 A key component of that pharmacovigilance system is that MAHs must have an appropri-
their disposal.11 The QPPV must reside and operate in the EEA (so, for example, the QPPV
may not live or work in Switzerland). The GVP Guidelines provide that each pharmacovig-
ilance system can have only one QPPV.12 A QPPV may be engaged by more than one MAH,
for a shared or for separate pharmacovigilance systems, and so it is common for smaller
companies to engage the services of a QPPV through a pharmacovigilance service provider,
rather than employ their own QPPV on a full-time basis. Back-up procedures should be in
place in the case of absence of the QPPV. In practice, this means that MAHs need to appoint
11 Directive 2001/83/EC, Article 104(3).

12 GVP Guidelines, Module I, Section I.C.1.1.

PHARMACOVIGILANCE
a deputy QPPV, who should be accessible through the QPPV’s contact details whenever the
QPPV is absent.
5.12 Individual member states may also require the designation of a pharmacovigilance contact
QPPV in Spain.
5.13 The QPPV is personally responsible for the establishment and maintenance of the MAH’s
pharmacovigilance system and so the GVP Guidelines require MAHs to ensure that struc-
-
ular, the MAH should ensure that there is full documentation covering all procedures and
activities of the QPPV and that mechanisms are in place to ensure that the QPPV receives
or can obtain all relevant information. These mechanisms should ensure that the QPPV is
informed of emerging safety concerns and any other information relating to the evaluation
-
ed clinical trials and other studies the MAH is aware of and which may be relevant to the
contractual arrangements.
5.14 -
ty system and the MAH’s pharmacovigilance activities.13 The QPPV should therefore be
-
tabase, with the authority to implement changes. The QPPV should also be allowed to
provide input into risk management plans and proposed regulatory actions in response to
emerging safety concerns.
5.15
trained individuals. This may include, for example, delegation to an individual of the duty
to act as a safety expert for a certain product. Any delegation of this sort should be docu-
-
ucts.
2.
5.16 Under the old pharmacovigilance rules, each marketing authorisation application had to
contain a detailed description of the pharmacovigilance system (‘DDPS’) that the applicant
would introduce for the product. Since it was part of the marketing authorisation dossier,
any change to the DDPS required a formal variation to the marketing authorisation. This
created a huge compliance burden for both MAHs and regulatory authorities, particularly
when a change to the pharmacovigilance system at a large pharmaceutical company could
trigger the need to vary hundreds of marketing authorisations.
5.17 The new legislation replaced the DDPS with the concept of a pharmacovigilance system
as the DDPS, although it is supplemented by various annexes, such as lists of standard oper-
13 Commission Implementing Regulation, Article 10(2).

PHARMACOVIGILANCE
ating procedures, tasks delegated by the QPPV, and contractual agreements covering dele-
gated activities.14 Rather than submit this as part of the marketing authorisation application,
-
tory authorities on request. The PSMF should be located in the EEA either with the QPPV
or at the site where the MAH performs its main pharmacovigilance activities.15 With respect
to pharmacovigilance, the marketing authorisation application now only needs to contain a
summary of the pharmacovigilance system, which includes the details of the QPPV and the
location of the PSMF. Changes to the content of the PSMF therefore no longer require the
submission of variation applications.
5.18 Since July 2012, all new marketing authorisation applications and any renewal applications
have been required to include a summary of the PSMF, rather than the DDPS. For all other
existing marketing authorisations, the MAH must vary the marketing authorisation by July
2015 to replace the DDPS with the summary of the PSMF, but must do voluntarily do so
sooner than that.
3. Pharmacovigilance audits
5.19 Article 104(2) of Directive 2001/83/EC expressly requires MAHs to conduct regular audits
of their pharmacovigilance quality systems. Such audits should include audits of organisa-
tions or person’s to whom the MAH has delegated pharmacovigilance tasks. Details of the
included within the PSMF.
D. EXPEDITED REPORTING REQUIREMENTS
1. Overview of legal obligations

5.20 Article 107 of Directive 2001/83/EC requires MAHs to record all suspected adverse reac-
tions (‘ARs’) occurring in the EU or in any other country which are brought to their atten-
tion, whether they were reported spontaneously by patients or healthcare professionals, or
they occurred in the context of a post-authorisation study. The MAH must ensure that there
reports are “accessible at a single point within the Union”. This does not mean that the
global safety database must be located in the EU. It appears both common and acceptable
for the MAH and QPPV to rely on access to a global safety database outside the EU, e.g.,
in the United States.
5.21 The MAH is required to report all suspected serious adverse reactions (‘SARs’ ) occurring
within the EU or in another country within 15 days following the day on which the MAH
gained knowledge of the event.16 An AR will be serious (an SAR) if it “results in death, is
14 GVP Guidelines, Module II.

15 Commission Implementing Regulation, Article 7(1).

PHARMACOVIGILANCE
life-threatening, requires inpatient hospitalisation or prolongation of existing hospitalisa-
birth defect”.17 The new legislation also requires MAHs to report suspected non-serious
adverse reactions that occur within the EU within 90 days following the day on which the
MAH gained knowledge of the event.18
5.22 Prior to July 2012, MAHs were only required to report ARs brought to their attention by
attention by a healthcare professional. There was no obligation to report ARs arising from
There was the obligation, however, to maintain these in a database. The reporting obliga-
tions now apply to all ARs received by the MAH, including ARs received from patients or
other consumers.
5.23 The legal reporting obligation is triggered when the MAH itself has received all the compo-
-
tive 2001/83/EC indicates that Day 0 is when the MAH itself gains the requisite knowledge
of the event, but the GVP Guidelines provide that for these purposes the personnel of the
MAH include medical representatives and contractors.19 Further, the GVP Guidelines im-
pose an obligation on MAHs to ensure that companies outside the EU belonging to the same
group as the MAH or with whom they have concluded a commercial agreement for one of
the MAH’s products bring any information on ARs to the MAH’s attention. The clock for
when those companies subsequently forward the information to the MAH.20
2. Causality assessment
5.24 It is important to note that EU law requires the reporting of ARs, rather than adverse events
(‘AEs’).21 -
tions as “A response to a medicinal product which is noxious and unintended and which
occurs at doses normally used in man for the prophylaxis, diagnosis or therapy of disease or
”. Since July 2012,
noxious and unintended”.22 This includes ARs arising from use of the product outside the
terms of the marketing authorisation, including overdose, off-label use, misuse, abuse and
medication errors.

19 GVP Guidelines, Module VI, Section VI.B.7.
20 GVP Guidelines, Module VI, Section VI.C.2.2.
21 -
ical-trial subject administered a medicinal product and which does not necessarily have to have a causal
relationship with this treatment… An adverse event can therefore be any unfavourable and unintended sign
(e.g.,
product, whether or not considered related to the medicinal product”.

PHARMACOVIGILANCE
5.25 The reporting obligation therefore only arises if either the MAH or the reporting individual
considers that there is at least a reasonable possibility of a causal relationship between an
AE and a drug.23 In other words, it requires the reporting physician or manufacturer to
assess not only if an event meets the basic criteria for an adverse event, but also whether
there is at least a possibility that it might be “a response to” a drug, i.e., it entails a causality
assessment.
5.26
in the regulations, the GVP Guidelines are clear that MAHs should assume that any adverse
event reported to them spontaneously by a healthcare professional, patient or consumer is
possibly causally related to the drug in question, unless the reporter explicitly states that
it is not related.24 Where the report is derived from an organised data collection system,
such as a non-interventional study, patient registry, market research programme, or patient
support programme, the MAH should exercise due diligence to obtain the opinion of the
primary source on the causal relationship between the medicinal product and the adverse
event. If that opinion cannot be obtained, the MAH must use its own judgment to determine
the causality.25 However, the MAH does not need to report any ARs arising from non-in-
terventional studies that are based on secondary use of data, such as medical chart reviews
or meta-analyses.26
3. Electronic reporting
5.27 Irrespective of the authorisation procedure of the relevant product and the source and des-
tination of these reports, they must now be submitted electronically.27 The Commission
Implementing Regulation requires that all electronic reports comply with ICH guidance.28
Reports are submitted to Eudravigilance, the European pharmacovigilance database and
data-processing network. All competent authorities in the EEA have access to these reports
through Eudravigilance.
5.28 Eudravigilance is not yet capable of receiving reports of non-serious ARs. As a result,
the obligation on MAHs to submit reports of non-serious ARs occurring within the EU to
Eudravigilance will not apply until Eudravigilance has been updated and validated. In the
meantime, some EU member states have imposed transitional reporting obligations requir-
ing non-serious ARs to be submitted direct to the national competent authorities in certain
circumstances, such as if the non-serious AR occurred in that country, that country acts as
23 This contrasts with the reporting requirements in the U.S., such as those in 21 CFR 314.80 which focus on
humans, whether or not considered drug related…”

24 GVP Guidelines, Module VI, Section VI.A.2.1.2.
25 GVP Guidelines, Module VI, Section VI.C.2.2.3.
26 GVP Guidelines, Module VI, Section VI.C.1.2.1.
28 Commission Implementing Regulation, Articles 25 and 26.

PHARMACOVIGILANCE
the RMS for the product concerned, or simply the product concerned is authorised in that
country.29
4. Follow-up obligations
5.29 MAHs have a legal obligation to “collect follow-up information” on reports of suspected
ARs and to submit updates to Eudravigilance.30 The GVP Guidelines have expanded on this
concept, so that if an initial report lacks the minimum infomration necessary to constitute
a valid report, MAHs “are expected to exercise due diligence in following up the case to
collect the missing data elements”.31 Thereafter, reports should be followed up “as neces-
the cases”.32 If the report was initially received directly from a consumer, the MAH should
seek the consent of the consumer to contact a nominated healthcare professional to obtain
the follow-up information required.
5.30
-
tion’ includes “new suspected adverse reaction(s), a change in the causality assessment and
any new or updated information on the case that impacts on its medical interpretation”.33 It
is important to note that changes in seriousness criteria and/or the causality assessment are
reportable even if they are downgrades. MAHs must also expedite reports of additional,
material administrative information, e.g.,
may allow the company and/or regulators to manage potential duplicate reports. They do
-
uation of the case.
5.31 The reporting time frame for follow-up information is generally the same as for the initial
report and the clock starts upon the MAH’s receipt of the follow-up information. If a case
initially reported as serious becomes non-serious as a result of follow-up information, the
downgrade should still be reported within the 15 day period allowed for reporting SARs,
but any subsequent follow-up information received would be subject to the reporting time-
frames for non-serious ARs.34
5. Additional reporting requirements

5.32 The GVP Guidelines impose a number of additional vigilance and reporting obligations.
MAHs must, for example, conduct at least weekly literature reviews of widely used databas-
es containing worldwide, peer-reviewed medical literature, e.g., Medline, Excerpta Medica
29 Reporting requirements of Individual Case Safety Reports (‘ICSRs’ ) applicable to marketing authorisation
holders during the interim period, 25 July 2013, EMA/321386/2012 Rev. 7.
33 GVP Guidelines, Module VI, Section VI.C.6.2.2.7.
34 GVP Guidelines, Module VI, Section VI.B.7.1.

PHARMACOVIGILANCE
or Embase.35
publications in local journals in countries where the product has a marketing authorisation.
frame as spontaneous reports (i.e., 15 days for SARs and 90 days for non-SARs occurring
within the EU).
5.33 A similar obligation arises in respect of ARs appearing on Internet websites or digital media
that are under the MAH’s management or responsibility. 36 For these purposes, websites
and digital media are considered to be company sponsored if they are “owned, paid for and/
or controlled by” the MAH, although a donation to an organisation or site does not bring
content of the site.
5.34 MAHs are expected to follow up any reports from healthcare professionals relating to preg-
nancy where the foetus may have been exposed to one of its products either through mater-
nal exposure or via semen from a father who has been exposed to a product. The MAH must
report abnormal issues during pregnancy or issues with the foetus or child once it is born.
This would include reports of congenital anomalies, foetal death, spontaneous abortion and
other SARs in neonates. Similar rules apply when infants experience adverse reactions
when they have breastfed from a mother exposed to a medicine.
5.35 MAHs must also collect and report instances of overdose, abuse, off-label use and misuse
of medicines, medication errors, or occupational exposure to medicines, in each case as-
sociated with an AR. Instances with no associated AR should not be reported, but should
be considered in PSURs (see below). MAHs are not normally required to report lack of
included in PSURs. In certain circumstances, however, individual case reports concerning

-
the treatment of a life-threatening disease, or with vaccines or contraceptives. MAHs are

expected to use their judgment when deciding whether to report such issues.
5.36 In addition to identifying these additional types of reportable issues, the GVP Guidelines
provide guidance on reporting in particular circumstances. For example, applicants for mar-
balance of any product to all authorities conducting the regulatory review. MAHs are also
encouraged to continue to report adverse reactions after a marketing authorisation has been
suspended or withdrawn for safety or commercial reasons. The MAH should discuss this
with relevant regulators on a case-by-case basis. In some cases, the regulators may agree
that it is appropriate simply to submit PSURs.
35 GVP Guidelines, Module VI, Section VI.B.1.1.2.

36 GVP Guidelines, Module VI, Section VI.B.1.1.4.

PHARMACOVIGILANCE
E. PERIODIC REPORTING REQUIREMENTS
1. Content and format of PSURs

5.37 Article 107(b) of Directive 2001/83/EC requires MAHs to submit periodic safety update
-
able, volume of prescriptions.
5.38 The format of the PSUR should follow the detailed requirements in Annex II of the Com-
-
cacy, effectiveness and safety data from various sources, including:
1. Non-clinical studies
2. Spontaneous reports
3. Product usage data and drug utilisation information
4. Clinical trials, including research in unauthorised indications or populations
5. Observational studies, including registries
6. Patient support programs
7. MAH-sponsored websites
8. Worldwide literature
9. Reports from regulatory authorities worldwide
10. Reports exchanged in the framework of contractual arrangements, such as licensing or
co-marketing agreements
5.39
change in the MAH’s knowledge of the medicinal product’s safety, and to indicate whether
changes should be made to the product’s Summary of Product Characteristics (‘SmPC’),
prepare suitable reference information for the purposes of this comparison in the form of
a Company Core Data Sheet (‘CCDS’),37 which includes material relating to safety, indi-
cations, dosing, pharmacology and other information concerning the product. The safety
information in the CCDS is often referred to as Company Core Safety Information (‘CCSI’).
For a PSUR, the CCSI is the basis for a determination whether an AR is already listed or is
unlisted, or whether there may be a change in frequency of an AR, which suggests a change
2. Submission schedules
5.40 For products granted a marketing authorisation on or after 2 July 2012 (centrally approved
products) or 21 July 2012 (nationally approved products), the frequency of PSUR submis-
37
CIOMS III/V working group.

PHARMACOVIGILANCE
authorisation before those dates, the frequency of submission may be laid down as a condi-
tion of the marketing authorisation, but if it has not and an EU reference date has not been
assigned for that active substance (see below), then the standard submission schedule shall
apply. This requires PSURs to be submitted at 6 month intervals once the product has been
authorised until 2 years after the initial placing of the product in the market in the EU, then
once a year for the following 2 years and thereafter at 3 yearly intervals.38
5.41 Under Article 107(c) of Directive 2001/83/EC, where different products containing the
same active substance are granted marketing authorisations, the submission schedule for
PSURs for those products may be amended and harmonised to allow a single assessment
of the PSURs and to set an EU reference date from which the submission dates will be
calculated. The EU reference date and PSUR submission schedule may be determined by
the CHMP, if at least one of the products is centrally approved, or otherwise by the Coordi-
nation Group for Mutual Recognition and Decentralised Procedures - Human (‘CMDh’), in
each case following consultation with the PRAC. The EMA will then publish the dates and
submission schedules on its website.
5.42 In addition PSURs must be submitted immediately upon request by a competent authority.
3. Assessment of PSURs
5.43 Once the EMA receives PSURs from MAHs, it will make them available to the national
competent authorities, the PRAC, the CHMP, the CMDh and the European Commission.
If the product is only authorised in one Member State and no EU reference date has been
assigned, then the competent authority in that member state is responsible for assessing
the PSUR. If the product is centrally approved and no EU reference date has been as-
signed, then a rapporteur appointed by the Pharmacovigilance Risk Assessment Committee
(‘PRAC’) will produce a draft assessment report and submit it to the MAH and the PRAC.
assessment report, together with a recommendation on whether the marketing authorisation

should be maintained, varied, suspended or revoked.
5.44 If the product is authorised in more than one Member State and/or an EU reference date has
been assigned to the relevant active substance, then there will be a single EU assessment
of the PSURs. Either a rapporteur appointed by the PRAC, if at least one of the products
is centrally approved, or otherwise a member state appointed by the CMDh will conduct
the initial assessment and prepare a draft assessment report. This report will be sent to the
MAH(s), the member states concerned and the PRAC for comment. Ultimately the PRAC
-
keting authorisations should be maintained, varied, suspended or revoked. If the CHMP
and/or the member states disagree with the PRAC’s position, then EU referral procedures
may be triggered.
38 GVP Guidelines, Module VII, Section VII.C.2.

PHARMACOVIGILANCE
F. RISK MANAGEMENT PLAN
1. Format and contents of RMP

5.45 Article 8(3)(iaa) of Directive 2001/83/EC requires marketing authorisation applicants to
include a risk management plan (‘RMP’) describing the risk management system which the
applicant will introduce, together with a summary of the plan. The RMP should follow the
detailed requirements in Annex I of the Commission Implementing Regulation and Module
5.46 -
tential risks and important missing information. It should address populations potentially
at risk and outstanding safety questions which merit further investigation. The non-clinical
been adequately addressed by clinical data, including toxicity, general pharmacology, and
-
ments, including limitations on the safety database, populations not studied in the pre-au-
also address the potential for overdose, transmission of infectious agents, misuse for illegal
purposes, off-label use and off-label paediatric use.
5.47 The pharmacovigilance plan should propose actions to address each of the safety concerns
monitoring, without the need for additional actions. For medicinal products with important
-
-
macovigilance plan. These activities generally constitute a PASS and could include studies
in a sample of sentinel sites, an intensive monitoring scheme, prescription event monitoring,
or patient registries.
5.48
risk minimisation activities for each safety concern. Some safety concerns may be ade-
quately addressed by the actions proposed in the pharmacovigilance plan. Routine risk mi-
nimisation activities include the provision of suitable warnings in the product information
and careful use of labelling and packaging. Additional risk minimisation activities should
only be suggested when essential for the safe and effective use of the medicinal product and
2. Submission of RMP and updates

5.49 An RMP has been required for all new marketing authorisation applications since July 2012,
although only an abbreviated version of the RMP is required for generic products. Unless
otherwise agreed with the relevant competent authority, a new or updated RMP must be
such as a new dosage form, new route of administration, new manufacturing process of

PHARMACOVIGILANCE
change in indication. A new or updated RMP must also be submitted whenever requested by
a competent authority, at the time of renewal of the marketing authorisation (if the product
product.39
5.50 The RMP should also be updated on a routine basis. The time schedule for such routine
updates will normally be included as a condition of the marketing authorisation or otherwise
authorisation and every three years thereafter.40
G. POST-AUTHORISATION SAFETY STUDIES

5.51 This chapter does not discuss the obligations under EU law to report adverse reactions iden-
relevant authorities and ethics committees in accordance with the requirements of Directive
2001/20/EC, which applies to interventional clinical trials.41 There is no overlap between
the clinical trial and post-marketing safety reporting obligations. If adverse reactions are
-
dance with the relevant clinical trial safety reporting rules, irrespective of whether the drug
under investigation is approved or not. Reporting of adverse reactions relating to approved
medicines outside the clinical trial context is in accordance with the requirements of Direc-
tive 2001/83/EC and the GVP Guidelines.
5.52 However, post-authorisation, non-interventional clinical trials are also subject to special
as “Any study relating to
an authorised medicinal product conducted with the aim of identifying, characterising or
measuring the effectiveness of risk management measures”.

any study investigating the safety of the product, including off-label studies.
5.53 If a PASS is an interventional clinical trial, reporting is in accordance with the Clinical
Trials Directive mentioned above. If a PASS is non-interventional and has been initiated,
-
39 GVP Guidelines, Module V, Section V.C.3.

40 GVP Guidelines, Module V, Section V.C.5.
41
medicinal product(s) is (are) prescribed in the usual manner in accordance with the terms of the marketing
authorisation. The assignment of the patient to a particular therapeutic strategy is not decided in advance by
a trial protocol but falls within current practice and the prescription of the medicine is clearly separated from
the decision to include the patient in the study. No additional diagnostic or monitoring procedures shall be
applied to the patients and epidemiological methods shall be used for the analysis of collected data”. There-
fore Directive 2001/20/EC applies to any clinical trial which is not a non-interventional trial, i.e., which is an
interventional clinical trial.

PHARMACOVIGILANCE
the competent authorities in which the study was conducted within 12 months of the end
of data collection.42 The competent authorities in the Member States in which the study is
conducted may also require the submission of the study protocol and progress reports. The
GVP Guidelines also require MAHs to make study information about PASS (including for
studies conducted outside the EU) available in an EU electronic register of post-authorisa-
tion studies (EU PAS Register) maintained by the EMA.43 The study protocol should be
entered in the register before the start of data collection. Thereafter, updates of the study
study report should also be entered in the register. In most circumstances, entering this
information in the register will satisfy the MAH’s legal obligations to submit the protocol,
5.54 Additional procedures apply whenever an MAH conducts a PASS pursuant to an obligation
imposed by a competent authority. In this case, the MAH must submit a draft protocol to
the PRAC for review and comment, and the MAH may only commence the study once it
has received a letter of endorsement from the PRAC.44 During the course of the study, any
substantial amendments to the protocol must also be submitted to the PAC for review and
study report and an abstract of the results to the PRAC, who may make recommendations
concerning the maintenance, variation, suspension or revocation of the marketing authori-
sation based on the results of the study.
5.55 The PASS requirements in Directive 2001/83/EC and the GVP Guidelines do not alter
during the PASS.
H. OTHER SOURCES OF REPORTING OBLIGATIONS

5.56 Additional reporting and other pharmacovigilance obligations can be imposed on MAHs as
a condition of the marketing authorisation. The MAH may commit to additional reporting
obligations in the RMP. MAHs can be required to report additional pharmacovigilance
information in response to a request from a competent authority. Finally, MAHS are also
1. Conditions of the marketing authorisation

5.57 Prior to July 2012, a conditional marketing authorisation or an authorisation granted in
conditions (see Chapter 2). The European Commission and the national competent author-
42 Directive 2001/83/EC, Article 107(m)(6).

43 GVP Guidelines, Module VIII, Section VIII.B.4.
44 If the PASS is conducted pursuant to an obligation imposed by a national competent authority after the grant
of the marketing authorisation and the study is performed only in that same Member State, then that national
competent authority is responsible for the review and approval of the study, rather than the PRAC.

PHARMACOVIGILANCE
ities would often also include such conditions, such as obligations to conduct a PASS, in
other marketing authorisations, even though there was no clear legal basis for the imposition
of such condition. However, since July 2012 Article 21(a) of Directive 2001/83/EC has
allowed any marketing authorisation to be granted subject to one or more of the following
conditions:
1. To take certain measures for ensuring the safe use of the medicinal product to be in-
2.
3. To comply with obligations on the recording or reporting of suspected ARs which are
4. Any other conditions or restrictions with regard to the safe and effective use of the
5.
6.
medicinal product has been marketed.
5.58 In addition, Article 22(a) now allows national competent authorities to impose, at any time
after the grant of the marketing authorisation, an obligation to conduct a PASS if there are
2. Obligations in risk management plans

5.59 Marketing authorisation applicants or holders may commit to a PASS or enhanced reporting
obligations in the RMPs that they submit. Article 104(3) of Directive 2001/83/EC expressly
requires MAHs to operate a risk management system for each product and to monitor the
outcome of risk minimisation measures which are contained in the RMP, but it does not
expressly require MAHs to perform the activities described in the RMP. However, pur-
suant to Article 21(a), the competent authorities may impose an obligation on the MAH to
perform the measures described in the RMP. Further, the RMP is included in the marketing
authorisation application under Article 8(3) and Article 23 of Directive 2001/83/EC requires
MAHs to supply competent authorities at once with any new information which might entail
Article 8(3). Arguably, if the MAH fails to comply with the commitments it had made in the
RMP, it should notify the competent authorities of this fact and amend the plan accordingly.
However, this provision only requires the MAH to keep theRMP up to date, rather than
actually perform the activities in the plan.
3. Requests for information

5.60 The reporting obligations under EU law are not limited to adverse reactions. There may be
and European regulators generally wish to be informed of such issues. For example, Article
23 of Directive 2001/83/EC and Article 16 of Regulation (EC) No 726/2004 expressly per-

PHARMACOVIGILANCE
for a product remains favourable, while Article 23(a) of Directive 2001/83/EC and Article
13(4) of Regulation (EC) No 726/2004 require MAHs to provide competent authorities with
all data relating to sales and prescriptions volumes if requested.
5.61 There is also an obligation in both Directive 2001/83/EC and Regulation (EC) No 726/2004
-
quency of a non-serious adverse event. Article 23 of Directive 2001/83/EC and Article 16
of Regulation (EC) No 726/2004 expressly state that the information “shall include both
positive and negative results of clinical trials or other studies in all indications and popula-
tions, whether or not included in the marketing authorisation, as well as data on the use of
the medicinal product where such use is outside the terms of the marketing authorisation”.
An obvious question is when does a safety concern become one that the MAH or a compe-
may be necessary.
I. OTHER CONSIDERATIONS
1. Data protection
5.62 The extent to which the EU data protection rules, contained primarily in Directive 95/46/
EC,45 overlap with and restrict a MAH’s safety reporting obligations has been a matter of
some debate for a number of years. The debate has focused on whether the legal obligation
-
tion and processing of patient data and data on the reporting healthcare professional. It is
the collection and reporting of patient data and data on the reporting healthcare professional
within the EU. It is less clear whether the obligation to report to a regulator outside the
Directive 95/46/EC does not legitimise the international transfer in order to comply with a
foreign legal obligation. Thus, the obligation to report adverse experiences to the U.S. Food
and Drug Administration (‘FDA’) does not legitimise the transfer of information relating to
European reporters and patients to the U.S.
5.63 This issue has yet to be considered or addressed by most regulators and MAHs, since the
importance of an effective global pharmacovigilance system and the potentially catastroph-
ic public health implications of a breakdown justify global safety reporting. However, some
45 Directive 95/46/EC of the European Parliament and of the Council of 24 October 1995 on the protection of
individuals with regard to the processing of personal data and on the free movement of such data, OJ 1995
L281/31.

PHARMACOVIGILANCE
are beginning to consider whether it is possible to conduct pharmacovigilance while re-

specting the privacy of reporters and patients and complying with applicable data protection
rules.46
5.64 Some companies therefore limit the patient information that they include in their global
they do not include patient initials and dates of birth, preferring to include information such
as sex and/or some other indicator of age. The GVP Guidelines recognise this dilemma,
-
tion should be transmitted in accordance with local data privacy laws.47 Similarly, when
transmitting information to Eudravigilance, MAHs are expressly permitted to replace “iden-
”.48 Most
regulators appear to be sympathetic to the need of MAHs to comply with their national data
protection or privacy rules and are willing to accept more limited information in the reports
report.
2. Contractual issues and safety data exchange agreements

5.65 As indicated above, the MAH must ensure that companies belonging to the same group
as the MAH or with whom they have concluded a commercial agreement for one of the
MAH’s products bring any information on ARs to the MAH’s attention and that the QPPV
of which the MAH may reasonably be expected to have knowledge. The GVP Guidelines
expand further on these principles:
Where the marketing authorisation holder has set up contractual arrangements with
a person or an organisation, explicit procedures and detailed agreements should exist
between the marketing authorisation holder and the person/organisation to ensure
that the marketing authorisation holder can comply with the reporting obligations.
These procedures should in particular specify the processes for exchange of safety
information, including timelines and regulatory reporting responsibilities and should
avoid duplicate reporting to the competent authorities.49
5.66
a pharmaceutical company enters into a contractual arrangement with an entity but only the
MAH or the pharmaceutical company has a reporting obligation. An example would be an
agreement with a distributor where the distributor simply handles and/or markets a product
in a territory. The agreement in such cases must simply ensure that the distributor supplies
46 See, for example, the Guidelines for Data Processing within the Framework of Clinical Drug Trials, pub-
lished in December 2007 by the Italian Data Protection Authority, which can be found at http://www.garan-
teprivacy.it/web/guest/home/docweb/-/docweb-display/docweb/1519230.
48 GVP Guidelines, Module VI, Section VI.C.6.2.2.8.

PHARMACOVIGILANCE
within a suitable timeframe. Typically, these agreements will oblige the third party to report
information to the MAH within a short period (e.g., two working days) and require the dis-
tributor to collect follow-up information where necessary and on the MAH’s request.
5.67 The second, more complex type of arrangement arises where a contract exists between
two entities, both of which have safety reporting obligations. Here, the agreement must
obligations within the appropriate timeframes. However, these agreements do not just deal
with this exchange of data. Since the two companies have freestanding safety reporting
obligations, they will usually also be obliged to maintain their own global safety databases,
submit PSURs, etc. It will usually make little sense for both parties to establish mirror phar-
macovigilance systems and infrastructures and to duplicate all the workload that this entails.
These agreements therefore typically allocate mutual responsibilities, including maintaining
a single global safety database, generating PSURs, and maintaining the CCSI to one of the
entities. The agreement then ensures that the other entity is able to access information in the
J. ENFORCEMENT AND PENALTIES
1. Pharmacovigilance inspections
5.68 Article 111 of Directive 2001/83/EC requires competent authorities to conduct repeated
and, if necessary, unannounced inspections to ensure that MAHs are complying with their
legal obligations, including those relating to pharmacovigilance. The inspectors are em-
powered to examine any documents relating to the object of the inspection and to inspect the
pharmacovigilance activities. After each such inspection, the competent authority must
provide the MAH with a report describing the MAH’s compliance or non-compliance with
its pharmacovigilance obligations. For centrally approved products, national competent
authorities conduct pharmacovigilance inspections on behalf of the EMA.
5.69 While national competent authorities have historically been the only regulators able to bring
direct enforcement action and/or prosecutions relating to breaches of the pharmacovigilance
penalties Regulation (EC) No 658/2007,50 which empowered the European Commission
below).
50 -
726/2004 of the European Parliament and of the Council, OJ 2007 L155/10.

PHARMACOVIGILANCE
2. Pharmacovigilance Risk Assessment Committee (‘PRAC’) procedures

5.70 If a competent authority, as a result of a pharmacovigilance inspection or otherwise, or an
MAH has concerns about the safety of a product, there are various EU Referral procedures
that can be triggered to address the concern. Most notably, Articles 107(i) to 107(k) of
Directive 2001/83/EC establish a new EU procedure for when urgent action is considered
-
cedure should be initiated by a Member State or the European Commission if it considers
suspending, revoking or refusing to renew a marketing authorisation, prohibiting the supply
of the product, or imposing a new contraindication, a reduction in the recommended dose or
a restriction to the indications. The procedure may apply to individual or multiple products,
including an entire therapeutic class. If a Member State considers that urgent action is nec-
essary to protect public health, it may suspend the marketing authorisation and prohibit use
of the product pending completion of the procedure.
5.71 The EMA must announce the initiation of any such procedure publicly via its website. The
announcement will contain information on the right of MAHs and the public to submit in-
formation relating to the procedure, but there is no other requirement for the EMA to notify
the MAHs concerned. The PRAC will then assess the matter in question and the MAH may
submit written comments. The PRAC may also choose to hold a public hearing and again
details of the hearing and how to participate will be published on the EMA’s website. If
submission of those data, but the PRAC is not obliged to accept that request.
5.72 Within 60 days of receipt of the relevant information, the PRAC must issue a recommenda-
tion, which may include recommendations for further evaluation of data, a PASS, risk min-
imisation measures, or the revocation, suspension, variation or non-renewal of a marketing
authorisation. The PRAC may also agree to a shorter deadline in urgent cases.
5.73 For non-centrally approved product, the CMDh must consider the recommendations within
30 days. If the CMDh opinion is adopted by consensus, the MAH will be informed and the
Member States must adopt the measures necessary to implement that opinion. If the CMDh
cannot reach a consensus, the matter will be referred to the European Commission. For cen-
trally approved products, the CHMP shall adopt an opinion within 30 days and this opinion
shall then be submitted to the European Commission for a binding decision.
3. Article 31 referral
5.74 Where the ‘interests of the Union’ are involved, Member States, the European Commission
or the MAH can refer a matter to the CHMP under Article 31 of Directive 2001/83/EC
before any decision is reached to suspend, revoke or vary a marketing authorisation. The
Union interest requirement has been interpreted broadly and includes situations where pub-
lic health may be affected by a product on the Community market.51 Where the referral re-
sults from the evaluation of data relating to pharmacovigilance of an authorised product, the
matter shall instead be referred to the PRAC and the procedures described above shall apply.
51 Notice to Applicants Volume 2A, Chapter 3 Community Referrals Procedure, European Commission, ENTR/
F2/SM D(2007), September 2007.

PHARMACOVIGILANCE
5.75 The CHMP must render its opinion within 60 days of the date that the matter was referred,
time period may be extended by a further 90 days or, in an emergency and upon a proposal
from the Chairman of the CHMP, the CHMP may agree to a shorter deadline. The MAH
has the right to appeal an unfavourable opinion. If it does, the CHMP must re-examine the
-
mission for a binding decision.
4. Urgent safety restrictions

5.76 Regulation (EC) No 1234/200852 establishes the procedure to vary marketing authorisa-
tions. Article 22 allows the MAH to take urgent safety restrictions in the event of risk to
public health. In effect, an urgent safety restriction enables an MAH to implement import-
ant safety-related changes in the labelling of its products rapidly, provided that the changes
are subsequently formalised by a Type II variation of the marketing authorisation.
5.77 The MAH must provide the competent authorities with advance notice of its intention to
implement the restriction. Competent authorities have 24 hours to raise any objections,
after which the MAH may proceed with the changes. Although the legislation suggests
prepared in close collaboration with the Rapporteur (for centrally approved products) or the
Reference Member State (for other products). The Commission and the national competent
authorities may also impose urgent safety restrictions on MAHs.
5. Article 116 procedure

5.78 Article 116 of Directive 2001/83/EC allows Member States to suspend, withdraw or vary a
marketing authorisation if “the view is taken that the product is harmful under normal condi-
”. If the Member State were to act unilaterally,
this would inevitably trigger an EU referral. However, there is no guidance on what standard
6. Penalties
5.79 Articles 102(f) and 111(8) of Directive 2001/83/EC and Article 84(1) of Regulation (EC)
No 726/2004 require Member States to subject MAHs, who fail to discharge their pharma-
covigilance obligations, to “effective, proportionate and dissuasive penalties”. The precise
nature and extent of these penalties varies from country to country.
5.80 Additionally, for centrally approved products, the European Commission can take action
-
-
cations, where it takes place or has its effects in more than one member state, or where
interests of the EU are involved (see Chapter 2, Section D.6)
52 Commission Regulation (EC) No 1234/2008 of 24 November 2008 concerning the examination of variations
to the terms of marketing authorisations for medicinal products for human use and veterinary medicinal
products, OJ 2008 L334/7.

6
MARKET DEFINITIONS
IN THE LIFE SCIENCES SECTOR
A. INTRODUCTION: BASIC CONCEPTS 6.01 2. Relevant geographic markets 6.38
C. OTHER PRODUCT GROUPS 6.39

1. Medical devices (IVD equipment) 6.40
B. HUMAN PHARMACEUTICALS 6.11 a) Relevant product markets 6.42
1. Relevant product markets 6.12 b) Relevant geographic markets 6.48
2. Animal health products 6.50
b) Product characteristics 6.17 a) Relevant product markets 6.51
c) Originator v generic products 6.33 b) Relevant geographic markets 6.55
d) Prescription v OTC products 6.35
D. CONCLUSION 6.57
e) Pharmacies v hospitals 6.36
A. INTRODUCTION: BASIC CONCEPTS

6.01
-
mission’s investigations under Articles 101 and 102 of the Treaty on the Functioning of the
European Union (‘TFEU’) and in merger control cases:
1. In investigations brought under Articles 101 and 102 TFEU, the Commission needs to
determine whether the relevant undertaking holds a dominant position (a pre-condition
for the application of Article 102 TFEU) or whether the parties hold high market shares
2. In merger control cases, the Commission calculates the parties’ combined market
-
pede effective competition.
6.02
1.
6.03 -
ucts and/or services which are regarded as interchangeable or substitutable by the consumer,
by reason of the products’ characteristics, their prices and their intended use’.1

MARKET DEFINITIONS IN THE LIFE SCIENCES SECTOR
6.04 Demand-side substitutability2 -

ucts are deemed to belong to the same market if they are interchangeable in the eyes of the
consumers. Demand-side substitutability can be measured based on both quantitative and
qualitative evidence.
6.05
alternative products belong to the same relevant market.3
6.06 However, in the life sciences sector, quantitative techniques such as the SSNIP test play a
generally both highly regulated and not paid directly by the patient or the doctor, but rather
by national or private insurance funds. Further, merger cases relating to the life sciences in-
dustry often involve a very large number of relevant products,4 making it virtually impossi-
ble for the parties and the Commission to conduct the SSNIP test or any other sophisticated
econometric analysis for each product.
6.07 Instead, in the majority of cases involving the life sciences industry, the Commission re-
pharmaceutical cases the Commission uses the Anatomical Therapeutical Chemical (‘ATC’)
-
cal Marketing Association) as a starting point for its analysis of relevant markets. The Com-
the product characteristics and its intended use. It also considers evidence of substitution in
the recent past, doctor and patient preferences, and various other qualitative factors.5
2.
6.08
which the undertakings concerned are involved in the supply and demand of products or
markets in those situations in which its effects are equivalent to those of demand substitution in terms of ef-
fectiveness and immediacy. This means that suppliers are able to switch production to the relevant products
4 See, e.g., -
sion decision of 5 August 2013,
, Case COMP/M.5253, Commission decision of 4 February 2009.
5 Ibid., para 17.

can be distinguished from neighbouring areas because the conditions of competition are
appreciably different in those areas’.6
6.09 -
formity of competitive conditions in a given area. In the life sciences sector, this approach
7
For example, as explained below, there
are substantial variations between Member States with regard to pricing, reimbursement
markets as national in scope.
6.10
main life sciences product categories. We start with human pharmaceuticals as the Com-
mission’s case law is particularly well-established in this area. We also discuss medical
devices and animal health products. The purpose of this chapter is not to provide a com-
Commission’s analytical approach and to identify the key patterns that prevail in this area.
B. HUMAN PHARMACEUTICALS
6.11 The term ‘life sciences’ describes various sciences dealing with the structure and behaviour
of living organisms. From the standpoint of EU competition law, human pharmaceuticals
constitute the most important component of life sciences. Indeed, the Commission’s case
law relating to this area is particularly well-established due to a large number of pharmaceu-
tical mergers that took place over the last twenty years. In this section, we summarise the
of human pharmaceuticals.
1. Relevant product markets

6.12 -
However, the Commission can depart from this assumption if other factors (e.g., product
6.13
according to their therapeutic indications. As discussed above, the Commission uses the
has been developed and is maintained by the European Pharmaceutical Market Research
Association (‘EphMRA’).
6 Ibid., paras 36-43.
industry. See Invitrogen/Applied Biosystems, Case COMP/M.5264, Commission decision of 11 November

2008, paras 67-68.

6.14 In the ATC system, products are divided into different groups according to anatomical site
of action, indications, therapeutic use, composition, and mode of action.8 Products are clas-
1.
2.
3.
4.
CoA reductase inhibitors).
6.15 At the third ATC level (‘ATC3’) pharmaceuticals are grouped in terms of their therapeutic
indications, i.e., their intended use. The Commission uses this level as the starting point for
9
6.16 However, on a number of occasions the Commission has departed from the ATC3 level. In
markets based on the ATC4 level and went so far as to state that ‘the ATC3 level rarely
appeared to be the correct range of products for analysing competition’.10 With regard to
originator drugs, the Commission continues to assume that the ATC3 level corresponds to
described below.
b) Product characteristics
6.17 -
-
tration. In light of these parameters, the Commission may decide to depart from the ATC3
Mode of action
6.18 The term ‘mode of action’ describes the manner in which the drug produces its therapeutic
effect. Products that have the same therapeutic indications but different modes of action
may belong to distinct product markets.
6.19 For example, in the Commission considered that the products that belonged
to the ATC3 category S1G (drops to treat eye allergies) could be further segmented based,
inter alia, on their modes of action. The Commission distinguished between anti-histamines
(that inhibit the action of histamines and relieve eye itching), mast cell stabilisers (that tar-
get the source of histamine to prevent its release), decongestants (that constrict the blood
vessels of the conjunctiva), and ocular antiseptics (used to clean the eye). The Commission
available at http://www.
9 See, e.g.,
, Case COMP/M.5253, Commission decision of 4 February 2009, paras 12-15.
10 See , Case COMP/M.5865, Commission decision of 3 August 2010, para 13.

noted that these products belonged to different ATC4 categories and concluded that each
product formed a separate market.11
6.20
-
cumstances, the Commission may hold that the products fall into separate markets.
6.21 For example, in the Commission found that two products which belonged
to ATC3 category H3B (anti-thyroid preparations) did not compete with each other because
cases fatal, have been reported in patients treated with one of the products (propylthioura-
cil) and, therefore, this product was reserved for patients who could not tolerate the other
product (thiamizole).12
Action time
6.22 The term ‘action time’ refers to the timing of the pharmacological effect. Certain medicines
act for only a short period of time for the relief of temporary symptoms, while other medi-
cines act over a long period of time for prophylactic or long-term management of an illness.
The action time may depend on the mode of action of the active ingredient, or it may be due
to the form of administration (e.g., a long-term effect may be implemented through slow-re-
lease capsules or intramuscular injections).
6.23 Medicines with different action times may fall within separate markets if they are, in prac-
tice, prescribed in different contexts. For example, in , the Commission distin-
guished between short-acting treatments of asthma (‘relievers’) and treatments for prophy-
lactic or long-term management of the illness (‘preventers’).13 Further, in ,
the Commission considered that short-acting and fast-acting lithium (used as an anti-depres-
sant) fell into different markets. It noted that short-acting lithium was used for new patients
where treatment had not yet stabilised and the doctors needed to closely monitor the lithium
dosage by taking frequent blood tests.14
6.24 However, where the action time of a product is relevant primarily to patient convenience
rather than to particular medical needs, the Commission is less likely to rely on action time
as a basis for subdividing the market. Thus, a once-daily version of a drug would typically
fall into the same relevant market as a twice-daily drug.15
11 See , Case COMP/M.5778, Commission decision of 9 August 2010, paras 114-125.

13 See , Case COMP/ M.1403, Commission decision of 26 February 1999, paras 40-41. Cf. Case
, Case COMP/M.3928, Commission decision of 24 November 2005, paras 29-31.
15 See
, Case COMP/M.1846, Commission decision of 8 May 2000, para 27.

Galenic form
6.25 The term ‘Galenic form’ describes the product’s dosage, pharmaceutical form and route of
market, as products may not be substitutable even if the active ingredient is identical.
6.26 The Commission discussed this issue at length in the decision. It not-
ed that different routes of administration of a medicine are, in general, designed to serve
the needs of different patient groups, and are therefore not interchangeable. For example,
syrups and suppositories may be principally for paediatric medicines, while pills are prin-
cipally for adult patients.16 Further, certain modes of administration may only be recom-
mended if another mode is not feasible: for example, high-dose ibuprofen suppositories are
not recommended when the oral form may be used.17 However, some variations in modes of
administration (e.g., orally dissolving tablets, effervescent forms, nasal sprays), may be pri-
18
6.27 A competition authority may also segment the market based upon the dosage of the products
common example is between adult and paediatric medicines, with paediatric medicines of-
ten merely being the low-dose equivalent of the adult medicines. While, in theory, patients
could purchase the adult version of the medicines and adjust the dosage accordingly, in
order to adjust the dosage for children.19
Pricing
6.28
market. In particular, it employs the SSNIP test in order to measure the likelihood of switch-
alternative products belong to the same relevant market.20
6.29
plays a less prominent role in pharmaceutical cases. This is due to the unique features of
these markets:
1. First, purchasing decisions are generally taken by the prescribing doctor rather than by
the end-user (the patient).
2.
3. Finally, patients do not generally bear the cost for prescription medicines. These costs
are normally reimbursed by the public health system.
16 See , Case COMP/M.5865, Commission decision of 3 August 2010, paras 17, 184, 338.
17 Ibid., para 253.
18 Ibid., paras 17, 349-354.
19 See, e.g., , Case COMP/M.4314, Commission decision of
11 December 2006, para 25.
20

6.30 As a result, in choosing between different medicines, prescribing doctors are not primarily
guided by the price.21
demonstrated that doctors were generally unable to rank branded drugs in order of price.22
Differences in prices may also be misleading in genericised markets because generic pro-
ducers often charge prices that are lower than those of originators.23
6.31 While the Commission does not systematically conduct a SSNIP test in pharmaceutical
occasionally considers the impact of a hypothetical price increase. For example, in

Ratiopharm
the Netherlands in the Rx segment of Pyridoxine (a Vitamin B6 compound). However,
the Commission noted that the parties’ products differed in prices and Galenic form. Ra-
tiopharm sold tablets at a unit price of €0.02 while Teva sold injectable products at a unit
price of €1.38. The Commission stated that ‘[d]ue to the different routes of administration
of these products and the large difference in price, the substitutability of these two forms
can be excluded’.24
6.32 The Commission’s approach to pricing analysis is further illustrated by the

case. With regard to anti-glaucoma products (ATC3 category S1E) the Commission noted
-
long to a distinct product market.25
several other product markets.26 However, with regard to certain products, the Commission
downplayed the relevance of price differences and stated that ‘in practice doctors are not
primarily led by price considerations’.27
c) Originator v generic products
6.33 The Commission generally considers that originator and generic drugs are substitutable
from the demand-side perspective and belong to the same relevant market.28 Generic prod-
21 See , Case COMP/37.507, Commission decision of 15 June 2005, paras 362-363.

22 See The Pharmaceutical Price Regulation Scheme, February 2007, page 23, available
at http://www.oft.gov.uk/OFTwork/markets-work/pprs.
23 See, e.g., , Case COMP/M.3354, Commission decision of 26 April 2004, para 299
24 See , Case COMP/M.5865, Commission decision of 3 August 2010, paras 116-119. Cf.
ATC3 category M1A).

26 Ibid., paras 120-122, 138, 160 (ocular anti-allergics, decongestants and antiseptics, ATC3 category S1G),
para 240 (lens care preparation, ATC3 category S1L).
27
agents, ATC3 class S1T).
28 See
, Case
COMP/M.5865, Commission decision of 3 August 2010, paras 25-27.

use of generics.
6.34 The loss of exclusivity for a pharmaceutical product and the corresponding launch of ge-
In several recent cases involving generic manufacturers (e.g., and Sa-
‘molecule level’ rather than at the ATC3 level. The Commission noted that the molecule
level was particularly relevant in those cases where:
(i) Doctors may, or are even required to, prescribe medicines using the international
non-proprietary name (‘INN’) of the molecule rather than by brand name (ii) reimburse-
ment is based on the price of a generic version of the originator medicine and (iii) phar-
macies may, or are required to, offer the patient the opportunity to substitute an originator
medicine with a generic equivalent.29
d) Prescription v OTC products
6.35 The Commission generally considers that prescription drugs do not fall into the same prod-
uct market as similar non-prescription or over-the-counter (‘OTC’) drugs. Prescription
pharmaceuticals are prescribed by a doctor and the purchase price is generally reimbursed
by the public health care system. Conversely, doctors do not directly play a role in the se-
lection of OTC pharmaceuticals and in most cases consumers bear the cost. Moreover, the
Commission found that ‘medical indications (including possible side-effects), legal frame-
work, marketing and distribution all tend to differ between the two categories of medicines,
even when the active ingredients are identical’.30 However, certain products available OTC
can be reimbursed if bought on prescription. In such cases, the frontier between OTC and
prescription drugs is less clear-cut and both products may belong to the same relevant mar-
ket.31
e) Pharmacies v hospitals
6.36 The Commission normally considers that the supply of the same product to pharmacies and
to hospitals belongs to the same relevant market. However, in certain instances it takes into
the Commission found that in the Czech Republic and Slovakia heparins (injectable
anticoagulants, ATC3 category B1B) were marketed to hospitals through a separate channel
and that certain subcategories of heparins were used only in hospitals. The Commission
concluded that with respect to heparins hospitals constituted a separate market segment.32
29 See , Case COMP/M.5253, Commission decision of 4 February 2009, para 18.

30 See
, Case COMP/M.5865, Commission decision of 3 August 2010, para 22.
31 See
, Case COMP/M.5865, Commission decision of 3 August 2010, paras 23-24.
32 See , Case COMP/M.5253, Commission decision of 4 February 2009, paras 78-80.

6.37 Similarly, in the case, the Commission found that the relevant market (proton
pump inhibitors used for treatment of peptic ulcer) did not include sales to hospitals. The
Commission noted that with regard to this drug, ‘[t]he pharmacy and hospital sectors are
different in terms of the operation of the distribution chain, the type of patients seen and the
nature of the therapy’.33
3. Relevant geographic markets

6.38 The Commission has consistently considered the geographic market for pharmaceutical
products to be national in scope because of differences between EU Member States in price
setting, conditions of reimbursement and channels of distribution.34 In the case
the Commission stated that the national dimension of pharmaceutical markets was due to
‘different price and reimbursement rules […], as well as different brand and packing strat-
egies, different distribution and different prescribing habits of physicians’.35 The Commis-
sion added that the EU harmonisation efforts have not yet created EU-wide markets because
these efforts were limited to rules relating to the authorisation of medicinal products.36
C. OTHER PRODUCT GROUPS

6.39 In this section, we summarise the Commission’s approach to two other life sciences product
groups: medical devices and animal health products. As explained above, our goal is not to
provide a complete catalogue of relevant markets in these areas but rather to highlight the
key features of the Commission’s approach.
1. Medical devices (IVD equipment)

6.40 The Commission has reviewed a number of markets for medical devices. Below we focus
on one segment of this product group, i.e., in vitro diagnostics (‘IVD’), an area in which the
Commission’s case law is particularly well-established.
6.41 The term ‘IVD’ is used to describe tests conducted outside the human body. The Commis-
sion has reviewed a number of transactions involving manufacturers of IVD testing equip-
33 See , Case COMP/37.507, Commission decision of 15 June 2005, para 68.

34 See, e.g., , Case COMP/M.6278, Reckitt
,
,
Case COMP/M.5661, Commission decision of 11 February 2010, para 13.
35 See , Case COMP/37.507, Commission decision of 15 June 2005, para 503.
36 Ibid.

a) Relevant product markets
6.42 IVD equipment includes reagents and analysers. Reagents are compounds and liquids used
to perform tests. Analysers are the machines which analyse the reagents and determine
test results. In recent decisions, the Commission found that the purchasing decisions of
laboratories generally concern a package, which includes reagents, analysers and after-sales
services. Moreover, the large majority of systems are proprietary: the reagents provided
by one supplier are used on the analysers of the same supplier. Therefore, IVD markets
normally include reagents, analysers and after-sales services.37
6.43 -
agents established by the European Diagnostics Manufacturers Association (‘EDMA’). The
with regard to pharmaceuticals: it is the starting point of the Commission’s analysis.
6.44 -
nochemistry, haematology, microbiology culture, infectious immunology, and genetic test-
ing. For most of these categories, the Commission has provided indications on possible
market segmentations.
6.45 For example, the Commission has reviewed immunochemistry reagents (also called ‘immu-
noassays’) in several decisions. This category includes tests that use antibodies to identify
and quantify the level of hormones, drugs and other substances found in relatively small
these assays into several thematic panels (e.g., cardiac, cancer, drug abuse, etc.). The Com-
mission initially suggested that the competitive assessment could be conducted not only
assays.38 However, in a more recent decision it concluded that purchasing decisions were
driven by a demand for a complete immunochemistry system and that further segmentation
39
6.46 The category ‘clinical chemistry’ describes diagnostics used to test for glucose, cholesterol,
sodium and other substances found in large concentrations in the blood stream. The Com-
mission acknowledged that all clinical chemistry reagents and analysers belong to the same
product market because (a) customers generally buy almost all of their requirements for
such tests from one source and (b) all major suppliers offer the same range of instruments
and reagents. However, the Commission distinguishes between clinical chemistry tests per-
formed in laboratories and ‘rapid tests’ performed at the point-of-care (e.g., pregnancy tests,
drug monitoring).40
6.47 In the case, the Commission found that the frontiers between dif-
ferent EDMA categories are becoming blurred. In particular, it recognised a trend towards
37 See
, Case COMP/M.4321, Commission decision of 31 October 2006, para 19.
38 See , Case COMP/M.4321, Commission decision of 31 October 2006, para 23.
39 See , Case COMP/M.4865, Commission decision of 25 October 2007, para 24.

integration between clinical chemistry and immunochemistry due to the spread of integrated
analysers (which perform both types of tests). It also noted the closeness between immu-
nochemistry and infectious immunology diagnostics.41 While in that case the Commission
-
b) Relevant geographic markets
6.48
based on two considerations. First, customers require rapid and reliable service to ensure
organise their distribution networks at a national level. Second, the Commission found con-
policies, social security rules and technologies used by laboratories.42
6.49 However, the Commission recognised that IVD markets were increasingly EEA-wide in
scope. All major suppliers of IVD systems are active worldwide and supply the same equip-
ment and reagents throughout the EEA. IVD products used in Europe have been harmon-
ised following the implementation of Directive 98/79 on in vitro diagnostic medical devic-
es.43 Customers increasingly purchase IVD devices by way of pan-European tenders.44 If
these trends lead to the alignment of prices for IVD products throughout the EU, we would
2. Animal health products

6.50 The Commission has reviewed animal health markets in several cases, including two cases
in which it imposed extensive remedies ( and
Wyeth). It has developed a complex matrix for the analysis of animal health products.
a) Relevant product markets
6.51 The Commission divides animal health products into three main categories: vaccines (also
called biologicals), pharmaceuticals, and medicinal feed additives. Each category is further
subdivided based on several factors.45

42 , Case COMP/M.4569, Commission decision of 24 April 2007, para
21.
43 See Directive 98/79/EC of the European Parliament and of the Council of 27 October 1998 on in vitro diag-
nostic medical devices, OJ 1998 L331/1.
44 See
, Case COMP/M.4569, Commission decision of 24 April 2007, paras 21-22.
45 See Scher-
, Case COMP/M.4691, Commission decision of 11 October 2007, paras
21-41.

6.52 -
mission takes into account the following factors:
1. Animal species: vaccines for different species are usually not substitutable even when
2.
3. Single or multiple pathogens: monovalent vaccines contain one or multiple strains of a
4. Live or inactivated vaccines: live vaccines are made from natural organisms while
inactivated vaccines are made from killed organisms or from inactivated parts of those
5. Marker or non-marker vaccines: marker vaccines allow distinguishing between ani-

mals that are immunised as a result of vaccination or as a result of a natural exposure
to the virus.
6.53 Similarly, animal health pharmaceuticals can be segmented based on several factors includ-
ing animal species, pathology targeted by the pharmaceutical, active substance, mode of
6.54 Given the large number of factors taken into account by the Commission, animal health cas-
the
Commission imposed remedies with regard to multivalent feline vaccination programmes,
cattle pasteurella vaccines, oral penicillin for companion animals, and several other narrow-
b) Relevant geographic markets
6.55 The Commission considers that relevant geographic markets in the animal health sector are
national in scope.46 This is due primarily to the fact that animal health products are subject
to national registration systems. These products are sold according to the indications and
uses prescribed by national registration and approval requirements. As a result, the compet-
itive situation varies between different Member States in terms of market penetration, mar-
ket shares, prices, organisation of distribution systems, and local veterinarian preferences.
6.56 In recent cases, the parties argued that the introduction of pan-European registration proce-
dures for some products and the presence of large multinational suppliers could lead to the
emergence of a pan-European market. So far the Commission has not been persuaded by
these arguments.
46 See Scher-
, Case COMP/M.4691, Commission decision of 11 October 2007, paras
42-45.

D. CONCLUSION
6.57
example, in merger cases involving pharmaceutical companies it generally reviews the
-
maceutical subgroups) or at an even more granular molecule level. The Commission may
further segment pharmaceutical markets based, e.g., on product characteristics, pricing, and
other factors. It adopts a similar approach with regard to animal health products.
6.58 -
pharmaceutical and animal health sectors, the parties can also successfully advocate broader
between relevant products.

7
PARALLEL TRADE OF LIFE SCIENCE PRODUCTS
A. INTRODUCTION 7.01 a) Greek GSK case 7.31

b) Belgian Bofar case 7.44
B. KEY STAKEHOLDERS
c) French medicine distribution case 7.46
1. Pharmaceutical suppliers 7.06
4. The restriction arises from national
2. Parallel traders 7.07
legislation 7.50
3. National health authorities
5. The restriction is necessary to protect
and health care funds 7.08
the supplier’s intellectual property 7.55
4. European Commission 7.12
a) Exhaustion 7.56
5. National competition authorities 7.13
b) The Special Mechanism 7.58
6. EU Courts 7.15
c) Repackaging 7.59
C. APPLICABLE LAWS AND CASES 7.16
D. APPLICATION OF THE LAWS AND CASES
1. The restriction is not an agreement
TO SPECIFIC STRATEGIES
subject to Article 101 TFEU 7.18
1. Supply quotas 7.73
2. The restriction does not violate
Article 101 TFEU 7.22 2. Dual pricing systems 7.79
3. Direct-to-pharmacy systems 7.85
A. INTRODUCTION
7.01 Parallel trade is the sale of products by resellers (‘parallel traders’) from one country to
another. Such trade typically occurs if a producer charges different prices for its products
in each country, as parallel traders can purchase the products in lower-price countries and
7.02 Logically, producers wish to limit the parallel trade of their products, as it undercuts their
parallel trade are generally prohibited as they are contrary to the goal of establishing a single
EU market.
7.03 In the pharmaceutical sector, the legality of restrictions on parallel trade has been a key sub-
ject of dispute between pharmaceutical suppliers and the European Commission for more
than twenty years. On the one side, the pharmaceutical suppliers argue that parallel traders
are exploiting the different price levels set by the different EU Member States, and depriv-
On the other side, the Commission argues that the regulatory price controls do not justify the
segmentation of the single market. However, after more than twenty years, there remains
no clear resolution concerning what behaviour is and is not legal. Instead, there are only

with EU competition law.
7.04 The reason for this uncertainty and the ongoing debate over parallel trade in the pharma-
ceuticals sector lies with the complex market conditions and the multiple stakeholders, each
-
and determine what behaviour is appropriate and what behaviour crosses the line and vio-
lates EU competition law.
7.05
Thereafter, we discuss the existing decisions and case law applicable to parallel trade in the
pharmaceutical sector. Finally, we discuss the practical application of these decisions and
case law and the strategies available to legally address parallel trade.
B. KEY STAKEHOLDERS
1. Pharmaceutical suppliers
7.06 Pharmaceutical suppliers are private companies operating with the principal goal of maxi-
the parallel traders receiving the price difference instead of the suppliers. Thus, the goal of
pharmaceutical suppliers is logically to restrict parallel trade to the maximum extent allow-
able by law, and they have developed several strategies to deal with this issue, including
supply quotas, dual pricing systems and direct-to-pharmacy distribution systems. Each of
these strategies is discussed in greater detail in Section D.
2. Parallel traders
7.07 Parallel traders include both independent parties that exclusively engage in parallel trade, as
well as pharmacies and wholesalers that resell part or all of their available product supply
other countries for higher prices. Parallel traders are particularly interested in products for
3. National health authorities and health care funds

7.08 The national health authorities and the corresponding health care funds are key stakehold-
ers in the pharmaceutical market, as they are the parties actually funding the purchases of
pharmaceutical products. As part of this role, the national health authorities generally set
the maximum price or maximum reimbursement rate for each product.
7.09 With respect to parallel trade, the interests of national health authorities are not aligned, and
instead will differ depending upon whether the country is a low-price or high-price country.

In high-price countries, health authorities may be interested in encouraging parallel trade,

as it represents an alternate source of supply of medicines at a lower price. The health au-
thorities in some Member States have implemented rules allowing the health fund to recoup
the savings from parallel trade.
7.10 On the other hand, health care funds in low-price countries may wish to discourage par-
allel trade, as they may be able to negotiate lower prices from pharmaceutical suppliers if
the suppliers know the price will be limited to the local market and will not undercut the
authorities in low-price countries will also be concerned about the availability of medicines
to patients in their country, as a risk exists that patients will not be able to obtain medicines
7.11 For example, in the United Kingdom, following the devaluation of the British Pound, many
pharmaceutical products sold into the UK were exported to higher-priced EU markets. In
response, the UK Department of Health issued guidance emphasizing the ethical and legal
obligations on pharmaceutical suppliers, wholesalers and pharmacies, among others, to en-
sure the continued supply of products to the UK market.1
4. European Commission
7.12 Historically, the European Commission has been the champion of the single European mar-
ket, aggressively prosecuting restrictions on parallel trade in order to eliminate the segmen-
tation of the market, especially on a national basis.2 While the Commission has, in recent
years, shifted its focus in the pharmaceuticals market to restrictions on generic entry, in
2012, the Commission started an informal investigation into the dual-pricing legislation
applicable to pharmaceuticals in Spain.
5. National Competition Authorities

7.13 The national competition authorities of the individual EU Member States all have parallel
competence to apply EU competition law while also applying national competition law.
While the national authorities generally follow the lead of the European Commission, on
the issue of parallel trade there has been some divergence. For example, in Spain, typically
a low-price country, the competition authority has largely ignored the position of the Com-
mission, as well as the EU courts, and has found that dual pricing systems implemented by
pharmaceutical suppliers do not constitute a violation of Article 101(1) TFEU.
7.14 On the other hand, the competition authority in Germany, typically a high-price country,
-
tion from pharmacies concerning parallel-traded products and allegedly reselling this in-
formation to pharmaceutical companies to allow them to restrict parallel trade. While the
1 See, e.g., UK Department of Health, Trading Medicines for Human Use: Shortages and Supply Chain Obli-
gations, 15 December 2010.
2 See, e.g., Case A.36,957, , para 146.

information on this investigation is limited,3 it indicates that national competition authorities

in high-priced countries may take a more aggressive position against restrictions on parallel
trade.
6. EU Courts
7.15 As the arbiters of EU law, the EU Courts have been forced to balance the competing inter-
ests of the relevant stakeholders. Thus far, the Courts have demonstrated a willingness to
compromise, rather than merely upholding an abstract legal principle or solely supporting
one side of the debate. Thus, while the Courts have held that suppliers are not allowed to
prevent all parallel trade between Member States, they have also recognised that pharma-
ceuticals suppliers must be allowed to defend their legitimate commercial interests.
C. APPLICABLE LAWS AND CASES

7.16 While the Courts have demonstrated a willingness to compromise, this has not resulted in a
clear legal standard to determine whether a restriction of parallel trade is allowable. Instead,
the patchwork of case law has resulted in numerous legal theories upon which a supplier
may be able to defend a restriction of parallel trade, including:
1. The restriction is not subject to Article 101 TFEU
2. The restriction does not violate Article 101 TFEU
3.
4. The restriction arises from national legislation
5. The restriction is necessary to protect the supplier’s intellectual property
7.17 In the following sections, we discuss the case law supporting each of these potential de-
fences.
1. The restriction is not an agreement subject to Article 101 TFEU

7.18 EU competition law does not apply to unilateral conduct by non-dominant companies, as
Article 101 TFEU only applies to agreements or concerted practices among two or more
undertakings, and Article 102 TFEU only applies if a company holds a dominant market
position. Thus, a unilateral restriction of parallel trade by a non-dominant company should
not be subject to EU competition law.
7.19
or concerted practice to catch any restriction of parallel trade, even those that would ap-
pear unilateral. This position was initially supported by the EU Courts. However, in its
3 See, e.g., Washington Post, ‘German entrepreneur makes millions in E.U. through parallel pharmaceutical
trade’, 24 March 2002.

landmark judgment in the Adalat case,4

behaviour constitutes an ‘agreement’ subject to EU competition law. In particular, the Court
of Justice stated that “the mere fact that a measure adopted by a manufacturer, which has the
object or effect of restricting competition, falls within the context of continuous business
such an agreement exists” (paragraph 141).
7.20 Despite the Court’s holding in the Adalat case, the European Commission continues to
take an aggressive approach to the question of whether a supplier and its wholesalers have
entered into an agreement. The Commission recently articulated its position on this issue in
the revised Guidelines on Vertical Restraints.5 According to the Guidelines, an agreement
may be in any form so long as “the parties have expressed their joint intention to conduct
”.6 Further, an agreement may be formed where
the unilateral policy of one party requires and receives the acquiescence of the other party.
The Commission provides the following example:
if after a supplier’s announcement of a unilateral reduction of supplies in order to

prevent parallel trade, distributors reduce immediately their orders and stop engag-
ing in parallel trade, then those distributors tacitly acquiesce to the supplier’s unilat-
eral policy. This can however not be concluded if the distributors continue to engage
7
7.21 While the Guidelines are not legally binding, they indicate that the European Commission
laws apply. For this reason, even unilateral measures by non-dominant companies to restrict
parallel trade could potentially be prosecuted as a violation of EU competition law.
2. The restriction does not violate Article 101 TFEU

7.22 An agreement or concerted practice will only violate Article 101 TFEU if (i) it has the ob-
ject or effect of preventing, restricting or distorting competition within the internal market
found to form part of an agreement or concerted practice subject to Article 101, the next
questions are whether the restriction has the object or effect of harming competition and, if
7.23 The EU Courts addressed these questions in the Spanish GSK case. In this case, the Com-
mission investigated the sales conditions implemented by GSK in Spain, whereby GSK
charged a lower price to wholesalers reselling its products to Spanish pharmacies or hos-
4 Case C-2/01 P Bundesverband der Arzneimittel-Importeure eV and Commission v Bayer AG [2004] ECR
I-00023.
5 Guidelines on Vertical Restraints, para 25,
available at http://ec.europa.eu/competition/antitrust/legislation/vertical.html.
6 Ibid.
7 Ibid.

pitals for (reimbursable) end-use in Spain, and a higher price to wholesalers exporting the
products. In its decision, the Commission held that:
1.
2.
3. 8
7.24 GSK appealed the decision to the EU General Court (previously the Court of First Instance).
On 27 September 2006, the Court partially annulled the Commission’s decision on the fol-
lowing grounds:9
1. Object of restricting competition. The General Court rejected the Commission’s argu-
ment that the dual pricing system had the object of restricting competition. While the
system had the aim of reducing parallel trade, the Court held that it could not simply be
assumed that this would result in higher prices for consumers, particularly due to the
price controls effective in most Member States.
2. Effect of restricting competition.
that the dual pricing system had an anticompetitive effect, as the dual pricing system
hampered the ability of parallel traders to compete with wholesalers in other EU mem-
parallel trade, namely reduced costs for products.

3. As the Court held that GSK’s dual pricing sys-
tem had an anticompetitive effect, it next considered whether the Commission was cor-
rect in concluding that the system was not eligible for exemption under Article 101(3)
TFEU. In order to justify an exemption, GSK bore the burden of putting forward ‘con-
vincing’ arguments and evidence showing that the dual pricing system is likely to result
in ‘appreciable objective advantages’ that outweigh any anticompetitive effect.
In its judgment, the General Court described the evidence presented by GSK as “rel-
evant, reliable and credible” and noted that it was corroborated in many respects by
documents originating with the Commission. Further, the General Court criticised the
Commission’s examination of this evidence as too cursory to support its conclusion
that the system was not eligible for an exemption. Accordingly, the General Court
annulled the part of the Commission’s decision denying GSK an Article 101(3) TFEU
exemption and referred the matter back to the Commission to conduct a more thorough
assessment of GSK’s evidence.
7.25 Both the Commission and GSK, among others, appealed the General Court’s judgment to
the Court of Justice. In June 2009, Advocate General Trstenjak issued her opinion on the
case, which was broadly followed by the Court of Justice. The Court ruled as follows:10
1. Object of restricting competition. The Court of Justice held that the dual pricing system
had the object of restricting competition and rejected the General Court’s position that
as follows (para 63):
8 Case A.36,957,
9 Case T-168/01, [2006] ECR II-2969.
10 Joined Cases C-501/06 P, C-513/06 P, C-515/06 P and C-519/06 P,
Commission and Others [2009] ECR I-9291.

First of all, there is nothing in [Article 101(1)] to indicate that only those agree-
ments which deprive consumers of certain advantages may have an anticompeti-
tive object. Secondly, it must be borne in mind that the Court has held that, like
other competition rules laid down in the Treaty, Article 101 TFEU aims to protect
not only the interests of competitors or of consumers, but also the structure of the
be deprived of the advantages of effective competition in terms of supply or price.

2. Effect of restricting competition. As the Court of Justice held that the dual pricing
system had the object of restricting competition under Article 101(1) TFEU, it was
not necessary for the Court of Justice to consider whether the system had the effect
of restricting competition.
3. On this point, the Court of Justice upheld
the General Court’s ruling that the Commission’s examination of GSK’s evidence
was too cursory to support its conclusion that the system was not eligible for an
exemption.
eligibility of the dual pricing system for exemption under Article 101(3) TFEU,
more likely than not that the agreement will make it possible to obtain appreciable
advantages that will outweigh any restrictive effects. The Court of Justice empha-
sised that the Commission’s examination of the evidence put forward to justify an
for the outcome of the analysis”. (see para 103).

Translated into the context of the case, the Court of Justice essentially agreed with
the General Court that the Commission should have undertaken a more rigorous
examination of the evidence put forward by GSK concerning the effect of parallel
that it is not necessary for a pharmaceutical company to show that all of the savings
exemption under Article 101(3) TFEU.
7.26
object of restricting competition under Article 101(1) TFEU. In holding that such a system
importance it attaches to the development and protection of a single EU market and its
deep-seated suspicion of any measure that restricts parallel trade among Member States.
The Court of Justice’s discussion of Article 101(1) TFEU is also interesting in that, by hold-
ing that the competition rules are aimed at protecting competitors as well as the structure of
the market, in addition to consumers, the Court of Justice signaled that it remains wedded to
a more formalistic application of the competition rules as opposed to one based on concepts
of consumer welfare.
7.27 While the Court held that dual pricing constitutes a restriction by object, it also left open the
door to the possibility of an exemption under Article 101(3) TFEU, as it upheld the prior
holding of the General Court that the Commission must give serious consideration to the
relevant evidence presented by the pharmaceutical supplier. Prior to the General Court’s
judgment, the Commission and EU courts had essentially treated dual pricing systems as per

se
for exemption under Article 101(3) TFEU.
7.28 Thus, following the Spanish GSK case, it remains possible for a pharmaceutical company to
a theoretical possibility, as there has not been a case yet where an authority or court has
-
pear to have a reasonable chance of success, particularly in light of statements made by the
Regulation Scheme: “To sum up, on a global (EU) level, parallel trade in pharmaceuticals
discrimination and incentives for innovation are reduced”.11
7.29 As discussed in the preceding section, an agreement restricting parallel trade will typically
constitute a restriction of competition by object under Article 101 TFEU. Further, where a
company is dominant, such a restriction will also typically constitute an abuse under Article
102 TFEU. Nevertheless, such a restriction may not constitute a violation if the supplier is
7.30 As described below, in the Greek GSK case the Court of Justice established the standard
for determining when a restriction of parallel trade in the pharmaceutical industry is objec-
principle should also apply to Article 101 TFEU cases involving restrictions of competition
by object.12
a) Greek GSK case
7.31 The Greek GSK case involved a typical supply quota system, whereby GSK limited the
volumes supplied to its wholesalers so that their orders – including large orders placed by
wholesalers engaged in export activities – were not supplied in full. The purpose of this
strategy was to cut down on parallel trade by these wholesalers, who were buying the prod-
ucts at the low prices prevailing in the Greek market and exporting them to Member States
with higher prices.
7.32 Several wholesalers complained about GSK’s strategy to the Greek Competition Commis-
sion, which then sought guidance from the Court of Justice on whether a dominant pharma-
ceutical company may limit supplies to its wholesalers in order to limit parallel trade in its
products. In an opinion that was highly favourable to the pharmaceutical industry, Advocate
General Jacobs concluded that such a limitation did not constitute an abuse of a dominant
11 The Pharmaceutical Price Regulation Scheme, 2007, Annex L, para 3.152.

12 See Case C-439/09, Pierre Fabre Dermo-Cosmétique v Président de l’Autorité de la concurrence [2011]
ECR I-09419, para 47 (operative language, where the Court of Justice held that a restriction only “amounts
objective of that contractual clause and the legal and economic context of which it forms a part, it is apparent
”.)

position.13 The opinion was particularly noteworthy in that it supported one of the indus-
try’s fundamental arguments, namely that, while market integration is a critical goal of the
European Union in general and EU competition policy in particular, the burden of market
integration should not be borne by the pharmaceutical industry alone as the parallel trade
was caused by national pricing and reimbursement schemes.
7.33 Thereafter, in May 2005, the Court of Justice dismissed the case on procedural grounds,
ruling that the case was inadmissible because the Greek Competition Commission is not a
court or tribunal, and therefore did not have the power to refer a case to the Court of Jus-
tice.14 However, the Court of Justice did not have to wait long to have a second bite at the
apple. While the case was pending before the Court of Justice, the complaining wholesalers
had brought parallel actions in the Greek courts. At the time of the 2005 Court of Justice
judgment, the parties were already in front of the Athens Court of Appeals, following an
earlier decision of a lower court in favour of GSK. The Court of Appeals, facing the same
facts as the Greek Competition Commission, referred the same questions back to the Court
of Justice.
7.34 In an opinion that was almost diametrically opposed to AG Jacobs’s earlier opinion, AG
Ruiz-Jarabo recommended an approach under which a dominant pharmaceutical company
could only limit supplies in a narrow set of circumstances.15 In particular, a company could
limit supplies if the market regulation left it no choice, if its sole motivation was to protect
-
vocate general opinions in the same case, but with two opinions that diverged dramatically.
7.35 In its Judgment, the Court of Justice crafted a compromise.16 It ruled that dominant phar-
maceutical companies may not cut off supplies to parallel traders altogether, but they may
refuse to supply orders from parallel traders that are out of the ordinary.
7.36 In reaching this ruling, the Court of Justice rejected GSK’s argument that the special fea-
tures of the pharmaceutical sector justify a departure from the general rule that a dominant
company’s refusal to supply constitutes an abuse under Article 102 TFEU. First, the Court
stating: “even in the Member States where the prices of medicines are subject to State
regulation, parallel trade is liable to exert pressure on prices and, consequently, to create
concerned, for whom the proportion of the price of medicines for which they are responsible
will be lower”..17
13 Opinion of Advocate General Jacobs, Case C-53/03 -

Kline AEVE [2005] ECR I-4609.
14 Case C-53/03 Syfait and Others [2005] ECR I-4609.
15 Opinion of Advocate General Ruiz-Jarabo, Joined Cases C-468/06 to C-478/06, Sot. Lelos kai Sia and Others
[2008] ECR I-7139.
16 Joined Cases C-468/06 to C-478/06, Sot. Lelos kai Sia and Others
[2008] ECR I-07139.
17 Ibid., para 56.

7.37 Second, the Court of Justice rejected the argument that price differences between Member
States are the result of national price controls over which pharmaceutical companies have
no control. The Court of Justice noted that, even in Member States where the national au-
thorities set the price of pharmaceutical products, pharmaceutical manufacturers take part in
the negotiations leading up to the decision on pricing and reimbursement.
7.38 While the Court of Justice rejected the argument that pharmaceutical companies could re-
fuse supplies to wholesalers engaged in parallel trade due to the regulation of prices in the
sector, it was unwilling to stop pharmaceutical companies from being able to impose any
limits whatsoever on supplies to these wholesalers. It noted that national regulation was one
of the factors creating opportunities for parallel trade, in contrast to the normal situation
where parallel trade was solely a result of a company’s own decision to price its products
differently in different Member States.
7.39 Since pharmaceutical companies were confronted with a problem that was not entirely of
their own making, the Court of Justice seemed more willing to allow them to take steps to
at least limit the amount of parallel trade. Moreover, the Court of Justice seemed concerned
that, unless a dominant pharmaceutical company could impose some limits on parallel trade,
it might have to resort to the extreme alternative of not placing its product on the market at
all in low-price Member States.
7.40 The Court of Justice concluded that, although the degree of regulation of pharmaceutical
prices did not mean that a dominant pharmaceutical company could refuse to supply parallel
traders without running afoul of Article 102 TFEU, the company could take steps that were
“reasonable and in proportion to the need to protect its own commercial interests”. Applying
this principle to the case and citing language from its prior judgment in United Brands,18
the Court of Justice held that the dominant company could refuse to supply orders that were
“out of the ordinary”.
7.41 The Court of Justice set out two factors that must be taken into account in determining
whether an order is ‘ordinary’:
1. The size of the order in relation to the requirements of the market in the Member
2. The previous business relations between the pharmaceutical company and the whole-
saler concerned.
7.42
wholesalers that are “out of all proportion to those previously sold by the same wholesalers
to meet the needs of the market in that member state”. However, the Court made it clear
that a supplier may not prevent all parallel trade, which suggests that it would be imprudent
for dominant pharmaceutical companies to set their quotas too tightly, leaving no product
available for export.
7.43 While the Court’s judgment provides useful guidance, litigation in the national courts will
undoubtedly continue between suppliers and their wholesalers over the meaning of ‘ordi-
nary’. This litigation will likely concern questions such as: When is an increase ‘out of all
proportion’ to previous orders? May a wholesaler’s supplies be reduced if the wholesaler is
18 Case 27/76, United Brands and United Brands Continentaal v Commission [1978] ECR 207.

exporting most of its product? Does a pharmaceutical company have an obligation to supply
new wholesalers?
b) Belgian Bofar case
7.44 The issue addressed in the Greek GSK case also arose in Belgium in the context of the Bofar
case.19 Bofar, an exporting wholesaler, complained to the Belgian competition authority that
the refusal of various pharmaceutical companies to supply it with products constituted an
abuse and requested that the authority adopt interim measures requiring the pharmaceutical
companies to supply products to Bofar. In addressing Bofar’s request for interim measures,
the Belgian Competition Prosecutor General ruled that Bofar had failed to establish a prima
facie
by the Court of Justice in the Greek GSK case, the President found that the pharmaceutical
company did not need to supply an exporting wholesaler because the exporting wholesaler
did not have an obligation to supply the local market.
7.45 While the President’s ruling in the Bofar case cannot be accorded undue weight, because it
only dealt with an application for interim measures, it is nevertheless noteworthy because
it suggests how the test articulated by the Court of Justice in the Greek GSK case should
be applied in the case of exporting wholesalers who do not have public service obligations.
Further, the President emphasised that exports remained possible through other channels,
despite the refusal to supply exporting wholesalers, mirroring the position of the Court of
Justice that pharmaceutical suppliers should not be able to cut off parallel trade completely.
c) French medicine distribution case
7.46 In July 2007, prior to the judgment of the Court of Justice in the Greek GSK case, the French
competition authority issued a decision addressing the legality of supply quota systems.20
The case involved complaints brought against a number of pharmaceutical companies who
had instituted supply quotas, thereby limiting the supply to wholesalers.
7.47 In its ruling, the French competition authority recognised that pharmaceutical companies
are entitled to implement supply quotas to rationalise production and ensure optimal dis-
tribution of their products. However, the restrictions should not go beyond what is strictly
necessary to ensure the reliable and economically-viable supply of product to the French
market. These restrictions should also allow for competition among wholesalers, including
by allowing new wholesalers to enter the market.
7.48 To accommodate these concerns, the pharmaceutical companies agreed to introduce certain
changes to their systems. While the details differ, the basic features of these commitments
were as follows:
1.
19 , MEDE-V/M-07/0038 (26 March

2008).
20 available at http://www.
appealed on procedural grounds.

market shares of wholesalers would not be frozen.

2. Each company agreed to make its system more transparent so that wholesalers would
know the quantity of a given product to which they were entitled under the system.
3.
their wholesaling activities.
7.49 While this decision pre-dates the holding of the Court of Justice in the Greek GSK case, it
provides useful guidance concerning the implementation of supply quotas. As quotas are
-
example, a supplier may not be able to distinguish between wholesalers that demand more
products because they are operating well and facing increasing local market demand, and
wholesalers that demand more products for exports. As a result, suppliers may choose to
-
ers are unable to obtain more products for supply to the local market. The decision of the
French competition authority addresses this issue by requiring pharmaceutical suppliers to
able to compete for local business.
4. The restriction arises from national legislation

7.50 In addition to the defenses discussed above, a restriction on parallel trade may also be jus-
Member States.
7.51 For example, in Spain dual pricing legislation is in place, whereby the government-im-
posed prices only apply to those products dispensed within Spain and funded by the national
health service. Relying on this legislation, many pharmaceutical suppliers have established
dual-pricing systems in Spain, whereby products sold for patients in Spain covered by the
national health service are priced at a lower level than products sold for other patients (i.e.,
those in other countries).
7.52 Some of the suppliers’ dual pricing systems were investigated by the Spanish competition
authority, which held that they were not subject to EU competition law, as they did not con-
stitute an agreement subject to Article 101 TFEU. Instead, the authority considered that the
supplier was charging a single price, but this price was replaced by the state controlled price
for products dispensed within Spain and funded by the national health service.
7.53 These decisions were appealed to the Spanish courts. In 2011, the Spanish National Court
applied the judgment of the EU Court of Justice’s in the Spanish GSK case (discussed
above), and held that the Spanish competition authority had been wrong to dismiss a whole-
21
the Spanish GSK
21

7.54
launched an investigation into whether the Spanish laws relied upon by pharmaceuticals
suppliers comply with the applicable EU laws. This investigation is ongoing.
5. The restriction is necessary to protect the supplier’s

intellectual property
7.55 Restrictions on parallel trade may also be permitted where the restrictions are used to pro-
tect a pharmaceutical company’s intellectual property rights. For example, it is generally
allowable for a pharmaceutical supplier to prevent the resale of products from outside of the
European Economic Area (‘EEA’)22 into the EEA, as such a resale would violate the suppli-
er’s trademark and patent rights.23 However, a pharmaceutical supplier will only be able to
prevent the resale of its products from one EEA country to another in limited circumstances,
where its IP rights have not been ‘exhausted’.
a) Exhaustion
7.56 Within the EEA, when a supplier places a product on the market, or allows a third party to
product are exhausted. This means that the supplier is no longer able to use its intellectual
24
7.57 As an example, assume that a pharmaceutical supplier sells its patented medicine into the
-
plier’s intellectual property rights throughout the EEA. Thus, the supplier cannot use any
of its German patents to prevent the wholesalers from reselling the medicine into Germany.
However, as this exhaustion only applies to the products sold, or consented to be sold, by the
supplier, the supplier could still use its patents in the UK and Germany to prevent the sale
of generic versions of the products supplied by third parties.
b) The Special Mechanism
7.58 One exception to the exhaustion rule applies with respect to the new Member States that
joined the European Union as of 1 May 2004 and 1 January 2007 (excluding Cyprus and
Malta).25 This exception is referred to as the Special Mechanism. The Special Mechanism
product that is protected in an old Member State is put on the market in a new Member State
in which equivalent protection could not be obtained. In such circumstances, the Special
Mechanism entitles the right holder to rely on the patent or SPC to prevent parallel trade
22 The EEA consists of the countries of the European Union plus Norway, Iceland and Liechtenstein.
23 See Case T-198/98, Micro Leader Business v Commission, [1999] ECR II-03989.
24 Case C-15/74 Centrafarm BV and Others v Sterling Drug [1974] ECR 1147.
25 List pursuant to Article 22 of the Accession Act, 2. Corporations Law, OJ 2003 L236/33, Annex IV.

from the new Member States into those Member States where patent or SPC protection ex-
ists. In order to ensure compliance with the Special Mechanism, wholesalers must provide
intended parallel import takes place.
c) Repackaging
7.59 Another exception to the rules on exhaustion applies where the products in question are
repackaged by the parallel trader for the purposes of sale in another EEA country. Such
repackaging falls into two groups: reboxing and overstickering:
7.60 A reboxed product is a product that is imported from another Member State in its original
internal packaging but with a new exterior carton printed in the language of the Member
State of importation. The parallel importer applies either his own logo or a house-style or
get-up used for a number of different products to the new exterior carton (‘co-branding’), or
-
ing’) or with a new trademark or label (‘re-branding’).26
7.61 An overstickered product is marketed in its original internal and external packaging to
which the parallel importer has applied an additional external label printed in the language
of the Member State of importation (‘re-labelling’). Overstickering may also imply that the
product is co-branded or rebranded.
7.62 Pursuant to Article 7 of the Trademark Directive,27 exhaustion occurs “in relation to goods
which have been put on the market in the Community under that trade mark by the pro-
prietor or with his consent” unless “there exist legitimate reasons for the proprietor to op-
pose further commercialisation of the goods, especially where the condition of the goods is
changed or impaired after they have been put on the market”.
7.63
and parallel traders concerning when a supplier has a legitimate reason to oppose repack-
aging.
Bristol-Myers Squibb
7.64 The Court of Justice judgment in Bristol-Myers Squibb and Others is today the main prec-
edent for determining when it is permissible for parallel traders to repackage products.28 In
that judgment, the Commission set out the following conditions:
1. The repackaging is necessary to permit importation (for example, because of national
rules specifying package sizes).
2. The repackaging or re-labelling does not affect the original condition of the product
inside the package.
26 Re-branding is only permissible where the original trademark may not be used in the Member State into
Pharmacia & Upjohn [1999] ECR I-6927, paras
43-44.
27 Directive 2008/95/EC of the European Parliament and of the Council of 22 October 2008 to approximate the
laws of the Member States relating to trade marks, OJ 2008 L299/25.
28 Case C-427/93 Bristol-Myers Squibb and Others v Paranova [1996] ECR I-3457.

3. The packaging clearly states who repackaged the product and the name of the manu-
facturer.
4. The presentation of the repackaged product is not such as to be liable to damage the
reputation of the trade mark and its owner (for example, the packaging must not be
defective, of poor quality, or untidy).
5. The importer gives prior notice to the trade mark owner and, on demand, supplies a
specimen of that product.
7.65
not. The judgment implies that the packaging itself is not part of the product, but repack-
aging not complying with the above criteria can still violate the rights of the owner of the
Boehringer Ingelheim II
7.66 The Court of Justice’s ruling on 26 April 2007 in Boehringer Ingelheim and Others v Swing-
ward Ltd and Others
to parallel importers who repackage or re-label products bearing the manufacturer’s trade
mark.29
7.67 The case involved changes to the packaging of the products of various pharmaceutical com-
panies by parallel importers for the purpose of selling the products in the UK. These chang-
es included both ‘overstickering’ and ‘reboxing’. The English High Court referred several
questions to the Court of Justice in connection with a case brought by the pharmaceutical
companies against the parallel importers for trade mark infringement.
7.68 After referring to Bristol-Myers Squibb

conditions laid out in that judgement apply to overstickering, therefore rejecting the parallel
traders’ argument that overstickering does not affect the trademark. The Court of Justice
the parallel trader can show that repackaging is needed to obtain authorisation to market the
product in the Member State where it has been imported or if the parallel trader can show
that consumers do not accept overstickered products.30
7.69
the repackaged product is not such as to be liable to damage the reputation of the trade mark
and its owner, should be interpreted broadly and “is not limited only to cases where the re-
packaging is defective, of poor quality, or untidy”. Instead, this condition may apply where
the repackaging or label are such as to affect the value of the trade mark by “detracting
capable of inspiring in the public concerned”.31

methods of repackaging were liable to damage the trade mark owner’s reputation, including
de-branding, co-branding, additional labels obscuring the original trade mark, failing to
29 Case C-348/04, [2007] ECR. I-3391.

30 Case C-243/00 Boehringer Ingelheim v Swingard I [2002] ECR. I-3759, para 52.
31
Eurim-Pharm MPA Pharma [1996] ECR. I-3687, para 35.

state on additional labels to whom the original trade mark belongs and printing the name of
the parallel trader in capital letters.
7.70
condition (not affecting the original condition of the product) and fourth condition (not
damaging the reputation of the trade mark), the Court of Justice went on to state that it is suf-
importer, the Court of Justice has strengthened the ability of the pharmaceutical companies
to bring and win cases against parallel importers not complying with the Bristol-Myers
Squibb conditions.
Subsequent judgments
7.71 The line of challenges by pharmaceutical manufacturers to the repackaging and relabelling
of their products by parallel traders has continued. In Wellcome v Paranova, the Court of
-
packaging chosen by the parallel trader is necessary.32 In line with Boehringer Ingelheim II,
the Court of Justice ruled that this is not the case.
7.72 In Orifarm, a case concerning the third requirement of Bristol-Myers Squibb, the Court of
Justice held that the trademark owner cannot oppose the marketing of repackaged pharma-
ceuticals under Article 7(2) of the Trademark Directive because the new packaging only
bears the mark of the undertaking ordering and taking responsibility for the repackaging, but
not the name of the undertaking that actually repackaged the product.33
D. APPLICATION OF THE LAWS AND CASES

TO SPECIFIC STRATEGIES
1. Supply quotas
7.73 In supply quota systems, the pharmaceuticals supplier unilaterally establishes a supply cap
or quota for each customer (wholesalers, pharmacies, etc.), and will only supply products to
such customers up to this quota. The quotas are based upon past sales levels as well as the
level of demand in the relevant local market.
7.74 In the pharmaceuticals industry, such quotas indirectly limit the levels of parallel trade, as
wholesalers and pharmacies may be subject to legal obligations to ensure the supply of ad-
32 Case C-276/05 The Wellcome Foundation Ltd v Paranova Pharmazeutika Handels GmbH [2008] ECR.
I-10479.
33 Joined Cases C-400/09 and C-207/10
Sharp & Dohme BV and Merck Sharp & Dohme [2011] ECR I-07063.

equate products to meet the needs of the local market.34 Thus, wholesalers and pharmacies
supply the needs of the local market.
7.75 In the event a supply quota is challenged as violating EU competition law, a supplier has
three principal defences.
7.76 First, if the supplier is not dominant, it can argue that EU competition law does not apply,
as these systems are typically implemented unilaterally, and not pursuant to an agreement
with the customers. In this respect, suppliers are typically very careful to ensure that any
-
ment between the parties to prohibit parallel trade.
7.77 Second, even if a restrictive agreement under Article 101 TFEU was found to exist, such
an agreement could be eligible for exemption under Article 101(3) TFEU on the basis of a
rationale similar to that put forward by the General Court in its ruling in the Spanish GSK
case (discussed above). In order to qualify, the supply quotas must be likely to contribute
to improving the production or distribution of goods or to promoting technical or economic
progress.
7.78
As discussed above, in the Greek GSK case, the Court of Justice indicated that pharma-
ceutical suppliers do not have an obligation to supply orders that are out of the ordinary.
Further, the Court set out two factors that must be taken into account in determining whether
an order is ‘ordinary’: (1) the size of the order in relation to the requirements of the market
-
maceutical company and the wholesaler concerned. Finally, the Court of Justice made it
clear that a pharmaceutical supplier may not prevent all parallel trade. This suggests that it
would be imprudent for pharmaceutical companies to limit supplies to local requirements,
leaving no product available for export. That being said, wholesalers cannot force suppliers
to increase supplies simply because they are using the existing supplies for re-export instead
of covering domestic demand.
2. Dual pricing systems

7.79 Dual-pricing systems are intended to limit the price set for one Member State to that partic-
supply. Instead, the manufacturer charges different prices to the wholesalers depending on
7.80 In the event a dual-pricing system is challenged as violating EU competition law, a supplier
has three principal defenses.
7.81 First, as discussed above, the introduction of dual-pricing systems may be mandated by
Member State legislation, in particular legislation providing for reimbursement of medic-
inal products through national health insurance. However, in light of the recent judgment
34 See, e.g., Directive 2001/83/EC, Article 1 No. 18.

by the Spanish National Court rejecting this argument, it is unclear whether this argument
would be successful.35
7.82
-
cussed above, in the Spanish GSK case, the EU Court of Justice annulled the Commission’s
decision on the basis that the Commission failed to properly consider the evidence presented
-
yse the merits of GSK’s claims, and it therefore remains in dispute whether this argument
would qualify for an exemption.
7.83
legal standard established in the Greek GSK case, as such a system indirectly limits the level
of supply to the needs of the local market. However, a risk exists that such a position could
be challenged as a dual pricing system typically eliminates all parallel trade.
7.84 As can be seen, all three of the above arguments have been or could be challenged. For
this reason, dual pricing systems, which have historically been perceived as the least risky
strategy, may presently face the highest risk of challenge.
3. Direct-to-pharmacy systems
7.85 While the applicable EU competition laws generally prohibit a supplier from imposing re-
strictions aimed at preventing such parallel trade from independent resellers, suppliers have
or via an agent. For example, while a supplier may not generally instruct a wholesaler that it
may not supply parallel traders, the supplier may, itself or through an agent, generally refuse
to supply such parties.
7.86 Due, inter alia, to this difference in the application of the EU competition laws, many
pharmaceutical suppliers stopped supplying the market through wholesalers in a number
of countries, and instead sell directly using ‘logistical service providers’ as their agents to
coordinate orders and deliveries. In this way, the suppliers achieved much greater control
over their supply chains. However, in order for a logistical service provider to qualify as
7.87 Following the implementation of direct-to-pharmacy systems and other wholesaler rational-
Trading launched a market study to determine the effect of such plans on the UK market. In
particular, the OFT considered the impact of the wholesaler reductions on competition, and
found that the concerns arising from the reduction in the number of wholesalers by the phar-
36
35 Spanish National Court (Audiencia Nacional), 13 June 2011, Case n 450/2009, Spain Pharma S.A., Cofares
36

8
LIFE-CYCLE MANAGEMENT STRATEGIES
AND EU COMPETITION LAW
A. INTRODUCTION 8.01 a) Overview of cases 8.47
b) Assessment criteria 8.56

B. PHARMACEUTICAL
SECTOR INQUIRY 8.06 D. PATENT SETTLEMENTS BETWEEN
ORIGINATORS AND GENERIC
C. REGULATORY ABUSE 8.08
COMPANIES 8.66
1. Supply of misleading information 8.12 2.
a) Supply of misleading information in patent settlements? 8.70
to a regulatory authority - 8.15 3. Relevant criteria to distinguish pro- from
anticompetitive patent settlements 8.73
b) Denigration 8.24
2. Manipulation of regulatory procedures 8.45 E. CONCLUSION 8.79
A. INTRODUCTION
8.01 In the pharmaceutical sector, patents and data exclusivity provide originator companies pro-
tection from generic competition as a reward designed to encourage the development of
new and improved medicines. Logically, originator companies, who successfully launch
new medicines wish to maximise the value of this reward and have teams of specialists
developing strategies to use these regulatory measures to be protected against competition
from generic companies for the longest term possible.
8.02 Over the past decade, the competition authorities have begun to question some of these
strategies to exclude generic competitors. Beginning with the decision against AstraZeneca
in 2005, the Commission established the principle that a strategy which is allowable under
the applicable regulatory regime is not necessarily allowable under the EU competition
-
nator companies aimed at delaying generic entry that, in the view of the Commission, could
potentially violate EU competition law. Finally, in the past few years, the Commission and
-
tices violate EU competition law.
8.03 The principal question at issue in these cases is what constitutes legitimate ‘competition on
the merits’ and what constitutes anticompetitive manipulation of the regulatory regime. To
date, competition authorities in the EU have found the following activities to violate EU
competition law:

LIFE-CYCLE MANAGEMENT STRATEGIES AND EU COMPETITION LAW
1. Withdrawing a marketing authorisation for the purpose of delaying generic entry to the
market ( )
2.
to issue prescriptions of generic products with prescribing software (Reckitt Benckiser)
3. Providing misleading information to a regulatory authority in an application for a SPC
( )
4. Denigrating the products of generic competitors ( )
5. Paying a generic competitor to not challenge a patent and to stay off the market (Lund-
beck)
8.04 -
low), which was overturned on appeal, distinguishing between the activities that constitute
competition on the merits and the activities that constitute anticompetitive manipulation is
-
latory activities constitute legitimate competition on the merits and which activities violate
EU competition law.
8.05 -
ropean Commission in its sector inquiry that could potentially raise issues under EU compe-
tition law. Thereafter, we discuss the cases brought to date by the competition authorities in
the EU and guidance that can be gleaned from these cases to distinguish between allowable
activities and those which violate EU competition law.
B. PHARMACEUTICAL SECTOR INQUIRY

8.06 In 2009, following an 18-month investigation, the European Commission published its
Pharmaceutical Sector Inquiry Report (‘the Report’).1 -
gies used by originators to prevent or disrupt generic entry and indicates that some of these
strategies might violate EU competition law:
1. . Originators may create legal uncertainty for generic competitors by
e.g., before the European
the original application or the protection period, the Commission noted that they can
extend the examination period (as the examination continues even if the parent applica-
tion is withdrawn or revoked). Such a situation may create legal uncertainty for generic
companies and thus discourage or delay generic entry.2
2. Patent litigation. Originators may impede generic entry through patent litigation.
While it is legitimate for originators to enforce their patent rights, the Commission
suggested that, in certain instances, originators pursue unmeritorious litigation for the
1 See Commission Communication of 8 July 2009, Executive Summary of the Pharmaceutical Sector Inquiry
Report, and Commission Staff Working Document (Technical annex to the Commission Communication),
available on DG Competition’s website at http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/
index.html.
2 See Commission Communication of 8 July 2009, Executive Summary of the Pharmaceutical Sector Inquiry
Report, pages 10-11.

primary purpose of delaying generic entrants.3

3. Patent settlements. -
nator companies and generic companies, in which generic suppliers received a payment
in exchange for their commitment to stay off of the market.4
4. Interventions in administrative proceedings. When generic manufacturers apply for
marketing authorisation/pricing reimbursement status, originators sometimes intervene
in the proceedings to claim that the generic products are less safe or less effective than
the originator’s drug. According to the Commission, this type of intervention is rarely
successful, but it delays generic entry, thus leading to extra revenue for the originator.5
5. Switching patients to a second generation product. While the Commission ac-
knowledged the importance of incremental research, the Report noted that the launch
of second generation products is often accompanied by intensive marketing aimed at
switching patients to the new drug prior to generic entry. According to the Commis-
of the market.6
6. Marketing strategies targeted at the generic product. Some originator companies
after the product has been approved for sale by the relevant administrative authority.
wholesalers as they prepare for the supply of generic products.7

7. Pricing strategies. The Commission observed that large originators commonly en-
gage in price competition with incoming generics and that this could involve selective
discounts/rebates, or the originator relying on its economies of scale to drive generic
companies out of the market.8
8. Launch of an own generic or licensing to a third party. As patent expiry approach-
es, some originator companies may decide to launch generic versions of their own
products or license the product to a third party, thereby making entry by other generic
companies less attractive.9 This strategy might be accompanied by marketing aimed
9. Switch to OTC. Towards the end of the product’s life-cycle, originator companies
might consider changing the medicine from prescription-only to an over-the-counter
(‘OTC’) product. According to the Commission, switching to OTC prior to patent
give the originator an opportunity to create brand loyalty for the product.10
3 Ibid., page 11.

4 Ibid., pages 12-13.
5 Ibid., page 20.
6 Ibid., pages 14-15.
7 Ibid., page 14.
8 Technical annex to the Commission Communication, Part 2, page 553.
9 Ibid.
10 Ibid.

8.07
generic entry, it did not clarify whether these strategies would violate EU competition law.
Instead of providing guidance the Commission indicated that enforcement actions
facts.11 The cases completed to date are discussed in the following sections.
C. REGULATORY ABUSE
8.08 It is a well-established principle under EU competition law that a company in a dominant
market position has a ‘special responsibility’ not to impair genuine, undistorted competition
on the internal market.12
8.09 In the judgment, the EU courts extended this principle to actions taken by
dominant companies before regulatory authorities, holding:
[A]n undertaking which holds a dominant position…cannot…use regulatory pro-
on the market, in the absence of grounds relating to the defence of the legitimate
interests of an undertaking engaged in competition on the merits or in the absence
of .13
8.10 This holding means that an action by a dominant company before a regulatory authority that
deters the entry of competitors may constitute an abuse unless the action constitutes ‘com-
of the undertaking is otherwise legal under the EU or national regulatory framework. This
holding has important implications for life-cycle-management strategies, which by their
nature aim to deter the entry of generic competitors onto the market for as long as possible.
8.11 In the following sections, we will discuss the application of this holding to the facts at issues
in the cases brought by the EU and national competition authorities following the sector
inquiry.
1. Supply of misleading information

8.12 Competition authorities consider that the supply of misleading information to exclude or
gain a competitive advantage over competitors or potential competitors does not amount
to competition on the merits, and could thus constitute an abuse of dominance contrary to
Article 102 TFEU.
8.13
to be abusive in two sets of circumstances: (i) the supply of misleading information to patent
11 Ibid., page 20.

12 See Case C-202/07 P France Telecom v Commission [2009] ECR I-2369, para 105 and case-law cited.
13 Case C-457/10P , Judgment of 6 December 2012, nyr, para 134 (emphasis added).

company of misleading information about generic drugs (denigration).
8.14 The common thread in these cases is that dominant pharmaceutical companies are under
a duty to act transparently and to avoid communicating inaccurate or incomplete informa-
tion which would be liable to mislead regulatory authorities, customers, or intermediaries.
-
haviour from abusive conduct.
a) Supply of misleading information to a regulatory authority -
8.15 -
sition in the supply of treatments for gastric ulcers. The Commission found, inter alia, that
14
8.16 -
-
tion to place their medicine on the market.15 The duration of the SPC depends on the date of
applications for omeprazole, the exact meaning of that concept was ambiguous.16 A usual
interpretation was that it referred to the date when a national authority actually granted the
was the later point in time when the marketing authorisation became effective (‘effective
marketing’ authorisation i.e., when a national authority approved the price of the drug).17
When it applied for SPCs, AstraZeneca did not mention the interpretation it retained.
8.17 The Commission found this conduct to be misleading and in violation of Article 102 TFEU,
date in its SPC applications referred to the date of grant and not to the alternate ‘effective
marketing’ date. According to the Commission, this misleading conduct allowed Astra-
Zeneca to obtain SPCs it was no longer entitled to (or was entitled to for a shorter period
only).18 19
How-
certain elements with respect to AstraZeneca’s allegedly abusive product withdrawals (see
14 See , Case COMP/M.1403, Commission decision of 26 February 1999 (‘ deci-

sion’).
15 Council Regulation (EEC) No 1768/92 of 18 June 1992 concerning the creation of a supplementary protec-
later repealed and replaced by Regulation (EC) No 469/2009 of 6 May 2009 concerning the supplementary
decision, paras 147-
149.
16 Hässle [2003] ECR I-14781.
17 See, e.g., decision, paras 228, 235.
18 See, e.g., decision, para 630.
19 Case T-321/05 , Judgment of 1 July 2010, nyr, (hereinafter the ‘
judgment’).

the General Court’s reasoning and holding.20
i) Assessment criteria
Misleading conduct
8.18 In the General Court found that the company’s conduct was misleading be-
cause it did not disclose the alternative interpretation it took of an ambiguous but critical
legal provision to its SPC applications.21 According to the Court, absent such express dis-
that the company relied on the more common interpretation of that unclear provision.22 In
wished to accept.23
8.19 Assuming that AstraZeneca became aware of the confusion concerning the relevant date
only once it had been granted extra patent protection, the Court considered that AstraZeneca
24
The
Court found that internal evidence showed that the company was aware of the mistaken in-
formation based on which the SPCs were granted, and pointed out that one of AstraZeneca’s
patent attorneys had suggested to rectify the SPCs.25
8.20 The Court also held that the misleading nature of companies’ representations to patent of-
26
and it is not necessary to demon-
strate that a company acted deliberately and in bad faith.27 However, intent can still be rel-
evant as it may be taken into account to support the determination that the company abused
its dominance.28 In , the General Court found that AstraZeneca deliberately
29
8.21 Moreover, the General Court indicated that the objectively misleading nature of the repre-
case.30 In other words, dominant pharmaceutical companies do not have to be ‘infallible’
20 Case C-457/10P , Judgment of 6 December 2012, nyr, (hereinafter the ‘CJEU

judgment’).
21 judgment, para 93.
23 CJEU judgment, para 95.
24 judgment, paras 532, 594.
25 Ibid.
26
30 judgment, paras 357, 361. Ibid, para 99.

in their interaction with regulatory authorities and each objectively wrong representation
would not necessarily result in an abuse.31 The benchmark is whether, taking into account
exclusive rights to which the dominant company was not entitled, or otherwise wrongly
erect regulatory obstacles to competition.32
dominant companies would not be considered to have engaged in abusive conduct simply
because a patent application was struck down when challenged.33
Capability of restricting competition

8.22 For the allegedly misleading conduct to infringe Article 102 TFEU, it is enough that, in view
of the economic and regulatory context in which they occurred, the dominant company’s
representations were capable of restricting competition.34 It is not necessary that a dominant
company actually enforced the IP rights granted on the basis of its alleged misrepresenta-
tions.35
8.23 Similarly, it does not matter whether the alleged misleading representations actually led to
the issuance of exclusive rights granting protection beyond the life of the original patent.
grant of such exclusive rights, and that, if those rights had been granted, they would have
36
In , the General
Court also pointed out that the company’s alleged misleading representations served solely
to prevent generic entry by obtaining SPCs in a manner contrary to the regulatory frame-
work.37
b) Denigration
8.24 Aside from the submission of misleading information to regulatory authorities, the com-
munication of misleading information that denigrates competing products may also violate
Article 102 TFEU or the equivalent national competition laws. The French competition
discrediting a product or service.38 According to the Authority, denigration can be distin-

32 judgment, para 357. The General Court stressed that the limited discretion of public authorities
or the absence of obligation for them to verify the accuracy of the information provided may be relevant fac-
tors to take into account to determine whether the practices at issue is susceptible to raise regulatory obstacles
to competition (para 357). See also CJEU judgment, para 105-106.
36 judgment, paras 602, 605. See also CJEU judgment, paras 108-112.
38 Aut. conc. Déc. no. 13-D-11 du 14 mai 2013 relative à des pratiques mises en oeuvre dans le secteur pharma-
the Paris Court of Appeal.

guished from criticism in that it originates from an economic operator seeking to obtain a
competitive advantage by discrediting its competitor or the products of the latter.39
8.25 The FCA has found that denigration could result from the communication of information to
the public that is not objective, incomplete, not nuanced enough, or untrue.40 In particular,
a dominant undertaking may be viewed as denigrating competing products or services if:
1. For exam-
ple, in several cases in which the dominant undertaking alleged that the generic drugs
were ineffective and/or potentially dangerous, the FCA considered that the market au-
thorisation granted to the generics demonstrated their bio-equivalence and their effec-
tiveness.41
2. The allegations are not based on facts. For instance, in Arrow Génériques, the Au-
thority criticised the fact that the allegedly harmful effects of the generic drug had
not been observed in practice, and that its alleged ineffectiveness had not been estab-
lished.42
3. The company distorts the statement of a public entity. For instance, the Authority
found in that the dominant undertaking had distorted a warning of the
director of the French Agency for the Safety of Health Products. The Authority held
that the warning had been reproduced by the dominant undertaking in an ambiguous
and truncated manner.43
8.26 The fact that the allegations made by the dominant undertaking do not fall in any of the
the case where the FCA found that the dominant undertaking’s allegations
were abusive while the company was only pointing out to the objective differences of com-
peting generic drugs (i.e., the type of clopidogrel salt used in the drugs was different). The
Authority decided that:
a product, highlighting not only the qualities but also the differences which in the
context of the communication and the conditions under which it is heard, can only
be understood as substantial differences, such as to create an objective doubt with
regard to the quality of the competing generic product, may indicate a willingness to
mislead the health practitioner and amount to an abuse of dominance.44
39 Ibid.
40 Cons. conc., Déc. n° 07-D-33 du 15 octobre 2007 relative à des pratiques mises en oeuvres par la société
France Télécom dans le secteur de l’accès à internet à haut débit (hereinafter ‘France Télécom
.
41 Cons. conc., Déc. n° 07-MC-06 du 11 décembre 2007 relative à une demande de mesures conservatoires
présentée par la société Arrow Génériques (hereinafter ‘Arrow Génériques
n° 09-D-28 du 31 juillet 2009 relative à des pratiques de Janssen-Cilad France dans le secteur pharmaceu-
tique (hereinafter ‘ ’), para 131.
42 Arrow Génériques
43 decision, paras 132-135.
44 decision, para 373.

8.27 The decisional practice of the FCA is controversial, as the distinction between pro-compet-
itive criticism and abusive denigration appears to be very subjective. Further, comparing
-
additional information which competitors and customers obtain about the products which
are being compared or criticised. The competitors whose products are being compared
or criticised can use the information which they obtain to compete more effectively on
about the different products available on a given market, the easier it is for them to make
neo-classical economic theory as being the model under which social welfare is maximised
45
In order to maximise
social welfare, it is thus important to allow companies to publicly compare their products
to those of competitors.
8.28 This section provides a brief description of the cases before the FCA in which the denigra-
tion of generics was found to be abusive and seeks to identify relevant criteria to distinguish
pro-competitive criticism from abusive denigration.
i) Overview of cases
8.29 The FCA has held that the denigration of generic products by originator pharmaceutical
46
-
nance.47 While the Authority accepted that competition requires a certain degree of rivalry, it
nevertheless held that this struggle for the conquest of customers does not allow a dominant
company to denigrate competing products.48
8.30 Arrow Génériques.

that Schering Plough organised a campaign aimed at convincing doctors and pharmacists
of the ineffectiveness and the potential danger of generics in order to delay their entry in
the market.49 In an interim measures decision, the FCA found that Schering Plough’s alle-
gations were not based on facts, as the marketing authorisation granted to Arrow’s generic
demonstrated its bioequivalence and its effectiveness.50 In other words, the FCA considered
that the fact that a generic has been granted a marketing authorisation necessarily means
that this generic can be safely substituted for the original branded drug. Correspondingly,
the FCA found that Schering Plough’s campaign was misleading and likely to constitute an
abuse of dominance.51
45 Richard Wish, Competition Law, Oxford University Press, Sixth edition, 2009, pages 4, 7.
46 In certain cases, the French Competition Authority was deciding on a request for interim measures.
47 See Arrow Génériques
‘ )’).
48 France Télécom Arrow Génériques decision, para 100.
49 Arrow Génériques decision, paras 14-17.
50 Ibid., paras 102 and 104.
51 Arrow Génériques decision, para 107.

8.31 Janssen Cilag. -

sen-Cilag organised a denigration campaign against Ratiopharm’s generic product via press
articles, emails, letters and telephone calls, with the aim of convincing doctors and phar-
macists of the risks associated with the use of Ratiopharm’s generic drug and the absence
of bioequivalence between this drug and the original branded drug.52 Similar to the Arrow
Génériques case, in an interim measures decision the FCA held that Ratiopharm’s market-
ing authorisation showed that its generic drug was bioequivalent.53 The FCA also insisted
on the fact that Janssen-Cilag had distorted a warning of the director of the French Agency
for the Safety of Health Products.54 The Authority thus found that Janssen Cilag’s conduct
was likely to amount to an abuse of dominance.55
8.32 -
generics apart from its own enjoyed the same composition as the original branded drug.56
-
fessionals from selling or prescribing any generic other than its own.57
argued that it was merely making an objective comparison between the characteristics of its
products and those of competitors.58
pointing out to differences between its drug and that of competitors that were irrelevant
because they did not have any impact on the bioequivalence or substitutability of the prod-
ucts.59
many health professionals on the possibility to substitute the original branded drug by com-
peting generics.60
ii) Assessment criteria
8.33 In these cases, the FCA has found that denigration amounts to an abuse of dominance only
if (1) there is a link between the undertaking’s dominant position and the act of denigrating,
(2) the denigration is liable to foreclose competition, and (3) the act is not objectively justi-
The required link between denigration and dominance

8.34 The FCA has made clear that denigration is not abusive per se. Denigration is only abusive
52 decision, paras 26-31, 32-56, 117, 130, and 145.

53 Ibid., para 131.
54 Ibid., para 132-135.
55 Ibid., para 148.
57 Ibid., para 7.
58 Ibid., para 439.
59 Ibid., paras 450 and 452.
60 Ibid., para 456.

if there is a link between the undertaking’s dominant position and the act of denigrating.61
In its decisional practice, the FCA has found that there was a direct link between dominance
and denigration when “it is the dominant position, including the notoriety and the trust that
derive from it, that had allowed the undertaking to render fully effective its strategy of den-
market”.62
8.35
General Court clearly held in that:
[a]s far as concerns practices intended to exclude or reduce competition, in order to
to result from, or be made possible by, the economic strength of the undertaking,
since no causal link is required between the dominant position and the abuse of that
position.63

8.36 The decisional practice of the Authority shows that denigration is only likely to lead to mar-
ket foreclosure in particular circumstances. An overview of these circumstances is provided
below.
8.37 The characteristics of the markets in which denigration takes place. Denigration has
only been found abusive in markets which were in the process of opening to competition or
which had only recently opened to competition. Denigration has, for instance, been found
abusive in network industries following liberalisation, such as the telecommunications,64
postal,65 and energy industries.66 In these markets, the incumbent, as the former monopolist,
was considered to have a particularly strong impact on the choice of consumers.67 Similarly,
the FCA found that denigration was abusive in markets that saw the arrival of competing
generic drugs.
61 Cons. conc., Déc. n° 07-D-33 du 15 octobre 2007 relative à des pratiques mises en oeuvres par la société
France Télécom dans le secteur de l’accès à internet à haut débit (hereinafter ‘France Télécom
Aut. conc., Déc. n° 09-D-14 du 25 mars 2009 relative à des pratiques mises en oeuvre dans le secteur de
la fourniture d’électricité (hereinafter ‘Gaz Électricité de Grenoble decision,
para 366.
62 decision, para 578. See also Gaz Électricité de Grenoble decision, para 59.
63 CJEU judgment, para 267. See also Case 6/72 Europemballage Corporation and Continental
Can Company Inc. v Commission [1973] ECR 00215, para 27, and Case 85/76 Hoffmann-La Roche v Com-
mission [1979] ECR 00461, para 91.
64 See, e.g., France Télécom decision.
65 See, e.g., Autorità Garante della Concorrenza del Mercato, 14 December 2011, A413, Decision n.23065, TNT
Post Italia/Poste Italiane, in Boll. 48/2011 (hereinafter ‘Poste Italiane’).
66 See, e.g., Gaz Électricité de Grenoble decision.
67 See, e.g., France Télécom Arrow Génériques deci-
sion, para 574.

8.38 The characteristics of the denigrated products or services. The denigration of new prod-
ucts is more likely to have a foreclosure effect because customers and intermediaries trust
these products less than older products that have already been available on the market for
some time. For instance, an original branded drug that has demonstrated its effectiveness
a priori assumption.68 By contrast, new generic drugs have not
yet been able to prove their effectiveness. Therefore, the denigration of new generics is
likely to have a strong impact on the choice of customers and intermediaries such as doctors
and pharmacists.
8.39 The denigration of certain types of products such as health-related products is also more
likely to affect competition because health is important and customers and intermediaries
will be more receptive to allegations that certain products are ineffective or potentially dan-
gerous.69
8.40 -
termediaries to evaluate the merits of the allegations made by the dominant undertaking.
This would be the case for instance when the denigration concerns the technical aspects of
a product,70 or when the merits of the allegations can only be evaluated over a long period
of time.71
8.41 The way in which denigration takes place. In several cases, the FCA insisted on the
existence of a real communication strategy aimed at denigrating competing products or
services.72
dominant undertaking has designed a strategy which it deploys on a large scale by publish-
ing articles in the specialised press, sending numerous letters, making frequent phone calls,
organising seminars, using its sales force and its network of wholesalers, etc. This was
the case for instance in where the dominant undertaking had --in the FCA’s
73
8.42 The moment at which denigration takes place. The FCA also highlighted in several
cases the importance of the moment at which denigration takes place. In the cases involv-
ing generic products, the FCA held that the fact that the denigration took place before the
commercialisation of the generics was particularly harmful for two reasons. First, the FCA
explained that in such case the company launching the generic drug is unable to respond
to the denigration because it has not yet launched its commercial action with pharmacists.
Second, it held that the rumours cannot be based on defects that have been observed given
that the generic drug has not yet been used.74
68 ) decision, para 102.

70 France Télécom decision, para 351.
71 For instance, patients, doctors and pharmacists can only evaluate the merits of the allegation that a given
generic drug is dangerous or less effective after a long period of use.
72 See, e.g., decision, para 444.
74 Arrow Génériques decision, para 147.

8.43 The general state of mind of customers or intermediaries. Another very important as-
pect to determine whether denigration is liable to have a foreclosure effect is the general
state of mind of customers or intermediaries. If the customers or intermediaries on a giv-
en market already have certain doubts about the quality of the products which are being
denigrated, the impact of the denigration is likely to be strong. The FCA insisted on this
element in several cases related to generics. This was one of the main reasons why, in the
and competing generic drugs was abusive. The FCA pointed out that the impact of this
comparison had to be assessed in the light of the fact that a certain number of health profes-
sionals who already had doubts about the possibility to substitute original branded drugs by
generics.75
fact that health practitioners were increasingly concerned by the risk of being held liable for
prescribing an inappropriate drug.76
8.44 As for all other abuses of dominance, the undertaking that is accused of denigrating com-
77
In the -
sen Cilag
that it is not for a dominant undertaking to substitute itself to a health authority.78 In doing
so, the FCA relied on the case-law of the EU Courts which provides that “[i]t is not the task
of a dominant undertaking to take steps on its own initiative to exclude products which it
regards, rightly or wrongly, as dangerous or at least as inferior in quality to its own prod-
ucts”.79
2. Manipulation of regulatory procedures

8.45 In addition to cases concerning the submission of misleading information, the European
Commission and national competition authorities have also held that the manipulation of
regulatory procedures to exclude or gain a competitive advantage over competitors or po-
tential competitors does not amount to competition on the merits, and thus constitute an
abuse of dominance contrary to Article 102 TFEU.
8.46
found to be abusive in two sets of circumstances: (i) the withdrawal or deregistration of a

76 decision, para 358. In , the Authority criticised the fact that the dominant un-
dertaking had explicitly referred to the risk of liability for doctors and pharmacists if they were to prescribe
or deliver the generic drugs ( decision, para 29).
77 Guidance on the Commission’s enforcement priorities in applying Article [102 TFEU] to abusive exclusion-
e.g., Case 311/84 Centre Belge d’Études
de Marché Télémarketing v CLT and IPB [1985] ECR 03261, [1986] 2 CMLR 558, para 26.
79 Case T-30/89 Hilti v Commission
enforcement priorities in applying Article [102 TFEU] to abusive exclusionary conduct by dominant under-
takings, OJ 2009 C45/7, para 29.

product for the purpose of delaying or hindering generic entry, and (ii) the use of a divisional
patent procedure to remedy an earlier mistake and obtain additional SPC protection.
a) Overview of cases
8.47 The common thread in these cases is that dominant pharmaceutical companies are perceived
to not be protecting legitimate interests but rather exploiting loopholes in the regulatory pro-
cedures in order to harm competitors. These cases are controversial, as the actions are not
legal behaviour from abusive conduct.
8.48 On 15 June 2005, the Commission imposed a €60

-
and (ii) the deregistration of its marketing authorisations for Losec capsules in Denmark,
Norway and Sweden.
8.49 The latter infringement concerned AstraZeneca’s decision to withdraw and deregister its
capsule formulation of Losec, its patented anti-ulcer medicine in Denmark, Norway and
Sweden, and replace it with a tablet formulation (called Losec MUPS). As a result of the
deregistration, generic companies could no longer use an abridged procedure to obtain their
own marketing authorisations, thereby delaying entry of generic competition.80 The Euro-
pean Commission held that this strategy constituted an abuse.
8.50 81
-
sion failed to establish the legal standard applicable to certain impediments to parallel trade.
the General Court’s reasoning and holding.82
8.51 When Reckitt Benckiser’s patent for Gaviscon Original Liquid (a treat-
by generic suppliers. First, it attempted to delay the publication of a generic designation for
Gaviscon Original Liquid by the UK authorities. Second, before the publication of a generic
designation, Reckitt Benckiser withdrew and delisted Gaviscon Original Liquid from the
NHS prescription channel. Instead, Reckitt Benckiser marketed Gaviscon Advance, a prod-
uct that had been sold in the UK since 1997 and was patent protected until 2016. As a result,
practitioners’ prescribing software would identify Gaviscon Advance when they entered the
name ‘Gaviscon’, and would not identify any generics. Practitioners would not be able to
issue generic prescriptions relevant to Gaviscon Original but only branded prescriptions
80 The abridged procedure would have enabled generic companies to rely on the technical data submitted by
AstraZeneca in relation to the Losec capsules. However, that was no longer the case when the marketing
patent protection on Losec’s original drug had expired.

81 Case T-321/05 , Judgment of the General Court of 1 July 2010, [2010] ECR II-
02805 (hereinafter the ‘ judgment’).
82 Case C-457/10P , nyr, (hereinafter the ‘CJEU judgment’).

relating to Gaviscon Advance. Pharmacies would therefore have no choice but to dispense
the Gaviscon Advance patent protected product.
8.52 The OFT found that by withdrawing and delisting Gaviscon Original Liquid, Reckitt Benck-
iser abused its dominant position.83 According to the OFT, that course of action tended to
restrict competition from generic drugs or was at least capable of having that effect.84 On 15
October 2010, Reckitt Benckiser acknowledged the infringement and agreed to pay a £10.2
85
8.53 In 1994, Pharmacia obtained a patent for latanoprost, the active in-
application. Pharmacia later applied for a divisional patent, which the EPO granted in early
86
8.54 In January 2012, the Italian Competition Authority (‘ICA’) imposed imposed a €10.7 mil-
products away from the market.87 The ICA argued that this strategy involved the following
steps: application for a divisional patent and application for a SPC in Italy solely aimed at
-
88
8.55
2012, the Lazio Regional Administrative Court annulled the ICA’s decision on the ground
89
In particular,
the court took issue with the ICA’s loose approach in characterising an abuse. The ICA
broad strategy to keep generics from the market.90 However, the Italian court stressed that
83 OFT, decision No CA98/02/2011, Abuse of a dominant position by Reckitt Benckiser Healthcare (UK) Limit-
ed and Reckitt Benckiser Group plc, 12 April 2011, available on the OFT’s website, at http://www.oft.gov.uk/
claims against Reckitt Benckiser in the UK (see for instance: http://www.theguardian.com/business/2011/

feb/21/reckitt-benckiser-legal-action).
84 Reckitt Benckiser, para 6.156.
85 Press Release, 15 October 2010, ‘Reckitt Benckiser agrees to pay £10.2 million penalty for abuse of domi-
nance’, available at http://www.oft.gov.uk/news-and-updates/press/2010/106-10.
86
87 Italian Competition Authority, decision A431 of 11 January 2012, (hereinafter referred to as the ‘
decision’).
89
the ‘ judgment’). The ICA has appealed this judgment.
90 See, e.g., decision, paras 83, 84, 220, 221, 223.

and that the ICA had failed to bring forward evidence to the contrary.91 The Italian Court
divisional patent in 2010, as the EPO’s ruling was under appeal at the time of the ICA’s in-
92
b) Assessment criteria
‘Competition on the merits’

8.56 The EU Courts have acknowledged that it is part of the normal competitive process for a
dominant company to determine strategies aimed at minimising the erosion of its sales and
dealing with generic competition.93 However, such strategies must not depart from compe-
tition on the merits.94 Under EU law, dominant companies are deemed to have a ‘special
responsibility’ and therefore cannot misuse regulatory procedures to impair competitor en-
try.95
8.57 In , the General Court determined that the company’s deregistration of some
of its marketing authorisations could not constitute competition on the merits. Indeed, this
action did not involve the legitimate protection of an investment that fell within the ambit
of competition on the merits because AstraZeneca’s exclusive right to use the results from
its pharmacological and toxicological tests and clinical trials had expired.96 Besides, when
engage in normal competition as, at the relevant time, it was not standard industry practice
to deregister a product for which there was still a commercial market.97
8.58 The OFT similarly found that Reckitt Benckiser’s withdrawal and product switch was not
normal competitive behaviour because, except for the prospect of pre-empting generic
competition, such strategy would have been loss-making and therefore not commercially
rational.98 Further, according to the OFT, a ‘normal life cycle management strategy’ would
involve a pharmaceutical company replacing an existing product with one that incorporates
innovations valued by practitioners and patients, such that it makes commercial sense to
withdraw the original product for which there may then be no residual demand.99 The OFT
found that Reckitt Benckiser’s strategy could not be ‘normal’, inter alia because it was not
91 judgment, Section 4.1.

92 judgment, Section 4.1.
94 Ibid.
95 Reckitt Benckiser, paras
3.40, 3.42 and 3.49.
97 decision, paras 791, 821 and 828.

demand) with a new, improved product.100 Rather, the strategy was meant to encourage
patients and physicians to switch to Gaviscon Advance, a product that had been marketed
Liquid.101
8.59 and Reckitt Benckiser also show that intent matters to distinguish what is com-
petition on the merits from what is not. Although the General Court reiterated that intent is
not necessary to characterise an abuse of dominance, which primarily necessitates an ob-
jective showing of abusive conduct,102 the General Court did note that intent can be a useful
103
The General Court pointed out that
import through deregistering its market authorisations.104
8.60 The OFT also determined that intent can be a helpful tool to determine whether a company
has engaged in competition that was not on the merits.105 The UK regulator granted con-
siderable weight to Reckitt Benckiser’s contemporaneous documents, which suggested that
‘the desire to impair effective competition was the key factor’ in the decision to withdraw
and delist the original drug.106 This approach is in line with the Commission’s position that
direct evidence of a strategy to exclude competitors may be helpful in interpreting a domi-
nant company’s conduct.107

8.61 In , the General Court stressed that the mere withdrawal of the Losec capsules
products. Rather, the withdrawal of the market authorisation for the initial Losec version
was the central feature of the abuse because it raised regulatory obstacles to generic entry.108
Likewise, in Reckitt Benckiser, it is the conjunction of the withdrawal and delisting together
with certain peculiarities of the UK regulatory and prescription system that was capable of
hindering generic competition.109

101 Ibid.
103 judgment, paras 359, 814, 849. See also: Reckitt Benckiser, paras 3.47 and 3.48.
104 judgment, paras 813-814.
105 Reckitt Benckiser, OFT decision, para 6.3.
106 Reckitt Benckiser, OFT decision, para 6.29.
ary conduct by dominant undertakings, OJ 2009 C45/7, para 20.
108 judgment, para 140. The General Court also stressed
that the fact that AstraZeneca was legally entitled to withdraw its marketing authorisation was immaterial in
determining whether it infringed Article 102 TFEU (para 677). Similarly, the fact that generic companies had
another avenue to get access to market was immaterial because such alternative was more burdensome and
would have taken more time (para 833).
109 Reckitt Benckiser, see, e.g., paras 6.14-6.16.

8.62 Dominant companies may try to objectively justify the alleged anti-competitive aspects
of their product portfolio management strategies. In its Guidance on the enforcement of
-
strating either (i) that the conduct at stake was objectively necessary, or (ii) that this conduct
110
8.63 In the cases described above the competition authorities and the Courts rejected the objec-
-
ments in order to justify the withdrawal of marketing authorisations. The General Court
rejected this argument stating that AstraZeneca failed to show that maintaining marketing
111
8.64
them was that Gaviscon Advance had safety advantages related to its lower level of sodium
in comparison to the original Gaviscon. The OFT found that any such safety advantages
could not justify the withdrawal of the original product. This was notably because (i) the
older version of Gaviscon was perfectly safe for the vast majority of patients, (ii) practi-
tioners themselves were competent to identify the patients for whom the original product
was not suitable, and (iii) Reckitt Benckiser would not have kept marketing the original ver-
sion of Gaviscon in the OTC channel if there was some concern about the level of sodium.112
8.65 Reckitt Benckiser further argued that the withdrawal of Gaviscon Original was meant to
preserve of the NHS prescription channel and (iii) avoid the fraudulent dispensing of OTC
Gaviscon Original packs against prescriptions. The OFT found that these arguments were
not credible and were instead a means of ‘diverting the focus’ from the actual rationale, i.e.,
the objective to impede generic competition.113
D. PATENT SETTLEMENTS BETWEEN ORIGINATORS

AND GENERIC COMPANIES
8.66 Patents settlements are commercial agreements to settle actual or potential patent-related
disputes.114 In its Sector Inquiry, the European Commission noted that patent settlements
in the pharmaceutical industry between originators and generics could have anticompetitive
ary conduct by dominant undertakings, supra, paras 28-31.
111 judgment, paras 685-694. Separately, the General Court noted, in passing, that the company
had not demonstrated that the deregistrations were necessary or even useful for the introduction of its Losec
tablets (para 812). See also, CJEU judgment, paras 135-138.
112 Reckitt Benckiser, paras 6.92-6.93.
113 Reckitt Benckiser, paras 6.66-6.67.
114 Technical annex to the Commission Communication, Part 1, para 704.

effects, in particular where the settlement involves a restriction on the ability of the generic
supplier to enter the market and a value transfer from the originator to the generic.
8.67 Following the Sector Inquiry, the Commission reopened its on-going case against Lund-
beck. Thereafter, the Commission decided that Lundbeck’s settlements with generic sup-
pliers concerning the product citalopram infringed Article 101 TFEU and imposed a €93.8
115
The
Commission decided that the settlements involved pay-offs by Lundbeck solely to prevent
competition from generic drugs.116 In the Commission’s view, the agreements provided
substantial value transfers from Lundbeck to the generic competitors, in the form of direct
product stocks for destruction to ensure that generic would stay out of the market.
8.68 In addition to cases, the European Commission has been monitoring patent settlements be-
tween originator and generic companies on an annual basis since the sector inquiry. In its
patent settlement monitoring report published in July 2012, the Commission stated that
-
cluded in 2011).117
8.69 In this section we explain the rationale behind patent settlements and discuss the criteria
used to distinguish pro- and anticompetitive patent settlements.
8.70 The classic scenario of a patent settlement is when a generic company prepares to market
its drug and faces patents that protect the pioneer drug. Instead of waiting for the patent to
expire, generic manufacturers may decide to challenge the validity of the patent, take the
position that their generics do not infringe the patent, or else simply ignore the patent. Orig-
inators and generic manufacturers may then prefer settling their dispute to spending years
and extensive resources on litigation.
8.71 The Commission acknowledged that settlements were a generally accepted way to put an
end to patent disputes.118 An originator and a generic company may want to settle their
dispute for a number of reasons, notably to avoid costly, resource-consuming and lengthy
procedures, or to avoid the uncertainty and risks of an adverse outcome.119
115 Commission sends Statement of Objections to Lundbeck and others for preventing market entry of generic
antidepressant medicine, 25 July 2012, available at http://europa.eu/rapid/press-release_IP-12-834_en.ht-
m?locale=en.
116 According to the Commission, entry was possible since Lundbeck’s basic patent had expired and it only held
pharma companies for delaying market entry of generic medicines, 19 June 2013, available at http://europa.
eu/rapid/press-release_IP-13-563_en.htm?locale=en.
117 http://ec.europa.eu/competition/sectors/pharmaceuticals/inquiry/patent_settlements_report3_en.pdf.
118 Technical annex to the Commission Communication, Part 1, para 707.
119 See Technical annex to the Commission Communication, Part 1, para 707.

8.72 According to the Commission, the main factor that originators consider to decide whether
to settle with generic companies is the strength of their patent, and thus their chance of
winning. In contrast, generic companies would consider settling primarily to avoid high
litigation costs.120 In reality, things are not necessarily clear-cut, as patent litigation entails a
opt to settle because it does not want to take any risk that its patent may be invalidated. In
other words, individual incentives to settle are complicated by each side’s individual level
of risk-aversion.
2. Relevant criteria to distinguish pro- from anti-competitive

patent settlements
8.73 The Lundbeck decision has not yet been published. Nevertheless, initial indications with
regard to the criteria that the Commission is likely to apply to patent settlements can be
drawn from the Sector Inquiry Report and from the Commission’s reports on monitoring
patent settlements.121 Based on these sources, the Commission principally relies on the
following two factors:
1. Whether the settlement limits the generic company’s ability to market its own drug.
Such limitation can take several forms, including non-challenge clauses, non-compete
clauses, licenses by the originator to the generic (the rationale is that the licensing terms
allow the originator to at least partly control the generic company’s entry), distribution
agreements (i.e., the generic becomes a distributor of the originator’s products), or
supply agreements (whereby the generic sources its supplies of active pharmaceutical
ingredients from the originator company).
2.
generic company. In the Commission’s view, while the most clear-cut form of value
transfer is a direct lump sum payment, value transfers can take other forms such as:
purchasing the generic company’s stock of products, distribution agreements or side
e.g., allows
entry pre-patent expiry in another geographic area or with another product marketed by
the originator), or licenses to the generic company allowing it to enter the market.
8.74 The Commission considers that patent settlements that do not restrict the generic compa-
ny’s ability to market its drug are typically unproblematic from an antitrust standpoint.122
Likewise, settlements that limit generic entry but without value transfer should generally
be unproblematic, unless (i) they go beyond the exclusionary zone of the patent, or (ii) the
originator knows that its patent does not meet the patentability requirements (e.g., because it
was obtained upon provision of incorrect, misleading or incomplete information).123
120 See Technical annex to the Commission Communication, Part 1, paras 720-721.
121 See, e.g., European Commission, Third Report on the Monitoring of Patent Settlements (period January-De-
cember 2011), published on 25 July 2012, paras 7-9.
122 Third Report on the Monitoring of Patent Settlements, para 12.
123 Third Report on the Monitoring of Patent Settlements, para 13.

8.75 In contrast, settlements that limit generic entry and provide for a reverse value transfer will
be subject to the ‘highest degree of antitrust scrutiny’, although the Commission noted that
each such settlement should be analysed on its own merits to determine its conformity with
EU competition law.124
8.76 It appears that in the Lundbeck case, the Commission determined that the agreements be-
tween Lundbeck and the respective generic companies were anti-competitive by their ob-
ject, such that there was no need for the Commission to determine that the agreements had
anti-competitive effects. The Lundbeck decision signals that the Commission may take a
strong stance against patent settlements involving a reverse payment.
8.77 Several parties involved in the Lundbeck case indicated that they would appeal the decision.
The key issues on which the EU Courts would have to rule in this case are as follows:
1. Can a patent settlement between an originator and a generic involving a reverse pay-
ment be analysed as a restriction by object under Article 101 TFEU? It is questionable
whether reverse payment patent settlements can constitute restrictions by object, in
particular given the presence of IP rights. Further, the Commission does not appear
to consider the pharmaceuticals regulatory framework in Europe, which is such that
even if the originator enters into a reverse payment settlement with a generic, this will
not prevent other generic companies from entering the market. Avoiding generic entry
would effectively require the originator to conclude deals with all potential generic
entrants.
2. Can a reverse payment patent settlement infringe EU competition law if the settlement
remains within the scope of the patent? It is debatable whether such settlements could
fall foul of competition laws given that any exclusionary effect results from the patent
rights and not from the settlement.
8.78 It should be noted that the U.S. Supreme Court has recently ruled that reverse payment
patent settlements must be analysed under the ‘rule of reason’ test.125 However, the Supreme
Court pointed out that a large payment could be a strong indicator that the originator had
serious doubts about the validity of its patent.
E. CONCLUSION
8.79
life-cycle management strategies constitute legitimate competition on the merits and which
strategies violate EU competition law. While the decisions of the competition authorities
during the past three years provide limited guidance with respect to certain strategies, these
national and EU courts.
124 See, e.g., Third Report on the Monitoring of Patent Settlements (period January-December 2011), paras 4
and 14.
125 US Supreme Court, FTC vs Actavis, 17 June 2013.

8.80 Despite the legal uncertainty, however, the EU competition authorities are aggressively im-
against Lundbeck, the Commission in 2003 told the Danish competition authority that the
settlement agreements at issue fell into a legal ‘grey area’,126 but nevertheless found ten
years later in its 2013 decision that the same agreements constituted restrictions of compe-
uncertain state of the law is not a valid defense against allegations by a competition author-
ity that a life-cycle management strategy violates EU competition law.
126 Danish Competition Authority and Consumer Authority, Study of Lundbeck, Council meeting on 28 January
2004.

9
PRICING OF PHARMACEUTICAL PRODUCTS
AND COMPETITION LAW
A. ABUSIVE PRICING PRACTICES 9.02 C. EXPLOITATIVE PRICING PRACTICES 9.85

1. Overview of the case law
B. EXCLUSIONARY PRICING PRACTICES 9.03
and the decisional practice 9.87
1. Predatory price-cutting 9.04
2. Excessive pricing cases in the
a) Overview of the case law and the decisional life sciences sector 9.96
practice 9.05
b) The Commission’s enforcement priorities D. DISCRIMINATORY PRICING
as set out in its Guidance Paper on Article PRACTICES 9.103
102 TFEU 9.12
1. Overview of the case law
c) Predatory pricing in the life sciences sector 9.20
and the decisional practice 9.106
2. Above-cost selective price cutting 9.27 a) The application of Article 102(c)
3. Margin squeeze 9.31 to secondary line price discrimination 9.107
a) Overview of the case law and the b) The application of Article 102(c)
decisional practice 9.32 to primary line price discrimination 9.109
b) Margin squeeze cases in the life sciences c) The application of Article 102(c)
sector 9.36 to geographic price discrimination 9.113
4. Conditional rebates 9.40 2. Discriminatory pricing in the life
a) Single-product rebates 9.41 sciences sector 9.114
b) Multi-product rebates 9.68
E. CONCLUSION 9.116
5. Naked restrictions 9.80
9.01 EU and national legislation imposes a number of constraints on the ability of pharmaceu-
tical companies to freely determine the price of their products. In addition to these obliga-
tions, pharmaceutical companies that hold a dominant position on a relevant market must
abide by Article 102 TFEU which prohibits abuses of dominance. Various pricing practices
have been found to be abusive in the case law of the EU Courts and the decisional practice
of the Commission. Price-cuts and loyalty-inducing rebates can be abusive. So can exces-
sively high or discriminatory prices. Vertically integrated pharmaceutical companies that
control an important input are also required to ensure that the prices they charge upstream
-
stream input (i.e., no margin squeeze). The different types of pricing practices that may be
found abusive are discussed in Section B below.

PRICING OF PHARMACEUTICAL PRODUCTS AND COMPETITION LAW
A. ABUSIVE PRICING PRACTICES

9.02 Article 102 TFEU prohibits three main categories of pricing abuses: exclusionary pricing,
exploitative pricing, and discriminatory pricing. Each is reviewed below.
B. EXCLUSIONARY PRICING PRACTICES

9.03 Exclusionary pricing practices are those that may reduce or prevent effective competition
by excluding existing or potential competitors. ‘Exclusion’, also referred to as ‘anticom-
situation where effective access of actual or potential competitors to supplies or markets is

hampered or eliminated as a result of the conduct of the dominant undertaking whereby the
-
ment of consumers”.1 The various forms of exclusionary pricing practices are examined
below.
1. Predatory price-cutting
9.04
level in order to discipline or exclude an existing competitor, or to prevent the entry of a
new competitor on the market.
a) Overview of the case law and the decisional practice
9.05 In its seminal Akzo judgment,2 the CJEU adopted the legal standard to be applied in preda-
tory pricing cases. This standard is based on three prongs.
3
9.06 First, prices below average variable costs (Pe < AVC)
no interest in applying such prices except that of eliminating competitors so as to

enable it subsequently to raise its prices by taking advantage of its monopolistic
(that is to say, those which remain constant regardless of the quantities produced)
and, at least, part of the variable costs relating to the unit produced.4
1 Communication from the Commission — Guidance on the Commission’s enforcement priorities in applying
Article 82 of the EC Treaty to abusive exclusionary conduct by dominant undertakings, OJ 2009 C-45/7
(‘Guidance Paper’), para 19.
2 Case C-62/86 Akzo Chemie BV v. Commission [1991] ECR I-3359.
3 Average variable cost (‘AVC’) is calculated by dividing variable costs by total output. Pe is the price effec-
tively paid by the customer (for instance, the list price minus a rebate).
4 Case C-62/86 Akzo Chemie BV v. Commission [1991] ECR I-3359, para 71.

5
9.07 Second, prices below average total costs (AVC < Pe < ATC), but above average variable
costs, are abusive “if they are determined as part of a plan for eliminating a competitor”.6
undertaking but which, due to their smaller size or resources, are incapable of sustaining the
price competition waged against them.
9.08 Third Pe ), it is generally not guilty of

predation. As will be shown below under Section B.2, above-cost prices may, in exception-
al circumstances, amount to abusive selective price cuts.
Example
The Akzo test can be illustrated by a simple example. Assume that the average total cost of producing drug
-
less of the amount produced), but it also prices below its variable costs (the costs that vary depending of the
amount produced), which means that any additional unit of drug A that is sold will increase its loss. Pursued
over an extended period of time, this strategy should lead the manufacturer to shut down its operations. Ac-
contrast, by setting the price at 45 €, the dominant manufacturer covers all its variable costs, but also part of
additional evidence to demonstrate that a price above AVC but below ATC is abusive, that it is indeed part
of a “plan for eliminating a competitor”.
9.09 The Commission has followed the EU Courts’ case law in its decisions. For instance, in Wa-
7
-
band internet services. The Commission found that France Telecom had priced (i) below
AVC at certain periods and (ii) above AVC but below ATC at others. In the latter case, the
Commission demonstrated predatory intent. This was not necessary for the former period.
9.10
costs, a different methodology has occasionally been utilised by the Commission. This is
important because innovative industries such as the pharmaceutical industry tend to have
AVC – and thus not be prima facie predatory – but still be substantially lower than the level
de facto predatory.
To address the problem, the Commission has used the long-run average incremental cost
(‘LRAIC’) benchmark.8 The LRAIC covers all the costs incremental to the production of
6 Case C-62/86 Akzo Chemie BV v. Commission [1991] ECR I-3359, para 72.
7 Commission Decision, 16.07.2003, [2005] 5 CMLR 120.
8 See, e.g., the Commission Notice on the Application of the Competition rules to Access Agreements, OJ
Deutsche Post, OJ 2001 L125/27,
[2001] 5 CMLR 99.

9
In cases
where the LRAIC benchmark is not met, predation is presumed.10
9.11 Notably, it is not necessary for predatory pricing to be found abusive to provide evidence
prices.11 This differs from the more reasonable approach that prevails under U.S. antitrust
law.12
b) The Commission’s enforcement priorities as set out in its Guidance Paper

on Article 102 TFEU
9.12 Building upon the test, the Commission introduced in its 2009 Guidance Paper a
more sophisticated approach to predatory pricing. It explained that it will normally inter-
do not outweigh its negative effects on consumer welfare.
9.13
predatory strategy on the part of the dominant undertaking. The Commission considers that
to exclusionary abuses (‘Discussion Paper’), paras 125-126.

10 See DG Competition Discussion Paper on Article 82, para 124. LRAIC is the average of all the (variable
each other, and are the same in the case of single product undertakings. If multi-product undertakings have
economies of scope, LRAIC would be below ATC for each individual product, as true common costs are
not taken into account in LRAIC. In the case of multiple products, any costs that could have been avoided
by not producing a particular product or range are not considered to be common costs. LRAIC is usually
conduct took place. In its recent judgment in Post Danmark, the CJEU accepted that certain common costs
could be taken into account when calculating average incremental costs, (Case C-209/10 Post Danmark v.
Konkurrencerådet [2012], nyr, paras 31-34).
11 Case T-340/03 France Télécom v Commission [2007] ECR II-107, para 228. The Guidance Paper also makes
it clear that proof of actual recoupment is not required (para 71). The NCAs in some Member States seem
to take the opposite position (e.g., France, Hungary, Ireland, Italy). See International Competition Network,
‘Report on Predatory Pricing’, (2008), p. 17, fn. 58 (also available at http://www.internationalcompetition-
network.org/uploads/library/doc354.pdf).
12 See Brooke Group Ltd. v. Brown & Williamson Tobacco, (1993) 509 U.S. 209, 224, which states “[recoup-
aggregate prices in the market, and consumer welfare is enhanced”.

9.14 First, the Guidance Paper states that pricing below average avoidable cost (Pe < AAC)13 will be
14
As a result, the
Commission suggests applying AAC as a cost benchmark instead of AVC, i.e., the benchmark
applied in
means it incurs a loss it could avoid by simply halting production. In such a case, the dominant
strategy can be presumed. In practice, AAC are often equal to AVC as only variable costs
production capacity and invest in additional factories/capacities in order to predate.15 If that is

16
9.15 Second, in order to show a predatory strategy, the Commission may investigate whether
the alleged predatory conduct led in the short term to net revenues lower than could have
been expected from a reasonable alternative conduct. The Commission will examine only
17
This approach, which expands the current state of the
case law, appears rather problematic as it is entirely open-ended. With hindsight, it is easy
9.16 Third, the Guidance Paper states that the Commission may also rely upon direct evidence con-
sisting of documents from the dominant undertaking showing clearly a predatory strategy.18
Market foreclosure
9.17
19
When
question (Pe < AAC -

20
Failure to cover LRAIC (Pe < LRAIC

-
tor’ could be foreclosed from the market.21 The Commission explains that, in principle, only
22
13
avoided, if the company had not produced a discrete amount of (extra) output.
14 Ibid, para 64.
15 DG Competition discussion paper on the application of Article 82 of the Treaty to exclusionary abuses, De-
cember 2005, para 108.
16 Ibid.
17 Guidance Paper, para 65.
18 Ibid, para 66.
19 Ibid, para 67.
20 Ibid, para 26.
21 Ibid.
22 Ibid, para 67.

9.18
principle infer that this conduct is unlikely to adversely impact effective competition, and
thus consumers, and is unlikely to intervene.23 If, by contrast, the data suggest that the
Commission will integrate this into the general assessment of anticompetitive foreclosure.24
Of particular relevance for the general assessment of anticompetitive foreclosure is (i) the
degree of dominance, (ii) the conditions of entry and expansion (e.g., network effects, econ-
omies of scale), (iii) the position of competitors (e.g., if the undertaking at risk is a maver-
ick), (iv) the position of customers (e.g.,
may be of particular importance for the entry of competitors), (v) the extent of the abusive
conduct (i.e., the percentage of total sales affected by the conduct), (vi) evidence of actual
foreclosure, and (vii) direct evidence of an exclusionary strategy.25
Objective necessity
9.19 It is unclear from the case law of the EU Courts whether below AVC selling may be objec-
26
the CJEU held that pricing below
AVC “must always be considered abusive as there is no conceivable economic purpose for it
other than the elimination of a competitor”.27 Many authors consider, however, that a domi-
e.g., sales promotions,
disposal of old stock at the end of the season).28 Several judgments of the CJEU suggest that
dominant companies should always be able to demonstrate that their conduct is objective-
29
Similarly, the Commission accepts in its Guidance Paper that it may
be shown that predation is objectively necessary and proportionate on the basis of factors
external to the dominant undertaking.30 The Commission considers it unlikely that predation
the market.31
23 Ibid, para 27.

24 Ibid.
25 Ibid, at para 20.
26 Case C-333/94 Tetra Pak International SA v Commission [1996] ECR I-5951, [1997] 4 CMLR 662.
27 Ibid, at paras 41-42.
28 R. Whish, Competition Law (Oxford, OUP 2009) 732-733.
29 Case C-209/10 Post Danmark v. Konkurrencerådet TeliaSonera Sverige
[2011] ECR I-00527, paras 31 and 75.
30 Ibid, paras 28-29.
31 Ibid, para 74.

c) Predatory pricing in the life sciences sector
9.20 There have been several predatory pricing cases in the pharmaceutical sector. In Napp
Pharmaceuticals
guilty of charging predatory prices for sustained release morphine to hospitals in the UK.32
9.21 The OFT explained that the market for sustained release morphine was divided into two
i.e., patients under
the ‘hospital segment’, which comprised hospitals that either purchased by competitive ten-
der organised on a regional basis, or directly from the manufacturer. The OFT found that it
community segment of the market directly and to get GPs to prescribe their product instead
of Napp’s MST product. It was, in principle at least, much easier for new suppliers to enter
the hospital segment of the market. Hence, the hospital segment was an important route for
new entrants into the much larger community segment of the market.
9.22 The OFT found that since the expiry of Napp’s MST patent and the arrival of competition,
Napp had consistently matched or undercut the prices of competitors in the hospital segment.
While the price of MST tablets to the community remained relatively stable, discounts to
hospitals increased dramatically over the same period. The OFT relied on the CJEU’s case
law which provides that prices below AVC should be regarded as abusive. It considered that
in this case, and found that Napp’s prices to hospitals were below such costs.33
9.23 In addition, the OFT went to great lengths to establish that Napp’s conduct was harmful to
competition. The most critical argument for the OFT was that Napp increased its share of
OFT argued that as “hospital sales are central to establishing the reputation of a new product
brand of sustained release morphine in the community segment”, Napp’s pricing in the hos-
Overall, the OFT concluded that “Napp’s discount policy impaired competition in at least
be greater when taking into account the reputation effect.
9.24 34
32 Case CA98/2/2001 Napp Pharmaceuticals Holdings Ltd. (30.03.2001). See generally, C. Ahlborn/ B. Allan,
‘The Napp Case: A Study of Predation’, (2003) 26 World Competition 233-262.
33 -
petitors were able to recover the full price from follow-on sales in the community segment. The OFT argued
that Napp’s argument was circular. Napp was able to earn high margin in the community segment precisely
because its discount policy in the hospital segment had hindered competition in the community segment
(paras 192, 195).
34 Napp Pharmaceuticals Holdings Ltd. v. Director General of Fair Trading [2002] Comp. A.R. 13 (CCAT).
See also S. Kon/ S. Turnbull, ‘Pricing and the Dominant Firm: Implication of the Competition Commission
Appeal Tribunal’s Judgment in the Napp Case’ (2003) 24 ECLR 70-86.

whether Napp had a plan or intention to eliminate competition and it proved that such an
intention indeed existed.35
9.25 Another example of predatory pricing in the pharmaceutical sector is the French -
Kline case in which the French national competition authority (‘NCA’) held that GlaxoSmithKline
for injectable acyclovir (Zovirax).36 GSK’s pricing behaviour had taken place in 1999 and 2000
and had led to the eviction of one competitor (Flavelab) from the market. After 2000, GSK had
noticeably raised its prices, thus largely recouping the losses recorded during the predation period.
9.26 The decision of the French NCA was, however, overruled by the Court of Appeal.37 The latter judg-
ment was then upheld by the Supreme Court (Cour de Cassation).38 Relying on the case law of the
CJEU which held that an abuse can be committed on a market other than the dominated market pro-
vided that both markets are closely linked,39 the French Courts found that in this case, the links be-
2. Above-cost selective price cutting

9.27 As explained above, prices that are set above ATC are not, in principle, contrary to Article
9.28 However, one controversial strand of decisions has condemned above-cost selective price
-
tematically and selectively undercutting the prices charged to certain customers by their
competitors with the goal of excluding or deterring the entry of such competitors, although
the prices charged remained above ATC.40 This strand of decisions is controversial as such
conduct is generally viewed as genuine competition on the merits.
9.29 The EU Courts accepted the Commission’s view that above-cost price cutting may be abu-
sive, albeit only in exceptional circumstances. In the excep-
tional circumstances were that (i) the maritime transport market is a specialised sector, (ii)
(iv) there was evidence of an intention to exclude that competitor from the market and (v)
35 Ibid., paras 228-229 and 334.

36 Dec. no 07-D-09, 14.03.2007, .
37 CA Paris, 2007/07008, 08.04.2008, .
38 Cass. com., n 08/14.503, 17.03.2009.
o
39 Case T-83/91 Tetra Pak v. European Commission [1994] ECR II-755.

40 Joined cases C-395-396/96
Hilti AG v. Commission [1991] ECR II-
1439, para 100.

undertakings were able to share losses of revenue among themselves.41 The factual circum-
stances were similar in the Irish Sugar case.42
9.30 -
gozzi clearly stated in Post Danmark:
where the (relatively exceptional) conditions of the Compagnie maritime belge and
Irish Sugar
the dominant undertaking to drive out a competitor or competitors can be inferred
from the circumstances other than offers of selective prices, a selective price reduc-
tion must be examined by reference to the costs of the dominant undertaking,43
which means that it will not be abusive when prices are set above ATC. The CJEU agreed
in its judgment with the Advocate General’s statement.44
3. Margin squeeze
9.31
its control over an input supplied to downstream rivals to prevent them from competing on
a) Overview of the case law and the decisional practice

9.32 Margin squeeze allegations have arisen in a number of Commission cases. In the Deutsche Telekom
case, for instance,45 Deutsche Telekom (‘DT’) was found guilty of a margin squeeze in circumstances
where it charged competitors more for unbundled wholesale access than it charged its subscribers for
access at the retail level. From 2002, prices for wholesale access were lower than retail subscription
for the supply of end-user services. The Commission stated that a margin squeeze would occur where
the competing services were comparable and “the spread between DT’s retail and wholesale prices is
”.46 This meant that DT
would have been unable to offer its own retail services without incurring a loss, if it had had to pay the
wholesale access price as an internal transfer price for its own retail operations. As a consequence, the
47
As pointed out by
incumbent does not have to support in providing its own retail services”.48
41 Joined cases C-395-396/96 Compagnie maritime belge transports SA, Compagnie maritime belge SA and
Dafra-Lines A/S v. Commission [2000] ECR I-1365, para 119. See also Opinion of AG Fennelly in that case,
paras 131-137.
42 Case T-228/97 Irish Sugar v. Commission [1999] ECR II-2969, paras 182-183.
43 Opinion of AG Mengozzi in Case C-209/10 Post Danmark v. Konkurrencerådet [2012] nyr, para 95.
44 below ATC are
not necessarily abusive (see below).
45 Commission Decision, 21.05.2003, OJ 2003 L263/9.
46 Ibid., para 140.
47 Ibid., para 102.
48 Ibid., para 141.

Example
A simple numerical example can illustrate margin squeeze practices. Let us assume that company A is a ver-
tically integrated company that produces an input used to manufacture product A. Company B is only active
in the downstream market and requests access to the input in order to produce product B. Products A and B
compete in the downstream market. Company A charges 5 € for the input and 8 € for product A.
In this case the spread between company A’s wholesale and retail prices is not negative (8 € - 5 € = 3€).
downstream costs. There will be a margin squeeze if company A’s downstream costs are above 3 €. Indeed,
in the downstream market.
9.33 More recently, in Telefónica,49 the Commission assessed whether the margin between the
wholesale prices that Telefónica charged to its competitors for wholesale broadband access
in Spain and the retail prices it charged to end-users was too low to enable Telefónica’s
competitors to compete in the broadband retail market.50 Based on a detailed analysis, the
Commission decided that margin squeeze was indeed present and capable of foreclosing
competition in the retail market, and harmed consumers. As there was no objective justi-
infringed Article 102 TFEU.
9.34 One of the most interesting questions at stake in Telefónica was whether, to prove the exis-
tence of a margin squeeze in breach of Article 102 TFEU, the Commission had to demon-
strate that access to Telefónica’s DSL network was ‘essential’ to its competitors to provide
retail broadband services. The question arose because a margin squeeze is nothing less
than a ‘constructive’ refusal to supply,51 and a refusal to supply is abusive only if the input
52
to which access is sought is essential. Despite the similarities between a ‘refusal to sup-
ply’ and a ‘margin squeeze’, the Commission found that it was not necessary to prove that
53
Telefónica’s DSL network was essential to compete on the retail broadband market.
9.35 Whether the ‘essentiality’ of the upstream input must be demonstrated in margin squeeze
cases was recently addressed in the TeliaSonera judgment of the CJEU.54 While the CJEU
found that essentiality need not be demonstrated in a margin squeeze case,55 it nonethe-
less held that “when assessing the effects of the margin squeeze, the question whether the
49 Commission Decision, 04.07.2007, OJ 2008 C-83/5.

50 Ibid., para 5.
51 While access to the requested input is not formally refused, the price at which the input is sold does not allow
52 See, e.g., C-7/97 Oscar Bronner v Mediaprint [1998] ECR I-7791, [1999] 4 CMLR 112, para 40.
53 The Commission’s decision was upheld on appeal in Joined Cases T-336/07 and T-398/07 Telefónica and
Telefónica de España v Commission and Spain v Commission, [2012] nyr.
54 Case C-52/09 TeliaSonera Sverige [2011] ECR I-00527.

wholesale product is indispensable may be relevant”.56 The CJEU stated that “in order to
establish that a pricing practice resulting in margin squeeze is abusive, it is necessary to
demonstrate that, taking into account, in particular, the fact that the wholesale product is
indispensable, that practice produces, at least potentially, an anti-competitive effect on the
”.57 The position of the CJEU
i.e., the refusal by the
than the test for a margin squeeze (i.e., where access is authorised but only at a price that is
(margin squeeze).
b) Margin squeeze cases in the life sciences sector
9.36 Margin squeeze abuses have also been condemned in the pharmaceutical sector. For in-
stance, in the Genzyme case, the OFT concluded that Genzyme Limited (‘Genzyme’) had
abused its dominant position in the market for the supply of Cerezyme (a drug for the treat-
58
9.37 Cerezyme is the main drug for the treatment of Gaucher disease. The drug was taken ap-
proximately by 190 patients in the UK and was usually administered at home with the as-
sistance of trained medical staff. For more than ten years, HealthCare at Home Ltd (‘HH’)
had an exclusive contract with Genzyme for the delivery and home care associated with
Cerezyme. However, in May 2001, Genzyme established its own in-house delivery and
home care services and bundled it with the supply of the drug.
9.38 The OFT’s decision concluded that there were two relevant markets: one upstream market
and delivery in general. Genzyme was found to be dominant in the upstream market with
which was served by several providers. The OFT found that through the creation of the
bundle, Genzyme was abusing its dominance in the upstream market. By selling the bundle
at the same price as the standalone drug, Genzyme was effectively eliminating homecare
service providers from the downstream market, because they had no margin with which to
compete.
9.39 The CAT fully shared the analysis of OFT:
In those circumstances, it is likely to be wholly uneconomic for other homecare ser-

vice providers to provide homecare services at no effective margin between [Gen-
zyme’s] buying and selling price of Cerezyme. We therefore accept that Genzyme’s
pricing policy constitutes a margin squeeze. We also accept that no undertaking,
56 Ibid., para 69.

57 Ibid., para 77.
58 OFT Decision 27 March 2003, Case C-A98/3/03. Genzyme appealed against the decision of the OFT. The
CAT allowed the appeal in part, accepting Genzyme’s claims in relation to other abuses, but upheld the OFT
, Case No 1016/1/1/03 [2004] CAT 4).

in the downstream supply of homecare services.59
60
4. Conditional rebates
9.40 Conditional rebates cover different incentive schemes granted by a supplier to its customers
or distributors/retailers provided that the latter’s purchases or sales achieve or exceed cer-
tain thresholds of volume targets, percentages of total requirements or increase in purchas-
es.61 Although the case law of the EU courts generally refers to several different concepts,
all belong to the broader category of conditional rebates. Within the broader category of
conditional rebates, distinctions are also drawn between single-product and multi-product
rebates, as explained below.
a) Single-product rebates
9.41 Over the last thirty years, the EU courts adopted a number of important judgments ad-
dressing the compatibility of rebates with Article 102 TFEU. Many of these judgments
of the dominant undertaking. Single-product rebates are distinguished from multi-product

rebates, where the discount is made conditional upon purchasing several different products.
9.42 In Hoffman–La Roche

62
agreements’. Under these agreements, the company paid a rebate to those customers who
had obtained all or most of their requirements from Roche, calculated on vitamin total pur-
chases. The amount of the rebate differed from customer to customer and typically varied
conditional on the customer’s obtaining all or most of its requirements—whether the quan-
tity of its purchases be large or small,” it violates Article 102 TFEU.63 The CJEU distin-
unlike quantity rebates exclusively linked with the volume of purchases from the producer
obtaining their supplies from competing producers”.64
59 , Case No 1016/1/1/03 [2004] CAT 4, paras 549-555.

60 Ibid., paras 576-623.
61
-
ditional rebates are rebates granted to customers to reward them for a particular form of purchasing be-
haviour”).
62 Case 85/76 Hoffman- La Roche & Co v. Commission [1979] ECR 461.
63 Ibid., para 89.
64 Ibid.

9.43 Another important judgment of the CJEU is Michelin I, in which Michelin offered its deal-
ers an annual variable discount based on the dealer’s turnover in Michelin heavy vehicle,
van and car tires in the previous year. The dealer received the discount only if he achieved
an annual sales target set by Michelin. Neither the discount system as a whole nor the scale
discussions. The Commission concluded that this discount scheme violated Article 102,65
and Michelin appealed the decision to the CJEU.
9.44 The CJEU observed that the rebate in question, which was characterised by the use of sales
Hoffman–La Roche
‘volume/quantity’ rebates. In deciding whether Michelin committed an abuse, the CJEU
said it was necessary:
to consider all the circumstances, particularly the criteria and rules for the grant of
the discount, and to investigate whether, in providing an advantage not based on
any economic service justifying it, the discount tends to remove or restrict the buy-
er’s freedom to choose his sources of supply, to bar competitors from access to the
market, to apply dissimilar conditions to equivalent transactions with other trading
parties or to strengthen the dominant position by distorting competition.66
Applying this approach, the CJEU determined that the discount systems based on a long
reference period, such as the one year period used by Michelin, had “the inherent effect,
needed to obtain the discount or to avoid suffering the expected loss for the entire period”.67
9.45 The CJEU also found that, due to the retroactive nature of Michelin’s discount system, “the
variations in the rate of discount over a year as a result of one last order, even a small one,
tires”.68 Hence, even slight variations could put dealers under appreciable pressure. The
CJEU further criticised the lack of transparency of Michelin’s discount system because its
rules changed on several occasions during the relevant period. Moreover, neither the scale
of discounts nor the sales targets or discounts relating to them were communicated in writ-
ing to dealers, which meant that they could not predict the effect of attaining their targets or
failing to do so. The CJEU concluded that:
all those factors were instrumental in creating for dealers a situation in which they
were under considerable pressure, especially towards the end of a year, to attain Mi-
chelin’s sales targets if they did not wish to run the risk of losses which its compet-
itors could not easily make good by means of the discounts which they themselves
were able to offer.69
65 Commission Decision, 07.10.1981, -

trie Michelin,
66 Case 322/81 NV Nederlandsche Banden Industrie Michelin v Commission (Michelin I) [1983]
para 14.
67 Ibid., para 81.
68 Ibid.
69 Ibid., para 84.

9.46 In a second case against Michelin (Michelin II), the GC reemphasised that quantity rebate
considered not to have the foreclosure effect prohibited by Article 102 TFEU. If the sup-
plier is able to reduce its costs by increasing the quantity supplied, it is entitled to pass on
that reduction to the customer in the form of a lower price. When the rate of the discount
increases according to the volume purchased, a rebate will not infringe Article 102 TFEU
“unless the criteria and rules for granting the rebate reveal that the system is not based on an
-
ty and target rebate, to prevent customers from obtaining their supplies from competitors”.70
The approach followed by the GC is therefore quite restrictive as quantity rebates will only
comply with Article 102 TFEU provided that the amount of the rebate is directly linked to
the cost savings achieved thanks to the greater volume of supply.
9.47 The GC also rejected the argument made by the applicant in Michelin II that the Commis-
sion should have carried out a detailed analysis of the effects of the rebates in question. The
other words, that the conduct ‘is capable of’ having that effect.
9.48 Contrary to the formalistic case-law of the EU Courts, the Commission adopted a more
effects-based approach to conditional rebates in its Guidance Paper, distinguishing between
incremental and retroactive rebates.
Incremental rebates
9.49 An incremental rebate is a conditional rebate that is available only to incremental purchases
above the threshold set by the dominant seller. Incremental rebates are subject to an as-
sessment that is largely similar to the predation test. As long as the effective price remains
-
stances the rebate is usually not capable of foreclosing rivals in an anti-competitive way.71
Where the effective price is below AAC, as a general rule the rebate scheme is capable of
72
Where the effective price is between AAC
and LRAIC, the Commission will investigate whether other factors point to the conclusion
73
9.50 As in the case of a traditional predation test, it must also be demonstrated that (i) a sub-
II.A.1.2)).
70 Case T-203/01 Manufacture française des pneumatiques Michelin v. Commission (Michelin II) [2003] ECR
II-4071, para 59.
71 See Guidance Paper, para 43.
72 Ibid., para 44.
73 Ibid.

Retroactive rebates
9.51 A retroactive rebate applies to all purchases below and above the threshold once the latter
is exceeded. Retroactive rebates are subject to a much more complicated ‘suction effect’
test.74
9.52 Once dominance is found on a relevant market, to establish an anticompetitive effect, it

-
9.53 Before turning to the legal test applied by the Commission in its Guidance Paper, it is
useful to consider the underlying competition concern. In order to do so, it is essential
to explain how retroactive rebates operate. Let us assume that a dominant supplier sells
to a particular company. The supplier has an assured base of sales to that customer be-
cause, for a portion of the customer’s demand, there are no adequate substitutes.75 These
sales represent the non-contestable share of that company’s demand. The portion of the
customer’s demand for which substitutes are available represents the contestable share
of that customer’s demand.76 The dominant supplier offers the customer a retroactive
rebate. This rebate applies to all the quantities sourced over a determined reference
period and is activated when the customer’s purchases exceed a certain threshold within
that reference period.77
9.54 The competition concern is that when the non-contestable part (‘NC) of the customer de-
mand in question is large as compared to the contestable part (‘C’), the retroactive rebate
may enable the dominant supplier to leverage its position of strength in the non-contest-
able part to the contestable part of its customer’s demand. Indeed, while the dominant
supplier can recoup the rebate on its total sales, both contestable and non-contestable,
competing suppliers will have to recoup any rebate they grant over a smaller base repre-
sented by the contestable part. This retroactive rebate scheme could thus have the effect
otherwise be contestable.
9.55 In this context the Commission will estimate what price a competitor would have to offer
in order to compensate the customer for the loss of the conditional rebate if the latter would
switch part of its demand away from the dominant undertaking. The effective price that
the competitor will have to match is not the average price of the dominant undertaking,
but the normal (list) price less the rebate the customer loses by switching, calculated over
the contestable portion of sales and in the relevant period of time.78
74
additional volumes becomes negative. This the so-called ‘suction effect’”. See S. Bishop/ M. Walker, The
Economics of Competition Law (Sweet and Maxwell, 2010), p. 258.
75 See Discussion Paper, para 143.
76 Ibid, para 156.
77 Ibid, para 152.

9.56 The contestable part of the customer demand over which the effective price is to be
how much of a customer’s purchase requirements can realistically be switched to a com-

petitor in the market context. If customers are willing and able to switch large amounts
of demand to a (potential) competitor relatively quickly, the contestable share is likely
to be relatively large. If, on the other hand, customers are only willing or able to switch
small amounts incrementally, then the contestable share will be relatively small. For
in those sales over time may also provide an indication of the contestable portion. For
potential competitors, an assessment of the scale at which they could potentially enter
the market must be undertaken. It may be possible to take the historical growth pattern
of new entrants in the same or in similar markets as an indication of a realistic market
share of a new entrant.79
9.57 The lower the estimated effective price over the contestable part of the customer de-
mand is compared to the average price of the dominant supplier, the stronger the loyal-
ty-enhancing effect. However, as long as the effective price remains consistently above
anticompetitive foreclosure. By contrast, where the effective price is below AAC, the
Where the effective price is between AAC and LRAIC, the Commission will investigate
whether other factors support the conclusion that entry or expansion even by equally ef-
to what extent competitors have realistic and effective counterstrategies at their disposal,
such as their capacity to also use a ‘non-contestable’ portion of their buyers’ demand as
leverage to decrease the price for the relevant range. Where competitors do not have
such counterstrategies at their disposal, the Commission will conclude that the rebate
80
79 Ibid, para 42.

80 Ibid, paras 43 and 44.

Example
A simple numerical example can clarify the test. Suppose that Customer A will always buy
that are available only from the dominant pharmaceutical supplier, so the as-
sured base or the non-contestable share is QANCS . But the customer’s total demand
QAT and the remaining -
plier or one of its competitors. Thus the contestable share QACS . The AAC = The LRAIC
The dominant supplier offers the following pricing scheme. The customer pays if it
buys any quantity less than 100 units. So PBefore Rebate But if the customer buys
100 units it receives a rebate R worth € 120 in total, or for each of the 100 units bought
in total. PAfter Rebate To determine whether there is a suction effect, the Guidance
Paper requires the calculation of the effective price, P for the units that belong to the contestable share and
see whether this price is lower to the dominant’s supplier LRAIC.
PBefore Rebate = 4 €/Unit
PAfter Rebate = 2.8 €/Unit = 4€/Unit – 1.2 €/Unit
Contestable share C = 50 Units
TotalWith rebate = 100 x 2.80 € = 280 €
TotalWithout rebate = 50 x 4 € = 200 €
TotalWith rebate - TotalWithout rebate = 280 € - 200 € = 80 € is being paid for the last 50 contestable units
The effective price (Pe) over the last 50 = 80 € / 50 = 1.6 €
As AAC < Pe
9.58 The Guidance Paper also states that it is important to consider whether the rebate system
is applied with an individualised or a standardised threshold. An individualised thresh-
old—one based on a percentage of the total requirements of the customer or an individu-
alised volume target—allows the dominant supplier to set the threshold at a level such as
-
ty enhancing effect. By contrast, a standardised volume threshold—where the threshold
is the same for all or a group of customers—may be too high for some smaller customers
and/or too low for larger customers to have a loyalty enhancing effect. If, however, it
can be established that a standardised volume threshold approximates the requirements
standardised system of rebates may produce anti-competitive foreclosure effects.81
9.59 Price-cost tests are useful to determine whether the rebates in question can foreclose
overcome. But the fact that a given rebate regime fails the price-cost test does not end
the assessment. The next stage in the inquiry is to determine whether these customers
represent a substantial share of the market to which such rivals can turn, depriving them
82

82 See Ibid, para 27: “If […] the data suggests that the price charged by the dominant undertaking has the poten-
anticompetitive foreclosure […]”.

9.60 -
ment of market foreclosure: (i) the degree of dominance, (ii) the conditions of entry and
expansion (e.g., network effects, economies of scale), (iii) the position of competitors (e.g.,
if the undertaking at risk is a maverick), (iv) the position of customers (e.g., if the dominant
-
tors), (v) the extent of the abusive conduct (i.e., the percentage of total sales affected by the
conduct), (vi) evidence of actual foreclosure, and (vii) direct evidence of an exclusionary
strategy.83
9.61 A dominant undertaking may also justify its conduct either by demonstrating that it is ob-
84
With
rebate systems achieve cost or other advantages which are passed on to customers. Transac-
tion-related cost advantages are often more likely to be achieved with standardised volume
targets than with individualised volume targets. Similarly, incremental rebate schemes are
in general more likely to give resellers an incentive to produce and resell a higher volume
than retroactive rebate schemes.85
9.62 Some of the criteria outlined in the Guidance Paper were applied in the Intel decision.86
However, the Commission has not yet fully embraced the new test. It continues to also rely
on the case law of the EU Courts, according to which loyalty rebates are caught by Article
102 TFEU, when they are capable of having foreclosure effects. In the recent judgment in
Tomra, the GC reiterated that the Commission is not required to show any actual effects on
competition.87 The result is an “effects based per se rule”.88
89
9.63 One of the cases where single-product rebates have been examined by an NCA in the
life-sciences sector is Abbott, which applies the rather formalistic case law of EU Courts.90
This does not come as a surprise, given that the decision well predates the publication of the
2009 Guidance Paper.
83 Ibid, para 20.

84 Ibid, para 28.
85 Ibid, para 46.
86 Commission Decision, 13.05.2009, Intel, OJ 2009 C-227/13.
87 Case T-155/06 Tomra Systems [2010] ECR II-04361, para 219.
88 L. Kjølbye, ‘Rebates and competition law: An overview of EU and national case law’ (2012) e-Competitions,
No. 41936.
89 Unsurprisingly, the dual approach to single-product rebates at EU level has fostered inconsistent application
at national level. Some national courts and competition authorities analyse effects to a greater or lesser
extent before deciding whether to prohibit loyalty rebates under Article 102 TFEU and/or national equiva-
lents. Others reject this approach and apply the strict test of the EU Courts. For instance, see French NCA,
Decision no 09-D-04, Messageries Lyonnais de Presse v Nouvelles Messageries de la Presse Parisienne (for
an effects based approach) while the Dutch NCA (LJN BN9947, CRV Holding BV v Nma) insisted on a per
se approach.
90 See Déc. no 01-D-23, 10.05.2001.

9.64
In 1993, Abbott proposed to CAHP (Private Hospital Purchasing Syndicate) and CACIC
-
companies. When a quantity threshold was exceeded, a discount was granted. In addition,
CLUB H, another purchasing syndicate, was offered a discount based on overall quantities
purchased.
9.65 The French NCA indicated that the above discounts effectively amounted to exclusive pur-
chasing for CAHP, CACIC and CLUB H. Given that Abbott had a dominant position in the
9.66 Abbott argued that the rebate schemes had no loyalty enhancing effect. First, the purchasing
syndicates had no power to commit their members (e.g., in 1993, Abbott lost CLUB H mem-
bers’ clients and a lot of CACIC and CAHP members). Second, one of Abbott’s competitors
9.67 However, the NCA indicated that even when rebate schemes did not lead to actual distor-
tions of competition, they still had potential anticompetitive effects. The investigation also
showed that in 1993 all of CAHP members continued to purchase from Abbott and that they
had signed an exclusivity contract for 1994/1995. In addition, all of CACIC members, ex-
cept for one, purchased exclusively from Abbott. In such circumstances and because these
argument that those practices did not produce any effect was rejected. The NCA concluded
that the rebate scheme to CAHP and CACIC had as its object and potentially as its effect to
deter certain purchasers from obtaining their supplies from a competing supplier entering
the market (e.g., generic producers entering in 1993/1994). By contrast, discounts offered
to CLUB H did not have any loyalty inducing effect because they were strictly based on
b) Multi-product rebates
9.68 Multi-product rebates (also referred to as bundled rebates, or mixed bundling) consist in
making products jointly available at a discount to the price that would be charged if they
were purchased separately.
9.69 In Hoffmann-La Roche, the CJEU held that ‘across-the-board’ rebates granted to its cus-
tie-in in breach of Article 102 TFEU.91 The CJEU, as well as the Commission in its early
decisions, seem to have taken the strict view that mixed bundling is per se contrary to Arti-
cle 102 TFEU, absent cost-savings attributable to the bundle.92
9.70 -
proach. This effects-based assessment requires identifying: (i) evidence that the practice is
91 Case 85/76 Hoffmann-La Roche & Co. AG v. Commission [1979] ECR 461, para 111.
92 See Commission Decision 92/163/EEC of 24 July 1991, OJ L 72, Case IV/31043 Tetra Pak II , para 174.

93
9.71 A multi-product rebate may be anti-competitive on the market for any of the bundled prod-
cannot compete against the discounted bundle.94
9.72 The best way to analyse the effect of the rebate would be to determine whether the incre-
mental revenue generated by each product in the dominant undertaking’s bundle covers its
incremental costs. Assessing the incremental revenue is, however, complex. Therefore, the
Commission will use the incremental price as a proxy in most situations. If the incremental
price that customers pay for each of the dominant undertaking’s products in the bundle
may, however, be warranted if the incremental price is below the LRAIC of including the
expanding or entering.95
Example
This test can be illustrated through a simple numerical example. Assume that a dominant
pharmaceutical company sells two products, X and Y. Product X is only offered by the dom-
inant company, but Product Y
rivals. Customer A will always buy from the dominant company, so
this company has an assured base of 50 units (QXANCS But the customer also has
a demand for A
Y CS
, and these sales could be contested
LRAIC of
producing one unit of X and Y is the same, i.e., .
The dominant company offers the following multi-product rebate scheme: the customer pays for
either product if they buy any aggr gate quantity less than So PBefore Rebate
Units. But if they buy they are given a rebate worth in total, or for each of the
units of product (either X or Y). So PAfter Rebate The effective price (Pe) over
the 50 contestable units of As Pe < LRAIC, the rebate creates a suction effect.
9.73 If the evidence suggests that competitors of the dominant undertaking are selling identical
bundles, or could do so in a timely way without being deterred by possible additional costs,
the Commission will generally regard this as a bundle competing against a bundle. If so,
the relevant question is not whether the incremental revenue covers the incremental costs
for each product in the bundle, but rather whether the price of the bundle as a whole is
predatory.96
93 Guidance Paper, paras 50 and 62.

94 Guidance paper, para 59.
95 Ibid, para 60.
96 Ibid, para 61.

9.74
competitors, the Commission will integrate this into the general assessment of anticompet-
itive foreclosure, taking into account the following elements: (i) the degree of dominance,
(ii) the conditions of entry and expansion (e.g., network effects, economies of scale), (iii)
the position of competitors (e.g., if the undertaking at risk is a maverick), (iv) the position of
customers (e.g., -
tance for the entry of competitors), (v) the extent of the abusive conduct (i.e., the percentage
of total sales affected by the conduct), (vi) evidence of actual foreclosure, and (vii) direct
evidence of an exclusionary strategy.97
9.75 A dominant undertaking may justify its conduct either by demonstrating that its conduct
-
cies.98 -
ings that their tying and bundling practices may lead to savings in production or distribution
reduce transaction costs for customers. It may also examine whether combining two in-
dependent products into a new, single product might enhance the ability to bring such a
purchase of large quantities of the tied product.99
9.76 Following the formalistic approach followed by the CJEU, NCAs have often taken deci-
sions that consider bundled rebates to be anti-competitive per se
dominant undertakings offering the rebate.
9.77 For instance, in 2003, the French NCA (Authorité de la Concurrence) imposed a EUR 7.8
100
San-
doz was manufacturing and marketing two proprietary medicinal products, Sandimmun and
Néoral, which were both patented and based on the same active substance, cyclosporin.
They were prescribed in hospitals in anti-rejection treatment for organ and bone marrow
transplants. During 1994-1997, Sandoz granted university hospitals (CHU) discounts in the
purchase price of Sandimmun and Néoral, on condition that the hospital also purchases oth-
er Sandoz products (e.g., Vepeside, Sandocal, Miacalcic, Loxen, Icaz, Leponex, Parlodel).
The NCA found that Sandoz had a dominant position in the market for cyclosporin and was
abusing it to foreclose competitors in the markets for other pharmaceutical products. An
appeal against the NCA decision was heard by the Paris Court of Appeal, but was rejected.101
The judgment of the Court of Appeal was unsuccessfully attacked before the Supreme Court
of Appeals (Cour de Cassation).102
97 Ibid, para 20.

98 Ibid, para 28.
99 Ibid, para 62.
100 See Déc. no 03-D-35, 24.07.2003.
101 See CA Paris, 1èr ch., 30.03.2004.
102 See Cass. com., No. 04-13.910, 28.06.2005, annotated at Concurrences 4/2005.79-82.

9.78 The French NCA had dealt with a similar case in 1996.103 Following a general enquiry on the
practices employed by hospitals for the purchase of pharmaceuticals, the NCA examined the
sales of Dobutrex by Lilly. The company was providing hospitals with a discount on the
prices of Dobutrex, only if they bought another Lilly product, Vancocine. The NCA consid-
ered that Lilly was dominant in the market for Dobutrex because the product enjoyed patent
protection and was an antibiotic and cardio-stimulant without substitutes. It then found that
Lilly was abusing its dominance by offering rebates to Dobutrex, only when purchased in a
bundle with Vancocine, whose active substance vancomycine was not patent-protected any
more. The NCA again followed a per se approach to bundled rebates. Lilly France lodged
an appeal before the Paris Court of Appeal attacking the conclusions on dominance and not
on abuse. The Court of Appeal rejected Lilly’s claims.104
before the Cour de Cassation, which was also rejected.105
9.79 The Cypriot NCA adopted an approach that is more in line with the Commission Guid-
ance Paper in its Decision Wyeth Hellas and Phadisco Ltd.106
and Phadisco Ltd were offering a free quantity of Meningitec (meningococcal vaccine) with
complaint made by a competitor, the NCA found that the two companies had a dominant po-
sition in the market for Prenevar, which they were using to promote Meningitec. Although
the NCA found an abuse effectively on the basis of a per se approach, it took into account
the position of competitors in the market and the existence of actual foreclosure effects
competitors in the market for meningococcal vaccines, which even increased their market
shares despite the bundled rebate schemes of Wyeth and Phadisco. It was also added that
the exit of one competitor from the market could not be reasonably linked to the Wyeth and
Phadisco’s conduct because it occurred 3 years later. The NCA implicitly accepted those
for Phadisco Ltd.
5. Naked restrictions
9.80 The Commission coined the term ‘naked restriction’ in its recent Intel decision.107 Naked
restrictions constituted payments made by Intel to customers inducing them to either delay
or cancel the launch of competing products. The scope of naked restrictions was more
arrangements were longer in term and covered at least entire business segments.108
103 See Déc. no 96-D-12, 05.03.1996.

104
105 See Cass. com., no 97-15.185, 15.06.1999.
106 Cypriot NCA Decision 14/2009, 19.05.2009.
107 Commission Decision, 13.05.2009, Intel, OJ 2009 C-227/13.
108 Ibid, para 1642.

9.81 The Commission adopted a legal standard close to the per se prohibition of naked restric-
tions in stating that:
In each case, Intel paid the OEMs to delay, cancel or otherwise restrict the com-
mercialisation of the planned AMD-based products. In each case, Intel’s conduct
had a material effect on the OEMs’ decision-making in that they delayed, cancelled
or otherwise restricted their commercialisation of the AMD-based computers. […]
Furthermore, there is no link between the conducts and any criterion which could
-
109
9.82 The Commission concluded as follows:
In the light of the above, Intel’s conduct of making the grant of payments to HP, Acer
and Lenovo subject to restrictive conditions concerning the commercialisation of
AMD-based products therefore constitutes recourse to methods different from those
governing normal competition and are therefore abuses of a dominant position under
Article [102] of the Treaty and Article 54 of the EEA Agreement.110
9.83 The same legal standard of per se prohibition appears to have been endorsed in the Guid-
ance Paper:
There may be circumstances where it is not necessary for the Commission to carry
out a detailed assessment before concluding that the conduct in question is likely to
result in consumer harm. If it appears that the conduct can only raise obstacles to
-
ferred. This could be the case, for instance, if the dominant undertaking prevents its
to its customers on condition that they do not test such products, or pays a distributor
or a customer to delay the introduction of a competitor’s product.111
9.84 In the life sciences sector, patent settlements and other agreements between originator and
generic companies could potentially be assimilated to naked restrictions. For instance, in
its 2008 inquiry, the Commission established that between 2000 and 2008, more than 200
transfer from the originator company to the generic company. Direct payments from origi-
nator companies to generic companies featured in more than 20 settlement agreements and
exceeded € 200 million. A detailed analysis of patent settlements is provided in Chapter 8.
109 Ibid, paras 1678 and 1680.

110 Ibid., para 1681 (emphasis added).
111 Guidance Paper, para 22 (emphasis added).

C. EXPLOITATIVE PRICING PRACTICES

9.85
imposing unfair purchase or selling prices or other unfair trading conditions” and which
112
9.86 While exclusionary abuses are essentially concerned about anti-competitive low prices, ex-
ploitative abuses are concerned with prices that are unfair because they are too high. Unlike
exclusionary prices, exploitative prices do not harm competitors (and then in the longer run
consumers), but directly hurt consumers.
1. Overview of the case law and the decisional practice

9.87 The criteria for assessing whether a price is ‘unfair’ within the meaning of Article 102
TFEU were established in the seminal United Brands ruling. The CJEU held that a price is
deemed ‘excessive’ when “it has no reasonable relation to the economic value of the product
supplied”.113 The CJEU adopted a two-stage approach for determining whether a price is
1. “[Examine w]hether the difference between the costs actually incurred and the price
2.
been imposed which is either unfair in itself or when compared to competing prod-
ucts”.114
9.88 Unfortunately, subsequent case law of the CJEU has not offered additional guidance in rela-
tion to these two conditions. For a long time, the Court had seemed to abandon the United
Brands two-part test, and favour a more ‘integrated’ approach based on various benchmarks.
115
In a second
112 -
istrable Legal Rules’ (2005) 1 JCLE 97-122.
113 See Case 27/76 United Brands Company and United Brands Continentaal BV v. Commission [1978] ECR-
207, para 250. See also para 251 (“This excess could, inter alia, be determined objectively if it were possible
for it to be calculated by making a comparison between the selling price of the product in question and its cost
114 Ibid., para 252.

115 See Case 110/88 Lucazeau and others v. SACEM and others [1989] ECR-2811 para 25 (“When an under-
taking holding a dominant position imposes scales of fees for its services which are appreciably higher than
those charged in other Member States and where a comparison of the fee levels has been made on a consistent
basis, that difference must be regarded as indicative of an abuse of a dominant position”). See also Case
30/87 Corinne Bodson v. SA Pompes funèbres des régions libérées [1988] ECR-2479 (to determine whether
prices are unfair, “[I]t must be possible to make a comparison between the prices charged by the group of
undertakings which hold concessions and prices charged elsewhere”). This test had already been implicitly
referred to in Case 78/70 Deutsche Grammophon v. Metro SB [1971] ECR-487.

strand of cases, the Court undertook to make comparisons between the prices charged by the
116
9.89 However, the most recent pronouncement of the Commission in Scandlines Sverige AB
suggests that the two-part test espoused in United Brands remains the relevant analytical
framework to assess excessive pricing.117
two conditions of the United Brand test are cumulative rather than alternative.
9.90 United Brands standard, which requires a determi-

nation of “whether the difference between the costs actually incurred and the price actually
First, deciding which of the domi-
Second, even
value of the product/service in question. However, much greater margins can be observed
9.91 United Brands test focuses on a price-cost comparison to deter-

mine the excessiveness of a price, the second part of the test suggests the need to benchmark
prices. As discussed below, the various benchmarks that have been applied by the Commis-
9.92 In British Leyland, the CJEU undertook a comparison between the prices of the dominant
118
The
considered them abusive. In that case, it was manifest that the increase in fees was not jus-
116 See Case 226/84 British Leyland Public Limited Company v. Commission [1986] ECR-3263 at paras 27-28
(where the Court restated – along the lines of the United Brands language – that a price is excessive where it
is “disproportionate to the economic value of the service provided”. However, the Court concluded that the
was not proportionate to the minimal cost differences between several services). A similar standard had
already been applied in Case 26/75 General Motors v. Commission [1975] ECR-1367, para 12. The lack of
clarity of the case law is further aggravated by isolated rulings applying a different methodology. See, e.g.
Case T-89/98 National Association of Licensed Opencast Operators (NALOO) v. Commission [2001] ECR II-
i.e.,
117 The decision arose from a complaint brought by Scandlines Sverige AB, a ferry operator active on the Hel-
singborg (Sweden) – Elsinore (Denmark) route, who sought to contest the pricing policy of the port of
Helsingborg. See Commission Decision, 23.07.2004, [2006]
bears no reasonable relation to the economic value of the services provided. The Commission would have
in order to determine whether
the prices charged to the ferry operators are unfair, either in themselves or when compared to other ports”
(emphasis added)).
118 See Case 226/84 British Leyland Public Limited Company v. Commission [1986] ECR-3263.

trade in motor vehicles. However, in many other cases, application of such a benchmark
factors distinct from the desire to exploit consumers (e.g., change in input price, market
circumstances).
9.93 In United Brands and Bodson, the CJEU compared the prices of a given product in differ-
ent geographic markets.119 Apart from the fact that comparing prices across geographic
e.g., selection of the appropriate comparator, taking
into account difference in market conditions), it may not be appropriate to infer the ‘unfair-
ness’ of a pricing policy from the observation of geographic price differentials. A ban on
consequences.
9.94 In certain cases, the EU Courts and the Commission also adopted a so-called ‘competitors’
benchmark which calls for comparing the prices charged by the dominant company with
those charged by its competitors.120 Such a methodology was used in United Brands and
General Motors. In General Motors, for instance, the Commission observed that the prices
manufacturers for a similar service.121
9.95 Reliance on this method is not without problems. For instance, price differences among
products of higher standards also sell at a higher price. Moreover, and perhaps more fun-
damentally, the presence of competitors seems to suggest that the market in question is not
subject to insurmountable barriers to entry.122 However, scholars as well as Commission
-
thorities to intervene against allegedly excessive prices.123
119 Case 27/76 United Brands Company and United Brands Continentaal BV v. Commission
Case 30/87 Corinne Bodson v. SA Pompes funèbres des régions libérées [1988] ECR-2479. See also, Case
395/87 Ministère Public v. Tournier [1989] ECR-2521 (“When an undertaking holding a dominant position
imposes scales of fees for its services which are appreciably higher than those charged in other Member
States and where a comparison of the fee levels has been made on a consistent basis, that difference must be
regarded as indicative of an abuse of a dominant position. In such a case it is for the undertaking in question
to justify the difference by reference to objective dissimilarities between the situation in the Member States
concerned and the situation prevailing in all the other Member States”) and Case 110/88 Lucazeau v. SACEM
[1989] ECR-2811 (another case concerning the level of royalties charged by SACEM for the playing of
recorded music in discotheques).
120 See R. O’Donoghue/ J. Padilla, supra 112, p. 616.
121 See Commission Decision, 19.12.1974, General Motors Continental, OJ 1975 L29/14, para 8.
122 See M. Motta/ A. de Streel, ‘Excessive Pricing and Price Squeeze under EU Law’ in C.D. Ehlermann/ I.
Atanasiu (eds), (Hart
Publishing, 2006), pages 91-125, at 113.
123 See Section D.

2. Excessive pricing cases in the life sciences sector

124
9.96 In the Napp Pharmaceutical case, prices were found excessive by the UK OFT. As ex-
plained above, Napp supplied sustained release morphine tablets (‘MST’) to both the hos-
both consumer segments. Combining that with the considerable barriers to entry in these
markets, the OFT decided that Napp had market dominance. The OFT found that Napp’s
pricing policies were both predatory and excessive. Predation has already been analysed
above, under II. A. 1.3
9.97 Napp’s pricing in the community segment was found to be excessive. The OFT held that
there were two ways to determine whether Napp’s prices to the community were above the
competitive level.
9.98
of MST on other markets (e.g., sales to the hospitals, export sales) and on sales of other
9.99 The second method was to establish what the competitive price of MST should be and com-
MST by looking at the prices of competitors and the price Napp charged over time. It found
-
itors in 2000. Napps’ prices for the community segment had not changed for 10 years after
patent expiration. OFT also benchmarked Napp’s prices with prices charged outside the
UK: community segment prices were 4-7 times higher than export prices.
9.100 On appeal, Napp argued that the OFT had not properly taken into account the dynamic
nature of competition in the market. It reasoned that any assessment of whether prices are
excessive should take into account that the pharmaceutical sector:
is a research-based, innovative industry, in which a few successful ‘winners’ must

not only repay their own development and promotion costs, but must also fund the
research and development of a large number of other products which do not cover
their own costs, as well as ongoing research into new products, very many of which
ultimately turn out to be unsuccessful.
9.101 The CAT did not altogether reject this argument. It just found it inapplicable to the case
of Napp, by underlining that “Napp’s original investment in MST was made in the early
1980s… [i]n the absence of any indication to the contrary, [the OFT] would expect initial
investment to have been recouped long ago”.
124 Case CA98/2/2001 Napp Pharmaceuticals Holdings Ltd. (30.03.2001).

9.102 Finally, Napp argued that prices were higher because of the undertaking’s brand value.
D. DISCRIMINATORY PRICING PRACTICES

9.103
to equivalent transactions with other trading parties, thereby placing them at a competitive
disadvantage”. The CJEU has extended this notion of abuse to the converse situation of the
application of similar conditions to unequal transactions.125
9.104 Among the conditions which need to be met for the application of Article 102(c) is the
requirement that the measure under investigation applies dissimilar prices to ‘equivalent
transactions’. The evaluation of the equivalence of two transactions is not a clear-cut mat-
ter as there are a myriad of factors that can be invoked to justify the lack of equivalence
between two transactions. The most obvious example is that the transactions may involve
different costs to the seller.126
differences should be for two transactions to be considered non-equivalent. Indeed, if all
cost differences, however small, were to be taken into consideration, very few transactions
would be considered as equivalent. Another example is timing. For many products or ser-
vices (airline tickets, package holidays, etc), the moment a sale is made has a major impact
on the price imposed by the sellers. Finally, one other possible difference between transac-
tions is the position of buyers.127 For instance, an undertaking may be selling to buyers with
different levels of demand elasticity. In such case, the common strategy of sellers to offer
prices inversely related to the elasticity would not be discriminatory under Article 102(c).
Unfortunately, the decisional practice of the Commission and the case law of the EU Courts
fail to provide any clear guidance on the above issues. In fact, the Commission and the
128
courts generally assume that two transactions are equivalent without much analysis.
9.105 Scholarly discussions regarding price discrimination often draw a distinction between ‘pri-
different prices to its own customers, and ‘secondary line’ injury, which is imposed on one
129
The
-
125 See Case 13/63 Italian Republic v Commission [1963] ECR-165 in the context of the ECSC Treaty.
126 See J. Faull and A. Nikpay, The EC Law of Competition, (Oxford, OUP 2007), para 4.397ff.
127 See, however, in Case 27/76 United Brands Company and United Brands Continentaal BV v. Commission
[1978] ECR-207, where the CJEU indicated para 228 that: “[...] Differences in transport costs, taxation,
customs duties, the wages of the labour force, the conditions of marketing, the differences in the parity of
currencies, the density of competition may eventually culminate in different retail selling price [...]”.
128 See I. Van Bael/ J.F. Bellis, Competition Law of the EU, Alphen aan den Rijn, (Kluwer Law International,
2010), at 811-812.
129 See, e.g. A. Jones and B. Sufrin, EU Competition Law
The EC Law of Competition (Oxford, OUP 2007), para 4.397ff..

tage” clearly indicates that the parties Article 102(c) seeks to protect are the customers of
the dominant player and not its competitors. The majority of all legal scholars seem to agree
130
on this point.
1. Overview of the case law and the decisional practice

9.106 Despite the wording of Article 102(c) clearly indicates that this provision was designed to
disadvantage vis-à-vis other customers, the Commission and the EU Courts have relied on
Article 102(c) to condemn not only secondary line price discrimination, but also primary
line and geographic price discriminations. The application of Article 102(c) to these three
types of price discrimination is examined below.
a) The application of Article 102(c) to secondary line price discrimination
9.107 The decisional practice of the Commission and the case law of the EU Courts provide sever-
al examples of secondary line price discrimination. Market structures where vertically-inte-
Indeed, vertically-integrated operators generally have a strong incentive to charge a lower

price to their downstream subsidiary than to that subsidiary’s competitors. An illustration
can be found in Deutsche Bahn. In that case, Deutsche Bahn charged different prices to
Transfracht (a subsidiary of Deutsche Bahn) and Intercontainer for access to the rail infra-
structure, although the two undertakings were providing similar services. The price charged
and the GC thus determined that Deutsche Bahn had infringed Article 102(c) through this
conduct. The discrimination had the effect of placing the parties operating from western
ports (Intercontainer) at a competitive disadvantage vis-à-vis Deutsche Bahn and its sub-
sidiary.131
9.108 The decisional practice of the Commission and the case law of the EU courts also abounds
with examples of secondary line injury price discrimination by non-vertically-integrated
operators, in particular in the transport sector where an undertaking (often a public one)
has been granted an exclusive right to operate an essential facility without, however, being
active on the downstream market. Most of the cases addressed by the Commission and the
courts involved direct or indirect discrimination on nationality grounds. For instance, in
the Brussels National Airport case, the Belgian legislation provided for a system of stepped
132
The thresholds established
130 See S. Martinez Lage/ R. Allendesalazar, ‘Community Policy on Discriminatory Pricing: A Practitioner’s
Perspective’ in C.D. Ehlermann/ I. Atanasiu (eds),
Competition Law
of the EU Competition Law
(Oxford, OUP 2011), at 759ff.
131 More generally, the Commission had gathered evidence that Deutsche Bahn’s price discrimination had sub-
stantially limited the carriage of containers between the western ports and Germany in favour of imports and
exports to and from Germany through the port of Hamburg.
132 See Commission Decision, 28.06.1995, OJ 1995 L216/8.

by the Belgian legislation were such that only a carrier based at the Brussels airport could
favouring the Belgian public carrier over its competitors. The Commission found that the
Airways Authority had a dominant position and its discriminatory pricing constituted an
abuse under Articles 102(c) and 106 TFEU.133
b) The application of Article 102(c) to primary line price discrimination
9.109 In several cases, Commission and EU Courts have condemned practices such as rebates and
selective price cuts on the basis of Article 102(c), omitting in their analysis the ‘competitive
disadvantage’ condition built in this provision.134 This can, for instance, be observed in
Hoffmann-La Roche, a case where the dominant company had granted rebates to a number
of purchasers as a counterpart to the commitment from the purchasers to acquire all or
most of their vitamins or certain vitamins from Hoffmann-La Roche.135 The Commission
held that these contracts, on the one hand, had a horizontal effect by distorting competition
between vitamins producers and, on the other hand, had a discriminatory effect in that they
applied dissimilar conditions to equivalent transactions. The ECJ ruled on the question of
discrimination by holding that:
-
tions with other trading parties in that two purchasers pay a different price for the
same quantity of the same product depending on whether they obtain their supplies
exclusively from the undertaking in a dominant position or have several sources of
supplies.
9.110 The Court condemned the discrimination on face value and did not engage in an analysis
of the competitive situation downstream as required under Article 102(c).136 Hoffmann La
Roche, however, argued that the rebates were not of such a kind as to place its customers at
a competitive disadvantage. The Court eluded the question declaring:
[...] since the course of conduct under consideration is that of an undertaking occu-
pying a dominant position on a market where for this reason the structure of com-
any further weakening of the structure of competition may constitute an abuse of a

dominant position.137
9.111 The CJEU’s reference to the weakening of the structure of competition on the producer’s
rather than for the secondary line injury required by Article 102(c).
133 Ibid para 17.

134 See, e.g., Case 85/76, Hoffmann-La Roche v. Commission
07.10.1981, , OJ 1981
Cewal Compagnie
Maritime Belge Transports SA and Others v. Commission [1996] ECR II-1211.
135 See Case 85/76 Hoffmann-La Roche v. Commission [1979] ECR 461.
136
137 Ibid., para 122ff.

9.112 Primary line price discrimination was also at stake in a recent preliminary ruling involving
selective price cuts applied by the Danish postal incumbent, Post Danmark, in favour or
three of its competitor’s main clients. In this case, the Court found that primary-line dis-
crimination is not an abuse in itself.138 In the absence of any evidence that the dominant
undertaking sought to eliminate a competitor,139 a policy by which a dominant undertaking
charges low prices to certain major customers of a competitor may not be considered to
amount to an exclusionary abuse merely because the price that undertaking charges one of
those customers is lower than the average total costs attributed to the activity concerned, but
higher than the average incremental costs pertaining to that activity.140 The Court explained
that:
to the extent that a dominant undertaking sets its prices at a level covering the great
bulk of the costs attributable to the supply of the goods or services in question, it
to compete with those prices without suffering losses that are unsustainable in the
long term.141
c) The application of Article 102(c) to geographic price discrimination
The EU courts’ case law also offers a number of illustrations where Article 102(c) has been
geographic price discrimination. The semi-
nal case is United Brands.142 United Brands Company unloaded at Rotterdam and Bremen
ports bananas of similar quality with identical unloading costs and then sold these bananas
prices. In its decision, the Commission considered that the practice of differentiating prices
according to the origin of the customers amounted to an abuse of a dominant position. In
its judgment, the CJEU upheld the decision of the Commission, stating that “the policy of
differing prices enabling UBC to apply dissimilar conditions to equivalent transactions with
other trading parties, thereby placing them at a competitive disadvantage, was an abuse of a
dominant position”. The analysis of the CJEU in the above passage postulates that the price
discrimination placed distributors/ripeners “at a competitive disadvantage”. However, this
conclusion could be questioned, given that distributors/ripeners operated in different Mem-
ber States (different geographic markets) and therefore did not compete with each other.
2. Discriminatory pricing in the life sciences sector

9.113 Two NCAs have issued decisions relating to discriminatory pricing by dominant companies.
SIA is a producer and trader of medical gas, which had a dominant position in the relevant
138 Case C-209/10 Post Danmark v. Konkurrencerådet [2012], nyr, para 30.
139 Case C-209/10 Post Danmark v. Konkurrencerådet [2012], nyr, para 29.
140 Ibid.
Danmark’s common costs (Ibid., para 31).
141 Ibid., para 38.
142 See Case 27/76 United Brands Company and United Brands Continentaal BV v. Commission [1978] ECR-
207.

markets, notably in the market for bottled medical gas. Prices set by AGA for different
i.e.,
were also imposed. AGA was required to start applying fair, non-discriminatory and cost-
143
based prices and to keep separate accounts for each product sold.
9.114 In the same year, the Maltese NCA examined a complaint that private clinics owners sub-
mitted against NBTS (the National Blood Transfusion Services). NBTS is the State author-
ity entrusted with the regulation of blood products in Malta, but is also responsible for the
commercial trading of some of the blood products it manufactures. The Maltese NCA found
that NBSTS was an ‘undertaking’ given its commercial activities and that it possessed a
dominant position in the market for the manufacturing and sale of blood products in Malta.
NBTS’ pricing placed private clinics at a disadvantage vis-à-vis public hospitals. While it
was providing the latter with blood products free of charge, it charged commercial prices to
private clinics. This was found to be an abuse of dominant position, breaching Article 9(2)
144
(e) of Maltese Competition Act, which is equivalent to Article 102(c) TFEU.
E. CONCLUSION
9.115 This Chapter has shown that dominant undertakings operate in a complex legal environment
that competition law authorities may impose for competition law infringements,145 it is thus
crucial for undertakings operating in this sector to analyse on an basis the competi-
tion law implications of their pricing strategies.
143 Competition Council of the Republic of Latvia (Latvijas Republikas Konkurences Padome), 07.09.2006,
AGA SIA, Case n° p/04/04/8.
144 Maltese Commission for Fair Trading (Kummissjoni Ghall-Kummerc Gust), 09.10.2006, National Blood
Transfusion Service, Measure 5/2005.
145 -
ing (Article 23 of Regulation 1/2003).

10
EU MERGER CONTROL IN
THE LIFE SCIENCES SECTOR
A. INTRODUCTION 10.01 c) Other entry barriers: marketing

and distribution costs 10.49
B. PROCEDURAL RULES 10.04 5. Countervailing buyer power 10.52
a) Change of control 10.06

OTHER THEORIES OF HARM 10.55
1. Collective dominance 10.56
2. EU merger control procedure 10.13
2. Vertical foreclosure 10.57
3. National merger control regimes 10.18
a) Vertical issues in pharmaceutical
concentrations 10.58
SINGLE DOMINANCE 10.21 b) Vertical issues in mergers
relating to medical devices 10.60
1. The test 10.22
3. Conglomerate effects
2. Analytical framework 10.24
3. Competitive constraints imposed E. REMEDIES 10.64
by existing competitors 10.29 1. Role of remedies in eu merger review 10.65
a) Competitive interaction between 2. Scope of the remedies 10.67
OTC products and prescription drugs 10.30
a) Transfer of production capacity
b) Competitive pressure exercised and personnel 10.69
by ‘Off Label’ use 10.34
b) Divestitures extending beyond
c) Competitive interaction between affected markets 10.72
originator products and generics 10.36
c) Remedies in cases relating
4. Assessment of potential competition 10.38 to medical devices 10.75
a) Competitive pressure exercised 3. Selection of a suitable purchaser 10.77
by pipeline products 10.41
b) Competitive pressure exercised F. CONCLUSION 10.82
by the threat of generic entry 10.44
A. INTRODUCTION
10.01
billion.1 -
-
1 Source: Irving Levin Associates, Deal Search Online.

EU MERGER CONTROL IN THE LIFE SCIENCES SECTOR
life-cycle, pipeline and related issues being experienced by certain sector players that were
behind many recent transactions will continue to drive further transactions in the sector.
10.02 In the EU, large mergers and acquisitions (of both shares and assets), and the formation of
certain joint ventures are examined by the European Commission (the Commission) under
the Merger Regulation.2 The Commission can make its clearance conditional upon divesti-
tures and other remedies. Since 2000, the Commission has imposed remedies on 16 phar-
10.03 In this chapter, we provide an overview of EU merger control rules with a special focus on
rules. Second, we provide an overview of the Commission’s approach to the concept of

single dominance in life sciences transactions. Third, we describe other theories of harm on
which the Commission relies under the Merger Regulation. Finally, we analyse the Com-
mission’s approach to remedies.
B. PROCEDURAL RULES
10.04
in the Merger Regulation. Below we outline these thresholds and summarise the main steps
between the EU and national regimes.
1.
10.05 Under the Merger Regulation, a transaction is reportable if it results in a change of con-
thresholds (giving the concentration a ‘Community dimension’).
a) Change of control
10.06 A concentration occurs where a change of control on a lasting basis results from:
1.
2. The acquisition by one or more undertakings of direct or indirect control of the whole
or parts of one or more other undertakings.3
10.07 4
Con-
trol is typically achieved when one company acquires the majority of voting rights in anoth-
er company. However, a minority stake can also confer control, e.g., if the minority share-
2 See Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between
undertakings, OJ 2004 L24/1.
3 See Article 3(1) of the Merger Regulation.

holder has veto rights over the company’s strategic decisions. Control may be acquired
solely by one entity or jointly by two or more entities.5
10.08 The creation of a joint venture performing on a lasting basis all the functions of an auton-
omous economic entity also constitutes a concentration.6 A joint venture is deemed to be
resources and should not rely exclusively on sales to or purchases from parent companies
(beyond a reasonable start-up period). It is important to appreciate that it is the turnover of
the parents of a newly formed joint venture that is considered in determining whether the
thresholds under the Merger Regulation are met. This means that a newly created joint ven-
10.09 In the life sciences sector, licensing-in of intellectual property rights often represents an
attractive alternative to an acquisition. Such in-licenses can amount to a concentration if
the licensed patents (and/or brands) are exclusive and constitute a business with a market
turnover.7 In the life sciences sector, licensing agreements are typically entered into before
the relevant product is launched. For example, a pharmaceutical company may enter into
an exclusive in-license with a biotech start-up developing a novel product before the prod-
Regulation. Similarly, if a ‘naked’ patent portfolio is licensed-in (i.e., an exclusive license
10.10 Concentrations that result in a change of control are reportable to the Commission if they
have a ‘Community dimension’, i.e., if the turnover of particular parties to the concentration
8
Article 1 of the Merger Regulation set out two alternative sets
of turnover thresholds, such that a concentration is reportable to the Commission if:
1. The combined worldwide turnover of the undertakings concerned exceeds €5 billion,
and each of at least two of the undertakings concerned has turnover in the EU that
2. The combined worldwide turnover of the undertakings concerned exceeds €2.5 billion,
and each of at least two of the undertakings concerned has turnover in the EU that ex-
ceeds €100 million. In addition, the combined turnover of the undertakings concerned
must exceed €100 million in three EU Member States and the turnover of at least two
of the undertakings concerned must exceed €25 million in each of those same Member
States.
10.11 However, where the undertakings concerned achieve at least two-thirds of their EU-wide
turnover within the same EU Member State jurisdiction reverts to that Member State (essen-
tially excluding domestic transactions from the Commission’s jurisdiction).
5 See Commission Consolidated Jurisdictional Notice under Council Regulation (EC) No 139/2004 on the
control of concentrations between undertakings (‘Jurisdictional Notice’), OJ 2008 C-95/1.
7 See Jurisdictional Notice, para 24.
8 ‘Turnover’ is broadly equivalent to net revenues.

10.12 The Jurisdictional Notice provides detailed instructions on the calculation of turnover. For
example, a joint venture’s turnover should be allocated to each of its parents in proportion
to their respective shareholdings.9 With regard to geographic allocation, the general rule is
that turnover should be allocated to the country in which the customer is located, although
centralised ‘hub’ purchasing contracts are often treated differently.10 The geographic allo-
cation rules also mean that royalties generated under global licensing agreements have to be
allocated to individual jurisdictions.
2. EU merger control procedure

10.13
cannot be implemented until it is cleared by the Commission.11 Where the Commission has
12
10.14 If a transaction does not meet EU thresholds, it may be reportable in one or more Member
States. When a transaction does not exceed EU thresholds but at least three EU Member
States have jurisdiction to review the transaction, the parties may request that the Com-
mission review the transaction. If none of the Member States with jurisdiction opposes
this request, the transaction would then be ‘referred’ to the Commission.13 This referral
one EU submission.
10.15
a ‘Short Form’) setting out key information about the concentration. The review procedure
can be split into three stages:
1. : following the announcement of the transaction, the parties usually
-
is crucial as it enables the parties to familiarise the case team with markets that might
be new to them and to provide the case team with information and input on any poten-
clear that remedies are likely to be required, discussions about appropriate scope and
form can also take place at this stage.
9 See Article 5(5)(b) of the Merger Regulation.

10 See Jurisdictional Notice, para 196.
11 See Article 7(1) of the Merger Regulation. The buyer may, however, implement a public bid provided that it
does not exercise voting rights prior to obtaining the Commission’s approval.
12 See Article 21 of the Merger Regulation. However, the Commission may decide to refer the transaction, in
whole or in part, to national competition authorities. See Article 9 of the Merger Regulation. In addition,
the notifying party may submit a reasoned submission to the Commission requesting that a concentration
State. See Article 4(4) of the Merger Regulation.

13 See Article 4(5) of the Merger Regulation. Member States may also request the Commission to review a
transaction but such requests are rare. See Article 22 of the Merger Regulation.

2. Phase 1 review: the Commission must take a decision within 25 working days from
Phase 1 review period is automatically extended by 10 working days.14

3. Phase 2 investigation: if the Commission considers that the transaction “raises se-
rious doubts as to its compatibility with the common market” and the parties do not
offer adequate remedies, the Commission will open an in-depth investigation.15 The
in-depth investigation (this time period may be extended in certain circumstances).16
10.16 The Commission must either clear the transaction (unconditionally or subject to remedies)
10.17 -
mission’s growing experience with the sector means that both the Commission and the
parties have a good understanding of what is required to obtain Phase 1 clearance for a
transactions tend to involve). However, the more protracted processes seen in medical de-
abandoned joint venture make it clear that the Commission is alive to interop-
erability and other technology-based competition concerns that such transactions can raise.
3. National merger control regimes

10.18
of one or more EU Member States. Of course, transactions are usually also reportable in
jurisdictions outside of the EU, depending on the geographic spread of the parties’ activities.
10.19
one jurisdiction to the other. This section does not attempt to address all of various national
globe:
1. Reportable transactions:
from country to country. Many jurisdictions follow an approach similar to the EU
‘concentration’ standard. However, acquisitions of non-controlling minority stakes are
reportable in certain jurisdictions (e.g., Germany, the UK and Austria). This effectively
2. :
based on the parties’ revenues, others on market shares or assets. In recent years, sev-
eral countries with low thresholds (e.g., Germany, Brazil, Russia) have amended their
some jurisdictions still have thresholds that can be met even if the target has limited
local presence (e.g., Italy, Ukraine and Ireland).
3. Suspensive effect: in most jurisdictions, transactions cannot be implemented prior to

15 See Article 6(1)(c) of the Merger Regulation.

obtaining antitrust approval, and very few of these will allow a transaction to ‘close
around’ them (e.g., Spain). However, in certain countries (e.g., the UK, Australia, New
e.g., Italy, after
-
menting while reviews are ongoing.
10.20 It managing the process of obtaining multi-jurisdictional approvals for a transaction it is

important to ensure that the extent and manner of cooperation and coordination amongst
authorities is given due weight. For example, the U.S., Canadian and Australian antitrust
agencies closely cooperate with the Commission. Further, the Chinese Ministry of Com-
merce (‘MOFCOM’) is becoming increasingly assertive, and required that commitments be
offered in two recent pharmaceutical transactions ( and ).
C.
1. The test
10.21 Article 2(2) of the Merger Regulation provides that:
common market or in a substantial part of it, in particular as a result of the creation

or strengthening of a dominant position, shall be declared compatible with the com-
mon market.
10.22 While the test goes beyond dominance, the analysis of the competitive effects of a con-
centration focuses on whether it would enable the acquisition or strengthening of a domi-
nant position. The reality of most market structures is such that the Commission’s analysis
generally focuses on single dominance concerns (e.g.,
market share and is able to raise prices and otherwise carry on its business without being
constrained by competitors or customers).
10.23 There are several other theories of harm on which the Commission can rely to challenge a
merger (e.g., collective dominance, vertical and conglomerate concerns). These theories
tend to play a more limited role in the Commission’s analysis of concentrations in the life
sciences sector. We summarise these theories in Section D below.
2. Analytical framework
10.24 The Commission’s analysis of concentrations involves two basic steps. First, the Commis-
above). Second, it conducts an assessment of the competitive effects of the concentration.
10.25 The Commission usually begins its competitive assessment with a review of the market
positions (particularly shares) of the parties and their competitors in the relevant markets.
-

mission as evidence the existence of a dominant market position.17 Below that level, the
not usually raise competition concerns in the markets in which the parties hold very low
18
10.26 -
numbers of overlaps in life sciences transactions). In essence, the Commission focuses
19
Having said that, if one party is already dominant in a
relevant market and another has late stage pipeline products that make it an imminent new
entrant or has a new product that could ‘take the market’, the Commission will look closely
at the effects of the concentration in the market.
10.27 The Commission traditionally relied on the value-based (i.e., revenue) sales data to calculate
market shares in pharmaceutical transactions. However, in several recent cases involving
generic producers, the Commission acknowledged that value-based estimates can overstate
-
volume (e.g., for markets consisting of several molecules, where it is necessary to agree on
some measure of therapeutic value, such as days of treatment). In ,
for example, the Commission relied on value-based data but also considered volume-based
shares in the markets in which the transaction raised competition concerns.20 In -
pharm, the Commission went further: it used data based on the weight of active ingredient
for multi-molecule markets in which there were competition concerns.21
10.28 While high market shares are often indicative of dominance, the parties can rely on the fol-
lowing factors to argue that the transaction does not raise competition concerns:
1.
2. Constraints imposed by the credible threat of entry by potential competitors in the
17 See Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of con-
centrations between undertakings (‘Horizontal Mergers Guidelines’), OJ 2004 C-31/5, para 17.
18
Regulation (EC) No 139/2004, O.J 2005 C-56/32.
19 See, e.g., ,
,
, Case COM-
-
vay ,
Case COMP/M.6175, Commission decision of 16 June 2011, para 37.

3. Constraints imposed by the bargaining power of the parties’ customers.
3. Competitive constraints imposed by existing competitors

10.29 There are a number of sources of existing competition that should be considered in assess-
ing the competitive dynamics of pharmaceutical markets. Beyond competition from drugs
categorised in the same ATC3 category (or, ATC4, in certain circumstances), it is important
to also consider the competitive impact of over-the-counter products, off label use of drugs
(particularly for oncology drugs) and generics. These competing forces (or the threat of
a) Competitive interaction between OTC products and prescription drugs
10.30 As explained in Chapter 2 above, the Commission generally takes the view that drugs avail-
able over-the-counter (‘OTC’), i.e., without prescription, fall into product markets that are
distinct from those in which prescription drugs (‘Rx’) fall. However, in several recent cases
-
stances.
10.31 provides an illustration of the Commission’s analysis of the competitive in-

teraction between OTC and Rx drugs. Both parties supplied drops used to treat eye allergies
(ATC 3 category S1G). The Commission found that:
-
ry as some products are available OTC, but they can be reimbursed if prescribed.
This means that they can be sold both as OTC and Rx. Furthermore, the regulatory
framework regarding the availability of these drugs may also differ from country to
country, i.e., the same drug may be prescription only in one country and might be
available OTC in another country. 22
10.32 The Commission reviewed the competitive interaction between the OTC and Rx drugs on
however, the Commission considered that this distinction was not decisive in Denmark be-
cause Novartis had only recently received approval to sell its product OTC and the product
continued to be reimbursed when prescribed.23
10.33 As this case illustrates, the Commission can take the competitive impact of OTC products
on Rx products into account either by including them in the relevant product market or by
products on the supply of Rx drugs.

23 Ibid., paras 140-142. See also , Case COMP/M.4314, Com-
mission decision of 11 December 2006, para 22 (with regard to topical anti-haemorrhoidal treatments, ATC
3 category C5A).

b) Competitive pressure exercised by ‘Off Label’ use
10.34 In certain markets (particularly those for oncology treatments) the Commission’s compet-
itive assessment can be based on how the products are actually used and whether they are
regarded as substitutable, rather than solely on their approved therapeutic indications.
10.35 Certain medicines are prescribed ‘off label’, meaning they are prescribed for an indication
for which they have not been approved. This most commonly happens with oncology drugs,
where certain treatment protocols are designed around combinations of multiple drugs (ir-
respective of their approved uses). The Commission will take into account the competitive
pressure exercised by such ‘off label’ use on drugs that are indicated for a particular treat-
ment. For example, in , the Commission examined markets related to the treat-
ment of kidney cancer and noted that Wyeth’s Torisel product, although only approved for
24
c) Competitive interaction between originator products and generics
10.36 The Commission has increasingly found that generic drugs are substitutes for originator
drugs.25 Initially stemming from the analysis of products for oncology drugs, the Commis-
-
ic type of cancer and the role (and substitutability) of individual molecules in the treatment
regime. For example, the Commission considers whether drugs containing the same active
molecules are used together or in sequence in a treatment protocol, or are used in different
lines of treatment (e.g.,
10.37 The Commission considers that generics exercise a particularly strong competitive pressure
on originators in the Member States in which health regulation strongly encourages the use
of generics. For instance, in , the parties successfully argued that pharmaceutical
markets in the UK were among the most competitive in Europe because of the regulation
of prescriptions in the UK were written generically. Similarly, the reimbursement scheme

successfully encouraged generic competition. Generic substitution was also strongly en-
couraged at the hospital level. The Commission took into account the level of generic com-
petition in the UK to conclude that the transaction did not raise concerns in UK markets.26
4. Assessment of potential competition

10.38 -
ences deals. Transactions may raise competition concerns if they eliminate potential com-
24 See , Case COMP/M.5476, Commission decision of 17 July 2009, para 25. Cf. -
, Case COMP/M.4314, Commission decision of 11 December 2006, paras
84-86 (substitutability between two products that were marketed and positioned differently).
25 See
, Case COMP/M.5253, Commission decision of 4 February 2009, para 17.
26 See
Wyeth, Case COMP/M.5476, Commission decision of 17 July 2009, para 80 (the Commission noted that the
Netherlands had a ‘preferential’ reimbursement scheme for generics).

petition, particularly in already concentrated markets. Conversely, if barriers to entry are

low, and this is evidenced by the presence of several potential entrants, the transaction is less
likely to raise competition concerns.27
10.39 -
itive assessments shaped by credible threats of entry (in the short- to -medium-term). Po-
tential entry in the sector takes a range of forms (many quite particular to these markets),
including:
1. The Commission will consider the likely impact of ‘pipeline’ products (usually only
those in ‘Phase III’ of development) that will provide a treatment regime that competes
with existing products (including existing products still protected by patents).
2. Where patents protecting the products have expired or may be expiring in the near future,
the Commission will consider the impact of the likely introduction of generic products.28
10.40 Potential competition concerns relating to medical devices are very similar to those asso-
ciated with other technology sectors.29 Accordingly, this section focuses on the analysis of
potential competition in pharmaceutical concentrations.
a) Competitive pressure exercised by pipeline products
10.41 The Commission generally considers pipeline products to be a potential competitive con-
straint only when the products have reached clinical trials (Phase III),30
risk of failure of products that have reached this point in their development cycle and the
likelihood that such products will be marketed within three years (bearing in mind the two
to three year timeframe that the Commission uses in making its competitive assessments).
10.42 Although a product in Phase III is usually considered to impose a competitive constraint,
this will not always be the case. For example, in , the parties successfully ar-
gued that Phase III products for Alzheimer’s disease were more likely to be abandoned than
both parties had Phase III pipeline Alzheimer’s products, the Commission concluded that
this overlap in pipeline products was unlikely to harm potential competition.31
10.43 Conversely, in certain markets, pipeline products in Phase III might be regarded as sources of
existing (rather than potential) competition. In , the Commission considered the
impact of pipeline products in the market for kidney cancer treatment. Because the market
27 See Horizontal Mergers Guidelines, paras 68-75.

28 Other sources of potential competition include, for example, products that have been withdrawn from the
market to address regulatory concerns being re-launched.
29 See , Case COMP/M.3687, Commission decision of 25 August 2005: the Com-
stents, while the target was a potential entrant. However, the Commission concluded that the transaction
would not raise concerns in that market because other new entrants (e.g., Medtronic and Abbott) also exer-
30 See, e.g., , Case COMP/M.5778, Commission decision of 9 August 2010, para 111.
31 See , Case COMP/M.5476, Commission decision of 17 July 2009, paras 88-91.

trials usually involved 1000 to 5000 patients, a pipeline product in clinical testing might rep-
resent a substitute for approved treatments, for the duration of the clinical trial and in the geo-
graphic catchment area for the trial. In these unusual circumstances the Commission conclud-
ed that kidney cancer pipeline products in clinical trial were sources of actual competition.32
b) Competitive pressure exercised by the threat of generic entry

10.44 When patents expires, generic entry becomes possible. The likelihood of generic entry
shares. For example, in , the parties held high shares in the supply of
to occur in the near future. As a result (and because the parties’ products were not the closest
substitutes), the Commission concluded that the transaction did not raise concerns in the
relevant market.33 Zentiva had a number of pipeline products that were generic molecular
the removal of the future constraint represented by Zentiva’s pipeline products raised seri-
ous competition concerns in each of the relevant markets.34
10.45 Having said that, quick and successful generic entry following patent expiry is not a fore-
gone conclusion. In the recent case (a merger between two generics manufactur-
ers), the Commission analysed entry barriers for generics, concluding that:
the investment required to get a marketing authorisation, to build up an operation, to
register for reimbursement, to get reimbursement approval, to promote and organise
the distribution of a generic drug are the main entry barriers. Furthermore, a generic
company needs to have credibility in the national market and knowledge of the na-
tional market. In addition, there is a certain degree of market saturation in some of
the affected countries and therefore prices are low. To enter a national market with
a generic drug takes one to two years. 35
10.46 This timeframe is within the approximate two year timeframe that the Commission uses to
determine whether entry is timely.36 In addition to these barriers to entry, the Commission
1. Markets that are small and/or mature with a number of established players, leaving
37
32 See , Case COMP/M.5476, Commission decision of 17 July 2009, para 35.

35 See , Case COMP/M.5295, Commission decision of 19 December 2008, para 26. See also Sano-
, Case COMP/M.5253, Commission decision of 4 February 2009, paras 213-216.
36 See Horizontal Mergers Guidelines, para 74.
37 See , Case COMP/M.1878, Commission decision of 22 May 2000, paras 59-64: the
destroy parasitic worms, ATC 3 segment P1B). The parties argued that their products have been off-patent
for over ten years and that any price increase would trigger a generic entry. The Commission disagreed:
because the relevant markets were small and mature, generic entry was unlikely and, indeed, has not taken
place despite the absence of patent protection.

2. Markets in which there is migration away from older products towards new, patent-pro-
tected products, such that the earlier generation product is rendered obsolete. This is
particularly likely to be the case where the holder of the expiring patent has made a
deliberate effort to migrate its customers to the newer product.38
10.47 In essence, there is often a good case to be made that generic entry (and the threat thereof)
-
piry. However, the case needs to be made to persuade the Commission -- the Commission
would not assume generic entry (and the resulting effect on competitive dynamics).
10.48 The Commission may also consider the broader question of whether the transaction would
strengthen the parties’ market position at the expense of generic competition by enabling
the acquirer to adopt an ‘authorised generics’ strategy. The issue is essentially whether
the holder of an expiring patent would exploit the protection afforded by the patent by
releasing an ‘authorised’ generic version of its drug just before the patent expires, giving it
this risk in
between 1996 and 2008 to perform an econometric analysis of the competitive constraint
-
cised by Zentiva was no stronger than that exercised by an average generic competitor, such
that the transaction did not raise competition concerns simply as a result of its elimination
of Zentiva as an independent generics supplier.39
c) Other entry barriers: marketing and distribution costs
10.49 -
es sector, particularly in OTC pharmaceutical markets because manufacturers market prod-
ucts directly to consumers, rather than doctors. For example, in
OTC
analgesics (ATC 3 segment N2B). The Commission noted that customers displayed high
levels of brand loyalty and that the parties’ brands (Aspro and Aspirin) were perceived as
‘must have’ brands. The Commission concluded that new entry was impeded by brand
loyalty and high advertising/marketing costs.40
10.50 -
shelf space.41
38 See , Case COMP/M.1846, Commission decision of 8 May 2000, paras

94, 108: the parties held high combined shares in the supply of anti-virals (ATC 3 category J5B) in several
Member States. The parties argued that Glaxo’s Zovirax product was off patent and faced generic competi-
tion. However, the Commission noted that a large part of Zovirax’s market share had migrated to the parties’
second generation drugs Valtrex and Famvir, which were patent-protected.
39 , Case COMP/M.5253, Commission decision of 4 February 2009, paras 538-548.
40 See , Case COMP/M.3544, Commission decision of 19 November 2004, paras
50-53. Cf. , Case COMP/M.3751, Commission decision of 27 May 2005, p. 11: the Com-
mission considered that new entries in the German market for topical anti-rheumatics (ATC 3 segment M2A)
were unlikely due to high advertising costs.
41 See , Case COMP/M.4314, Commission decision of 11
December 2006, para 112.

10.51 In prescription markets, historic prescribing behaviour of doctors may create a barrier to
entry, since direct consumer advertising is not permitted and doctors may be slow to change
their behaviour patterns.42
5. Countervailing buyer power

10.52 Market power can also be constrained by customers. Countervailing buyer power is the
bargaining strength that the buyer has vis-à-vis the seller in commercial negotiations due
43
10.53 In the life sciences sector, the Commission rarely accepts that suppliers face countervailing
buyer power. In general, the customer base is fragmented (e.g., a large number of pharma-
market power.44
there was countervailing buyer power. For example, in the Commission found
that (in several Member States) certain vaccines were procured by public tenders by State
attempt by the merged entity to raise prices.45
10.54 The Commission appreciates that the competitive dynamics of markets can change, such
that buyer power may increase over time. For example, in the in vitro diagnostics sector, the
46
However, in recent decisions the Commission observed a trend towards consolidation on the
buyer side resulting in an increase in countervailing buyer power. The Commission noted
that customers procured through formal tenders, frequently switched between suppliers, and
multi-sourced. These factors constrained suppliers’ market power.47
42 See , Case COMP/M.1846, Commission decision of 8 May 2000, paras

110 and 135.
43 See Horizontal Mergers Guidelines, para 64.
44 See, e.g., , Case COMP/M.3083, Commission decision of 2 September 2003, paras 204-
210 (no countervailing buyer power in the market for patient monitors).
45 See , Case COMP/M.5476, Commission decision of 17 July 2009, para 264. Cf. Scher-
, Case COMP/M.4691, Commission decision of 11 October 2007, para 296
, Case COMP/M.3687, Commission decision of 25 August 2005, paras 83-86, 237-238, 281
(the Commission considered that hospitals exercised countervailing buyer power with regard to drug-eluting
stents but not with regard to other relevant devices).
46 See , Case IV/M.950, Commission decision of 4 February 1998,
paras 101-105.
47 See
, para 34.

OTHER THEORIES OF HARM

10.55 Theories of harm in life sciences transactions are less frequently based on collective domi-
markets. However, if production outsourcing, sub-contracting and input supplying (e.g., of

active pharmaceutical ingredients) continue to grow, and consolidation leads to suppliers
with ever-broadening portfolios, this could change overtime.
1. Collective dominance
10.56 Collective dominance exists in highly concentrated markets in which: oligopolists can mon-
actual/potential competitors or customers.48 These conditions have very rarely been found
in life sciences markets. As a result, there are very few life sciences transactions in which
the analysis has turned on theories of harm based on collective dominance.49
2. Vertical foreclosure
10.57 Concentrations may have vertical effects when one party to the transaction supplies input
products or services that the other party and/or its competitors use in related markets. The
basic question to be addressed in assessing these transactions is whether they might lead to
vertical foreclosure. Vertical foreclosure would arise if the merged entity would have the
ability and the incentive to impede competition by refusing to supply to its downstream
competitors or to purchase from its upstream rivals.50
a) Vertical issues in pharmaceutical concentrations
10.58 In several cases the Commission has examined potential vertical concerns relating to the
supply of active pharmaceutical ingredients (‘APIs’). For example, in ,
the Commission found that Teva had a large portfolio of APIs that it supplied to third par-
ties, identifying 49 vertically affected markets (i.e., markets in which Teva produced the API
while Ratiopharm was active in a downstream market for a pharmaceutical product in which
the API was used). However, the Commission concluded that the transaction did not raise
serious vertical concerns because it would not:
48 See Case T-342/99, Airtours plc v Commission, [2002] ECR II-2585, para 62.
49 See , Case COMP/M.1846, Commission decision of 8 May 2000, para
148: the Commission ruled out collective dominance in the supply of topical antibiotics (ATC 3 segment
, Case IV/M.1298, Commission decision of 23 October 1998, paras 58-59: no collec-
50 See Guidelines on the assessment of non-horizontal mergers under the Council Regulation on the control of
concentrations between undertakings (‘Non-Horizontal Mergers Guidelines’), OJ 2008 C-265/6, paras 28 et
seq.

1. Affect downstream customers: if Teva stopped supplying its customers or offered to

supply them on less favourable terms, customers would be able to switch to alternative
2. Affect Teva’s competitors active in the upstream API markets: while the parties held
high combined shares in certain national downstream markets, the Commission consid-
ered API markets to be global in scope, such that the parties represented only a small
fraction of total worldwide demand for the relevant APIs.51
10.59 The Commission has rejected vertical foreclosure concerns in a number of cases.52 How-
ever, in , it imposed remedies intended to
of nicotine patches while the target sold nicotine patches in the OTC retail market. The
-
ity to foreclose GSK by limiting or reducing supply of nicotine patches, reducing quality,
patch business.53
b) Vertical issues in mergers relating to medical devices
10.60 The Commission has had concerns about vertical foreclosure in several medical devices
transactions. The most prominent precedent is . Instrumentarium sup-
plied medical devices, including patient monitors and anaesthesia delivery machines. It
held a strong position in the supply of anaesthesia delivery machines (GE was not active
in that market). The Commission noted that anaesthesia machines and patient monitors
(a market in which the parties had a high combined market share) were complementary
products: while a patient is undergoing anaesthesia, doctors use monitors to control the pa-
tient’s vital signs. The Commission was concerned that the transaction would give GE the
manufacturers of patient monitors to connect their devices to Instrumentarium’s anaesthesia

machines. To address the Commission’s concerns, GE divested Instrumentarium’s patient
monitoring business and undertook to enable third parties to interconnect their patient mon-
51 See , Case COMP/M.5865, Commission decision of 3 August 2010, paras 393-407. The
Commission followed the same approach with regard to APIs in several other cases. See
, Case
, Case COM-
, Case COM-
P/M.5661, Commission decision of 11 February 2010, paras 38-43.
52 See, e.g., , Case COMP/M.2922, Commission decision of 27 February 2003, paras 102-
this would have no appreciable effect on the availability of hard gelatine capsules in the EEA.
December 2006, paras 119-135.

itors with GE’s equipment used in operating theatres and intensive care units (including
anaesthesia machines).54
3. Conglomerate effects
10.61 Conglomerate effects can occur as a result of transactions that combine companies active
in related markets. The main concern is also foreclosure-related: will the combined entity
have the ability and incentive to leverage a strong position from one market into another,
e.g., by refusing to sell two products separately (tying) or by offering discounts to customers
that buy both products as a package (bundling).55 Foreclosure concerns are often a combi-
nation of ‘vertical’ and ‘conglomerate’ effects (as illustrated by the
case).
10.62 -
petition concerns raised by horizontal overlaps. For example, in the Com-
mission took into account the risk of bundling in its review of the German market for OTC
topical anti-rheumatics (ATC 3 category M2A). In this market the parties held a combined
itself problematically high, the transaction raised concerns in this market because “the com-
bination of the leading originator brand with the leading generic would give the parties the
opportunity to offer package deals to pharmacies and to block shelf space”. 56
10.63 The Commission rarely views conglomerate issues as a stand-alone concern in life sciences
mergers. For instance, in , the Commission found that the transaction did
not raise conglomerate concerns in the Netherlands because the parties would face a number
of important competitors (including both originators and generics) and their range discounts
would not foreclose these rivals.57
54 See , Case COMP/M.3083, Commission decision of 2 September 2003. Cf.

Drägewerk, Case COMP/M.2861, Commission decision of 30 April 2003 (similar vertical concerns and
interface undertakings).
55 See Non-Horizontal Mergers Guidelines, paras 91-118.
56 See , Case COMP/M.3751, Commission decision of 27 May 2005, pp. 10-11. Cf. Hoffmann
, Case IV/M.950, Commission decision of 4 February 1998, paras 92-94
(increased bundling possibilities in the supply of clinical chemistry reagents and instruments viewed as a
, Case COMP/M.5476, Commission decision of 17 July 2009, paras 301,
309 and 381 (multi-product discounts viewed as a barrier to entry in certain animal health markets).
57 See , Case COMP/M.5865, Commission decision of 3 August 2010, paras 461-469. Cf.
Novartis-Alcon, Case COMP/M.5778, Commission decision of 9 August 2010, paras 259-260 (solutions for
, Case COMP/M.3816, Commission decision of 15 June 2005, paras 35-36
, Case COMP/M.4569, Commission decision
of 24 April 2007, paras 41-44 (in vivo and in vitro diagnostics).

E. REMEDIES
1. Role of remedies in EU merger review

10.64
competition, the parties may offer remedies aimed at alleviating the Commission’s concerns
in an effort to obtain ‘conditional clearance’. Remedies can be offered in Phase 1 of the
review (to avoid an in-depth investigation) or in Phase 2 (to avoid a prohibition decision).
10.65 The Commission generally prefers structural (rather than behavioural) remedies,58 and fre-
quently requires divestiture commitments be made in the life sciences transactions. In sev-
-
ber of products. For example, in
relating to 15 pharmaceutical markets in six Member States. In , the divestitures
10.66 In this section we describe the approach adopted by the Commission with regard to deter-
mining the scope of remedies, the selection of a suitable purchaser, and the implementation
transactions in an effort to avoid divestitures.
2. Scope of the remedies

10.67 -
ceutical mergers described a standard remedy package as follows:
divestment of medicines limited to the country where the competition concerns actu-
ally arise, together with their brand names, marketing authorisations and all relevant
assets. 59
10.68 The Commission considers this approach to be generally appropriate because (i) assets are
divested to suitable purchasers who have their own production and distribution facilities and
(ii) markets are national in scope and there are few cross-border spill-over effects (i.e., med-
icines can be marketed under the same brand by different suppliers in different countries).60
However, in some cases the Commission has departed from this approach and has required
-
sion also occasionally requires divestitures that go beyond the affected geographic markets.
58 See Commission notice on remedies acceptable under Council Regulation (EC) No 139/2004 and under
Commission Regulation (EC) No 802/2004 (‘Remedies Notice’), OJ 2008 C-267/1, para 15. Having said
this, the Commission has sometimes accepted behavioural remedies in medical devices cases (e.g., remedies
relating to access to interfaces).
59 See S. Greenaway et al., “Recent Commission Merger Control Decisions in the Pharmaceutical Sector: Sa-
Competition Policy Newsletter, No 2, para 64.
60 Ibid.

a) Transfer of production capacity and personnel
10.69 A commitment to transfer production facilities may be required if existing production ca-
pacity is scarce. For example, in
-
ufacturing facility in Sligo, Ireland (unless the purchaser acquired a minimum set of vac-
cines). The Commission found that production capacity for vaccines was scarce in the EEA
and that the building or transfer of production capacity was a lengthy and complex process
-
61
10.70 The Commission was considering similar commitments in connection with the abandoned
animal health joint venture. However, in addition to requiring the divestiture of
production facilities, it was also considering carefully the identity of those facilities, in an
effort to reduce the number of vaccines that would be transferred to a new production facil-
ity (bearing in mind that transferring vaccine production is time consuming and potentially
how far the Commission would have gone in this respect.
10.71 In several recent pharmaceutical cases the parties undertook to transfer certain key per-
sonnel to the purchaser. This requirement is relatively standard if the divestitures include
pipeline products or technologies under development: the parties undertake to transfer the
researchers involved in the development of the product.62 In the abandoned case
transactions.
b) Divestitures extending beyond affected markets
10.72 The principle of proportionality is ordinarily interpreted to require that divestitures be limit-
ed to the markets in which the transaction raises competition concerns. However, in several
cases the Commission decided that an EEA-wide divestiture was required (even though
competitive concerns were limited to certain Member States) because (i) a carve-out would
have compromised the business’s viability and attractiveness and (ii) there were centralised
assets and functions used on a pan-European basis that were essential for the viability of the
divested assets.
10.73 For example, in

types of animal health vaccines, pharmaceuticals and medicinal feed additives. While con-
61 Ibid, paras 461-463. Cf. , Case COMP/M.4314, Commis-
patch facility by way of lease (or at the option of purchaser by temporary sale) for a period of at least 3 years.
62 See Case COMP/M.4314, Commission decision of 11 De-
, Case COMP/M.5778, Commission decision of 9 August 2010,
para 289.

EEA-wide business. The Commission argued that only an EEA-wide divestiture could
ensure the viability of the divested assets.63
10.74 In several recent cases, the Commission included so-called ‘crown jewels’ provisions in
the divestiture package. This means that the parties would have been required to divest a
more extensive package if they had failed to divest a more limited package within a certain
period of time. Such provisions incentivise the acquirer to make the more limited sale. For
example, in
-
a purchaser for these assets within a certain (undisclosed) period of time, Teva promised to
divest Ratiopharm’s entire Dutch business.64
c) Remedies in cases relating to medical devices
10.75 Remedies imposed in cases relating to medical devices normally include both the facility
at which the device is produced and dedicated personnel. For example, in
ConvaTec
the buyer undertook to divest its existing wound care production facility.65 This is potential-
ly more complicated where the competitive concerns relate to a product that is one of many
produced in a particular facility.
10.76 In several cases relating to medical devices, the Commission has also accepted behavioural
undertakings. The interface undertakings offered in and
Drägewerk are discussed in Section D above. In , the Commission imposed
-
action. This case arose from the joint bid for Guidant, a supplier of cardiovascular devices
Guidant’s interventional cardiovascular devices (e.g., -

quired the rest of the company. The buyers agreed to share Guidant’s intellectual property
portfolio relating to drug-eluting stents (‘DES’). The Commission was primarily concerned
with the effect of the transactions on DES. The parties agreed to amend the license given by
66
63 See , Case COMP/M.5476, Commission decision of 17 July 2009, paras 458 and 465. See also
, Case COMP/M.4314, Commission decision of 11 Decem-
raised concerns only in Greece.

64 See , Case COMP/M.5865, Commission decision of 3 August 2010, paras 471-498. A
similar approach was used, e.g., in , Case COMP/M.4314,
would divest the entire business).

65 See , Case COMP/M.5190, Commission decision of 15 July 2008, paras 69-75 (the
facility also produced ophthalmic needles and this business was also included in the divestiture even though
it did not raise any concerns).
66 See , Case M.4150, Commission decision of 11 April 2006, paras 98-100.

3. Selection of a suitable purchaser

10.77 A divestiture can only maintain effective competition in the relevant market if the business
is transferred to a suitable purchaser in whose hands it is viable, in that it will be an active
competitive force. To be approved as the purchaser of assets being divested a potential
purchaser must:
1.
2. Have the ability and incentive to maintain and develop the divested business (in partic-
3. Not raise new competition concerns.67
10.78 In considering the suitability of potential purchasers of life sciences divested assets, the
Commission goes beyond these basic conditions. First, it frequently requires that the pur-
1. The Commission has required that the purchaser be active in the relevant product
and/or geographic market. For example, in , the Commission’s
clearance was conditional upon the divestiture of certain of SSL’s products in the UK
and Ireland to a purchaser already active in the sales and marketing of pharmaceutical
products in the UK and Ireland because the divested business was small and might not
justify the creation of a stand-alone distribution system.68
2. If the divestiture includes production facilities, the Commission may require that the
purchaser be able to run the facility.69 Conversely, if production facilities are not in-
cluded, the Commission may require that the purchaser has existing facilities with the
capacity to take over manufacturing the divested products (or to outsource manufactur-
ing to an independent third party).70
10.79 Second, in some circumstances the Commission requires that all assets be transferred to a
single purchaser, particularly if the overall package is not large. For instance, in ,
the Commission’s clearance was conditional upon the divestiture of a number of oncology
-
chaser have an existing presence in oncology pharmaceuticals in the EEA.71
10.80 Depending on the risks inherent in the divestiture package there are three approaches open
to ensure that the assets/business go to a suitable purchaser:
67 See Remedies Notice, para 48.

68 See , Case COMP/M.5953, Commission decision of 25 October 2010, para 120. See
also , Case COMP/M.5661, Commission decision of 11 February 2010, para
have experience with molecular testing).

December 2006, para 165.
71 See , Case COMP/M.5295, Commission decision of 19 December 2008, para 210. Cf.
Wyeth, Case COMP/M.5476, Commission decision of 17 July 2009, paras 469-470.

1. The Commission may require that the divested assets/business be transferred within a
-
2.
3. The parties may commit to identify a purchaser and enter into a binding agreement
approach) -- similar to the up-front buyer approach, except that the Commission knows
the identity of the buyer before it issues the approval decision.
10.81 The approach taken is largely driven by how certain the Commission needs to be that the
divested package will be viable in the hands of the particular buyer. The more self-standing
and complete the divestiture package, the larger the group of possible purchasers is likely
to be, reducing the Commission’s concern about ensuring that the assets/business go to one
of a small number of players.
F. CONCLUSION
10.82 The current trends in EU merger control in the area of life sciences can be summarised as
follows:
1. Competition analysis: the Commission usually focuses on horizontal overlaps be-
tween the parties’ activities. However, the Commission’s analysis is not a mechanistic
‘numbers’ exercise based simply on market shares. Rather, the Commission will look
at concentration in the market, potential entry (including new products that might rep-
resent competition ‘for the market’), and competitive constraints imposed by OTC/
prescription and off-label use of products. Accordingly, it is important to thoroughly
assess the competitive dynamics of markets in which the activities of parties to a trans-
action overlap and prepare the appropriate econometric and expert evidence longer
before engaging with the Commission.
2. Remedies: the Commission views divestitures as the best way to eliminate competition
concerns. It is becoming increasingly focused on ensuring that the divested assets/
business are truly viable, focusing on the adequacy of facilities and the sustainability of
the divestiture package (e.g.,
3. Process:
competition issues. Engaging up front on the key issues is crucial to a constructive and
frank working relationship with the case team.

11
DATA PROTECTION IN THE LIFE SCIENCES
INDUSTRY
A. EU DATA PROTECTION LAW 1. Laws and codes of conduct 11.28

1. Background 11.01
2. Origin 11.04 a) Clinical trials 11.34
b) Pharmacovigilance 11.38
3. The EU data protection directive
and its general principles 11.07 c) CRM databases 11.41
a) Data controllers and processors 11.09 C. DATA PROTECTION LAW
b) Lawfulness of the processing 11.11 IN THE PHARMACEUTICAL
c) Purpose limitation 11.13 SECTOR IN PRACTICE 11.43
d) Proportionality 11.15 1. Concept of personal data 11.43
e) Transparency 11.17 2. Responsibility 11.55
4. International data transfers 11.20 3. Consent or not? 11.59
4. Purpose limitation 11.62
activities or databases 11.23 5. Transparency 11.66
6. The future of eu privacy law: 6. Rights of individuals –
the general data protection regulation 11.24
B. DATA PROTECTION IN
THE PHARMACEUTICAL SECTOR 11.27 8. International transfers 11.74
A. EU DATA PROTECTION LAW
1. Background
11.01 Europe has a long history of protecting the privacy of individuals, and the current EU regula-
tory framework on data protection is often referred to as the most sophisticated and in many
under EU data protection law of what constitutes ‘processing of personal data’, virtually
every company that is doing business in Europe, and an increasing number of companies

DATA PROTECTION IN THE LIFE SCIENCES INDUSTRY
that are located outside of the EU,1 are in one way or another subject to the provisions of
the EU Data Protection Directive. Data protection considerations have to be taken into ac-
count whenever an EU based company processes the personal information of current, future
and past employees, collects customer or vendor data, provides online services, responds
to queries from a regulator or shares personal data of its employees, vendors or customers
within its corporate group (i.e., from one subsidiary to another or to its parent company).
11.02 For decades, compliance with European data protection laws has not a top priority for many
companies. In recent years, however, businesses in Europe and elsewhere have been re-
thinking their approach to data protection. This is partly due to new rules and regulations,
to be a change in attitude among both regulators and the general public. Nowadays, Euro-
pean regulators attentively monitor compliance with data protection laws and, if necessary,
stringently enforce them. The days of educating and encouraging companies to do the right
-
-
was imposed on the German railway company, Deutsche Bahn. In 2009, the regional data
repeated privacy violations, when the railway company covertly screened bank account data
of its employees and their family members as part of its anti-corruption program.2
11.03
misuse of their personal data. In many countries, the media regularly takes up stories on
privacy violations. These often are front page news. Such risk appears especially high for
companies in the life sciences industry, which inevitably process very sensitive data such
as health or genetic data.
2. Origin
11.04
in the early 1970s, quickly followed by other Scandinavian countries and by Germany,
France and other EU Member States. Because of the increasingly global nature of data
differences in the various data protection laws were a serious obstacle to the creation of
the European common market and that an EU wide initiative therefore would need to be
1 Under the current EU Data Protection Directive (and the national legislation transposing the Directive), a
company located outside of the EU but ‘using means’ in the EU to collect data, is subject to EU data pro-
tection law. An example of using means is the use of a server located on EU territory. Under pending data
protection legislation, the ‘use of means’ test will be replaced by a ‘targeting EU consumers’ test which
potentially could bring even more companies under the ambit of EU data protection law.
available at http://www.dat-
enschutz-berlin.de.

taken. At the same time, international organisations like the Council of Europe3 and the Or-
ganisation for Economic Co-Operation and Development (‘OECD’)4 adopted international
the existing national laws in the various Member States form the basis for the 1995 EU Data
Protection Directive.
11.05 It is important to emphasise that in the EU, contrary to the situation in many other parts of
the world, the right to data protection is a fundamental right enshrined in Art. 8 of the Char-
ter of Fundamental Rights of the European Union which reads as follows:
Everyone has the right to the protection of personal data concerning him or her. Such
of the person concerned or some other legitimate basis laid down by law. Everyone
has the right of access to data which has been collected about him or her, and the
an independent authority.5
11.06 The right to data protection is often referred to as the right to privacy, which is also a fun-
damental right. In fact, the right to data protection includes the right to privacy but it is
considerably broader. The right to privacy refers to the right to private and family life,
the right of a private home and private correspondence. The right to data protection is
considerably more encompassing as evidenced by the above cited Art. 8 of the Charter of
Fundamental Rights.
3. The EU data protection directive and its general principles

11.07 One of the most important milestones in the development of modern data protection law is
the adoption of the EU Data Protection Directive 95/46/EC in 1995.6 This Directive has
shaped the privacy landscape in Europe - and beyond - by setting forth general principles for
the handling (or as the Directive puts it: the ‘processing’) of personal data which apply to
all individuals and entities irrespective of whether they process data in the private or public
sector or whether they are an individual or a legal entity.7
11.08 The Directive undoubtedly is the cornerstone of EU data protection law and this chapter is
therefore focused solely on the Directive and the national laws transposing the Directive
into the laws of the EU Member States. However, it is worth mentioning that at the EU
3 Council of Europe Convention for the Protection of Individuals with Regard to Automatic Processing of
Personal Data (ETS No. 108), 28 January 1981.
-
tember 1980.
5 Charter of Fundamental Rights of the European Union, OJ 2000 C364/1.
6 Directive 95/46/EC of the European Parliament and the Council of 24 October 1995 on the Protection of
Individuals with Regard to the Processing of Personal Data and the Free Movement of Such Data, OJ 1995
L281/31.
7 In fact, the only areas excluded from the scope of the Directive are processing operations (i) concerning
public security and defence or (ii) by a natural person in the course of a purely personal or household activity
(see Art. 2 of the Directive).

level a second important Directive, the so called e-Privacy Directive 2002/58/EC, as amend-
ed8
important rules on spam and cookies that have a broader application, and apply to everyone
that solicits consumers or places cookies.
a) Data controllers and processors
11.09 The distinction between data controllers and data processors is key to understanding EU
data protection law. While many different parties may be involved in the processing of a set
of data, the Directive makes it clear that it is the data controller that is responsible (and ul-
timately liable) for the compliance with data protection rules. The Directive essentially de-
A classic example of a data controller is an employer, for the personal data of its employees.
Processor is a term of art for every natural or legal person that processes personal data ‘on
behalf’ of the controller. A classic example of a data processor is a payroll company that
processes human resources data on behalf of the employer.
11.10 Before entrusting personal data to a processor, the data controller must enter into a written
agreement with the processor. This agreement must contain a number of provisions, includ-
ing a provision that the processor only acts upon the instructions of the controller and only
uses the data for the purposes stipulated by the data controller. It is important to emphasise
that even though some of the processing activities have been delegated to a processor, the
controller remains responsible for the entirety of the data processing activities towards the
data subject, i.e., the individual whose data is being processed. The data controller also
remains responsible towards the data protection authorities (‘DPAs’). If the DPAs need to
intervene, they will address themselves to the data controller and not the processor.
b) Lawfulness of the processing
11.11 The EU Data Protection Directive is based on a number of principles. One of the key
the Directive which distinguishes between legal bases for regular personal data and more
narrow legal bases for sensitive personal data, such as health data. The most common legal
basis for data controllers to rely on are:
1. Consent i.e.,
based on complete and clear information) and freely given (i.e.,
2. Necessity of the processing for the performance of a contract to which the data subject
3.
4. A catch all basis referred to as the ‘legitimate business interest’ of the controller, with
the caveat that these interests must be weighed against the equally legitimate privacy
interests of the individual.
8 Directive 2002/58/EC of the European Parliament and of the Council of 12 July 2002 concerning the process-
ing of personal data and the protection of privacy in the electronic communications sector, OJ 2002 L201/37.

11.12 There is no formal hierarchy amongst the different legal bases. Traditionally, most com-
panies have relied on consent but this tendency is changing, mainly because regulators
increasingly insist that the conditions imposed on consent by the Directive (consent must
be informed and freely given) are not met.9 For instance, regulators take the position that
there is no such thing as a freely given consent in an employer/employee relationship, and
therefore show increasing reluctance to accept that the consent of the employees is a proper
legal basis for the employer to collect and process personal data from his employees. Also,
if there is a legal basis other than consent on which the data controller can rely, such as a le-
gal obligation to collect certain information, the data controller should not seek consent as it
creates the false impression with the data subjects that they actually have a choice, including
the choice to refuse, which of course they do not since the data controller is in fact relying
on another legal basis. Requesting consent in such circumstances is viewed as misleading.10
c) Purpose limitation
11.13 The Directive further provides that personal information may only be collected for a “spec-
on the purposes for which data may be processed. Any processing that goes beyond the
originally determined purpose is unlawful and may trigger the intervention of the regulator.
11.14 Because of the purpose limitation, companies are limited in what they can do with the
personal information they possess. In particular, they must resist the temptation to exploit
the vast amount of information they often collect during their normal course of business,
even though this information is potentially commercially valuable for the companies them-
selves or others. For example, a car dealer may not make available the personal data of its
customers to an insurance company, which of course is interested in obtaining this data for
advertising of its car insurance products, because the purpose for collecting the customer’s
contact details is to perform the purchase agreement. Only if the customer has been in-
formed and has agreed at the time of the purchase, that his contact details may be passed on
to third parties such as insurance companies, can the car dealer pass on the information and
the insurance company use the information in a lawful manner.
d) Proportionality
11.15 Another bedrock principle of data protection law with large practical implications is the
principle that that every data processing activity has to be proportionate. The Directive
prohibits any processing that is ‘excessive’ in relation to the purposes for which the data is
collected. In other words, do not collect too much information and do not keep it for lon-
ger than necessary. Also, if there is more than one possible way to reach a particular goal,
choose the least privacy intrusive way.
9 For a detailed analysis on the legal bases used in the context of processing operations carried out by pharma-
ceutical companies, see further under Section 5 of this chapter.
10 Article 29 Working Party, Working Document on the processing of personal data relating to health in elec-
13 July 2011.

11.16 It is worth highlighting that the principle of proportionality always applies, regardless of
the legal basis on which a data controller is relying to justify the collection and processing
of personal data. This means, among others, that consent of the data subject is not a blank
cheque - even if the data subject has consented, the data controller must follow the propor-
tionality principle and, for instance, not collect more data than necessary, not keep it longer
than necessary and chose the least privacy intrusive approach.
e) Transparency
11.17 Another key component of the Directive is transparency. Transparency means that any col-
lection and processing of data must be carried out openly and fairly. Companies are legally
collection and processing that is about to be carried out. Any failure to provide accurate and
complete information endangers the subsequent processing of the data, among other reasons
11.18 The required level of information depends on the actual circumstances of the data process-
ing. As a rule of thumb, the less obvious or expected the processing and use of the data is
to the data subject, the more detailed the information to be provided to the data subject must
be. The Directive provides the following guidance as to the kind of information that must
be provided to the data subject at the moment of collection of the data:
1.
2. Purposes of the processing for which the data is intended
3. Recipients or categories of recipients of the data
4. Existence of the data subject’s right of access to and the right to rectify the collected data
11.19 The information needs to be presented in a clear and intelligible manner to data subjects.
4. International data transfers

11.20 The transfer of EU data to countries outside the EU11 is subject to particularly strict rules.
With a view towards protecting the rights of EU citizens in the best possible way, the Direc-
tive generally prohibits, subject to very limited exceptions, every transfer12 of personal data
to a ‘third country’ (i.e., a country outside the EU) unless that country ensures an ‘adequate
level of protection’ for privacy rights. The decision whether or not a country offers an ad-
equate level of protection can only be taken by the European Commission after a lengthy
procedure. To date very few countries have achieved adequacy status.13 Similarly, com-
panies that certify to and apply the EU-US Safe Harbor Agreement are deemed to provide
an adequate level of protection, subject to the limitations of the EU-US Safe Harbor Agree-
11 Technically this should read: outside of the European Economic Area (‘EEA’) which is comprised of the 27
EU member states plus Norway, Lichtenstein and Iceland. Switzerland is not part of the EEA but its data
protection law is very similar to that of the EU, including the data transfer restrictions.
12 Please note that providing remote access to data to a person residing outside of the EU equals a data transfer
in the eyes of the data protection regulator.
13 Andorra, Argentina, Australia, Canada, Switzerland, Faeroe Islands, Guernsey, Israel, Isle of Man, Jersey,
New Zealand and Uruguay.

ment. The Agreement is limited to transfers from the EU to the US. Transfers to countries
other than the US are not covered by the Safe Harbor Agreement.
11.21 Absent adequacy, companies can put in place a contract, referred to as ‘model contract
clauses’, between the EU based data exporter(s) and the data importer(s). These clauses
intend to bind the non-EU recipient(s) of the data to a level of protection equivalent to that
in the EU. These clauses are drafted by the European Commission and cannot be changed.
type of data and the purposes of the transfer. Even though the terms of the model contract
the authorities and a limited number of countries moreover require that the companies wait
for authorisation from the relevant authorities before initiating the transfer of data. This
a Data Protection Regulation that would replace the current Directive.14
11.22 Recently, the EU developed a new mechanism for international transfers within a group of
companies, the Binding Corporate Rules (‘BCRs’).15 Companies that adopt BCRs commit
to apply their corporate data protection rules to European personal data regardless of the
location within the group where data is being processed. BCRs only apply internally within
the company and do not cover the disclosure of personal data to third parties or service pro-
viders outside the company. BCRs must be approved by the EU Data Protection Authorities
(‘DPAs’) of all the countries where the company has a covered establishment, which is still
a fairly lengthy process. Moreover, some DPAs consider that even with a BCR each indi-
vidual transfer outside the EU still requires an authorisation. So far, only large companies
have adopted BCRs, including some pharmaceutical companies. The pending Proposal for
for BCRs, which is likely to foster their uptake.
5. or databases
11.23 Subject to several exceptions and exemptions, data processing activities or databases must
likely will be abolished once the pending Proposal for a Data Protection Regulation has
-
6. The Future of EU privacy law: the general data protection regulation

11.24 The EU is currently in the process of reviewing Directive 95/46/EC. In January 2012, the
European Commission presented its Proposal for a General Data Protection Regulation,
14 of this Chapter.
15
third countries: Applying Article 26 (2) of the EU Data Protection Directive to Binding Corporate Rules for
International Data Transfers (WP 74), 3 June 2003, and then further elaborated and developed in WP 108, WP
153, WP 154, WP 155, and WP 195.

which is intended to replace Directive 95/46/EC.16 The Proposal which is very controver-
sial, is currently being reviewed in the European Parliament and the Council. Its primary
aim is to update the existing Directive from 1995 and address new privacy challenges aris-
ing from the internet and the digital economy.
11.25 The Proposal calls for a regulation which means the new rules would be directly applicable
would address one of the chief criticisms of the existing EU data protection regime, namely
that EU Member States have often implemented the Directive in divergent ways leading to
burdensome ‘national’ differences.
11.26 Although the current version will almost certainly undergo numerous changes throughout
the legislative process, it seems for now that the new Regulation (which contains more than
90 articles) will adhere to the general principles of the existing privacy regime, but will also
include a number of new concepts:
1. Higher sanctions: along the same lines as sanctions for infringements of EU compe-
enterprise’s annual worldwide turnover.

2. Different test for extra-territorial application of EU privacy law to non-EU companies
that ‘direct’ their processing activities toward data subjects residing in the EU or whose
activities serve to monitor the behaviour of data subjects. The current ‘use of means’
test would be abolished.
3. Further limited use of consent as a legal basis: consent cannot be used as a legal basis
between the position of the data subject and the data controller” exists.
4. -
vacy impact assessments and others).
5.
6. Mandatory privacy by design.
7. New rights for data subjects: the draft proposal contains a heavily caveated ‘right to be
forgotten’ according to which a data controller must render certain data inaccessible,
and ‘a right of data portability’.
B. DATA PROTECTION IN THE

PHARMACEUTICAL SECTOR17
1. Laws and codes of conduct

11.27 Like any other economic sector in the EU, the pharmaceutical sector is subject to EU data
16
17 Portions of this chapter have been updated from an article previously published: K. Van Quathem, ‘Con-

operations in the pharmaceutical sector are similar to the processing operations in other
sectors (e.g., processing of employee data for human resources purposes or the processing
of vendor data for accounting purposes).
11.28
protection laws presents particular challenges. For example, clinical research conducted
through clinical trials, almost inevitably involves the collection and use of data related to the
sector is subject to detailed reporting obligations on the safety of its products – the so-called
‘pharmacovigilance’ obligations which involve the collection of health data.
11.29 The often sensitive nature of the pharmaceutical sector’s operations has led to the develop-
ment of an extensive regulatory framework. This is also true in the area of data protection.
While general data protection laws apply also to the pharmaceutical sector, many Member
States have created add-ons that concern more sensitive areas, such as medical research.
11.30 The approach taken by the Member States to create these add-ons differs. In Germany, for
example, data protection in clinical trials is almost exclusively addressed by the Medicines
Law (Arzneimittelgesetz) instead of the Federal Data Protection Law (Bundesdatenschutzge-
setz
but those rules have been incorporated in the dedicated chapter of the data protection law
(Loi informatique et libertées).
11.31 In other Member States, industry groups have developed sector codes of conduct often with
the support of the national data protection authorities. In The Netherlands, for example, the
DPA approved the Nefarma Code on clinical trials in 2002 and 2010.18 In Spain, Pharmain-
dustria adopted an extensive code of conduct on data protection in clinical trials, which also
received support from the Spanish DPA.19
11.32 Having to comply with this plethora of laws, regulations and guidelines in complex research
settings sometimes frustrates researchers, prevents collaboration and data exchange, and
from Obstruction to Construction”.20 That said, real obstruction should be rare, provided
companies are diligent and forward-looking in complying with their data protection obli-
gations.
18 Dutch Data Protection Authority, Decision of 26 April 2010, Goedkeuring van de Gedragscode inzake het
verwerken van persoonsgegevens van de Nederlandse Vereniging van de Research-georiënteerde Farma-
ceutische Industrie (Nefarma).
19 Código tipo de Farmaindustria de protección de datos personales en el ámbito de la investigación clínica y de
farmacovigilancia.
20 Conference organized by the Belgian Data Protection Authority on 23 November 2010 (http://www.privacy-
commission.be/nl/evenementen/congres-privacy-en-wetenschappelijk-onderzoek).

11.33 As indicated above, the research and commercial practices of the pharmaceutical sector
a) Clinical trials
11.34 Clinical trials are at the heart of the pharmaceutical industry’s research and development
and safety testing. This testing requires experimenting with new substances on humans and
collecting relevant information from such experiments. The conduct of clinical trials has
been the subject of strict regulation for many years. On an international level, the non-bind-
ing Helsinki Declaration established the basic principles.21 In addition, the International
Conference on Harmonisation (‘ICH’) developed “Good Clinical Practices” setting out very
detailed rules on the many aspects of clinical trials. At the EU level, the Clinical Trials
Directive (currently under revision) sets out a standard for the EU and serves as a basis for
making the Good Clinical Practices mandatory. 22
11.35 As a general rule, clinical trials involve three main parties. First, there is the ‘trial subject’
or patient on whom a substance will be tested and whose data will be collected. Second is
the ‘investigator’, the doctor who executes the trial, often in a hospital. Third is the ‘spon-
sor’, the pharmaceutical company that develops a drug and wants it tested. In addition to
these three parties, ‘ethics committees’ evaluate trials and approve them, and pharmaceuti-
cal inspectors supervise the correct implementation. Finally, sponsors often engage clinical
research organizations (‘CROs’)
to the monitoring of the trial to ensure it is conducted properly, but it can also extend to the
monitoring, collecting and preparing research data, etc.).
11.36
subjects (the source data). This data is key-coded by replacing the patient name and some-
times birth date by a code (e.g., based on initials and birth year or just an random number).
The investigator holds the key that matches the code to a trial subject. The coded data are
then shared with the sponsor. The sponsor, CRO and competent authorities may have on-
site access to the (nominative) source data to verify that the trial is conducted properly (e.g.,
to ensure that all necessary consents have been obtained). However, neither the sponsor
11.37 Save exceptional circumstances, clinical trials are conducted on the basis of the informed
consent of the trial subject. In most cases, this consent also covers the lifting of the in-
21 World Medical Association (‘WMA’), Declaration of Helsinki on Ethical Principles for Medical Research
Involving Human Subjects, adopted by the 18th WMA General Assembly, June 1964.
good clinical practice in the conduct of clinical trials on medicinal products for human use, OJ 2001 L-121,
p. 34.

documents) and the collection and processing of sensitive personal data (e.g., health and
genetic data) by the sponsor.
b) Pharmacovigilance
11.38 Pharmacovigilance refers to the extensive regulatory framework governing the safety of
medicines. 23 Companies conducting clinical trials or receiving an authorisation to market
their medicines have an obligation to collect any available information on the safety of their
products and to regularly report this information to competent authorities.
11.39 In practice, pharmaceutical companies collect this information in a variety of ways. In clin-
ical trials, the investigator reports adverse effects. For products on the market, physicians
inform pharmaceutical companies of side effects shown by patients. They use dedicated
forms to that effect, which generally only identify the patient with a code. In addition, phar-
maceutical companies collect pharmacovigilance data from patients who may contact them
directly and by monitoring specialised publications.
11.40 It is important for pharmaceutical companies that pharmacovigilance reports can be linked
-
ety of channels by which safety reports can be collected, it is not uncommon for a company
to receive several reports on the same incident involving the same patient. Such duplica-
tions must be avoided as it might exaggerate the safety concerns surrounding a medicine and
result in undue restrictions on its allowed use.
c) CRM databases
11.41 The sales of medicines is heavily regulated in the EU. Many medicines can only be sold by
pharmaceutical companies. As a result, many marketing campaigns in the pharmaceutical

sector focus on the prescriber rather than the user. Companies develop sophisticated infor-
their medicines.
11.42 Market intelligence is an essential element of such tailored marketing campaigns. Success-
ful campaigns depend on knowing who you are dealing with, which physicians are more
likely to prescribe your product, what information is most likely to convince them, etc. The
vast majority of companies therefore hold and/or purchase sophisticated customer relation-
ship management (‘CRM’) databases containing information on physicians and feed these
publications. The data in those databases obviously constitutes personal data, even though
some of the data is publicly available (e.g., name, specialty, professional address and contact
details of the physician).
23 Regulation (EU) No 1027/2012 of the European Parliament and of the Council of 25 October 2012 amending
Regulation (EC) No 726/2004 as regards pharmacovigilance, OJ 2012 L-316, p. 38.

C. DATA PROTECTION LAW IN THE

PHARMACEUTICAL SECTOR IN PRACTICE
1. Concept of personal data

11.43 -
sonal nature and subject to the law, or it is not and therefore not subject to the law. In many
cases, the situation will be quite clear. A CRM database containing names and addresses of
physicians, clearly contains personal data. In contrast, generic data and most statistical data
will usually be considered anonymous. But what about key-coded clinical trial data and
key-coded pharmacovigilance data?
11.44
the least because of the controversy in the area of information technology applications and
clinical trials, health data incorporated in case report forms are key-coded by the investi-
gator in line with a procedure set out in the research protocol. There are no standardised
methods for key-coding patient data. Companies use different techniques ranging from
randomly allocated numbers to numbers based on the initials and/or birth date or year of the
patient. The investigator holds the key and only discloses coded data to the sponsor in the
case report forms.
11.45 European data protection laws and regulators adopt diverging positions on the status of such
point of contention relates to the Data Protection Directive’s provision that for assessing
the status of data, account must be taken of the means reasonably and practically available
to identify data subjects, taking into account cost and time. Regulatory authorities seem to
disagree about the question whom those means should be made available to: only the en-
tity holding the data or ‘anyone else’ (as provided in Recital 26 of the Directive). In other
words, in order to determine if the key-coded data held by the sponsor is personal data for
the sponsor, do we only have to consider the ability of the sponsor to identify the patient
(using reasonable means), or also the ability of the investigator?
11.46 -
sonal data of reversibly key-coded data. If only the ability of the sponsor to identify a
patient is considered, one could conclude that the sponsor will not succeed if the data is
adequately key-coded and if the sponsor cannot otherwise identify a patient.24 However, if
the ability of the sponsor and anyone else is considered, reversibly key-coded data held by
the sponsor is always personal data, because someone (i.e., the investigator) can de-code the
data, and quite easily so.
11.47 The Article 29 Working Party

2007.25
24 For example, in case of very rare diseases or extremely old age, the patient group can be so narrow that iden-
25 Art. 29 Working Party, Opinion 4/2007 on the concept of personal data (WP136), 20 June 2007.

element for our discussion.
11.48 The Working Party extensively discusses the complex issues surrounding data on (indirect-
is covered by European data protection law. In particular, the Working Party discusses
Recital 26 of the Directive, which provides that in order to evaluate the nature of indirectly
controller or anyone else”.
11.49
data, all factors at stake should be taken into account: the intended purpose of the data, the
subjects concerned, and the available state of the art technological processes to identify
individuals on the basis of the available data.
11.50 The Working Party stresses the importance of the ‘purpose’ pursued by the entity that holds
the data. If data is being held with the purpose of identifying someone or being able to do
thus serve two distinct objectives depending on the purpose for which the data is used:
1.
measure (key-coding) is a security measure – a ‘consequence’ of Art. 17 of the Data
2. -
nical measure (key-coding) is a ‘condition’ for the data not to be considered personal
data.
11.51 The Working Party’s opinion gives two practical examples to illustrate its analysis. First, a
company that receives key-coded patient data from a physician (presumably in a registry)
may be considered not to be processing personal data, provided the data does not allow for
11.52 Second, and in contrast to the above, key-coded clinical trial data should generally be con-
sidered personal data. The difference is that the key-coding in clinical trials is meant to
pharmaceutical company has construed the means for the processing, including the organi-
sational measures and its relations with the researcher who holds the key in such a way that
may happen, but rather as some-
thing that must happen under certain circumstances”. However, the Working Party points
out that this key-coded trial data should not always be considered personal data. Indeed,
the same key-coded data may be used by entities who will never have a need, interest, or
possibility (because of technical, organisational and legal protections) to identify patients.
While the Working Party does not offer examples, one may think of cases where a sponsor
shares the key-coded trial data with a partnering company cooperating in the research into
the development of a drug. If this partnering company has no formal role in the trial (and
thus no responsibility), it will have no reason to identify the patients, and may thus be con-
sidered as not processing personal data.

11.53 In the case of clinical trials, the Working Party’s bottom line seems to be that trial data
should be considered personal data for those who may have access to the key (or nominative
source data) in certain circumstances, and thus to most parties directly involved in a trial,
such as the sponsor, the CRO, and obviously the investigator.
11.54
in the context of clinical trials continues to vary. In countries like Belgium, France, Italy,
Portugal and Sweden, key-coded clinical trial data is generally considered personal data. In
countries such as Germany and the UK, the situation is analysed on a case-by-case basis,
while in countries such as Spain and the Netherlands, key-coded clinical trial data is typical-
ly not considered personal data. One of the objectives of the ongoing revision of the Data
2. Responsibility
11.55 The allocation of responsibility under applicable data protection laws will be obviously
depend on whether certain data is considered personal data or not. For CRM databases, the
pharmaceutical companies using those databases will be responsible for compliance and be
considered the data controller. But what about clinical trials and pharmacovigilance? Given
the number of parties involved and the uncertain nature of the data, it is not always easy to
allocate and clearly delineate responsibility.
11.56 The responsibility of the sponsor will be determined in part by the data it collects and uses.
As indicated above, key-coded data increasingly seems to be considered personal data, ei-
ther because of the amounts of data available to the sponsor, the characteristics of the (reg-
ulatory) environment in which trials are conducted, or the investigator’s ability to reverse
the code. As a logical result, sponsors are increasingly considered data controllers, subject
to the data protection law.
11.57 CROs, on the other hand, are hired by the sponsor to perform a variety of functions. In
some cases, their role is limited to a monitoring function, in which they mainly verify the
proper implementation of the trial by the investigators and their teams, and the accuracy of
the data included in case report forms. In other cases, they play a more prominent role and
are paid by the sponsor to conduct most aspects of the trials. CRO are most often considered
data processors of the sponsor. French, Italian and Portuguese guidelines explicitly support
performs its tasks, through appropriate contractual measures and regular supervision and
audits. The Italian Garante’s guidelines, however, clearly warn sponsors that if they do not
take their responsibility towards their CROs seriously, CROs may morph into data control-
lers, with all possible adverse consequences in terms of the legality of disclosures to CROs,
and the legality of their use of patient data.
11.58 The position of the investigator is more delicate. On the one hand, the investigator is sub-
ject to very strict rules, controls, and contractual obligations imposed by the sponsor, which
investigators have their own professional responsibility, have a direct relationship with the
patient (the data subject), and are actively involved in the set-up of a trial, which support a
-

troller is most common. This has been supported by the Italian Garante in its consultation
document which states that “the individual trial facilities and sponsor companies in general
have distinct responsibilities with
autonomous actors”.
3. Consent or not?
11.59 As indicated in the introductory chapter, under EU data protection law, any processing of
legal bases can be found in the EU Data Protection Directive (and the upcoming Regula-
tion), which distinguishes between legal bases for personal data and more narrow legal
bases for sensitive personal data, such as health data. In both cases, consent is one of the
which may or may not be available depending on the circumstances. In the absence of
consent, personal data may be processed for the execution of a contract (e.g., a consulting
agreement with a HCP), because of a legal obligation (e.g., pharmacovigilance obligations
or document retention obligations) or in the vital interest of the individual (e.g., emergency
procedures or emergency clinical trials). Finally, non-sensitive data can be processed for a
legitimate business interest, provided this interest is not outweighed by the privacy interests
of the individuals concerned. This legal basis requires companies to balance their interests
against the interests of the individuals involved. For example, do the privacy interests of
an HCP outweigh the legitimate interests of a pharmaceutical company to collect and hold
publicly available data on the HCP for outreach purposes? Probably not, although the as-
sessment can vary from one Member State to another. In any event, it is clear that consent is
by no means a necessary condition for the processing of personal data in all circumstances.
11.60 The use of consent is further limited by the conditions imposed on its use. The EU Direc-
tive provides that consent must be informed and freely given. The proposed Regulation
subordinate position and thus not in a position to freely consent (e.g., an employee in respect
of his or her employer). The question of how free consent can or must be continues to be a
against data, etc.). But in the research area this question can also raise concerns. For exam-
ple, what is the quality of someone’s freely given consent to participate in a clinical trial if
-
ments in his or her general well-being? Did the patient consent freely in this case? In some
countries, such as France, the question was important enough to replace patient consent by
an authorisation of the data protection authority. In that case, trial participants no longer
consent to the collection of their data in clinical trials (they do consent to participate in the
trial, as required by clinical trial rules). Instead, a public authority assesses the trials and
data collection methods and consents on behalf of the patients, through an authorisation.26
11.61 Various other national laws also contain provisions that allow for the collection of (sen-
sitive) data for research purposes, without consent. These research exemptions are often
accompanied by conditions, such as authorisation by competent authorities or data minimi-
26 The French approach is nevertheless ambivalent because consent is required for the collection of genetic
data. For the most sensitive data processing operations (and the one of which the potential impact is most

zation obligations. However, these rules are often vague and not harmonised, which makes
them ill-suited for multi-site research projects. For this reason, most clinical research is
still performed on the basis of consent, at least when such consent can be easily obtained.
The proposed Regulation could bring about some important changes as it harmonises the
research exemption and provides that personal data, including sensitive data, may be used
for the research purposes, without consent, if (i) the research aims cannot be achieved by
the need to obtain consent for the processing of personal data in clinical trials. Unfortunate-
ly, matters may not be that simple, as discussed below.
4. Purpose limitation
11.62 One central tenet of European data protection law is that personal data must be collected and
research under appropriate safeguards.27 These safeguards for secondary use (or further
use) have not been harmonised and sometimes impose heavy regulatory requirements.28
-
sequences. For HR and CRM data, secondary use is rarely an issue because employee HCP
data are collected for precise but fairly broad purposes. In the research area, however, sec-
ondary use is much more common.
11.63 Clinical trials, for example, often rely on personal data drawn from patient records. Those
the special safeguards set out by Member States. However, sponsors design clinical trials
-
search. The end result is a data set of which some data (from the pre-exiting patient record)
subject to primary use rules. In practice, this distinction is seldom made and all the data is
collected and used on the basis of patient consent, irrespective of whether the use constitutes
a primary or secondary use. This begs the question how broad a patient consent can be?
11.64 A broad consent results in a broad primary use (e.g., consent to the use of my health data
-
ment, in particular where the data involved is sensitive and a higher level of precision on
the purpose may be expected. Most Informed Consent Forms therefore tend to narrow the
primary use consent to uses for research in the particular condition (e.g., Alzheimer disease)
or the particular compound under investigation.
27 Directive 95/46/EC, Art. 6(b).

28 See, for example, the regime set out by the Belgian Royal Decree of 13 February 2000, which imposes a com-
plicated set of obligations, including the use of trusted third parties, depending on the nature of the personal
data used (coded versus nominative).

11.65 The European Commission’s proposed Regulation may have an important impact on sec-
-
tions do not include research, this probably means that a new consent would be required
for any further use of personal data for research purposes. Interestingly, for sensitive data,
including health data, the proposal is silent on the subject of further use. The meaning of
this omission is not entirely clear. Does this mean that no secondary use of health data is
allowed? That seems too stringent as it would seriously undermine many research opportu-
for primary use? But then the rules for sensitive data would be more relaxed than for ordi-
nary data. It would mean, for example, that secondary use of health data is allowed on the
basis of the very broad research exemption, so without consent. Further guidance from the
regulator on this important issue would be desirable.
5. Transparency
11.66 As indicated above, European data protection laws heavily emphasise transparency and
rights of individuals. In a pharmaceutical context, these obligations and rights sometimes
pose unique problems.
11.67 Informing individuals of the processing of their data (i.e., notice) is fairly straightforward
for CRM database. Those databases are developed for the precise purpose of reaching out to
health professionals and informing them about the use of their personal data and should not
present insurmountable problems. Such information can be imparted in a dedicated letter or
through inserts in other communications with health professionals.
11.68 Similarly, in clinical trials, patients can easily be informed through the informed consent forms
they have to sign before entering a study. These forms contain dedicated sections on the col-
lection of health data and the rights of patients in respect of their data. However, in some cases
for new research (further use of data). In principle, individuals must be informed about such
new use, but this is often impossible or very hard to do (the sponsor may not have their names,
study participants may have moved or passed away, etc.). Data protection laws often contain
exemptions that allow for such use of data for research purposes, under certain conditions. As
indicated above, the conditions can take different forms and include such things as excluding
data of persons who opposed further research, the non-reversible coding or anonymisation of
data, or obtaining an authorisation from the data protection authority.
11.69 In the context of pharmacovigilance, the transparency obligation is a thorny issue despite
the legal obligation of companies to collect this data. For example, it is not easy for an au-
thorisation holder to inform a patient that (coded) data about him or her is being processed
in this context, if the authorisation holder received this information from other sources (e.g.,
a physician). In this case, the authorisation holder will have no choice but to rely on the
physician to impart the necessary information to the respective patients.29
29 See French authorisation requirement for the processing of personal data in pharmacovigilance. Délibération
n° 2008-005 du 10 janvier 2008 portant autorisation unique de mise en œuvre par les entreprises ou organ-
ismes exploitants de médicaments de traitements automatisés de données à caractère personnel relatifs à la
gestion des données de santé recueillies dans le cadre de la pharmacovigilance des médicaments postérieure-
ment à leur mise sur le marché, n° 39, 15 February 2008.

11.70 -
cant problems. That said, a physician asking access to the information about him or her in
a company’s CRM database can be very embarrassing depending on the liberties taken by
company representatives in documenting their relationship with the respective physician.
-
icant PR concerns.
11.71 In the research area, the rights of individuals raise concerns in two main areas: blind studies
and the consequences of the right of opposition. In blind studies, a group of patients receive
a placebo in order to eliminate the impact of bias from test results. However, if patients
can use their right of access to learn what substance they have received, blind studies would
become impossible. At the same time, the right of access is often considered a central piece
of data protection law to which very little exceptions can be accepted. In some countries,
such as France, the right of access has been interpreted to supersede the research interest
of sponsors. Patients have a right of access and may request the un-blinding of their data,
although exercising this right will exclude them from further participation in the study.30
Other countries, such as Belgium, accept that in certain circumstances and with the initial
consent of the individual, the right of access can be postponed.31
11.72 Similarly, the right of opposition and the withdrawal of consent can have serious conse-
quences. It is generally accepted that such opposition or withdrawal of consent has no retro-
active effect – it does not require the deletion of already collected data (unless the collection
study sponsors and physicians to retain data. Moreover, such deletion of data would allow
unscrupulous researchers to manipulate results by encouraging ‘bad patients’ to exercise
their rights and remove them from the study. A more complicated question concerns the use
of the information already collected. Clearly, it should serve to demonstrate the proper im-
plementation of the study and to demonstrate the integrity of the study results. But can it be
used for actual research? It probably can. The recently proposed data protection regulation,
which contains an expanded right of opposition in the form of a ‘right to be forgotten’ limits
this latter right by legal retention obligations and
research.32
7.
11.73 -
monised European approach has encouraged individual Member States to adopt their own
laws. In 2009, for example, the German data protection law was amended to introduce a
33
The obligation applies to the unlawful
disclosure of certain types of data, including sensitive data (such as health data), unless the
30 Code de la santé public, Art. L 1111-7.

31 Belgian Data Protection Law of 8 December 1992, as amended, Art. 10§2.
32
33 Bundesdatenschutzgesetz, para 42a.

Such a risk can be avoided, for example, by ensuring that data is suitably protected against
access by unauthorised persons through technical means, such as encryption. Whether the
circumstances of the case, including the method of key-coding, and the ability of unautho-
rised parties to identify the affected individuals.
8. International transfers
11.74 The restrictions on international transfers of personal data are among of the most comment-
ed and criticised aspects of European data protection law. Like any other sector, they also
seriously affect the pharmaceutical sector. For most pharmaceutical companies, interna-
tional transfers of employee data, HCP data and research data is essential for their business
operations. Those transfers are often geared to company headquarters or serve providers
in third countries, such as the U.S. or India. Sometimes the transfers serve to render data
e.g., a centralised employee or HCP database), while in other
cases the transfers are necessary to meet regulatory requirements (e.g., the submission of
medical data for product authorisations in third countries).
11.75 As explained in the introductory part of this chapter, the methods used to frame a transfer
purpose of the transfer, and the countries of destination.
11.76 An additional word on the exemptions foreseen in art 26 of the Directive needs to be added.
Those exemptions need to be used with caution and they often are less promising than they
sound. For example, transfer restrictions can be overcome for HCP data if the transfer is
necessary to perform a contract, such as making payments to an HCP for consulting ser-
vices. Similarly, the transfer of pharmacovigilance data may be acceptable, if such transfer
is necessary to meet a legal obligation. The latter example, however, also demonstrates
the limitations of relying on the exemptions, which are interpreted narrowly. Regulatory
authorities have argued that the legal obligations that underlie a transfer must be European
obligations, not foreign obligations. As a result, pharmacovigilance data (assuming it is
in a form that would constitute personal data) could only be transferred internationally on
the basis of this exemption if European law or the national law of a Member States requires
such transfer, not because U.S. law requires it.34
11.77 The narrow interpretation of the exemptions has also been applied to the use of consent for
international transfers of personal data. European data protection authorities have argued
that consent should only be used in exceptional circumstances and not for regular bulk trans-
fers. This interpretation is based entirely on the idea that exemptions must be interpreted
narrowly but has no explicit basis in the Data Protection Directive.35
34 Article 29 Working Party, Working document on a common interpretation of Article 26(1) of Directive 95/46/
EC of 24 October 1995 (WP114), 25 November 2005, p. 15.
35 Ibid., p. 11.

11.78 As indicated in the introductory chapter, as an alternative to the exemptions, a company can
put in place protective measures that overcome the restrictions, such as transfer contracts or
binding corporate rules.
11.79 In practice and despite regulators’ criticism of the use of consent, in the research area, con-
sent is still often used to overcome transfer restrictions, partly because consent must be
predict to which countries the data may be transferred, for example, to obtain product au-
thorisations. In such cases, the Safe Harbor mechanism, transfer contracts and even BCRs
do not offer a practical solution (BCRs only cater to internal company transfers, not trans-
fers to public authorities in third countries). Many U.S. pharmaceutical companies have
to their U.S. headquarters and onward transfers from there.36
9.
11.80 The European reporting obligations also affect the pharmaceutical sector in many ways.
The EU Directive allows Member States to subject the processing of personal data to a
transparency of data processing in the EU. In some cases, the processing of personal data
may be subject to an authorisation, in particular the more sensitive processing operations
(e.g., health data, and biometrics). The requirements vary considerably from one Member
State to another. In France, for example, the sponsor of a clinical trial must obtain an
authorisation from the Data Protection Authority (‘CNIL’)37, whereas in Belgium the same
to data protection law.
36 The agreement and a list of registered companies can be found on the website of the U.S. Department of
Commerce (http://export.gov/safeharbor).
37

12
BRIBERY RELATED RISK AND MITIGATION
MEASURES FOR LIFE SCIENCES COMPANIES
A. OVERVIEW OF BRIBERY ACT 12.11 2. US enforcement actions 12.68

1. Jurisdiction 12.12 a) 12.68
b) Smith & Nephew plc 12.77
2. Offenses 12.14
c) 12.82
3. Adequate procedures defense 12.19 d) Eli Lilly 12.88
4. Penalties and other consequences 12.20 e) Other potential settlements
with life sciences companies 12.93
B. OVERVIEW OF THE FCPA 12.23
D. RISK AREAS AND ANTI-CORRUPTION
1. Jurisdiction 12.26
CONTROLS 12.95
2. Anti-bribery provisions 12.32
1. Distributors, sales agents,
3. Accounting/Financial control provisions 12.38 joint venture partners and
4. 12.41 other representatives 12.97
2. Consulting agreements, studies,
5. Penalties and other consequences 12.46
clinical trials, opinion leader groups
C. RECENT EUROPEAN LIFE and advisory panels 12.101
SCIENCES ANTI-CORRUPTION 3. Medical congresses and
ENFORCEMENT ACTIONS 12.49 other educational grants 12.106
1. Recent European life sciences 4. Sales incentives and pricing 12.110

anti-corruption enforcement actions 12.50 5. Travel, gifts, meals, and entertainment 12.114
a) DePuy International Limited 12.51 6. Charitable donations 12.118
b) R v Dougall 12.55 7. Product registration, shipping,
and customs 12.121
c) 12.59
8. Acquisitions 12.124
d) 12.65
E. CONCLUSION 12.129
12.01 -
Practices Act (‘FCPA’) and another £4.83 million for violating the UK anti-bribery laws.
With at least ten other pharmaceutical and medical device companies reporting investiga-
tions by US government authorities, additional large settlements are likely in the future.

BRIBERY RELATED RISK AND MITIGATION MEASURES
FOR LIFE SCIENCES COMPANIES
12.02 Moreover, the Chinese government’s recent targeting of multinational pharmaceutical com-
panies presents an additional enforcement risk: prosecution under domestic Chinese law,
in addition to potential exposure under the UK Bribery Act (the ‘Bribery Act’), FCPA and
anti-bribery statutes in other countries.1
12.03 Why has the life sciences industry become a magnet for anti-corruption enforcement? Be-
cause doctors and other professionals who work for public hospitals outside the US are con-
2
Accordingly, transactions in which companies
provide something of value to a Health Care Professional (‘HCP’), such as a consulting
contract, a trip to a medical congress or a subscription to a pharmaceutical journal, can be
fraught with risk.3
12.04 In addition, governments around the world having limited resources are naturally tempted
and using the levers that are available to them to exert downward pressure on the cost of
both medicines and medical devices.
12.05 As Lanny Breuer, former head of the criminal division at the US Department of Justice
(‘DOJ’) and once again a Covington partner, has stated:
[…] under certain circumstances and in certain countries, […] nearly every aspect
of the approval, manufacture, import, export, pricing, sale and marketing of a drug
industry competition and the closed nature of many public formularies, creates, in
4
12.06
Green, announced that the SFO will begin ‘proactive sweeps’ of key sectors that are “most
vulnerable to economic crime, such as construction and public contracts, oil and gas”.5 The
1 In late June 2013, the Chinese government announced that it had detained four senior executives of UK-based
GlaxoSmithKline for alleged economic crimes including bribery of health care professionals. By September
2013, several other multinational pharmaceutical companies had announced that Chinese authorities had
2 As we explain below, although the FCPA focuses on public sector bribery, anti-bribery laws of other coun-
tries, including the Bribery Act, criminalize bribery in both the public sector and the private sector.
3 In that regard, a recent Transparency International survey report highlights how the pharmaceuticals and
healthcare sector is perceived by 3,016 senior business executives from 30 countries around the world. On
-
sponds to a perception that they always do, the pharmaceuticals and healthcare sector scored 6.4. Transpar-
ency International, (2011), 16-17. In our experience, enforcement authorities will often
be guided by such data when they are deciding how to target scarce enforcement resources.
4 Lanny Breuer, Former Assistant Attorney General, Criminal Division, Prepared Keynote Address to the Tenth
Annual Pharmaceutical Regulatory and Compliance Congress and Best Practices Forum, 12 November
2009, available at http://www.justice.gov/criminal/pr/speeches-testimony/documents/11-12-09breuer-phar-
maspeech.pdf.
5 The Financial Times, ‘SFO Changes approach with aggressive scrutiny of key sectors’ (24 October 2013),
available at http://www.ft.com/cms/s/0/01b12dbc-3cc9-11e3-86ef-00144feab7de.html#axzz2j0VBn76a.

with the National Health Service within the United Kingdom and other countries’ public
health systems.
12.07 Although a life sciences company is permitted to enter into contracts with and provide
in exchange for the HCP’s purchasing or prescribing the company’s products or providing
some other advantage to the company. Otherwise, the company may face an anti-corruption
enforcement action by UK, US and other regulators.
12.08 In fact, Breuer announced to a Pharmaceutical Regulatory and Compliance conference in

2009 that the DOJ would be “intensely focused on rooting out foreign bribery [in the life
sciences] industry6”. Life sciences companies are thus under increasing pressure to ensure
-
ence in an improper manner HCP purchasing or prescribing decisions.
12.09 This chapter will provide an overview of the Bribery Act which entered into force in July
2011, followed by an overview of the FCPA. The chapter will then review recent anti-cor-
ruption enforcement actions against European and US life sciences companies that have
been penalized for improper conduct in Europe. As will become clear from the cases dis-
cussed in that section, the long arms of UK and US enforcement authorities frequently reach
to life sciences companies that are doing business in Europe.
12.10 Finally, the chapter will review the predominant risk areas for life sciences companies and
to prevent or quickly detect improper conduct. Although focused on the Bribery Act and
FCPA, the recommendations in this chapter should go a long way toward protecting life
sciences companies subject to anti-bribery statutes in other countries.
A. OVERVIEW OF BRIBERY ACT

12.11 The Bribery Act, enacted in 2010, amended the UK criminal law to replace common law
bribery offenses and several statutory offenses with a new, consolidated scheme of bribery
offenses. The Bribery Act, which does not apply retroactively, took effect in July 2011. We
are still in the early stages of the Bribery Act’s implementation and the lead enforcement
agency for the Bribery Act, the SFO, continues to resolve actions against companies and
individuals under older statutes for improper conduct that pre-dates July 2011. At the time
of writing, the SFO has eight active Bribery Act cases.7
1. Jurisdiction
12.12 The Bribery Act applies to UK companies, UK partnerships, and other UK commercial
organisations and to British citizens, nationals and residents. The Bribery Act also applies
6 Ibid.
7 Speech by David Green to the Cambridge Symposium (2 September 2013), available at http://www.sfo.gov.
uk/about-us/our-views/director’s-speeches/speeches-2013/cambridge-symposium-2013.aspx.

to non-UK companies, partnerships and other commercial organisations that “carry on a

business, or part of a business” in the UK. Finally, the Bribery Act applies territorially to
non-UK commercial entities and individuals when an act or omission forming part of the
offense takes place within the UK.
12.13
business” in the UK, the Ministry of Justice (‘MOJ’) has published guidance suggesting
that the Bribery Act would not apply to commercial organisations lacking a demonstrable
business presence in the UK. For example, a mere listing on the London Stock Exchange or
possession of a UK subsidiary may not automatically subject a company to the jurisdiction
of the Bribery Act, according to the MOJ.8 However, the SFO - which is not bound by the
jurisdiction.
2. Offenses
12.14 The Bribery Act creates four substantive offenses: bribing another person (Section 1), being
(Section 7).
12.15 -
tage” to another person, directly or indirectly, whenever the person intends the advantage to
itself would be improper.
12.16
or other advantage in three circumstances: (1) when the person intends, as a consequence,
that a relevant function or activity will be improperly performed (whether by that person or
or another) of a relevant function or activity.
12.17 Section 6 prohibits a person from - directly or indirectly - offering, promising or giving any
by the offer, promise or gift.9
12.18 Finally, Section 7 creates a new offense for commercial organisations that fail to prevent
bribes being paid on their behalf. Commercial organisations commit this crime if an ‘as-
8 Ministry of Justice, -
isations Can Put Into Place to Prevent Persons Associated With Them From Bribing, para 36 (March 2011),
available at http://www.justice.gov.uk/downloads/legislation/bribery-act-2010-guidance.pdf.

sociated person’ bribes another person to obtain or retain business or an advantage in the
conduct of business for a relevant commercial organisation and they are deemed to have
failed to implement ‘adequate procedures’ to combat bribery. An ‘associated person’ is
someone who performs services for or on behalf of a commercial organisation. Employees
are presumed to act for or on behalf of their employers, although companies can seek to
rebut that assumption.
3. Adequate procedures defense

12.19 The Bribery Act allows commercial organisations to defend themselves from a Section 7
charge by proving they had implemented ‘adequate procedures’ to prevent associated per-
sons from engaging in bribery. The MOJ guidance sets forth six principles for companies
seeking to implement adequate procedures to prevent bribery.10 In brief, the six principles
include:
1. Proportionate procedures: Employers should have bribery prevention policies and
procedures that are clear, practical, accessible, effectively implemented and enforced.
The type of policies and procedures should be proportionate to the bribery risk faced
by a commercial organisation and its nature, size and activities.
2. Top level commitment: The ‘top-level’ management of a company must be commit-
ted to preventing bribery by persons associated with the company and must foster a
culture within the company in which bribery is never acceptable.
3. Risk assessment: The organisation should carry out periodically documented assess-
ments of the nature and extent of its exposure to internal and external risks of bribery
on its behalf by associated persons.
4. Due diligence: Due diligence should be carried out in respect of persons who perform
services on the organisation’s behalf to mitigate the risk of bribery.
5. Communication (including training): Internal and external communication, includ-
ing training, should ensure that the organisation’s anti-bribery policies and procedures
are embedded and understood by all associated persons.
6. Monitoring and review: Anti-bribery policies and procedures should be monitored
and reviewed periodically by internal or external experts to ensure ongoing effective-
ness and improvements made wherever necessary.
4. Penalties and other consequences

12.20
12.21
within the European Union, including public health services. In the United Kingdom, the
Public Contracts Regulations 2006 (the ‘Regulations’) prevent public authorities from se-
lecting as a contractor any commercial organisation that has been convicted under Section 1
10 Ministry of Justice Guidance, supra.

or Section 6 of the Bribery Act. This mandatory debarment rule extends to other European
Union member states pursuant to Article 45 of the EU Public Procurement Directive.11
12.22 The Regulations also give contracting authorities discretion to exclude from selection any
commercial organisation that has been convicted of an offense under Section 7 of the Brib-
ery Act.
B. OVERVIEW OF THE FCPA

12.23 The US Congress passed the FCPA in 1977 in response to Securities and Exchange Com-
mission (‘SEC’) investigations that uncovered hundreds of millions of dollars in corrupt
parties outside the US.12 The FCPA contains two sets of provisions: anti-bribery provisions
13
12.24 The anti-bribery provisions, which apply to a broad set of companies and individuals, im-
pose criminal and civil penalties on covered persons who and entities that bribe non-US
‘issuers’ of securities in the United States, impose criminal and civil penalties on covered
companies that fail to record accurately and in reasonable detail in their books and records
payments that they have made or that fail to adopt an adequate system of accounting con-
trols.
12.25 The DOJ and SEC share enforcement responsibilities under the FCPA.
1. Jurisdiction
12.26 The FCPA provides jurisdiction over three categories of entities and individuals: ‘issuers,’
‘domestic concerns,’ and ‘any person’ who or that takes an act in the United States in fur-
therance of a corrupt scheme – that is, a scheme that violates the FCPA.
12.27 An ‘issuer’ is a company that trades its own securities or American Depository Receipts on
the FCPA apply to issuers.
12.28 The FCPA’s anti-bribery provisions also apply to ‘domestic concerns’, a category that in-
cludes non-issuers, partnerships and other entities organised under the laws of a US state
11 Directive 2004/18/EC OJ L134/114.

12 Criminal Division of the US Department of Justice and Enforcement Division of the US Securities and Ex-
change Commission, A Resource Guide to the FCPA, page 3, available at http://www.justice.gov/criminal/
fraud/fcpa/guide.pdf .
13 15 U.S.C. §§ 78dd-1 et seq.

or having a principal place of business in the United States. Like the issuer provisions, the
employees and agents. Domestic concerns also include citizens, nationals and residents of
the United States.
12.29 US-based issuers and domestic concerns can violate the FCPA even if the improper conduct
lacks a US nexus. Non-US based issuers must make use of the mails or some other means
or instrumentality of interstate commerce in furtherance of a corrupt scheme to be prose-
cuted under the FCPA.
12.30 In 1998, Congress amended the FCPA to add territoriality jurisdiction over ‘any person’
in the territory of the United States. US enforcement authorities have interpreted these ter-
ritoriality requirements broadly, taking the position that transferring funds through a corre-
spondent bank account in the United States or sending emails or faxes to the United States,
14
12.31 The FCPA therefore applies to many European companies, including both parent companies
that trade ADRs on a US stock exchange and the US subsidiaries of companies that do not
trade on a US exchange. US enforcement authorities also have charged non-issuer foreign
subsidiaries under the theory that the foreign entity acted as an ‘agent’ of the issuer. As of
October 2013, eight of the ten largest recoveries from FCPA enforcement actions had been
involved European companies.15
2. Anti-bribery provisions
12.32 The FCPA’s anti-bribery provisions apply to every category of person and entity subject to
the FCPA - issuers, domestic concerns and ‘any person’ taking in the United States an act in
furtherance of a corrupt scheme. The FCPA makes it unlawful for covered individuals and
entities corruptly to offer, pay, promise to pay or authorise the payment or offer of money
purpose of obtaining or retaining business or securing a business related advantage. The
the World Bank.
12.33 The scope of the FCPA anti-bribery provisions is broad in a number of respects. First, the
intent can be inferred from the circumstances, including circumstantial evidence demon-
his or her position.
14 A Resource Guide to the FCPA, page 11.

15 -
-

12.34 Second, the provisions prohibit the corrupt provision of ‘anything of value.’ In addition to
companies, this broad interpretation means that the provision of travel, registration fees for
congresses, free samples, consulting contracts, honoraria, journal subscriptions and many
12.35
non-US government or any department, agency or instrumentality thereof or of a public
US government or government entity. US enforcement authorities have interpreted the

-
ernment-controlled entities, an interpretation that has been upheld by several US courts.16
12.36
with obtaining or retaining business, US courts have interpreted that requirement to include
opportunities of the payor”.17

-
toms or tax liability have been held to trigger FCPA liability even though the offer, promise,
18
12.37 Finally, the knowledge element of the FCPA has been interpreted broadly to include ‘willful
blindness’ or ‘conscious disregard’ of likely FCPA violations.19 A life sciences company
therefore can face liability, for example, for improper payments made by an intermediary
even if the company did not actively authorise or have actual knowledge of the improper
payment.
3. Accounting/Financial control provisions

12.38
control provisions. The books and records provisions require issuers and their controlled
that, among other things, transactions will be executed in accordance with management in-
and DOJ focus on, among other issues, whether a company has devised, implemented and
maintained controls designed to prevent and detect violations of the FCPA.
16 United States v Aguilar United States v Carson, 2011 WL

5101701, at *9 (C.D. Cal. May 18, 2011).
17 United States v Kay, 359 F.3d 738, 751 (5th Cir. 2004).
18 Id., at 755.

12.39
which the issuer does not hold a majority interest or with respect to which the issuer is not
-
ence in good faith, and to the extent reasonable under the circumstances, to cause the entity
12.40 -
duct that is prohibited by the FCPA’s anti-bribery provisions. For instance, the anti-bribery
the accounting provisions do cover such payments if they are not recorded accurately and
in reasonable detail or if the payments are made without management’s having exercised
adequate control over them. Similarly, the FCPA anti-bribery provisions do not cover com-
are inaccurately recorded in a company’s books and records or suggest a lack of adequate
controls.20
12.41 The FCPA’s anti-bribery provisions do not apply to “facilitating or expediting payment[s]
”.21 The statute provides examples of
-
formance or the transit of goods.
12.42 The US enforcement authorities have interpreted the FCPA facilitation payment exception
modest payment to a regulator to register a product likely would fall outside the exception
and could expose the company to liability under the FCPA. Moreover, even a permissible
facilitating payment must be recorded accurately or it could trigger a books and records
violation under the FCPA accounting provisions.
12.43 -
written laws and regulations of the country in which it was made”.22 Second, the FCPA
-
rectly related to “the promotion, demonstration, or explanation of products or services” or
“the execution or performance of a contract with a foreign government or agency thereof”.23
20 Although not prohibited by the FCPA, commercial bribery is prohibited by other federal statutes as well as
statutes that have been adopted in many 20 US states. John P. Rupp and David Fink, ‘Foreign Commercial
Bribery and the Long Reach of U.S. Law’, Bloomberg Law Reports (11 January 2012).
21 15 U.S.C. §§78dd-1(b), -2(b), -3(b).
22 15 U.S.C. §§ 78dd-1(c)(1), -2(c)(1), -3(c)(1).
23 15 U.S.C. §§ 78dd-1(c)(2), 2(c)(2), -3(c)(2).

12.44 Although the latter defense permits companies to provide travel and lodging for legitimate
promotional purposes, US enforcement authorities have brought criminal and civil charges
Companies have found themselves facing enforcement actions for trips that lacked a legit-
imate business purpose, included non-business-related side trips or involved payment for a
family member’s expenses, among other characteristics that bring a trip outside the scope
12.45 In contrast to the ‘adequate procedures’ defense that exists under the Bribery Act with re-
spect to the Section 7 offense of failing to prevent bribery, the FCPA does not include
compliance programs. However, the DOJ and SEC will consider the adequacy of an organ-
isation’s program when determining how to exercise their prosecutorial discretion under the
FCPA.24
effective anti-bribery compliance program, which are equivalent to the six principles listed
in the MOJ guidance in the United Kingdom.
5. Penalties and other consequences

12.46
-
al.25 A willful - and therefore criminal - violation of the accounting provisions can result in a
-
ment for an individual. Under the Alternative Fines Act, enforcement authorities can obtain
26
Each
violation in a series of violations can result in penalties.
12.47 Companies and individuals can also face civil penalties for violating the FCPA. Compa-
12.48 In addition to the penalties provided by statute, companies can face other consequences
from FCPA violations. The DOJ may require the company to engage - at the company’s ex-
pense - an independent compliance monitor for several years as a condition of a Deferred or
-
panies could face debarment from government contracts, loans, grants, or other programs.
24 A Resource Guide to the FCPA, page 56: “In addition to considering whether a company has self-reported,
cooperated, and taken appropriate remedial actions, DOJ and SEC also consider the adequacy of a company’s
charges should resolved through a deferred prosecution agreement (‘DPA’) or non-prosecution agreement
(‘NPA’), as well as the appropriate length of any DPA or NPA, or the term of corporate probation. It will often
affect the penalty amount and the need for a monitor or self-reporting”.
25 -
payment.
26 18 U.S.C. § 3571.

suit to recoup their losses. And, of course, companies may suffer reputational harm.
C. RECENT EUROPEAN LIFE SCIENCES

ANTI-CORRUPTION ENFORCEMENT ACTIONS
12.49 Enforcement authorities in the United States and the United Kingdom have been actively
investigating a number of life sciences companies and associated individuals. US enforce-
ment authorities have settled several recent anti-corruption enforcement actions against life
sciences companies that involved improper conduct in Europe and additional settlements
are expected. Several European countries other than the United Kingdom also recently have
pursued anti-corruption charges against life sciences companies and individual employees.
1. Recent European life sciences anti-corruption enforcement actions

12.50 In the past several years, European enforcement agencies have followed the lead of their
anti-corruption enforcement.
a) DePuy International Limited
12.51
in 1998. DPI is a Leeds-based manufacturer and seller of orthopedic products. According
to enforcement documents, at the time of the acquisition, DPI was engaged in a widespread
bribery scheme in Greece to sell surgical implants. DPI sold its products in Greece through
products and paid commissions via a separate contract to the distributor’s offshore compa-
ny.
12.52 The agent /distributor used the commissions to bribe publicly-employed doctors to induce
and after DPI acquired the agent’s Greek company in 2011, hiring the agent as a consultant.
DPI executives and at least one executive from DePuy were aware that the agent paid cash
incentives to doctors to generate sales.
12.53 DPI later terminated its relationship with the agent and hired a new agent to continue mak-
ing improper payments to doctors. In addition to the payments made by the Greek agents,
employees of a DPI subsidiary also withdrew petty cash to make direct payments to doctors.
period of eight years and mischaracterised the payments on their books.
12.54 -
cussed below, DPI’s parent company, the SFO concluded that double jeopardy prevented
a criminal prosecution in the UK. The SFO obtained a civil recovery order against DePuy
International for £4.829 million plus prosecution costs, however, with the order being an-

States.
b) R v Dougall
12.55 The SFO also brought charges against Robert Dougall, a UK citizen who became the Di-
rector of Marketing at DPI in 1999. The SFO charged Dougall with conspiracy to corrupt,
alleging that he had conspired with DPI and others to make corrupt payments to public-
ly-employed HCPs in Greece in exchange for contracts to supply DPI products. Dougall
reportedly acted as a whistleblower with respect to others within the company: the SFO
investigation.27
12.56 Dougall pleaded guilty to the conspiracy charge, having entered into a plea agreement
with the prosecution pursuant to Section 73 of the Serious Organised Crime and Police Act
2005.28 The plea agreement stated that “[i]n particular, the court would act wholly within
its discretion by imposing a suspended sentence of imprisonment”. According to the SFO,
Dougall was of previous good character and had cooperated fully with the SFO investiga-
tion.
12.57 Mr. Justice Bean initially sentenced Dougall to 12 months imprisonment, rejecting the SFO
plea agreement that had suggested a 12 month suspended sentence. Commentators noted
that Dougall’s sentence threatened to deter future whistleblowers since the SFO had thought
to make an example of Dougall to encourage whistleblowers.29
12.58 On appeal, the Court of Appeal suspended Dougall’s 12-month sentence. In reaching its
verdict, the court took into account several mitigation factors, including Dougall’s cooper-
ation with the SFO’s investigation, his guilty plea and the fact that he had not derived any
-
er, that plea agreements are always subject to approval of the court and that judges are not
bound by such agreements.30 In particular, “agreements between the prosecution and the
defence about the sentence to be imposed on a defendant are not countenanced”.31
27 available at http://www.sfo.gov.uk/press-room/lat-
est-press-releases/press-releases-2010/british-executive-jailed-for-part-in-greek-healthcare-corruption.aspx.
28
to the prosecutor in relation to an offence, with powers being given to the courts to take that into account
in accordance with Section 71(4)(c) of the Serious Organised Crime and Police Act 2005.
29 E.g., Sean Farrell, ‘SFO Whistleblower Robert Dougall is Spared Prison,’ The Telegraph
International Whistleblowers.com, ‘SFO Whistleblower is Spared Prison,’ available at https://www.interna-
tionalwhistleblowers.com/whistleblowers/38-research-and-case-studies/655-sfo-whistleblower-robert-dou-
gall-is-spared-prison.
30 Case 2010/02063/A3, R v Dougall [2010] EWCA Crim 1048.
31 Ibid.

c)
12.59 In November 2009, the SFO charged Mark Jessop with criminal violations in connection
with payments that Jessop had made to the Iraqi government in connection with the UN Oil
for Food Program. Jessop, a UK citizen, was the sole director of two life sciences compa-
nies, JJ Bureau Limited and Opthalmedex Limited, through which he sold medical goods
in Iraq.
12.60 Jessop also acted as an agent of other suppliers, negotiating contracts on their behalf. Be-
tween 1996 and 2003, Jessop entered into 54 contracts for medical goods with Iraq’s State
Company for Marketing Drugs and Medical Appliances, known as Kimadia. The contracts
12.61
allow a ten percent kickback to the regime. Pursuant to that policy, suppliers were required
to pay the kickbacks to the Iraqi government prior to their shipping goods into Iraq.
12.62 Jessop accepted contracts on that basis and paid ten percent kickbacks totaling approximate-
ly €104,649 to the former Iraqi regime, with a further €235,237 outstanding. Jessop made
the payments through intermediaries, who were paid commission in excess of £40,000.
Both the commission payments and the kickbacks were in breach of UN sanctions that pro-
hibited payments to Iraq or persons in Iraq without (in the UK) a Treasury license.
12.63 Jessop plead guilty to ten counts of engaging in activities to make funds available to the
Iraqi government in contravention of the Iraq (United Nations Sanctions) Order 200032,
which made it a criminal offence to do so without a license granted by HM Treasury. On 13
April 2011, HHJ Leonard sentenced Jessop to 24 weeks imprisonment and ordered him to
pay £25,000 in prosecution costs and £150,000 to the Development Fund for Iraq.
12.64 UK enforcement authorities have also investigated other companies for ten percent kickback
payments to the former Iraqi regime in connection with the UN Oil for Food Program.33 It
was reported in 2007 that the SFO had requested documents from GlaxoSmithKline, As-
traZeneca and Eli Lilly in connection with its investigation of the Oil for Food Program.34
d) (Serbia)
12.65
served with a criminal indictment. The indictment concerned allegations that local em-
ployees of AZ had made improper payments to doctors at the Institute of Oncology and
Radiology of Serbia.
12.66
Radiology of Serbia, including director Nenad Borojevic and representatives from several
32 SI 2000/3241.
33
34 See, e.g., ‘Drug Firms Probed Over Iraq Cash,’ BBC News (30 December 2007), available at http://news.bbc.
co.uk/2/hi/uk_news/7164677.stm.

pharmaceutical companies - including AZ and Roche - on suspicion of accepting and giving
12.67
35
2. US enforcement actions
a)
12.68
along with an accompanying settlement with the SFO, which is described above. In addi-
Romania and Iraq.
12.69
were responsible for selecting medical products for Polish hospitals through a tender pro-
cess. Although the contracts were purportedly for professional services such as lecturing,
leading workshops and conducting clinical trials, the HCPs did not in fact provide any
services under the contracts and were not required to provide proof of any work completed.
12.70 The subsidiary also paid for HCPs to travel to medical conferences in Poland and abroad
12.71
distributors to provide cash payments and gifts to HCPs at public hospitals in exchange for
percent of the sales value of the pharmaceuticals, distributors provided laptops, electronics
12.72
-
ucts. Employees of the subsidiary also arranged for travel agents to overcharge for travel
and used the excess cash generated to provide ‘pocket money’ to the HCPs above the limits
-
12.73 -
nection with the Iraq Oil for Food program. While the FCPA’s anti-bribery provisions do
35 AstraZeneca plc, Form 6-K (October 2011), available at http://www.sec.gov/Archives/edgar/

data/901832/000095010311004642/dp27061_6k.htm.

not apply to payments to non-US government agencies, corrupt payments to non-US gov-
ernment agencies can violate the FCPA’s accounting provisions when the corrupt payments
DPI case.
12.74
and individuals in connection with business practices in various markets”.36 The DPA also
-
sion not to impose a corporate monitor.37
12.75
-
ruption realm38.
12.76
risk areas faced by life sciences companies, including the engagement of distributors, con-
sulting agreements with doctors and the provision of travel support to HCPs. These areas
and others will be discussed in more detail later in this chapter.
b) Smith & Nephew plc
12.77 -
to the DOJ and the SEC in connection with improper payments to government-employed
doctors in Greece.
12.78
sold orthopedic products to a Greek distributor at full list price and then paid a percentage
representing the distributor’s discount to off-shore shell companies controlled by the dis-
tributor. The subsidiaries paid between 25 and 40 percent of sales to the shell companies
as part of ‘marketing arrangements’ with the companies, although the shell companies did
not, in fact, provide any marketing services. The distributor used these off-shore funds to
provide cash incentives and other things of value to doctors at public hospitals.
12.79 The US subsidiary later entered into a distribution contract with another shell company
discount on its purchases of orthopedic products sold in Greece. The Greek distributor used
the discount to fund bribe payments to Greek HCPs.
36 available at http://www.justice.
gov/criminal/fraud/fcpa/cases/depuy-inc/04-08-11depuy-dpa.pdf .
37 Ibid.
38 This point is emphasised through a statement by former SFO director Richard Alderman in October 2010:
The SFO is also looking closely at the pharmaceutical industry, and businesses should not “underestimate the
amount of information sharing that goes on between us and the DOJ and the SEC about all of these issues”.

12.80
investigations of “other companies and individuals in connection with business practices
in various markets”.39 -
months. The DOJ’s press release noted that the settlement was “part of an investigation
into bribery by medical device companies of physicians employed by government insti-
tutions”.40 Indeed, the very next month, medical device company Biomet settled FCPA
violations with the DOJ and SEC involving conduct in Latin America and China.
12.81 -
mation about a corrupt distributor to go after multiple companies selling to that particular
intermediary. At least one of the Greek distributor’s shell companies involved in the im-
company to pay bribes to public doctors in Greece”.41 Given the similarity of the allega-
c)
12.82
SEC in a three-part settlement announced in August 2012: an indirect wholly-owned sub-
-
-
12.83 According to the enforcement documents, from at least 1997 through 2006, employees and
pharmaceutical products and secure regulatory approvals. The improper payments were
made through a variety of means including ‘bonus agreements’ tied to sales, ‘incentive
care professionals.
12.84
expensive gifts to sales representatives and government health care providers in exchange
for sales agreements and formulary approval. The Italian subsidiary additionally conducted
12.85
gifts and support for international travel to doctors employed by Chinese government-af-
39 available at http://www.
justice.gov/criminal/fraud/fcpa/cases/smith-nephew/2012-02-01-s-n-dpa.pdf.
40 Press Release, U.S. Dep’t of Justice (Feb. 6, 2012), available at http://www.justice.gov/opa/pr/2012/Febru-
ary/12-crm-166.html.
41 See Complaint, SEC v Smith & Nephew plc, No. 1:12-cv-00187, para 20 (D.D.C. Feb. 6, 2012), available at
http://www.sec.gov/litigation/complaints/2012/comp22252.pdf.

incentives for future sales and prescriptions. The SEC also alleged misconduct by subsid-
China, Indonesia, Pakistan and Saudi Arabia.
12.86
and integration of anti-corruption controls on successor liability. Although the DOJ im-
12.87 -
ducted an extensive due diligence and risk assessment review of Wyeth’s operations after
the acquisition and promptly integrated the new Wyeth entities into its internal controls pro-
d) Eli Lilly
12.88 -
lion to the SEC to resolve allegations of FCPA violations based on alleged bribes to govern-
12.89 According to the enforcement documents, Lilly’s Polish subsidiary made eight payments to
the Chudow Castle Foundation, a small charitable foundation founded and administered by
the head of a regional government health authority at the same time the subsidiary sought
SEC alleged that the payments were improperly recorded as charitable donations because
to allow the purchase of a Lilly product.
12.90 In Russia, Lilly’s subsidiary allegedly paid millions of dollars to off-shore entities for pur-
ported ‘marketing services’ in order to induce pharmaceutical distributors and government
entities to purchase Lilly’s drugs. The SEC alleged that the subsidiary had little information
about these third-party entities, beyond their addresses and bank accounts outside of Russia.
12.91
provided, the SEC alleged that there was “little evidence that any services were actually
provided under any of these third party agreements”. In particular, the subsidiary was al-
associated with an important member of Russia’s Parliament.
12.92 Notably, the SEC criticized Lilly’s due diligence efforts in Russia, noting several examples
the third party was able to provide the contracted-for services. The settlement underscores
the importance of conducting thorough due diligence on higher-risk third party represen-
tatives, including distributors and sales agents. Indeed, the SEC’s settlement with Lilly
closely followed the November 2012 release of US regulators’ Resource Guide to the FCPA,

which included “third party due diligence and payments” as one of the ten elements of an
42
e) Other potential settlements with life sciences companies
12.93 More than ten additional life sciences companies recently have disclosed FCPA-related in-
quiries and investigations. Some of the investigations involve conduct occurring in Europe,
and two UK pharmaceutical companies - AstraZeneca and GlaxoSmithKline - are among
the companies that have disclosed inquiries.
12.94
in Germany, Italy, Poland and Russia as well as countries outside Europe. Similarly, Bristol
matters formerly under investigation by the German prosecutor in Munich, Germany, which
since have been resolved.
D. RISK AREAS AND ANTI-CORRUPTION CONTROLS

12.95 -
-
to HCPs. Life sciences companies would be well advised to put controls in place to ensure
the company.
12.96 The suggestions summarised below are not intended to present a comprehensive compli-
ance program. Both US and UK enforcement authorities expect companies to implement
-
ular risk areas. In addition to effective controls, an optimum compliance program should
include monitoring and auditing as well as a prompt response to any issues that arise.
1. Distributors, sales agents, joint venture partners

and other representatives
12.97 Representatives present one of the highest risk areas for life sciences companies, which often
in trouble under the Bribery Act, FCPA and other anti-bribery statutes when a representative
makes an improper payment to a publicly employed HCP to sell the company’s product or
obtain some other advantage for the company. Moreover, when multiple companies use the

same sales agent or distributor, an investigation of or disclosure by one company can lead
enforcement authorities to other companies working with the same corrupt representative.43
12.98 UK and US enforcement authorities expect life sciences companies to conduct due dili-
gence on their representatives and joint venture partners who will be making or arranging
-
bust anti-corruption due diligence - which can be conducted internally or by an outside
detailed above).
12.99 -
clude provisions requiring compliance with applicable anti-corruption laws and permitting
the company to terminate in the event of a violation. After a representative is engaged,
companies should carefully monitor the representative’s activities, invoices and expenses.
Emerging markets often represent a special area of concern.
12.100 A life sciences company also should considering educating its representatives about appli-
cable anti-corruption laws and the company’s expectations of compliance. Representatives
may be accustomed to a local culture in which the provision of expensive gifts and meals
is customary and expected. They also may be accustomed to “playing by local rules” in
countries where corruption is prevalent.
2. Consulting agreements, studies, clinical trials,

opinion leader groups and advisory panels
12.101 Life sciences companies must exercise caution when entering into consulting agreements or
other contracts with HCPs, which can constitute something of value under anti-corruption
laws.
12.102 Consulting arrangements present at least two types of risk: (1) that the company is choos-
ing to hire a particular consultant in exchange for the consultant or the consultant’s family
representative) has entered into sham contracts as a means of creating a pool of money for
improper payments. Engaging HCPs to conduct studies and clinical trials, or sit on advisory
panels, can present corruption risks for similar reasons.
12.103 Several recent FCPA settlements with life sciences companies involved consulting agree-
-
duce their purchase of Biomet products. The subsidiary paid these commissions through
43
distributor to investigate multiple companies selling to that intermediary. At least one of the Greek distribu-
another medical device company to pay bribes to public doctors in Greece”. See Complaint, SEC v Smith &
Nephew plc, No. 1:12-cv-00187, para 20 (D.D.C. Feb. 6, 2012), available at http://www.sec.gov/litigation/

invoices for consulting or professional services. In China, Biomet’s subsidiary paid doctors
12.104
that did not provide marketing services as a way of creating funds for its distributor to use
products such as by entering into an agreement for ‘regulatory consultancy services’ with a
Croatian doctor who held various positions within Croatian government agencies regulating
the pharmaceutical industry.
12.105 As a result, proposals to enter into consulting agreements or engage doctors to participate in
studies or clinical trials should be carefully reviewed. Companies should take care to ensure
that a legitimate business purpose exists for the arrangement and should avoid entering into
agreements with HCPs who are in a position to provide an advantage to the company (such
as, for example, HCPs sitting on tender committees).
3. Medical congresses and other educational grants

12.106
cash incentives with sponsored travel after the company began an internal investigation into
the cash incentives. The distributor sponsored travel for HCPs in exchange for prescribing
travel and used the excess cash generated to provide ‘pocket money’ to the HCPs above the
12.107
purchasing of company products by their institutions.44 Some of these bonuses took the
form of travel expenses for attending medical conferences. Regulators also alleged that
the company used conference attendance and travel as a corrupt inducement for healthcare
45
12.108 Other FCPA enforcement actions similarly have faulted companies for providing govern-
-
congresses due to the compliance risks associated with such activities.46
12.109
company avoid paying for trips with excessive leisure components, lavish receptions, unre-
44 available at
Nephew Deferred Prosecution Agreement, para 43 (6 February 2012), available at http://www.justice.gov/
criminal/fraud/fcpa/cases/smith-nephew/2012-02-01-s-n-dpa.pdf.
45 Id., paras 18, 32, 42.
46 Ben Hirschler, ‘AstraZeneca Pulls Plug on Free Trips for Doctors,’ Reuters (May 27, 2011).

lated side trips or other features that are likely to bring the trip within the scope of applicable
anti-bribery provisions. A company also should consider implementing controls to track
its sponsorships to ensure that the company does not provide multiple sponsorships to the
same physician within a short period of time as well as assist with accurate recording of the
4. Sales incentives and pricing

12.110 Sales incentives and pricing structures can be used to mask improper payments to govern-
funds that can be used to make improper payments.
12.111
commissions to its sales agent through separate contracts with the agent’s offshore compa-
paid a percentage of sales made by its Greek distributor to offshore shell companies, pur-
portedly in exchange for marketing services. The SEC also alleged that Lilly gave a distrib-
utor in Brazil “unusually large discounts”, a portion of which the distributor used to bribe
47
12.112 There are many legitimate reasons for a life sciences company to provide sales incentives.
But sales incentives structures create varying degrees of risk from a compliance perspec-
tive. Among other issues, managers and controllers should consider whether a commercial
reason exists for the incentive structure that is being considered and whether an HCP might
12.113 Similarly, managers and controllers should consider compliance concerns when entering
into commission arrangements. Among other issues, managers and controllers should con-
-
mission will be paid and whether the commission represents the market rate for comparable
work.
5. Travel, gifts, meals, and entertainment

12.114 Companies that provide travel, gifts, meals, entertainment or other hospitality as an incen-
tive or reward for obtaining business or some other improper advantage could face liability
under the Bribery Act, FCPA and other comparable statutes. Gifts can be a particularly
thorny issue in cultures where gift-giving is customary at business meetings and helps cul-
tivate business relationships.
12.115 Lavish hospitality is typically viewed as improper and the repeated provision of meals and
entertainment - even if not lavish - can violate anti-corruption laws. As the UK MOJ stated
in its Bribery Act Guidance, “the more lavish the hospitality or the higher the expenditure in
relation to travel, accommodation or other similar business expenditures provided to a for-
47 See Complaint, SEC v. Eli Lilly and Company, No. 1:12-cv-02045, para 23 (D.D.C. Dec. 20, 2012),
available at http://www.sec.gov/litigation/complaints/2012/comp-pr2012-273.pdf.

48
”.
12.116 Similarly, the Resource Guide released by US regulators provides:
Items of nominal value, such as cab fare, reasonable meals and entertainment ex-
-
cial, and, as a result, are not, without more, items that have resulted in enforcement
action by DOJ or SEC. The larger or more extravagant the gift, however, the more
likely it was given with an improper purpose.49
12.117 Most anti-corruption compliance programs therefore include controls relating to the provi-
sion of gifts and hospitality.
6. Charitable donations
12.118 Because the FCPA, like many other anti-bribery statutes, such as the Bribery Act, covers the
can come within the scope of the statute if the other elements of the statute are met. In
and agreed to hire an independent consultant to settle an enforcement action involving a

donation to the favourite charity of a regulator in Poland.50
12.119
Polish subsidiary and had made clear that it would be in the subsidiary’s interest to make
the contribution. The subsidiary’s manager authorised the contribution in several smaller
payments to avoid exceeding his authorisation level. The company then mischaracterised
the payments in its accounting records.51
12.120 Many anti-corruption compliance programs thus include the implementation of controls
relating to a company’s charitable contributions, potentially including review by a compli-
ance committee, charitable contributions committee or senior businessperson who has been
trained to spot potential anti-corruption issues.
7. Product registration, shipping, and customs

12.121 Life sciences companies also may face anti-corruption risks when registering or importing
a product into a foreign market. A 2009 settlement with the SEC by Nature’s Sunshine
48 Ministry of Justice Guidance, supra, para 28.

50 In re Schering-Plough Corporation, Exchange Act Release No. 49838 (9 June 2004), available at http://
www.sec.gov/litigation/admin/34-49838.htm.
51 The SEC similarly alleged that Lilly violated the FCPA’s accounting provisions based on payments the com-
pany made to the same charitable foundation in Poland .

12.122 According to the SEC’s complaint,52 the Sunshine Products’ Brazilian subsidiary had had
-
tain vitamins, herbal products and nutritional products as medicines, thereby requiring the
company to register these products before importing or selling them in Brazil. To circum-
vent the new registration requirements, the Brazilian subsidiary made undocumented cash
payments to Brazilian customs brokers, some of which were later paid to Brazilian customs
12.123 -
tors on import/export issues, policies and procedures adopted with respect to representatives
also might consider implementing additional controls to address these types of risks.
8. Acquisitions
12.124 -
pany could face potential liability for improper payments made after an acquisition. Much
-
tinued long after the acquisition. Depending on the anti-corruption laws applicable to the
on the target’s conduct prior to the acquisition.
12.125 Second, a company might overpay for a target if the target relied upon a corrupt business
model. If the target company’s sales volumes are based on a network of corrupt dealers,
the target company will make far fewer sales after the acquiring company terminates the
corrupt dealers.
12.126 Pre-acquisition anti-corruption due diligence helps companies assess the value of a target.
If corruption problems are discovered, the acquiring company might require the target to
remediate the issue prior to the acquisition, demand a reduction in purchase price or create
an escrow account for part of the purchase price to cover the costs the acquiring company
may incur because of the pre-acquisition conduct of the target. The acquiring company also
can seek to take advantage of pre-clearance mechanisms that have been created in some
countries, including the UK.
12.127 After an acquisition, the acquiring company should roll out its anti-corruption compliance
policies and procedures promptly and train new employees on the new compliance frame-
work. The acquirer also should remediate any issues uncovered but not addressed prior to
the acquisition.
12.128 US regulators included pre-acquisition due diligence and post-acquisition integration as one
52 See Complaint, , No. 2:09-cv-0672, paras 1-6 (C.D. Utah Jul. 31,
2009), available at http://www.sec.gov/litigation/complaints/2009/comp21162.pdf. Notably, the SEC com-
plaint also charged the company’s President/CEO and former CFO under a ‘control person’ theory of liability.
Neither executive was alleged to have participated in or had personal knowledge of the improper payments.
Rather, the executives were alleged to have, directly or indirectly, failed to keep accurate books and records
that transactions were recorded accurately.

of their ten “hallmarks of an effective compliance program” in the Resource Guide.53 US

regulators encouraged companies to:
(1) conduct thorough risk-based FCPA and anti-corruption due diligence on potential
and compliance policies and procedures regarding the FCPA and other anti-corrup-
tion laws apply as quickly as is practicable to newly acquired businesses or merged
-
nesses or merged entities, and when appropriate, train agents and business partners,
on the FCPA and other relevant anti-corruption laws and the company’s code of
conduct and compliance policies and procedures, among other steps.54
E. CONCLUSION
12.129 The focus of regulators on the life sciences industry combined with the myriad anti-corrup-
tion risk areas faced by the industry makes it prudent for companies throughout the industry
to take pro-active steps to decrease their compliance risk. The continued imposition of
those companies seems likely in the coming years.

54 Id., page 29.

INDEX
Advertising and information 63 Due diligence 239

EU Public Procurement Directive 240
Advertising and promotion of medical devices 82 Jurisdiction 237, 240
Advertising to the general public and to HCPs 64 Monitoring and review 239
Agreements 83 Offenses 238
Penalties 105, 239, 244
Code of Practice 65
Proportionate procedures 239
EFPIA Code 65 Public Contracts Regulations 2006 239
EFPIA Patient Organizations Code 66 Risk assessment 239
Eucomed Code 82 Top level commitment 239
FCPA 240
Hospitality 77 Accounting control 240
Incentives 77 Anti-bribery provisions 241
Information to patients 71 Jurisdiction 237, 240
The International Federation of Pharmaceutical Penalties 105, 239, 244
Manufacturers and Associations (IFPMA) 65
Meetings 83 Data protection 215
Other incentives 77
Patient associations 84
Clinical trials 253
Sales representatives 76 Clinical research organizations (CROs) 224
Samples 78 Coded data 224
Sunshine rules 83 Investigator 224
Websites 78 Pharmacovigilance 43, 225
Source data 224
Sponsor 224
Bribery 235 Consent 218
Anti-corruption controls 252 CRM databases 225
Acquisitions 257 Data controllers 218
Agents 252 Data processors 218
Charitable donations 256
Clinical trials 253 General data protection regulation 221
Congresses 254 International transfers 233
Consulting agreements 253 International data transfers 220
Distributors 252 Personal data 226
Educational grants 254 Article 29 Working Party 226
Entertainment 255 Data minimization 230
Gifts 255 Sensitive data 231
Product registration 256
Sales 255
Studies 253 Proportionality 219
Anti-corruption enforcement actions 245 Purpose limitation 219
AstraZeneca 142, 247 Right of access 232
DePuy 245 Right of opposition 232
Dougall 246
Safe harbor 234
Eli Lilly 251
J&J / DPI 248 Transparency 220
Jessop 247
Life-cycle management 139
Smith & Nephew 249
Bribery Act 237 Patent settlements 156
Adequate procedures defense 239 Pro- from anticompetitive patent settlements 158
Communication (including training) 239 Regulatory abuse 142

AstraZeneca 142, 247 Chapter 2 of Volume 2A of the Notice to Applicants 31
Capability of restricting competition 145, 149, 155 Chapter 4 of Directive 2001/83/EC 31
Competition on the merits 154 Decentralised procedure 33
Denigration 145 Procedure 32, 196
Link between denigration and dominance 148 Scope 31, 209
Misleading conduct 144 National procedure 34
Supply of misleading information 142
Other authorisation procedures 39
Restricting competition 155
Compassionate use programmes 41
Exceptional marketing authorisation 41
Special responsibility 142 Herbal medicinal products 40
Sector inquiry 140 Homeopathic products 14, 32
Interventions in administrative proceedings 141 Hospital compounding 42
Launch of an own generic 141 Named patient use 42
Licensing to a third party 141 Temporary marketing authorisation 41
Types of marketing authorisation 34
Patent litigation 140 Bibliographical application for well-established
Patent settlements 141 medicinal use 37
Pricing strategies 141 Biosimilar application 37
Switching patients to a second generation product 141 Conditional marketing authorisations 39
Switch to OTC 141 Applications under exceptional circumstances 38
Marketing strategies targeted at the generic product 141 Fixed combinations applications 38
Full application 35
Generic application 36, 53
Hybrid application 37
Animal health products 117 Informed consent applications 38
Biologicals 117 Mixed application 38
Factors 117 Modules 35
Human pharmaceuticals 109
Action time 111
Merger control 193
Galenic form 112
Mode of action 110 Collective dominance 206
Originator v generic products 113 Conglomerate effects 208
Prescription v OTC products 114
Countervailing buyer power 205
Pricing 112, 161
Product characteristics 110
Change of control 194
Phase 1 review 197
Other product groups 115 Phase 2 investigation 197
European Diagnostics Manufacturers Association (EDMA) 116
Pharmacies v hospitals 114
Procedure 32, 196
Medical devices 16, 115, 207 National merger control regimes 197
Clinical chemistry 116
Directive 98/79 16, 117 Reportable transactions 197
Relevant geographic market 108 Potential competition 201
Relevant product market 107 Entry barriers 204
Pipeline products 202
Threat of generic entry 203
Marketing authorisation 25
Remedies 209
Centralised procedure 26 Divestitures 210
Approval process 29, 32 Role 209
Committee for Medicinal Products Scope 31, 209
for Human Use (CHMP) 29, 87 Suitable purchaser 212
EU-Common Technical Document (CTD) 30 Transfer of production capacity 210
Mandatory and optional scope 27 Single dominance 198
New active substance 27 Analytical framework 198
Standing Committee on Medicinal Products Competitive constraints 200
for Human Use 30 Off label use 201
Marketing authorisation holder 42 Originator products and generics 201
Interaction between OTC
Manufacturing and batch release 43 Products and prescription drugs 200
Distributor issues 44 Suspensive effect 197
Other obligations 44 The test 198
Pharmacovigilance 43, 225 Vertical foreclosure 206
Mutual recognition 31 Pharmaceutical concentrations 206
Approval process 29, 32 Advertising and promotion of medical devices 82

Parallel trade 121 Follow-up 93
Legal obligations 90
Agreement subject to Article 101 TFEU 124 Regulatory authorities 12, 87
Direct-to-pharmacy 138 European Medicines Agency 8, 87
Dual pricing 137 National authorities 10
EU Courts 124 Risk Assessment Committee (PRAC) procedures 104
Health care funds 122 Article 29 Working Party 226
European Commission 12, 123 Risk management plan 97
National Competition Authorities 123 Format and contents 97
Submission 97
National health authorities 122 Updates 97
National legislation 132
Belgian Bofar Case 131 Pricing 112, 161

French Medicine Distribution Case 131 Above-cost selective price cutting 168
Greek GSK Case 128
Conditional rebates 172
Parallel traders 122 Incremental rebates 174
Pharmaceutical suppliers 122 Multi-product rebates 179
Necessary to protect the supplier Retroactive rebates 175
Intellectual property 133 Single-product rebates 172
Exhaustion 133 Sunction effect 175
Repackaging 134 Discriminatory pricing 188
Special mechanism 133 Geographic price discrimination 191
Supply quotas 136 Primary line price discrimination 190
Secondary line price discrimination 189
Violation of Article 101 TFEU 123
GSK case 125
Exploitative pricing 184
Excessive pricing 187
Pharmacovigilance 43, 225
Margin squeeze 169
Enforcement and penalties 103 Market foreclosure 165
Article 116 procedure 105
Objective necessity 166
Article 31 referral 104
Inspections 103 Predatory price-cutting 162
Penalties 105, 239, 244
Pharmacovigilance Risk Assessment Committee (PRAC) Thresholds 195
88
Urgent safety restrictions 105
Other considerations 101
Contractual issues 102 Patent protection 47
Data protection 101 Absence of patent linkage 49
Safety data exchange agreements 102 Exhaustion 49
Other sources of reporting obligations 99 General considerations 48
Scope of the patent 51
Conditions 99
Requests for information 100 Regulatory exclusivity 57
Risk management plans 100
Periodic reporting requirements 95 Exceptional regimes 58
Assessment of PSURs 96 Global marketing authorisation 53
PSURs 95 New active substance 53
Submission schedules 95 ‘New’ regime 53
Post-authorisation 98 ‘Old’ regime 52
Orphan market exclusivity 59
Directive 2001/20/EC 98 Paediatric rewards 61
Directive 2001/83/EC 11, 98 Regulatory exclusivity periods 57
GVP Guidelines 98 New indication of well-established substances 58
Non-interventional clinical trials 98
Quality system 88
Audits 90
Regulatory categories and regimes 5
Biocidal products 19
European Chemicals Agency 20
Reporting requirements 90 Evaluations 20
Additional reporting requirements 93 Regulation 528/2012 19
Causality 91
Electronic reporting 92 Treated articles 20

Borderline determinations 21 European Medicines Agency (EMA) 8
EU-wide approach 21 European Commission 12, 123
Marketing authorization 25
Pharmaceutical operators 15
Cosmetic products 17 Regulation 726/2004 20
Cosmetics Directive 76/768 17 Regulatory authorities 12, 87
List of banned ingredients 17
Market surveillance 17
National rules and procedures 9
Product safety assessment 17
Article 168 of the Treaty on the Functioning of the EU 9
Regulation 1223/2009 17
Comprehensive 9
National authorities 10
EU life sciences product rules 6
Jurisdiction of the national courts 10
EMA 12
National rules of procedure 10
First EU life sciences rules 7 Private litigation 10
Foodstuffs 18 Retail distribution 9
European Food Safety Authority (EFSA) 18 Transparency Directive 9
Nutrition and Health Claims Regulation 1924/2006 19
Rapid Alert System 18 Non-branded generic medicines 7
Regulation 178/2002 18 Products for animal use 20
Geographical scope 22 Antibiotics 20
Common regulatory approach 23 Directive 2001/82 20
Customs Union Agreement 23 Directive 2008/38 20
EU rules on feedingstuffs 20
Medical devices 16, 115, 208 Parnut 20
Directive 90/385 16 Regulation 726/2004 20
Directive 98/79 16, 117 Regulation 767/2009 20
Medicinal products 11
Committees 12
REACH Regulation 1907/2006 11
Single market legislation 6
Directive 2001/82 20 Protection of public health 6

BIOS
EDITORS
Peter Bogaert
the life sciences group. He has been a member of the Brussels bar since 1984 and was called to the
English bar in 1995. Peter has developed a pan-European practice in the regulation of pharmaceu-
ticals, medical devices and other health products, as well as biotechnology, foods and feedingstuffs
under European Union law and the national laws of the EU Member States. His practice comprises
among others regulatory counselling, litigation before the EU and Belgian courts, strategic advice
and compliance assistance. He has been involved in all EU legislative projects affecting the phar-
maceutical and medical devices industry over the last 20 years. He frequently speaks at professio-
nal seminars, and has taught pharmaceutical law classes at the universities of Leuven and Brussels.
Peter holds law degrees from the University of Leuven and Oxford University.
Damien Geradin
Commission investigations with a focus on the high-technology and life sciences industries. He is
also representing clients before the General Court and the Court of Justice of the European Union.
In addition to being a practitioner, Damien is a Professor of Competition Law & Economics at
Tilburg University and at George Mason University. He is the co-editor of the Journal of Com-
petition Law & Economics, a non-governmental advisor to the ICN, and a member of the ABA’s
Antitrust Section International Task Force. After his law degree in Belgium, Damien gained a LLM
at King’s College London and a PhD at Cambridge University. He was a Fulbright Scholar at Yale
Law School.

CONTRIBUTORS
Robin Blaney -
tice focuses on life sciences matters. He advises pharmaceutical, biotechnology, medical device
and cosmetic manufacturers and trade associations on a wide range of regulatory, compliance,
transactional and legislative matters, as well as the full range of commercial agreements that span
the product life-cycle in the life sciences sector.
Jennifer Boudet
focuses on all areas of EU competition law, including abuse of dominance investigations, merger
control, state aid and litigation before the European Courts.
Miranda Cole
practices competition law. Her competition law expertise encompasses merger control, actions
under Articles 101 and 102 TFEU, advisory work and actions before the European courts in Luxem-
bourg.
Michael Clancy
he practices competition law. He has developed particular expertise in the life sciences sector
advising clients on compliance issues and defending clients against investigations by the European
Commission concerning restrictions on generic entry and reverse-payment patent settlements.
Sarah Forest -
tice focuses on life sciences matters. She has developed particular expertise in pharmaceutical law,
including regulatory exclusivity rights, advertising and transparency.
Laurie-Anne Grelier
assists international companies with navigating complex areas of European competition law, inclu-
ding cartel investigations, the clearance of mergers, the structuring of distribution, collaborative
and other commercial arrangements, and issues related to abuse of dominant position.
Christos Malamataris
he practices EU Competition law. He has developed particular expertise in abuse of dominance
investigations, mergers, and State aid.

John Rupp
companies in revising their compliance policies and procedures and structuring and undertaking
internal investigations involving trade control issues, bribery, money laundering, accounting irre-
gularities and pharmaceutical marketing issues.
Jennifer Saperstein
where she practices civil and criminal litigation. She has developed particular expertise advising
clients on compliance with the Foreign Corrupt Practices Act and other anti-bribery laws.
Henriette (Jetty) Tielemans
Nicoleta Tuominen
practice focuses on all areas of EU Competition law, European and international trade law and
various regulatory issues.
Kristof Van Quathem -

ling LLP where he practices data protection and privacy law. He has developed particular expertise
in the area of clinical trials, CRM databases and the use of Internet applications in clinical research
and patient programs.
John Wileur
at the University of Liège Law School. His practice focuses on EU and Belgian competition law,
with a particular emphasis on the interface between competition and intellectual property and the
application of competition law in network industries.
The editors would also like to thank the following individuals for their help on some of the chapters:
Vladimir Adamis, Brian Byrne, Ianis Girgenson, David Hull, and Gabriela Klasa.

The Institute of
Competition Law
The Institute of Competition Law is a think tank, founded in 2004 by Dr. Nicolas Charbit, based in Paris
and New-York. The Institute cultivates scholarship and discussion about antitrust issues through publications
committees to ensure independence, objectivity, and academic rigor. Thanks to this management, the
Aim Events
The Institute attracts government, business and More than 130 events since 2004 in Brussels,
academic attention to a broad range of subjects London, New York, Paris, and Washington DC,.
relating to competition law, regulations and
industrial economics.
Publications
The Institute publishes Concurrences Journal, a
Boards print and online quarterly peer-reviewed journal
To maintain its unique focus, the Institute relies dedicated to EU and national competitions laws.
upon highly distinguished editors, all leading
experts in national or international antitrust: Bill of Competition Law, the journal provides a forum
Kovacic, Mario Monti, Eleanor Fox, Barry Hawk, for both practitioners and academics to shape
Laurence Idot, Fred Jenny, etc. competition policies. The Institute also releases
that features more than 9,000 case summaries

Authors from 1,900 experts in 55 countries. In addition to
2,500 authors, from 55 jurisdictions. Concurrences Journal and e-Competitions
Bulletin, the Institute publishes two series of
books. The e-Competitions series comprises an
Partners annual Competition Digest, in US and EU
versions, and Festschrift or Mélanges. The
- Universities: University College London, King’s Concurrences series comprises the proceedings of
College London, Queen Mary University, Paris the annual conferences, the Concurrences Award
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Concurrences website provides all articles
published since its inception, and about 1,000
articles published online only, in the electronic
supplement.
Concurrences
Journal
Concurrences is a print and online quarterly peer reviewed journal dedicated to EU and national compe-
Hollande and Nicolas Sarkozy.
Contents Boards
More than 8,000 articles, print and/or online.
Quarterly issues provide current coverage with Idot, Professor at Panthéon Assas University. The
contributions from the EU or national or foreign International Committee is headed by Frederic
countries thanks to more than 800 authors in Jenny, OECD Competition Comitteee Chairman.
Europe and abroad. Approximately 25 % of the Boards members include Bruno Lasserre, Mario
contributions are published in English, 75 % in Monti, Richard Whish, Wouter Wils, etc.
Court of justice of the EU; all contributions have

English abstracts. Online version
Concurrences website provides all articles pu-
blished since its inception, in addition to selected
Format articles published online only in the electronic
- In order to balance academic contributions with supplement.
opinions or legal practice notes, Concurrences
- Interviews: Interviews of antitrust experts
provides its insight and analysis in a number of
formats: - Trends: 4 to 6 short papers on hot issues
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e-Competitions
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provides consistent coverage of antitrust cases editors, all leading experts in national or interna-
from 55 jurisdictions, organized into a searchable tional antitrust. Advisory Board Members include:
database structure. e-Competitions concentrates Sir Christopher Bellamy, Ioanis Lianos (UCL),
on cases summaries taking into account that in the Eleanor Fox (NYU), Damien Geradin (Tilburg
context of a continuing growing number of University), Barry Hawk (Fordham University)
sources there is a need for factual information, Fred Jenny (OECD), Jacqueline Riffault-Silk
i.e., case law. (Cour de cassation), Wouter Wils (DG COMP), etc.
- 9,000 case summaries
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Judges: The AECLJ is a forum for judges of
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Peter BOGAERT
EU Law and Damien GERADIN

Editors
Life Sciences
This volume comprises 12 chapters authored by Covington & Burling lawyers.
These chapters cover key areas of EU law that impact the life sciences industry,
including the specific regulatory obligations that apply to life sciences
companies, EU competition rules, EU data protection rules and the laws
governing bribery. Each chapter is authored by one or several leading
specialists of the subject matter discussed.
EU Law and Life Sciences aims at providing in house counsel in life sciences
of rules that affect the business of life sciences companies. It combines

theoretical insights with practical advice.

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EU Law and

© Institute of Competition Law, 2014

Copyright © 2014 by Institute of Competition Law

Printed in the United States of America

First Printing, 2014

EU law and life sciences / editors, Peter Bogaert, Damien

1. Life sciences--Law and legislation--European

KJE6172.E9 2014 349.24

Cover and book design by Yves Buliard, www.ybgraphic.fr

suggestions for additional topics that might be covered in future editions.

WILLIAM E. KOVACIC: AN ANTITRUST TRIBUTE

2013 COMPETITION DIGEST

2014 COMPETITION DIGEST

COMPETITION LAW ON THE GLOBAL STAGE:

EU LAW AND LIFE SCIENCES

IV EU Law and LifE SciEncES

Henriette (Jetty) Tielemans

Kristof Van Quathem

EU Law and LifE SciEncES V

1 OVERVIEW OF THE REGULATORY CATEGORIES

2 THE MARKETING AUTHORISATION FOR MEDICINAL

3 THE PROTECTION OF MEDICINAL PRODUCTS 47

4 ADVERTISING AND INFORMATION – EU RULES GOVERNING

EU Law and LifE SciEncES 1

6 MARKET DEFINITIONS IN THE LIFE SCIENCES SECTOR 107

7 PARALLEL TRADE OF LIFE SCIENCE PRODUCTS 121

8 LIFE-CYCLE MANAGEMENT STRATEGIES

2 EU Law and LifE SciEncES

10 EU MERGER CONTROL IN THE LIFE SCIENCES SECTOR 193

11 DATA PROTECTION IN THE LIFE SCIENCES INDUSTRY 215

12 BRIBERY RELATED RISK AND MITIGATION MEASURES

EU Law and LifE SciEncES 3

A. INTRODUCTION 1.0 c) Marketing authorisation 1.31

B. HISTORICAL OVERVIEW 1.03 e) Pharmaceutical operators 1.41

EU Law and LifE SciEncES 5

taken at the EU level.

device prior to its placing on the market.

6 EU Law and LifE SciEncES

1. Gradual development over several decades

EU Law and LifE SciEncES 7

8 EU Law and LifE SciEncES

2. Importance of national rules and procedures

1.13 . For medicines,

EU Law and LifE SciEncES 9

C. KEY ASPECTS OF THE MAIN

10 EU Law and LifE SciEncES

EU Law and LifE SciEncES 11

infringement of certain regulatory obligations by marketing authorisation holders.

37 See also below, Section F.

12 EU Law and LifE SciEncES

b) Any substance or combination of substances which may be used in or administered to

EU Law and LifE SciEncES 13

contain a number of principles”.

14 EU Law and LifE SciEncES

turnover of the marketing authorisation.

47 See Chapter 3 on the protection of medicinal products.

EU Law and LifE SciEncES 15

16 EU Law and LifE SciEncES

EU Law and LifE SciEncES 17